I sympathise with the Chairman on the death of his uncle whom I knew and who was a charming man. I also thank Mr. Bradshaw for his presentation.
A comprehensive response to the issue of debt has to come from an integrated vision of the current position of the poorest countries, which includes not just debt but trade and aid. The fact of the matter is that many of the commitments now being made are done so out of sums that were previously committed. This is a real difficulty. Aid has been falling for ten years. If we take the aid-trade-debt corridor, less than €19 billion goes towards the south, while about €39 billion goes north. If we are creating permanent inequality through unfair trade and if we do not deliver on the Doha round, we will make the circumstances on the ground worse for the poorest countries. This sub-committee would provide an important function if it decided to prioritise the monitoring of the sums that have been pledged for the achievement of the eight millennium development goals in September 2000. The HIV-AIDS element of those development goals is somewhere around 40% of what was pledged.
Mr. Bradshaw has also drawn our attention to something else. This is the need for accountability not just from the poorer nations, but also from the countries that are making pledges. The HIV-AIDS component of the eight millennium development goals is at less than half of what is needed to achieve the target by 2015. Other aims include universal primary education by 2015 and they are all receiving less than the pledges made. There is an issue here of bad faith. In fairness, Irish aid is untied. However, a great proportion of the aid promised by other countries is very heavily tied. It distorts the indigenous economy and also represents a form of hidden exports. It frequently includes matters that are very deeply damaging to the relationship between developed countries and the wider world.
However, I do not want to seize the positive moment that exists. If the communiqué from the G7 did not go as far as many of us wanted on debt cancellation, it nevertheless creates an atmosphere and if our resources are put into an analysis of the debt at this time, then very significant gains can be made. It is nearly quarter of a century since I looked at this issue of debt and odious debt. In 1981-82 in Nicaragua, I recall the then Government discussing the burden that was placed on people, who were trying to construct a post-dictatorship society, by being required to pay the debts of the Somoza family. Look at where those debts went. Here I am 25 years later and I get lectures on poor African countries who do not know how to use the aid that they receive. Part of the money allocated by the international financial institutions to the Somoza family was spent in Florida. It was regularly used as seed money for the international drug industry. However, we will move on.
I agree with Mr. Bradshaw on the concept of odious debt. We should take the entire debt profile and break it into its different categories. The US always uses gross figures for its aid as it is political to do so. Its aid is at 0.12% of GNP. It is therefore at the bottom of the list. The Bush Administration accompanies its gross figure announcement with the statement that it cannot support Gordon Brown's initiative because it feels that civil society must be reformed before we can safely speak of initiatives. What about the accountancy that gave us Enron and other funds and that destroyed the pension funds of millions of workers? What if that was put in as a conditionality by the international community? There would probably be outrage. I am not convinced by that American argument as it is specious. We are all in favour of civil society reform and accountable economics.
How many countries in Africa are spending more on debt service in 2005 than they are on the combined health and education budget? I have done my sums on that and there is an achievable issue. Let us take the example of the HIPC a few years ago and what happened to them. They have slipped back into indebtedness and in some cases are looking forward to even greater indebtedness. There is a point that is achievable. No country which is in that category should be spending more on debt service than the combined health and education budget. Where initiatives have been established in countries for health, education and necessary basic infrastructure, it is possible to construct macro-economic schemes for them. That is where we should look at the issue. If the sustainability of the debt is incapable within three or four years, then that is the case for debt cancellation. It is not the case for debt rescheduling. Someone in the Dáil who does not even have time for economics could still identify countries that are appropriate to fill that category. I saw a piece in the newspaper yesterday about the change in succession of a small poor African country. The suggestion that one can mock the manner of succession in an African country and say that we were going to wait to address the issue of debt until the countries have reformed themselves into something that resembles us is to condemn these countries. There is a deep cultural, near racist bias at its base. I find that unacceptable.
