Why Pakistan’s debt should be cancelled

I’m reposting a position paper on debt retirement that was issued at a press conference in Islamabad today.  In attendance at the press conference were representatives of the Workers Party of Pakistan, the Labor Party of Pakistan, and several others.

For every £1 the rich world gives to the developing world in aid, the developing world still pays back £5 in debt repayments.


A summer of unprecedented torrential floods has wreaked havoc on Pakistan. Physical infrastructure worth tens of billions of dollars has been destroyed, countless eco-systems devastated, and entire districts cut off from major communication and transport routes. It is conservatively estimated that 20 million people have been directly affected and the livelihoods of countless more destroyed (17 millions acres of agricultural land). Speaking at the United Nations, the federal minister for foreign affairs claimed that total damages caused by the floods are in excess of US$43 billion, which amounts to no less than 25% of Gross Domestic Product (GDP).

International aid commitments in the aftermath of the flooding have been sluggish. It is said that Pakistan has been in the international spotlight for so many years now that a case of ‘donor fatigue’ has set in. Nevertheless, high-powered missions of the World Bank and Asian Development Bank (ADB) have already come and gone in the wake of the floods and decided to re-direct up to US$3 billion of their existing assistance packages towards the flood relief effort.

A number of high-ranking UN functionaries have said that more money needs to come in. In fact, the reality is that the amount of money leaving Pakistan has consistently exceeded that coming into the country, notwithstanding the numerous ‘assistance’ packages that are designed and executed by bilateral and multilateral donors. The economic policies of successive governments since the 1980s have facilitated the easy entry and exit of ‘hot’ capital to the detriment of the needs of the country’s people. Even when remittances have been high – as was the case in the years following the September 11 attacks – a large amount of money has flowed out of the country as investors look for windfall gains in the stock and real estate markets before shipping out.

However, the resource drain has a much longer history than 10 years – Pakistan’s dependency on private commercial banks and the international financial institutions is written into the global capitalist structure. During the colonial period the political economy of the territory that is present-day Pakistan was engineered in such a way as to ensure a permanent state of productive backwardness and financial dependence on the industrialized economies of western Europe and north America. Following the departure of the British in 1947, Pakistan’s economic dependence grew even more acute due to its insecurity complex vis a vis India which led to the establishment of a national security state and the under-nourishment of democratic processes.

In its initial years the state secured some bilateral grants which eventually gave way to loans and increasingly harsh interest obligations. However the real debt curse was to be inflicted by the multilateral aid agencies. While various governments throughout the 1950s, 60s and 70s did take loans from the WB, ADB and International Monetary Fund (IMF), the policy-based lending that began with so-called ‘structural adjustment’ programmes in the 1980s has exponentially increased the debt burden. In 1970 Pakistan’s total debt servicing burden as a proportion of export revenues was 7.45%, a figure which went up to 35.40% by 1997.[1] While in 1980, 62% of all foreign assistance was in the form of grants, by 2000, grants constituted only 21% of the total.[2]

Needless to say this debt burden has been borne by the working masses in the form of subsidy cuts, regressive indirect taxes, and a general shift towards jobless growth. While worker’s remittances have partially offset the huge outflow of resources since the 1970s, the debt burden has risen exponentially over the past two decades. In 1990 total external debt was US$21.4 billion, a figure which had risen by 2010 to a staggering US$55 billion, an increase of 157%. As a result of this growing burden, which has been exacerbated by numerous adverse factors such as un unsustainable oil import bill, the spread of imperialist war into Pakistan, and the continuing stranglehold of anti-people neo-liberal policies, the Pakistani people have been plunged into economic and social freefall. If the debt burden continues to grow more onerous after the devastation of this summer’s floods, the country and its people could face descent into a never-ending abyss.

