Loans make beggars
“bus ke leta hun har mahiney qaraz,
or rehti hey sood ki takrar
Meri tankha men ik tihai ka
ho gia hey sharik sahookar” Mirza Asad Ullah Ghalib
In 1989, the Supreme Court of Pakistan declared bonded labour to be unconstitutional. Entire families of men, women and children, mostly working as brick kiln workers, bonded in return for loans to their parents, for amounts as little as two thousand rupees, could now choose to be free. Bonded labour, also called “debt bondage” is recognised as another form of “slavery” and is prohibited under the 1956 UN Supplementary Convention on the Abolition of Slavery. Debt bondage violates a range of basic human rights of liberty, options and equality, to which all human beings are entitled. But despite these significant legislations, debt bondage continues to thrive at home as well as the national level. It is estimated that there are over 50,000 bonded labourers in Sindh alone, while at the national level the entire population of 150 million Pakistanis is bonded in return of the loans taken on their behalf. Thus not just the current but many future generations of Pakistanis would continue to live as “debt slaves” to western banks for loans contracted by their governments, that were neither for their good nor by their will. Every new child born in this country begins the first day with mortgaged liberty, options and opportunities, besides an inherited debt of Rs.14400. This article is intended to discuss how loans taken by irresponsible and corrupt governments have only added to the poverty and misery of the people in whose name the loans were taken. It is also intended to suggest that the solution to this problem can not be sought from the World Bank “experts” but from the very people who are the greatest and the ultimate victims of the debt bondage.
The global dictatorship of debt
Poor countries live under a perpetual dictatorship of debt, which grows more crippling by the day. Addiction to loans coupled with the new world trade order, has not just brought untold misery and poverty to much of humanity, but also widened the cruel gap between the very few “haves” and the very many “have-nots”. Let us take an overview of the global havoc caused by the disease of debt bondage:
The more the debts – the greater the poverty.
Of the 47 most indebted poor countries, Pakistan, Indonesia and Nigeria have the distinction of being the world’s three largest debtor nations. After almost 30 years of consistent begging and borrowing, Pakistan is caught in a classic debt-trap, incapable of escaping insolvency except by undertaking yet more debt-creating loans. Unemployment is rising, up from 5.89% in 1999 to 7.82% in 2002. Exports have remained near static for a decade, and there has been a particularly dismal performance by large-scale manufacturing. With half of the yearly budget extracted by the Western banks on account of debt servicing, another quarter set aside for military’s massage, there is little left to improve the lot of the remaining 150 million. The debts have been particularly harsh to the poor, whose poverty has known only an upward trend in all these years. In 1990, some 22% people were living below the poverty line. This figure rose up to 35% in 1999 and to a shameful 44% in 2002. The per capita income has consistently dropped from US$480 in 1997, to US$ 470 in 1999, US$440 in 2000 and US$420 in 2002. It is alarming to note from the State Bank of Pakistan report that 32 per cent of the population numbering 45 million has a monthly income of less than Rs.650 per month. The rise in Pakistan’s external debts from US$ 20.89 billion in 1990 to US$ 36.53 billion in 2002, harshly highlights the warped relation between debt and poverty. The more the debt – the greater the poverty. The rise in debts has caused an “across the board” devastation in almost every aspect of social development. The latest infant mortality figures indicate 83.3 deaths per 1,000 (compared to Thailand 27.9, Indonesia 40.9 and Bangladesh 60). 17% of the urban, and 47% of the rural population has no access to the most basic human need of clean drinking water. With the development expenditure shrinking with each passing year, (from 6.4% of GDP in 1991 to 2.8% in 2001), the people of Pakistan can be certain of a bleak future, unless they can urgently detoxify the government from its chronic loan-taking addiction.
Are the poor destined to remain poor?
Can Pakistan even hope to come out of this deepening quagmire of poverty and bondage, or is it ordained that its poor are destined to remain poor. The answer is “yes”, it can overcome poverty provided it understands and is willing to rectify the root causes of this self-acquired affliction. The poverty of Pakistan is due to: (1) loans and debts that have created an atrophy of independent thought and action. (2) bad governance (3) backwardness in science and technology (4) low educational levels (5) rapid population growth (6) an unfair international economic system, and (7) environmental degradation. While most of these causes would be discussed in separate articles, we shall only focus here on how loans destroy a nation’s ability to think and act on its own. Consider the following random sample of foreign funded projects contracted by Pakistan:
One can clearly recognise the emphasis on vagueness and jargon to describe these high and “noble” sounding programs. None of these programs required a level of technology that was either not known or could not be managed by our own people. What we got in return was a bunch of irrelevant western “experts”, their inadequate appreciation of local problems, their inappropriate recommendations and their disproportionate perks and payments. The so-called “technical co-operation and technology transfer” projects are a common way in which poor countries are exploited and befooled. Financed by foreign loans and tied with attached strings, such projects provide huge salaries and other expenses to the mandatory foreign “experts”. These costs may take as much as 75% of the project funds, including bribes for government officials and politicians. Whether the projects succeed or fail, as often they would – the country must repay the loan plus the interest. Meanwhile, development remains an elusive dream, which must be conveniently postponed to a yet another loan. The greatest impact, besides the accumulation of non-sustainable debts is the crippling effect on the ability to think and act with one’s own faculties and resources. These faculties are henceforth surrendered to the lending institutions, who begin to decide what is good and not so good for us. Slavery of thought is thus the largest piece of poverty that comes in the same package that contains the bondage of debt.
The external debt today is more than an instrument of extraction of wealth from poor countries. It is a weapon for subjugation, a modern form of slavery. A nation cannot embark upon liberating others (Pakistan’s favourite ideological pastime), before it has liberated its own self. And liberation is not possible, unless we break the chains of debt. Perhaps our schools may like to include this little rhyme in their books (even without waiting for a yet another syllabi improvement CIDA grant.)
“Rags make paper
Paper makes money
Money makes banks,
Banks make loans,
Loans make beggars,
Beggars make rags.”