John Perkins, the economic hitman, discusses what a debt to the IMF means. Gives an idea of what the announced deal for Lebanon will mean.
Chomsky on the IMF
But that’s not the way the international system works. If a bank makes a loan to, for example, General Suharto of Indonesia or some Argentinian neo-Nazi, and they know it’s risky, they use high interest rates to get a return on it. The bank makes plenty of money, and the debt stays about where it was. If then at some point Indonesia, Argentina or whoever it is can’t pay the debt, it’s not the bank’s problem because at that point the International Monetary Fund (IMF) steps in. The IMF was described accurately by its American Executive Director as the ‘Credit Community’s Enforcer’. That’s what the IMF is – now what does the IMF do?
Well, money was actually borrowed by General Suharto – the most corrupt dictator of the modern period by far (as estimated by the British organisation Transparency International). He took loans, he enriched himself, he enriched his other friends, and so on. Indonesia can’t pay off its subsequent debt, so who’s supposed to pay it? Poor people in Indonesia are paying for it – they’re subjected to Structural Adjustment Programmes – so they get strangled in order to pay off the loans that they never borrowed in the first place. Meanwhile, what about the rich banker here? Well, you know, he’s not going to accept any risk – he has to be paid off by Northern taxpayers via the IMF, who make sure that the investors and lenders don’t have any problems.
So the system works by the combination of imposing the debt – which they didn’t borrow in the first place – on the poor people of the South primarily, and to a secondary extent on Northern taxpayers. That’s called Third World debt. Why does this scam even exist? There probably is no Third World debt if we adopted just elementary capitalist principles. It’s a power system. And in fact sometimes it’s even worse.
One of the most highly indebted countries in the world is Nicaragua. Its huge debt comes from two sources. The one is the US war against Nicaragua which practically destroyed the country in the 1980s. And the second is the enormous corruption – unbelievable corruption – of the governments that the US instituted in the 1990s, and have been running the place ever since. So between them there’s a huge foreign and also a huge domestic debt. Is that the fault of the people of Nicaragua? What did they have to do with it? They’re the victims.
Try replacing “Nicaragua” with “Lebanon”