The Political Context of Debt

Debt never functions as a ‘neutral’ policy tool, and particularly not in Pakistan. The vast majority of the country’s debt has been contracted during the illegitimate rule of military dictators. The trend was established during the Ayub Martial Law regime. Prior to 1954 (when Ayub Khan became Defence Minister), Pakistan had received virtually no foreign aid, despite its desperate appeals to the western countries. By 1968 Ayub had been in power for 10 years and was the blue-eyed boys of the western countries for his participation in anti-communist pacts; his reward was foreign aid totaling US$4.7 billion, which was equivalent to 50% of total imports and 34% of total development expenditure.[3] The rosy predictions of Pakistan being a model of third world development notwithstanding, it was already apparent by this time that Pakistan was paying for the ‘aid’ it was receiving: foreign sources accounted for 3.24% of total capital receipts in 1955-60 and 52.57% by 1966-7.[4]

Through the 1970s foreign aid packages were sparse. However the heavens opened again following the coming to power of General Zia-ul-Haq in 1977. Geo-political considerations mandated that Zia’s brutal regime be showered with dollars, even while democratic norms were subverted and a large amount of money wasted on the country’s covert nuclear programme. Bilateral aid during the Zia years from the US alone totaled US$4.2 billion. While this aid and large remittance incomes ensured some modicum of economic stability for the regime, the structural crisis of the Pakistani economy was impossible to ignore: net aid flows decreased substantially between 1977 and 1988 and with the signing of the Geneva Accords the western countries turned off the supply line of dollars. From this point onwards the suffocating conditionality-based lending of the IFIs was to rear its ugly head.

Throughout the 1990s the WB, ADB and IMF were exacting in their treatment of Pakistan. However when yet another military General deposed an elected government in 1999, the international aid brigade yet again descended on the country. More specifically it was the events following the September 11, 2001 attacks that precipitated a new wave of loans. Pakistan’s role as frontline state in the so-called ‘war on terror’ garnered Pervez Musharraf’s regime huge benefits. The IMF, WB and ADB together issued ‘assistance packages’ worth more than US$10 billion to the Musharraf dictatorship, while the US alone doled out US$12 billion of economic and military aid. Throughout this period the regime was lauded for ‘reviving Pakistan’s economy’ and ‘good governance’. However, by 2008 inflation (including food inflation) was above 20% and foreign exchange reserves virtually depleted. The so-called ‘economic revival’ was based on a massive financial bubble. Meanwhile external debt, which stood at approximately US$35 billion when Musharraf took power, had ballooned to US$49 billion.

There can be no denying the direct correlation between Pakistan’s debt crisis and military rule. The complicity of international donors and power-hungry generals must be accounted for; the Pakistani people cannot be held responsible for the decisions of generals and bank executives. But this is precisely what has happened throughout Pakistan’s history: the burden of paying back illegitimate debt has fallen on working people. And this burden will intensify dramatically in the wake of the floods if the illegitimate debt acquired over the past five decades is not written-off.

The legal case

We think it is important to proceed into a discussion about the international law based justifications for debt relief with the caution expressed by Wade Mansell that ‘since the 1960’s, Western institutions of law have been able indirectly o perform the miracle which colonialism scarcely permitted’: The miracle of enabling ‘rich, developed and often ex-colonial states…to continue extracting wealth from the poorest countries’.  He suggests that relations between ‘debtor’ and ‘creditor’ are aligned to systems of rules that allow a simultaneous erasure of the social context in which loan agreements are drawn in the first place.

International Treaty Law:

We start with the report of the UN’s Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights.

The following Conventions and articles are particularly relevant:

UN Charter: Article 1(3) “The purposes of the United Nations are: . . . To achieve international co-operation in solving international problems of an economic, social, cultural, or humanitarian character, and in promoting and encouraging respect for human rights and for fundamental freedoms for all without distinction as to race, sex, language, or religion”

International Covenant on Economic, Social and Cultural Rights: Article 2(1) “Each State Party to the present Covenant undertakes to take steps, individually and through international assistance and co-operation, especially economic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means, including particularly the adoption of legislative measures.”

Additionally, the Convention on the Rights of the Child as well as the Convention on the Rights of Persons with Disabilities contain language which stresses the particular duties imposed upon states to ensure and provide for the “economic, social and cultural rights” of children and the disabled: “States Parties shall undertake such measures to the maximum extent of their available resources and, where needed, within the framework of international co-operation.”

