Power of financiers versus power of the people

By Njongonkulu Ndungane,

Archbishop Njongonkulu Ndungane is the Anglican Archbishop of Cape
Town. This is an excerpt of a talk he gave in Montreal on Saturday.
It previously appeared in Business Day (South Africa) October 23,

Archbishop Ndungane was speaking at a Teach-In on Transforming the
Global Financial System, organized by the Halifax Initiative
Coalition to coincide with the meeting of the G-20 finance
ministers in Montreal (October 24-25). The G-20, set up "to promote
international financial stability, includes: Argentina, Australia,
Brazil, Canada, China, France, Germany, India, Indonesia, Italy,
Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey,
United Kingdom, United States of America, as well as the European
Union, the IMF and the World Bank.

For official information on the G-20, see the G-20 web site
http://www.g20.org). Additional information on the teach-in and
related topics can be found at the non-governmental site


THE G-20 meeting that was held in Montreal, Canada, at the weekend
offered an opportunity to the international community to reflect on
where both official and popular reactions to financial
globalisation are headed.

SA Finance Minister Trevor Manuel could not have captured the
dilemma facing the world more aptly when he left last month's
annual meetings of the World Bank and International Monetary Fund
(IMF) a day early, in the wake of disruptive demonstrations in
Prague, shaking his head: I know what the protesters are against,
I just don't know what they're for.

And indeed, what are we up against? The two consistent threads of
concern in relation to international finance are instability and
systematic injustice.

Manuel is well placed as a respected politician and chairman of the
IMF/ World Bank board of governors to influence reform to both
ends. His attempts at changing voting rights and governance in the
Bretton Woods Institutions, and his arguments for more debt relief,
are also to be supported. But they don't go nearly far enough.

In contrast, the parallel Montreal meeting of nongovernmental
organisations (NGOs) and social/church movements debated more
creative options, including exchange controls, a redirection of
domestic investment into productive activity and credit aimed at
those who most need it.

But for all these measures to succeed we must first define the main
constraints to social progress. These undoubtedly include the two
Washington institutions recently labelled by Harvard University's
Jeffrey Sachs as masters of deceit.

US Treasury Secretary Larry Summers continues to use his veto power
over top personnel in the World Bank. Two leading bank reformers
Joseph Stiglitz and Ravi Kanbur have resigned in disgust over the
past year. And the bank continues to impose full cost-recovery
requirements on even water supply, with the result that when
low-income households can't pay their bills they are cut off. As SA
has seen in KwaZulu-Natal, people then become more vulnerable to
expensive health ailments.

Last week, the US Congress considered legislation proposed by
progressive NGOs which would prohibit the World Bank and IMF from
imposing user fees on primary health care and education. I am
informed that Summers remains adamantly opposed to the bill and
will probably have it vetoed [ed.it passed Congress and Senate)

Reform while Summers holds veto power over IMF/World Bank decisions
is, it appears, utopian. That is why the global movement for
justice is making the case that Washington's financial boot, now
pressed against Africa's neck, must be lifted, even if that means
abolishing the bank and IMF.

Because many World Bank/IMF loans to Africa are channelled to repay
old loans and to import luxury goods for the elites, mobilising
domestic resources would be far preferable, even if that means more
expansive monetary policies as a substitute for foreign loans.

Through campaigning by the Jubilee 2000 movements across the world,
debt cancellation is also closer. The return of stolen wealth such
as former Nigerian dictator Sani Abacha's Swiss bank hoardings, and
reparations for what technically can be termed odious debts already
repaid, are also on the agenda.

If the World Bank, for instance, was serious about owning up to
past mistakes and malpractice, it would take responsibility for its
200m in loans to apartheid, its rejection of a UN general assembly
mandate not to lend to Pretoria in 1966, and the fact that $100m in
Eskom credits during 1950-60 helped expand SA electricity supplies
but only for white households, although the entire society repaid
those loans.

Surely reparations would help clear the bank's conscience?

In recent months I have raised the Swiss banks apartheid debt
directly with their government officials and I hope that instead of
waiting the five long decades they did before reimbursing Nazi
victims, we may soon see some kind of southern African reparations
fund for apartheid's victims to which Swiss and other European and
US financiers will willingly contribute. This initiative is
important as a disincentive for these banks to ever fund apartheid
or similarly despotic regimes again.

Commercial banks will always hesitate to consider moral issues, but
the World Bank's rhetoric on governance leads us to believe that
bank president James Wolfensohn may look at reparations more
seriously. Rhetoric is easy, however, and if moral carrots such as
the opportunity to provide reparations do not work, there is also
a stick.

Jubilee 2000 SA [South Africa] was one of the initiators of a World
Bank bonds boycott to defund the bank by having pension funds,
church and university endowments, and municipalities tell their
investment managers not to buy bank bonds.

Through such tough tactics the global movement for justice is
introducing social values to an economic system that often seems
topsy-turvy. But we also will recognise the importance of restoring
national sovereignty over capital flows. To that end, debates
continued this weekend over the apparent success of Prime Minister
Mahathir Mohamad's exchange control system in Malaysia, endorsed by
some leading economists.

A Tobin tax of 0,5% on international financial transactions was
recommended by the Canadian parliament last year. SA lags behind,
having dropped its main capital control the rand in 1995, at the
expense of seeing much wealth immorally accumulated during
apartheid leave the country and leaving our currency extremely
vulnerable to the kind of havoc experienced in early 1996,
late-1998 and at present.

And as for mobilising our own internal development finance
resources, everyone now recognises that government has been
lackadaisical in regulating banks to serve society's interest. The
marches against financial injustice in SA on Saturday, catalysed by
the SA Communist Party, may have forced authorities to finally gain
the political will to stiffen a spine that has so far bent over
backwards in the bank's interest.

At the end of the day, this is about power: the power of
international and local financiers and allied bureaucrats versus
the power of people. I have been through such a power struggle once
before and will be with the global movement to the end of this one.