The South Debts, Western Economic and Political Control - Essay Example

?Third World Developmental Studies Introduction The north and south global divide basically refers to the economic divide between the developed and the developing countries, with the north being the developed countries, and the south being the less developed countries. Debts of the southern countries are mostly those owed to the northern countries, including international financing organizations like the World Bank. The terms north and south referring to developed and underdeveloped countries respectively is considered somewhat obsolete, because many countries from the “south” have since gained equal status as other developed countries. In effect, the geographical analogies are no longer functional in the contemporary setting. Nevertheless, for purposes of this discussion, the terms north and south shall be used to respectively refer to the developed and the developing/third world countries. This analysis shall provide a critical evaluation of the following statement from Susan George (2004): “Southern debt, a festering sore for the past twenty years has relatively little to do with money and finance, and everything to do with the West's continuing exercise of economic and political control.” In general, this paper shall clearly state the overall arguments in relation to this statement, and will be framed in relation to the entire question, including all the key terms and concepts. This essay shall present four clear and convincing cases which will support the argument that the southern debts represent Western economic and political control, and has little to do with money and finance. These four cases will be presented logically and with supportive details. This essay shall then be summarized and concluded based on the specific points discussed within the text. This paper is being carried out in order to establish a strong and decisive assessment of the statement, specifically on the issue of southern debts. Body 1. Impact of Colonialism in Africa The African continent is made of a group of countries which are largely considered developing. Years of colonialism and exploitation from the Western countries depleted their natural resources and brought socio-political turmoil into their lives (Salifu, 2010). Although, colonialism has also affected various ‘southern’ territories, this portion shall focus on the impact of colonialism on Africa. Along with other global problems, establishing the primary cause of Africa’s political and economic hardship is important in understanding the overall issues of the continent (Salifu, 2010). Conflicted boundaries have been blamed mostly for the ethnic issues of the country. These issues have been attributed to the forced segregation of ethnic groups in different countries, as well as the imposed assimilation of other groups within states. Colonialism supplanted the government structures of these ethnic groups, replacing them with Western-based structures (Salifu, 2010). It also created the system of kleptocracy where ruling structures, founded on hierarchies were established. With these ruling structures, the colonialists lured elite Africans to positions power offering them prominent status and wealth in various government posts (Salifu, 2010). Riches were offered to the elite Africans, further keeping the wealth of Africa within the hands of the same few. This widened the gap between the rich and the poor, especially with the rich further exercising their economic dominance over the poor. These rich Africans also had control over Africa’s natural resources (Hrituleac, 2011, p. 42). Even when colonialism ended for these countries, the impact of colonialism remained persistent. African elites stayed in their countries and continued to nurture relationships with the colonialists (Allen and Gandiya, 2004, p. 19). Under these conditions, the exploitative actions of these elites were continually rewarded by the colonialists. The natural resources of Africa were exploited by the elites who had the financial means and backing to carry out the exploitation of resources and then hand these resources over to the colonialists. Colonialism also caused the establishment of single-crop economies which subjected the African economy to the fluctuations of the market (Salifu, 2010). As these states were integrated into the international market, the inequality between the developed and developing countries – the north and the south widened. Although the colonial rule in Africa has ended, some former colonies are still being controlled by their former ruling countries. Chad and Cote d’Ivoire for example is still being dominated to some extent by France (Salifu, 2010). Such control has been maintained by the northern country France as a means of maintaining its dominance over the country. Throughout the years of colonialism in Africa, its natural resources have been subjected to exploitation by the colonizers. Historically, Africa has been considered a continent rich in various resources (Hrituleac, 2011, p. 43). With such abundance, it is therefore unfortunate to note that this region’s economic development has become very much deficient. Such deficiencies have driven their governments to borrow from the northern countries, from the developed states, as well as the major international banking institutions (Hrituleac, 2011, p. 43). At present, the continent’s foreign debts amount to not just billions, but trillions of dollars. Even with trillions of dollars borrowed, the level of development for this region remains constant and unchanged. It is important to point out that colonialism denied the natural development of Africa’s history; in the process, it developed a system which necessitated the presence of the white men (Fonchingong, 2006, p. 13). The pre-colonial territories in Africa were relatively stable and governed democratically. Citizens also had an easy and open access to their political processes. The systems were based on centralized systems, but some were decentralized. The central governments were often divided into regions, zones and districts, with assigned rulers for each (Hrituleac, 2011, p. 44). The chiefs for the ethnic