Blog Action Day: Poverty and Finance

Today has been proclaimed Blog Action Day – when thousands of bloggers from every corner of the world write something to draw attention towards global poverty. At Jubilee Debt Campaign blogging against poverty isn’t unusual, but I’m going to use this year’s Action Day to make some connections between poverty and what’s foremost in the news – the credit crunch.

We have another name for the credit crunch – a debt crisis. The credit crunch has been explained as a lack of liquidity, or credit, available to banks on the international markets. Inject these markets with enough liquidity, restore lenders’ confidence enough to start lending again, and everything will come right. Hence the gigantic bail-out packages.

But actually the problem is less one of available credit, and more a massive over-accumulation of debt – much lent in a reckless way, like sub-prime mortgage debt, and packaged up in such a complex manner that no-one is quite sure how much or how bad the debt they hold amounts to – how ‘exposed’ they are to ‘toxic’ debt. Hence the loss of confidence.

Some commentators, like former head of Jubilee 2000 Ann Pettifor, have been predicting a ‘First World Debt Crisis’ for some time. These warnings went unheeded by a financial sector which has got used to having everything it’s own way.

This bears a strong resemblance to the debt crisis that the debt movement has been campaigning to end for 10 years. As today, banks in the 1960s and 70s lent huge amounts of money, in ever more complex and inventive ways, to developing countries. When interest rates soared and commodity prices fell, developing countries could no longer repay. The debt crisis was born – and 20 years later the world has still failed to learn the lesson.

Today developing countries’ debt stocks stand at a staggering $2.9 trillion and every day the poorest countries pay the rich world almost $100 million in debt repayments. Many countries in the world have been going through a financial crisis for more than 20 years.

Then, as now, many banks were effectively bailed out as the World Bank and other ‘multilateral banks’ gave new loans to pay off their old loans. But as the banks took the money, the poorest people in the world were still indebted – still couldn’t access health care, education or social security because their governments had to allocate such enormous sums to repaying old debts. Many countries remain in that state today.

We need to make sure that this time the financial sector is made to learn the lessons; that this time it is not the poor – in the developed or developing world – who pay the price for the recklessness of a few.

The answer isn’t ever greater freedom for the financial sector but greater regulation to make sure the financial sector is at the command of society rather than the other way round.

End Poverty Now forum - what next?

Anti-poverty campaigners gathered in Central London on Saturday for a forum to discuss what today's global crises (the financial crisis, the food and fuel crisis, and climate change) mean for campaigners against poverty. Were you there? If so what did you think?

Photo: Benedict Parsons/BOND

Unsurprisingly the financial crisis dominated, and speakers and activists talked about using it as an opportunity to explain how the overwhelming power of the financial system has been the cause of so much poverty and inequality in recent decades. There was a call for urgent regulation which would hold the financial sector accountable to democratic institutions across the world.

Tony Juniper (former head of Friends of the Earth), Celine Tan (the Third World Network) and Nick Hildyard (the Cornerhouse) showed the inter-connectedness of the crises the world is now facing and spoke of the necessity of going well beyond a single issue approach to campaigning. The anti-poverty movement needs to understand and convey the connectedness of the crises we’re facing – allowing ordinary people to understand how our actions or failure to act can impact on the developing world for better or worse.

A series of papers discuss these links in more depth:

• Tony Juniper and others, A Green New Deal report, July 2008
• Nick Hildyard, A (Crumbling) Wall of Money: Financial Bricolage, Derivatives andPower, 9 October 2008
• Jubilee Debt Campaign, The debt crisis and the credit crunch, October 2008
  

The afternoon was dominated by a discussion of whether current anti-poverty campaigning was up to the task of combating the crises faced by the world. Speakers from Make Poverty History North East, Leeds University and the Climate Camp argued for better working together by activists at a national and local level across a range of different issues, including better provision of educational resources and other means of empowering local activists.

There was widespread agreement that we must join the growing call for a radically restructured financial system, and ensure that any reformed system will place people and the planet at its core. We couldn’t afford to wait for months or years to join this call – immediate action is necessary.

The conference described itself as a starting point – to allow us to start conversations and actions which will strengthen the anti-poverty movement. It achieved that but real progress depends on others getting involved to reinvigorate and broaden the anti-poverty movement.

The networks who organised and supported the day include: The Global Call to Action against Poverty, Jubilee Debt Campaign, Trade Justice Movement, Stop Aids Campaign, Stamp Out Poverty, and Stop Climate Chaos.