I want to respond to Mr. Bradshaw's comments on the Madrid conference. I looked at the pledges at the conference and I entirely agree with him. A figure of €33 billion was announced in aid out of €127 billion which was needed in reality. However, following the Madrid conference, Falluja was razed to the ground only for contracts to rebuild it to go to private contractors, provided one was registered in the United States. It is an absolute scandal that cities were razed to the ground following the international conference on reconstruction.
I will refer to the debt issue in the context of the tsunami. The sub-committee should have had an earlier report in regard to what is being pledged to the UN special estimate on south-east Asia and what is needed. The assessment of the United Nations Secretary General is that approximately 30% of the much publicised pledges are available, and less hard cash. We are not talking about an auction in moral superiority. I am 20 years in the Dáil and can see that the fault in this, even in Ireland, is a kind of thinking that is not linked up.
Last year, we were close to getting the officials responsible for finance, trade and industry and those involved in development to meet regularly to achieve an integrated approach to the issues arising in regard to aid, trade and debt. However, we are far from having an integrated approach. In the Dáil, for example, we need a debate on the statements made by and to the IMF on our behalf. We need more openness and transparency.
These are not just academic matters. The Irish public and publics all over the world run faster with their sympathy for what they see on television, which is always a good thing. However, to draw an important conclusion from that, the public must be told that what is pledged must arrive, and that this must be additional and must not interfere with the attainment of the eight world millennium development goals. The public must begin to move in an evolutionary sense to a point past the present neoliberal economic model.
I lectured on monetary economics when I was 26 years old and I am delighted there is a return to interest in gold reserves; I thought it had gone like my youth and that no-one would talk about gold reserves any more. I remember explaining the Kuwait gap and that kind of thing. With regard to the revaluation of the IMF's gold reserve, which was used already in regard to an arrangement between Brazil and Mexico, there lies a wonderful opportunity of raising new net and additional funds which could begin at the bottom category of the most vulnerable indebted countries and move its way up. However, I warn against the real opposition, which comes not particularly from the Department of Finance but from its colleagues internationally which cling to the shreds of the neoliberal model.
I was once illiterate in economics but know that after the Second World War we lived through several decades of Keynesianism. This was followed by decades of tragedy, influenced by Friederich von Hayek and others in the 1980s, resulting in a gross, crude individualism that distorted the subject. At the end of Keynesianism, intervention had given us health and security, concepts of citizenship, good education and so forth. However, the countries that need aid, trade and debt relief are being refused anything like a Keynesian moment, and are obstructed by the requirements of the IMF in constructing their economies. They are under pressure from the WTO to take imports that are totally in conflict with their capacity to do so — rice is a good example in this regard. While I am supposed to be talking about relieving debt, I know that the right to have a chicken farm in some of the countries I visited in Africa is regarded as being in breach of WTO rules. This highlights the case for having an integrated approach to aid, trade and debt.
I do not want to go on without saying something positive, namely, the Government should lend its assistance to driving the Gordon Brown initiative, even if the United States is not involved. The Government should make specific proposals for opening a new transparency charter in regard to the IMF publishing its papers. It is important the Government is not hesitant on the basis that because it is not owed debt it is any way precluded from having an opinion. These are global moral and economic issues.
An offensive piece of rubbish was published in one of the newspapers yesterday — I do not want to mention the author's name — concerning what happens when debt relief is provided. Debt relief works. For example, I have given a suggestion in regard to the concept of sustainable debt and we can point to the achievement of universal primary education, water irrigation schemes or infrastructural schemes.
Let us have an end to the neo-racist prejudice, based on ignorance, that regularly suggests that if debt relief was granted it would be abused. I am not required to justify undemocratic regimes in Africa or Asia. After 20 years of involvement in this field, I can state that the international monetary institutions found it very easy to lend to dictators and authoritarian and military regimes, and then to go after the post-dictatorship societies for the repayment of those funds. The region that provides the best in-your-face examples of this process is Latin America.