groups were often assigned to handle the balance and the accountability of their office and activities. With the entry of colonialism, this ethnic system was eliminated because it did not fit the ideas of colonialism. Moreover, there was no national foundation, security forces, and there was no public administration (Chafer, 2002, p. 22). Under these conditions, the domination of the northern territories prevented the natural progression of a government system which worked well for the African people. Such system however did not fit the highly ethnic and fragmented group of people. Although this system was unheard of for the northern countries, such system worked well for the African people (Barbieri, 2010, p. 12). Without this system, Africa was victimized by the domination of the northern countries, and to this very day, such political and economic domination remains strong. With an unstable and ill-fitting political system, Africa will likely remain vulnerable to the whims of the northern creditors. 2. Exploitation of natural resources by the northern (developed) countries As was mentioned previously, years of colonialism also opened the southern countries to the exploitation of their natural resources. This has been highly apparent in Africa and in other former colonies in Southeast Asia. Africa has huge deposits of oil, timber, diamonds, gold, coltan, and bauxite (Turner, 2007). The profits from the extraction of these natural resources should ideally secure finances to allocate for their development, however, these resources have also led to corruption, environmental depletion, and violence. In effect, these resources have become a curse for Africa (Turner, 2007). During the 19th century, the northern powers scrambled to establish some form of dominance and control over the lands and resources of Africa. To date, the scrambling is still happening in some shape or form. The continent has again become an area which is strategic in terms of geopolitical dominance between the current economic and political powers: the US, France, the United Kingdom, China, as well as India (Turner, 2007). Oil resources are luring these states to Africa with foreign direct investments amounting to about 50%. Foreign direct investments are generally beneficial because of the capital investment, however, in terms of their impact on natural resources, these investments have the unfortunate impact of asset stripping. In relation to timber, the exports of timber to European countries are dominant, however, China is the primary importer for timber coming from east Africa, particularly Mozambique (Turner, 2007). The American Forest and Paper Association indicates that for Cameroon, Equatorial Guinea, Gabon, Ghana, and Liberia, about 30% of their timber production is considered highly questionable (Turner, 2007). In relation to oil, there are eight known oil exporters from Africa – Nigeria, Angola, Gabon, Cameroon, Chad, Congo, Equatorial Guinea, and Sudan. Nigeria is considered the 11th largest oil producer in the world, with Angola being the second largest, and by 2008 it was producing up to 2 million barrels a day (Turner, 2007). The US is considered the largest importer of African Oil, with China being the second. Despite these significant oil reserves, these countries are still poorly developed, and with each year, their oil reserves are benefiting foreign oil companies who are only concerned about raising profits. The Niger Delta is actually bearing the brunt of the ecological impact of oil exploration by major oil companies (Ekeh, 2005, p. 295). The unfortunate reality of these environmental issues is that the northern or developed countries are less concerned about preserving the natural resources or reducing the environmental impact of their activities (Ekeh, 2005, p. 296). These developed countries persist in gaining as much profit from their activities, with hardly any benefits attributed to these southern countries. Moreover, these developing countries have to deal with negative economic and ecological effects, often being forced to borrow from the World Bank and other foreign countries which are already profiting at their expense (Petersson, 1998, p. 17). It is a vicious and unfortunate cycle for the southern countries, with these countries bearing all the unfortunate impact of the exploitative activities of northern states, and the latter enjoying the economic advantages and decreased regulatory measures (Bilin and Andrew, 1999, p. 117). Minerals are also abundant in Africa, with large stores of gold, copper, cobalt, and coltan. However, Africa has limited technologies to explore and mine these minerals (Turner, 2007). The technology of northern countries is essential to the extraction of these minerals. Investments are therefore necessary. However, instead of a large share of profits from these mineral resources, their resources are mined with hardly any profit accruing to the source countries (Alao, 2007, p. 34). Africa is also rich in diamonds, with Botswana, Congo, Sierra Leone, and South Africa having the largest diamond reserves. The illegal export of diamonds is however being used to support wars and conflicts in Sierra Leone, Democratic Republic of Congo, and Angola (Turner, 2007). These are known as blood diamonds. The United States is the largest importer of diamonds and to a certain extent, although the US has indicated its stand against the purchase of conflict diamonds, these diamonds are still entering their market. The demand is still strong, and in order to gain the most profit, various companies have to resort to subterfuge in order to gain access to these African diamonds and market them into the northern market (Columbus and Wusu, 2006, p. 84). All in all, such exploitation, including the exploitation of majority of Africa’s natural resources, the ecological impact of western domination has been largely detrimental to African political and economic stability. 