A situation wherein there is a continued drain of resources from poor to rich regions of the world violates the principles of cooperation imposed upon all states in the international system as outlined in the above articles. Furthermore, various Declarations and Political Commitments articulated by the General Assembly as well as subsidiary and specialized bodies of the UN make specific reference to relations between the debt burden and the non-realization of basic human rights within low income countries. In 1978 the UNCTAD Trade and Development board agreed on a resolution stating :  ‘developed donor countries will seek to adopt measures for an adjustment of terms of past and bilateral development assistance’.  However, since then, there has been only haphazard advance towards instantiation of processes for the achievement of the same.

Continuing advocacy efforts towards debt reduction or cancellation therefore are reliant upon relations drawn between the ‘right to development’ as articulated in the 1986 Vienna Declaration and Programme for Action and the possibilities of relieving poorer nations of their debt burdens. Article 12 of the Vienna Declaration states:

“12. The World Conference on Human Rights calls upon the international community to make all efforts to help alleviate the external debt burden of developing countries, in order to supplement the efforts of the Governments of such countries to attain the full realization of the economic, social and cultural rights of their people.”

In 2002, under the auspices of the UN and with the participation of over 200 nations as well as the heads of the IMF, WB and WTO, the Monterrey Consensus on Financing for Development was articulated.  The statement obliges both creditors and debtors to ‘share the responsibility for preventing and resolving unsustainable debt situations’. The Doha statement recognized that “existing international debt resolution mechanisms are creditor-driven” and that further steps need to be taken to ensure equitable treatment of creditors and debtors in crisis situations.  Furthermore, it recommended that states and multilateral agencies “consider fundamental changes in debt scenarios, in the face of large exogenous shocks, including those caused by natural catastrophes, severe terms-of-trade shocks or conflict.”

Change of Circumstances and International Obligations:

Certain commentators on debt restructuring have suggested that in circumstances analogous to Pakistan’s at this time “the first line of argument in favour of a right to stop debt repayment might draw on the doctrine of clausula rebus sic stantibus”.  The concept which underlays this doctrine is that “obligations can, as a result of supervening developments, be subject to changes”.  This principle is also incorporated within article 62 of the Vienna Convention on the Law of Treaties (1969) as ‘Fundamental Change of Circumstance’ for suspension of treaty obligations by state parties.  Relatedly, it has been noted that a ‘state of necessity defence is enshrined in Article 25 of the International Law Commission’s Articles on State Responsibility”.  A necessary condition for application of this principle to overcome an international obligation on the part of state is that there must be a situation of grave and imminent peril that the state party is facing.

Customary international law also enables us to look at the conditions of exclusion and suspension of international obligations as provided under other treaty based systems such as of the WTO.  Under the GATT Article XX are listed conditions which provide for general exceptions from the enforcement of WTO obligations which include those ‘necessary to protect human, animal or plant life or health;…’.  It is beyond question that the situation currently faced requires a redirection of all available assets towards maintaining the lives and health of a substantial proportion of the country’s population, rehabilitating livelihoods and shelter as well as in rebuilding of essential infrastructure, including the recultivation of devastated agricultural lands towards these ends.  Additionally, a natural disaster of this magnitude could not have been reasonably foreseen at the time of the completion of such loan agreements and the state cannot be held responsible for its unfolding.

Odious Debts:

As already noted, Pakistan’s current debt burden incorporates a significant proportion which was negotiated for and handed over to non-elected military regimes.  The legal precedents vis a vis ‘odious debts’ are therefore applicable in our specific case. A broad description of the Odious Debt doctrine is as follows: ‘those obligations contracted by a predecessor, contrary to the interests of its population, which are later taken over by a successor state, are odious.. those obligations are non-transferable to the successor state’.  The odious debt doctrine has been successfully invoked by the US after completion of the Spanish-American in which the former ceded Cuba to the US and the latter argued that debts incurred by Cuba had been used to suppress a rebellion against its former colonial overlord.  Similarly, after the Boer War, the UK suggested that the debts incurred by the Boer Republics were used in aid of repelling the British and were therefore of an odious nature and to be considered extinguished.  In the case of the US’s seminal use of this exemption it specifically argued that the debt incurred by Cuba had been imposed upon the people of that country ‘without their consent’ and therefore ‘the creditors, from the beginning, took the chances of the investment’.

