Global South demands immediate end to debt

Adebt or die – Global South debt cancellation can start the revolution that we need to stop climate change

© Alice Pasqual - Unsplash

52 countries in the Global South are in a debt crisis, and many more on the brink. Debts to the Global North with unrealistic interest rates are often to blame. In the face of the climate crisis and the cultural and historical debt of Western colonialism, an inspiring and fast-growing movement is now calling for the unconditional cancellation of all debt owed by the Global South.

Adapting to a world dominated by the consequences of climate change is not easy. Above all, it is expensive. Countries in the Global South are often at the forefront of the battle against the warming climate – despite being least responsible for it. A 2020 study by Lancet Planetary Health shows that the Global North is responsible for 92% of the worldwide carbon emissions.

Many Global South nations are not financially prepared for the extensive adjustments that now need to be made to deal with the climate crisis. Rising food and energy prices as well as the Covid-19 pandemic have pushed many countries into a debt spiral. But “tackling natural disasters, and protecting the environment are the single most significant causes” for debt increase – this was established by Mia Mottley, the Prime Minister of Barbados and a political advocate for a climate financial reform.

According to a study by Debt Justice UK, 54 countries are now in debt, 52 of them in the Global South. And at least 43 other countries are on the brink.

Climate debt drives wildfires

To avoid total bankruptcy, many countries in the Global South are forced to borrow from the World Bank or the International Monetary Fund (IMF). But these loans are far from cheap or charitable, as many come with interest rates so high that they are almost impossible to repay.

At the root of these debt traps lie colonialist dynamics that, even in the 21st century, continue to underpin transnational relations. Debt is a strategy of control and oppression and allows an exploitation of the Global South under a financial pretext.

The international movement Debt For Climate, initiated by countries of the Global South, wants to put a stop to this. Recognising the colonial roots of the debt system, they demand a complete cancellation of the debt of the Global South. “Financial colonialism is the foundation of capitalism. Financial colonialism is the colonialism of today”, asserts Esteban Servat, one of the founders of Debt For Climate, in a lecture at the Research Institute for Sustainability in Potsdam, Germany.

According to Servat, who was born in Argentina but is now based in Berlin, Eurocentrism and the colonial debt traps are not only holding back climate action by financially draining countries in the Global South – they are actively aggravating climate change by practically forcing emerging and developing economies to continue with the extraction of fossil fuels.

The Argentina Example

Only in 2022, Argentina took out a loan from the IMF over the vertiginous sum of 44 billion US-Dollar – an agreement that, as even the IMF admits, comes with risks that are “exceptionally high”. According to a report by Reuters, this marks the 22nd programme signed between Argentina and the IMF.

This deal is supposed to replace a failed 57-billion-dollar programme from 2018, but for which Argentina still owes more than 40 billion. Clearly, the loan offered by the IMF is but a drop in the bucket for Argentina, and a direct route down the ever-winding debt spiral.

In the midst of such a debt crisis, Argentina’s social infrastructure – health care, education, public facilities et cetera – is dwindling. Poverty, malnutrition, and increased criminality are concomitant effects of the economic crisis.

“It is unbelievable that anyone in the world, especially governments of Europe, could believe anything that they are signing with their counterparts in the Global South”, says Esteban Servat. So why are completely unrealistic debt deals like this still happening?

The answer to this is as simple as it is unexpected: cheap gas. Argentina has huge shale gas reserves, such as the Vaca Muerta (“Dead Cow”) Field in the west of the country. But not only South American companies are exploiting these. Germany’s largest crude oil producing company Wintershall – a rather unknown energy giant – has been operating fracking and other methods of fossil fuel extractions in Argentina for the last 45 years.

Fracking, also called Hydraulic Fracturing, is a method of extracting natural gas that involves pumping large quantities of water, sand and various chemicals into the ground at high pressure. Because of the collateral contamination of the groundwater and air pollution, fracking was banned in Germany in 2017 despite the local shale gas reserves. But instead of ceasing these operations altogether, Wintershall has simply outsourced this dangerous energy enterprise to a Global South country, which simply cannot afford to say "no".

Right now, in October 2023, Argentina is on fire. Dozens of houses had to be evacuated due to several fires in central Argentina. Last year alone, the country lost around 561,164 hectares of land to wildfires. The seasonal droughts that scorch Argentina and other South and Central American nations have worsened in recent years, which experts link to climate change. As long as no real changes are being made, catastrophes like this are going to increase in number and intensity.

Who owes whom?

Recounting the colonial history, Servat asserts: “Europe is the result of the exploitation and enslavement of most of the world over the last 500 years.” Since the North pays much less for Southern imports than for local goods and services, it “continues to impoverish the South”, Debt for Climate state.

In the light of this, cancellation is not just about climate action, it is also about establishing global justice. The Global North has built its wealth on the exploitation of the South. Now it is not only high time for this exploitation to stop, but for the North to repay this cultural and historical debt to the Global South.

Debt For Climate are taking these issues to the streets. On October 12th and 13th, two simultaneous protests in Berlin and West Germany’s former capital Bonn created awareness for the growing movement. In the early morning of the 12th, activists placed two concrete blocks in front of the Ministry of Finance in Berlin.

The bigger one, which is about 1.70 metres in height and weighs over a ton, has the words “Climate and colonial debt of the Global North” written on it, whereas the smaller one only about 40 centimetres high, reads “Financial debt of the Global South.”

The protest raises the question: Who owes whom?

_Fracking © Yuan Chen - Unsplash _

A realistic, global venture: Debt cancellation can really work

Ironically, Germany has its own history of debt cancellation. After the Second World War, half of its debts were cancelled in the 1953 London Debt Agreement. Why? An economically strong West Germany was needed as a “bulwark against communism”.

This shows that debt cancellation is nothing new. It has worked in the past, and it can work again – especially when there is more at stake than keeping a country out of communism.

What’s more, a complete debt cancellation would not harm the working class of the Global North. The livelihoods of people in the Global North do not depend on debt repayment.

Debt cancellation primarily affects banks or other investors – those who hold the debt. They would lose a part of their property, but given the fact that in many cases the initial amount borrowed has already been repaid, sometimes over and over again, in the form of interest, the financial loss would probably be manageable. Those not holding debt, as is the case for the working class of the Global North, “wouldn’t’ feel anything.”

In fact, debt cancellation is one of the only tangible options for starting the system change that is necessary to limit global warming to 1.5°C. Financial justice is only the beginning: take this idea further and it lays the foundation for social justice and global climate action.

The ecological exploitation of emerging countries would be stopped, billions of tons of fossil fuels would be left in the ground. Debt cancellation could be the first step in a global movement which is determined and capable to stop global warming – without anybody being harmed, exploited or left behind.

Think of debt cancellation as a domino that can set off a chain of reactions – all it needs is a little push. That push, as Esteban Servat makes clear, must come in the form of activism and protest.

The Friday for Future movement, as well as Extinction Rebellion, have shown that it is possible to move millions of people. But Debt for Climate pushes climate activism beyond a Eurocentric bubble, while providing a concrete starting point for political action.

“I think this campaign is revolutionary”, Servat ended his lecture with the Institute for Sustainability. “I’m really glad to be a part of it and I hope that all of you will join us. I will see you on the streets.”

Feel inspired? If you want to support the movement to cancel the debt of the Global South, take a look at this petition.