3. Exploitation of natural resources in Southeast Asia Southeast Asia is also considered traditionally rich in natural resources, mostly because of its tropical conditions and its mineral resources. This region however has also had a long history of colonialism, from the Spaniards, the Americans, and the British (Ooi, 1983, p. 221). The periods of colonialism have brought forth major influences in governance and in culture, as well as economic activities. Their natural resources however have also been exploited by northern countries (Ooi, 1983, p. 221). Timber has been one of the top products of Southeast Asia, and northern countries like Japan have been eager to exploit exports from these countries, especially since these exports are usually marketed at significantly low rates (Resosudarmo, 2005, p. 35). The advantage of cheap labour and reduced regulatory processes also make production costs cheaper for these Southeast Asian timber products. Japan has also been criticized by other timber-producing states in the Asia-Pacific region for plundering the timber resources without replacing these, and without considering the impact of their exploitation on the local economy. They have also entered into agreements with comprador concessionaires which do not have much loyalty to the local economies (Awanohara, 1979, p. 88). Japan has also been criticized for using the wood-exporting countries as the main level of production, and not increasing the amount of processing or value to the products before exporting them (Awanohara, 1979, p. 89). From Japan’s perspective, developing local processing in Southeast Asia is not profitable for them. The industry of Japan is however large and labour-intensive and protected by tariff barriers which support the import of unprocessed timber but discourage value-added imports (Awanohara, 1979, p. 89). Barriers in trade have increased the distrust of southern developing countries towards the northern developed states (Singh and Singh, 2005, p. 34). These are feelings of distrust which have long been present since the days when these southern states were under northern control and dominance. These barriers in trade have not only been applied for the timber industry, but have also been seen in the trade and economic activities for minerals. Japan has also long taken advantage of the rich mineral resources in the Southeast Asian region (Balai Asian Journal, 1981, p. 6). The Philippines is the third largest producer of chromite and at one point during the 1980s, it was the ninth largest copper producer in the world. Indonesia’s tin reserves were also significant, with Malaysia following. Zinc has been found in abundance in Thailand and the Philippines. Thailand has also produced lead ore, iron ore, and manganese (Ghee and Valencia, 1990, p. 45). The northern and developed countries have long been dependent on natural resources. As industrial powers, they need these raw and lightly processed materials to support their economy. In data prepared by the Japanese Ministry of International Trade and Industry, it indicates that Japan’s dependence on other countries can be summarized as follows: coal – 81.8%; iron ore – 98.7%; copper – 96%; lead – 83.9%, and so on and so forth (Ghee and Valencia, 1990, p. 30). Asia is the main source of its raw materials. During the 1970s, a trade crisis broke out between Japan and the Philippines when three major copper buyers in Japan unilaterally announced a 30-day cutback on their purchase of Philippine copper (Yu-Rivera, 2005, p. 129). This resulted in a major slump the economy of the Philippines. As about 80% of the copper in the Philippines was sold to Japan, the cutback severely impacted on the trade balance (Ghee and Valencia, 1990, p. 30). The Philippines tried to use the Treaty of Amity, Commerce, and Navigation to stop Japan’s cutback, however, Japan rejected such treaty. This crisis persisted for the Philippines until 1975. The Philippines has also tried to establish its own mineral-processing plants, however, Japan has refused to cooperate with the country (Ghee and Valencia, 1990, p. 30). Whatever investments Japan has made have been half-hearted, often causing ill-maintained processing plants. In the end, the efficiency of these plants has been poor. Japan has also exploited the southern countries’ need for technological support when it established the Asahan Aluminum Project in North Sumatra (Ghee and Valencia, 1990, p. 31). This plan however has faced various issues including concerns on national development, resource extraction, and ecological destruction. Concerns on Indonesia’s dependence on Japan were also raised. The exploitation of the natural resources of southern countries of Third World countries was also apparent in the Gunung Bijih copper mine in Indonesia (Ghee and Valencia, 1990, p. 31). This was a mining undertaking which was supported at that time by the Suharto government and which was to be a coordinated venture with the US. The Freeport Minerals firm was the primary beneficiary for this venture and was attributed by a work contract by the Indonesian government (Parkinson, 1993, p. 54). This gave the firm free reign over a significant contract area and was even granted a three year tax holiday. During the first 23 months, it earned significant profits, amounting to billions. The contract specified that it did not have to release dividends until 1987 and this prompted Indonesia to renegotiate the contract terms (Ghee and Valencia, 1990, p. 31). The adjustments however did not affect the mining firm to any significant extent, making its ventures even more profitable, and leaving Indonesia at the losing end of the contract with hardly any profits earned from its exploited and depleted resources. With these exploited natural resources, significant profits have been earned by developed countries in the north at the expense of the developing countries in the south (Resosudarmo, 2005, p. 36). Under these circumstances, it can be justifiably argued that the southern debts are more a product of dominance and economic control by the West, not so much about money and finances. 