Capitalism: Root Cause for Massive Debts in the “Third World” Countries
The headline of The East African (Monday, 11 November 2019) entitled the $100.3 b East Africa debt crisis. According to the Newspaper, the Five East African countries have together amassed more than $100 billion domestic and foreign debt. As at June 2019, Kenya and Tanzania’s total public debt stood at $58 billion and $22.5 billion respectively. Uganda’s stock of public loan is $12 billion. Last year, Rwanda’s public debt stood at $5.4 billion. Burundi’s national debt is estimated at $2.4 billion. On Wednesday, 6 November 2019, Kenya’s Senate voted and gave the government green light to raise country’s debt ceiling to Ksh9 trillion.
In a capitalist economy, domestic debt is defined as the total debt that a country owes to domestic lenders. It complements foreign debt that is the debt a country owes to foreign lenders. Capitalist countries have set up laws to allow their governments to seek for loans. For example, chapter 422 of Kenya’s constitution (External Loans and Credit Act) allows the Government to borrow or obtain credit from any person or government. A debt crisis is defined as a situation in which a government loses its ability to repay its accumulated loans. This situation is also referred to as public debt overhang that is defined as the deterioration of the economy due to excessive public debt.
Under the veil of development through grand infrastructure projects the governments go crazy into the international financial bodies such as World Bank and IMF seeking for loans that turn into a curse rather than real development. After the Bretton Woods conference in 1944 where the world financial order was introduced through the newly established financial bodies IMF and World Bank, the world was now introduced to creditors and debtors. In the 1970s, Western banks were eager to lend to “developing countries” and therefore the external debts of the so-called third world kept growing in alarming rate. IMF and World Bank were introduced as tools for western powers to control the economy of third world countries. Structural adjustment programs (SAPs) which has been in place since 1980, through which capitalists impose strict conditions attached that require debtors to restructure their economies in line with neoliberal policy by cutting subsidies and price controls; privatising public utilities; allowing foreign corporations to buy up public assets, bid on government contracts and repatriate profits at will. This is how the foreign nations are exploiting the economies of developing world. Currently their exploitation happens under a new umbrella disguised as ‘business development gatherings’ such as US-Africa Business Forum, Forum on China-Africa Cooperation and Japan’s Tokyo International Conference for African Development (TICAD) etc. Such deals will further worsen the economic situation across Africa.
The local political elites with a capitalist mindset who seem not to bother much into the common person’s interests and hence contributed to the massive debt in East Africa. Through corruption and abysmal mismanagement of public funds, African elites are plundering their own countries. The investigative report “The Plunder Route to Panama”, released by Panama papers in 2016, highlights how African leaders are doing more than accepting bribes from foreign companies or evading tax. Rather, they are systematically setting up power structures run by favored friends or family members to steal billions of dollars and store the loot outside of their countries, the report finds. This cuts budgets, hinders development and keeps people impoverished.
Remarkably, the state of borrowing is not due to the scarcity of resources rather it emanates from lack of strong economic policies on how to use them. Moreover, East Africa’s leadership have no absolute decision nor independence in deciding and managing the affairs of their citizens. They normally work along with their western masters in serving the interests of the bunch of capitalists by exploiting and pillaging the countries’ resources and thereafter lobbying for loans to back their administration.
East Africa is full of mineral resources unfortunately; the leaders have squandered such natural wealth and took loans to fund their own regimes. What lacks in East Africa and the world at large is the Islamic economic system, which focuses on distribution and circulation of wealth rather than production and accumulation of wealth within handful elites. Furthermore, with a bimetallic currency based on gold and silver only, interests based loans have no chance in the Islamic economic model. This profound economic system will be implemented under the Khilafah (Caliphate) State that will be re-established upon the method of Prophet Muhammad (saw).
Shaban Mwalimu
Media Representative of Hizb ut Tahrir in Kenya