One can turn the latest version of this argument around to state that Africa is inherently unsuited to a democracy model, and many of the colonial countries state they know best because they were there. This must stop. Debt relief will work. It can bring major change in regard to the most basic conditions such as child survival. Some 19,000 children per day would have survived if 1% of the funds of seven African countries had been shifted from debt service to health expenditure. How can this ever be justified? Ignoramuses write articles stating that the money will be spent on banjoes, white uniforms and braid etc. which would be bought in the western world.
Debt relief will work but we need clarity on the distinction between debt cancellation and debt rescheduling. The statements made post tsunami in regard to the debt component of the response showed how confused is this distinction. Debt rescheduling in a society that has lost all its infrastructure is totally inappropriate. We are intellectually challenged on this. While there are cases where debt rescheduling is appropriate, I do not accept the argument that it is intellectually impossible to distinguish where debt cancellation or debt rescheduling is appropriate.
With regard to the new conditions, there is need for reform in the general relationship between debtors and creditors in regard to the procedures and transparency of the existing creditor dominated relationships in the context of debt and the Paris Club. With regard to the HIPC countries, the conditions accepted led to seven of the 14 countries qualifying. We need to ask why this was so and reconsider the crudity of the criteria used. Uganda has a debt that amounts to 250% of its exports. Ethiopia, where matters are deteriorating as we speak, has a debt burden of 200% of its total exports. This points to the need to return to the HIPC initiative and to put a better system in place.
A reform programme that is too strict, and not matched by a generous debt cancellation and restructuring programme, may make the emergence of a new economic entity impossible. From an academic standpoint, if ever there were a continent that could benefit immediately from a new type of economic theory, it is Latin America in regard to classical Keynesianism. For many of the African economies, neo-Keynesianism would bring about the desired economic structures.
However, in most of the heavily indebted countries in Africa, little less than direct state intervention and the allowance for that in every programme and the cancellation of debt, which will enable sums to be spent on direct provision in health and education, are probably the only means of achieving this. In Benin, for example, 43% of debt relief was spent on the hiring of teachers. There is a major difference between a country that spends almost half of what it receives in debt relief on hiring teachers and what one might read in a column about black, ignorant Africa and its oppressive military dictators.
The time has come for many of us who have been involved in this area for a long time to simply call a halt to the type of statements that suggest, for example, that aid can be increased but there is no guarantee it will be spent properly, or that better trade practices cannot be allowed without the world moving into a deep recession. What about the economy that has the largest deficit in the history of the world and its effect on the global economy? We will accept no lectures from that side.
This is the best possible moment to achieve everything we desire on the issue of debt. People have been stirred by the use of television to show the devastation suffered by five countries in the recent tsunami. I was in Somalia at the time of the famine, a fortnight before the former President, Mary Robinson, arrived there. Representatives of the international community wanted me to lift starving children in my arms in order that they would get a shot. Afterwards, however, everyone walked away from Somalia.
A new and sustained approach is needed. The Department of Finance should come out and openly present itself as an innovator, strongly supporting Mr. Gordon Brown and ignoring any suggestion that the foot-dragging by the United States — which contributes 0.12% of GDP in overseas development aid — on this issue requires any support from us. We should stop this nonsense of reeling out figures in the Dáil and Seanad or in committees such as this. We are contributing 0.42% of gross national income. I hope we get to 0.7%, as we promised, but I do not want to hear any more of these gross figures. These figures are used by those countries which wish to conceal that they are spending so little — 0.12%, for example — on overseas aid.
The combined NGOs have produced a very good paper, which shows in one of its appendices the precise annual cost to donors to 2015 in regard to the consequences of debt relief, and the annual cost per capita. This is the approach we must take and I am hopeful because there is a positive atmosphere internationally in this regard. I wish the Department of Finance well in its attempts to break away from the club and opt for a radical innovation in supporting debt relief by issuing regular statements and seeking debates in the Dáil. The Department will have my support for all that. I thank Mr. Bradshaw for his very good presentation. Now is the time for us to take this issue seriously.