4. Illegitimate and odious debts The organization known as Jubilee South is an organization which is seeking to cancel the billions of dollars of debts which the southern countries owe the World Bank and other Western/Northern countries (Rustomjee, 2004, p. 3). Along with other similar organizations, this organization argues that the southern debts should be cancelled because they are illegitimate and odious. As odious debts, they only serve as a means of exerting and maintaining western power in the developing country (Rustomjee, 2004, p. 4). These are odious debts because they are often debts which are secured by oppressive regimes to serve personal ends; these debts have not been secured to serve the needs and interest of the country. Odious debts have been secured by corrupt regimes and eagerly handed over by western economies in order to gain some form of leverage over the debtor country (Hanlon, 2002, p. 7). Some of these debts are considered as hostile acts against the people and therefore should be annulled. They represent the ability of the west to dominate the southern country by holding such debts as leverage for political and economic favours (Bhargava, 2006, p. 254). In the end, these favours are often highly detrimental to the needs of the third world developing countries. Southern debts may also be defined as illegitimate debts when they may be gained by a legitimate authority but subsequently misused by the authorities (Hanlon, 2002, p. 8). Examples of these cases include debts gained but diverted as stolen wealth; debts from loans used to serve the needs of the elite few; debts from irresponsible projects which have then failed or have caused harm to the people or the environment; and debts incurred under severe and exploitative repayment schemes, including high interest rates, as well as compounding interests (Jubilee USA Network, 2007). Jubilee South also echoes the arguments already indicated above regarding the historical and political bases for the injustices upon which these debts have been imposed. The organization argues that the Southern debts are a legacy of the unjust colonial domination of the north (Jubilee USA Network, 2007). These colonialists entered these countries, accessing their natural resources and establishing political control over them, and eventually leaving these areas impoverished and in political turmoil. These debts have also been incurred because of the exploitative trade terms which have been imposed by northern/western economies on the southern/developing countries (Bendana, 2006, p. 4). Tariff rates have been imposed based on international trade agreements to which many developing countries are signatories. These rates have indicated gradually reducing rates for the entry of foreign goods into the developing countries, and under reciprocity terms, the developing countries have also been allowed these same lowered tariff rates (Picciotto and Weaving, 2004, p, 124). Developed countries have vast interests in various industries and technologies, while developing states have significantly fewer goods to trade or export. In the end, the advantage for these reduced tariff rates are felt more by the developed northern economies, not so much by the southern developing countries. Under these conditions, the developing countries can hardly earn the profits they need to eventually gain economic and political power (Picciotto and Weaving, 2004, p. 124). They are therefore prompted to borrow money from the World Bank and other western economies. Conclusion Southern debts have little to do with money and finance, and indeed, have everything to do with Western political and economic dominance. Years of colonial rule on various colonial territories signify years, even centuries of political dominance over the southern developing countries. Such dominance has supplanted their political systems, replacing these with the ill-fitting Western systems which nurture hierarchical rule. This prompted the rise of the dominant wealthy groups in the southern countries, and widened the gap between the rich and the poor. The years of colonial rule also led to dominance and misuse of natural resources, especially in Africa and Southeast Asia. Oil and other mineral resources have been exploited in Africa and in Southeast Asia by multinational companies and western economies. In the end, these countries have gained little in terms of profit, while their natural resources have been severely depleted. Away from their prohibitive and watchful governments, these western countries are less concerned about matters like environmental protection, or even human rights practices in their smaller subsidiaries. In the end, the southern states are forced to bear the brunt of economic and ecological costs, often causing them to borrow from foreign economies. The odious and illegitimate debts which the developing countries owe to the western territories also represent political dominance. These debts have been incurred by corrupt and dictatorial regimes, encouraged and supported by the western countries hoping to gain access to the southern states. The interests of these debts have also been considered highly onerous to the southern states which, in the first place have been prompted to borrow because of the circumstances which the western economies have driven them to. All in all, the above conditions support the notion that southern debts are not purely about money and finance, but they refer more to the continuing and persistent political and economic control of the west. The years of colonial rule in the developing countries have damaged the political and economic fabric of these countries, imposing on them western systems which have not blended well with their specific ethnicities, culture or their existing political practices. The west made the political system of these countries very much unstable, and the fact that western dominant never actually eased, these territories contributed to the persistent instability in these territories. All in all, the exploitative activities of the west on the natural resources as well as the politico-economic systems of these countries have caused various hardships for these ‘southern’ states, forcing them to borrow and to be vulnerable to the whims of the western economies. References Alao, Abiodun, 2007. 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Patterns of continuity and change: imaging the Japanese in Philippine editorial cartoons, 1930-1941 and 1946-1956. Manila: Ateneo University Press. Read More