I.O.U.
Noreena Hertz
The Debt Threat and Why We Must Defuse It
To Jonathan, Arabel and David
Thank you so much.
Table of Contents
CHAPTER TWO It’s Politics Stupid
CHAPTER THREE Backing the Bad Guys
CHAPTER FOUR Pushers and Junkies
CHAPTER FIVE Traders and Vultures
CHAPTER SIX Grey Men in Grey Suits
CHAPTER SEVEN Stop Not Making Sense
CHAPTER EIGHT Can’t Pay Won’t Pay
CHAPTER NINE A Plague On Both Your Houses
CHAPTER TEN It’s Not Just Osama
CHAPTER ELEVEN Truth, Reconciliation and Regeneration
‘And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubilee unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family.’
Leviticus 25:10 – as partially inscribed on the Liberty Bell
‘Who’s the Elvis here?’ asked the rock star impatiently. The question reverberated through Leslie Gelb’s book-filled office in the beaux-arts brownstone that houses the Council on Foreign Relations. The exasperated tone came from a man accustomed to addressing stadiums filled with fans hanging on his every word and syllable but it was far from an arrogant question.
Gelb had just finished his tutorial on the American power structure by laying out the great chain of influence – from David Rockefeller to UN Ambassador Richard Holbrooke to US Treasury Secretary Robert Rubin to former Chairman of the Fed, Paul Volcker to a number of key Republicans – that led from Wall Street to Washington and back again. Which only served to remind Bono that he was aiming to play in a very different league. Paul McGuinness, U2’s manager, had only just admonished him that it was one thing to lobby for the debt cancellation cause at music industry events but quite another to pilot the issue through the American political process. With these words still clearly ringing in his ears the star tried to find a shortcut towards his goal.
‘You know I’ve got a day job?’ asked Bono half jesting. It was entirely possible that the decidedly un-hip Gelb, then President of the United States’ premier foreign policy think-tank – a place that played host to many self-important investment bankers, foreign service officers, journalists and academic wonks but no conventional celebrities – had no idea why the young man was important.
But Bono’s attempt at humour cut him no slack, Gelb leaned across to him and repeated in rasping tones (he had lost his voice that day) that any one of the names he’d just listed ‘could basically stop this idea from getting off the ground.’ And if Bono truly wanted to get the United States to cancel all the debts owed to it by the world’s poorest countries, not to mention get the US to provide funds to cover monies owed to the World Bank, the IMF and regional development banks, he would need the support of every one of these American dignitaries – and that was just the beginning. Gelb broke the news that there was no single figure with enough clout to pull off such a complicated – and politically inert – manoeuvre. Developing world debt was a diverse issue with many constituencies. For the US government to orchestrate debt cancellation would require the kind of unanimity rarely seen in such a partisan climate. ‘There is no Elvis,’ Gelb finally answered, and ushered the rock star firmly out of the door.
Gelb had been right: there was no Elvis and there were no short-cuts. Eventually Paul Hewson, the Irish singer revered by millions as Bono, would travel back-and-forth across the Atlantic Ocean 30 times, painfully assembling a coalition from some of the world’s least sentimental politicians. After a year and a half beseeching and cajoling, he arranged for a dozen prominent Democrats and Republicans in Congress and the Clinton administration to support a package that pledged to cancel all the debts owed the US by the world’s 33 poorest nations, as well as cover part of what they owed the World Bank and IMF. It was the culmination of the first – and last – serious attempt by the ordinary people of the West to force politicians to address the painful legacy of Third World debt.
But what was it about the debt of developing countries that motivated Bono to go to so much effort? Aren’t all countries in debt? The United States certainly is. It owes $3 trillion, around 10 times what Africa owes, but Bono wasn’t campaigning to cancel that.
The difference is this. The US may be the world’s most highly indebted nation, but it can afford to service its loans, for now at least. The world’s poorest countries in Africa, Asia, and Latin America cannot. Because to do so they have to pay an unacceptably high price, mainly at the expense of their poor or sick. Botswana, in which 40 per cent of adults are now HIV positive, pays more today on debt servicing than it can afford to pay on health care or provision. Niger, the country with the highest child mortality in the world, continues to spend more on debt servicing than on public health. Countries that can’t afford to provide basic health care, education or shelter to their people have to