Debts have pushed developing countries in the 70ies to the edge. The increase of the oil price drove many countries of Latin America and Africa into the debt trap. Even eastern European countries were dependent on the capitalist system. In the early 80th the indepted Poland was forced by the International Monetary Fund to accept the so called structural adjustment programs. The consequence was that workers were squeezed, says Wallerstein. That sparked the Solidarnosc movement in Poland. At the same time Ceausescu in Romania was considered the model boy by the IMF as he paid back the debt while the Romanian government cracked down on its own citizen. Later corporations, states and consumer got indepted, too, accompanied by bursting bubbles.
Immanuel Wallerstein, Senior Research Scholar at Yale University, USA. Co-Founder of the World-Systems Theory, President of the International Sociological Association from 1994-1998 and Author of numerous books
David Goessmann: Africa is still the poorest continent in many aspects and marginalized in world trade for example. Why is that so? Which role did the debt crisis in the 70ies and 80ies play?
Immanuel Wallerstein: Well, the depth crisis of course was devastating. The debt crisis is step two. Step one is when we have a rise in the price of oil, a very serious rise in the price of oil, which is a way of restructuring the flow of surplus value to oil-producing states. Those states that weren’t oil-producing, which was most of African states, found that their national income had gone down significantly because they had to pay a lot more and the items that they sold, given the decline in world production, brought in less income. So, the money that was accumulated in the oil-producing states couldn’t be spent. It was put in banks and banks were in large the in Germany and the United states. What these bankers did - you have to have this image, it’s quite incredible - the banks sent out representatives to meet the finance ministers across the world. They were saying; you are having balance of payments difficulties, we’ll lend you money, ok? We’ll lend you money. Now, they lend them piles of money. Obviously, the finance ministers were going to accept this money because they otherwise would have had political difficulties in their countries. So that was very simple, except that debts have the nasty habit of wanting to be paid back, especially since they build on themselves. The depth crisis comes when countries have to begin to pay back the debts. It’s usually stated that the debt crises began in Mexico in 1982. This is incorrect. The debt crisis begins in Poland in the 1980s. The debt crisis - what has the polish government - which is a great borrower, most of the east European states were great borrowers in this period and not just African states and not just Latin American states but east European states and what happened was that the Polish government at some point couldn’t pay the debts. So, what did they do? On their own they decided on the policy which the World Bank would recommend. They decided to squeeze the workers. It’s as simple as that and the same thing that happens in Mexico in 82. But because people in the West were so incapable of realizing that the east European countries were part of the capitalist world economy and were borrowing money the same way as the Latin American countries, they simply couldn’t understand that that was what solidarity was about. It was a workers rebellion against a state that was trying to squeeze the workers in order to pay back the debts. And it’s interesting, people forget, in the 1980ies the International Monetary Fund had a list of good boys and bad boys and the leading good boy in the world, the best boy was Romania. Because Romania was paying back all its debts. And of course…
Fabian Scheidler: Squeezing the people?
Immanuel Wallerstein: Yeah, squeezing the people and of course, you know what happened in Romania. In the end Ceaucescu is thrown out in a most violent way. But, so, the debt crisis is actually the first of the bubbles that bursts in the history of the bubbles that go on from 1970 to our day.
Fabian Scheidler: And after the debts crisis there is structural adjustment?
Immanuel Wallerstein: Well, there was structural adjustment and then… But if you want to look at it, you have to look at it as who gets indebted next. So what happens after getting third world countries and eastern European countries to borrow money which they can’t pay back? So, that’s the first debt, a group of debtors. The second group of debtors is the junk bonds. What are junk bonds? Basically it means that the corporations are borrowing enormous amounts of money which they can’t pay back. They liquidate the corporations and that makes a lot of money for some people, of course. But it destroys those industries or corporations. Then there is another group of indebted people which is the US government which begins to be indebted. Then there is the individual debtors all over the world which culminates in this problem of the housing burst. Now we are getting finally the states, which are borrowing money like mad and are finding it impossible or will be finding it impossible to pay back their debts.