In 1923, the US Supreme Court decided in the Tinoco Case (after the overthrow of the Costa Rican dictator Frederico Tinoco) that funds lent not for legitimate governmental purpose, within the knowledge of the creditors, could not to be extracted from the nation as a whole.  Similarly, in formalizing the scope of the odious debt doctrine, Alexander Sack suggested that if a despotic regime has accrued debt to strengthen itself against the people of the nation then the creditors who have supplied this sum are to be considered to have committed a ‘hostile act with regards to the people’.

The United States was at the forefront of negotiating for a full-scale write-off of loans undertaken by foreign creditors to the Saddam Hussein regime after its overthrow.  It was explicitly argued that the people of the nation should not be saddled ‘with those debts incurred through the regime of dictator who is now gone’.  The total sum of debts was therefore written off.

Contemporary debtors

In 1996 the IFIs launched the Heavily Indebted Poor Countries (HIPC) debt forgiveness initiative through which a substantial portion of the poorest countries’ debt was to be written-off/substantially restructured. Haiti qualifies under the HIPC initiative for debt relief: in the wake of the devastating earthquake in Haiti at the turn of the year, almost all of the country’s multilateral debt was written-off, totaling close to US$2.5 billion. While Pakistan does qualify as a low-income country, it does not qualify under the HIPC initiative due to relatively high export earnings.

However it is important to bear in mind that much of the impetus for a writing-off of Haiti’s external debt in the wake of the earthquake was generated by political leaders in the First World; British prime minister Gordon Brown acknowledged: “It must be right that a nation buried in rubble must not also be buried in debt”. In short, Haiti offers a precedent of a country that qualified for debt write-offs following a devastating natural calamity on account of the fact that it simply could not meet the burden of existing debt repayments.

The political case for cancellation of Foreign Debt

Given the blatant support of international aid agencies alongwith western governments for military rulers in the past, a cancellation of a substantial portion of Pakistan’s debt at this particular juncture could go a long way towards rehabilitating the image of western governments and international aid agencies in the eyes of the Pakistani public. If working people in this country often express common cause with anti-American and anti-western protests it is because of the blatant hypocrisy and double standards on the part of these governments and agencies towards Pakistan (and other poor countries as well).

In the post 9/11 period, a wave of Islamophobia has swept through large parts of the western world. Pakistanis resent the fact that their society has become a staging ground for the US-led ‘war on terror’ and yet the vilification of Pakistanis (and Muslims more generally) continues unabated around the world. Indeed, it appear as if the proverbial ‘clash of civilizations’ thesis could well become a self-fulfilling prophecy.

This is particularly true because right-wing religio-political organizations are at the forefront of the flood relief effort and are likely to win the sympathies of at least some of the millions who have been devastated over the past few weeks. A similar situation existed after the October 2005 earthquake; if the international community is serious about countering radicalization in Pakistani society, the failed policies of employing military force against innocent populations and indebting the long-suffering people of Pakistan should be repealed at once.

More generally Pakistan’s fledgling democracy would benefit greatly from the cancellation of a portion of the country’s overwhelming external debt. The military establishment continues to wield power in the country and the elected government – for all of its failings, which are many – stands to be further weakened, economically and politically, by the floods. Engaging in flood relief efforts has provided an opportunity to the military to enhance its public image – through the explicit support of the media – while politicians and political parties have been subjected to a public battering. Given the dire economic fallout of the floods, the elected government could well be weakened further if it does not garner fiscal space through debt cancellation.[5]

Cancellation is the only option

It is argued that it is overly ambitious to call for debt cancellation and a more realistic demand is to push for rescheduling of debts. Crucially there have been numerous occasions in the past when Pakistan has been offered options to reschedule debt. Between 1999 and 2003 the so-called Paris Club of donors re-scheduled a reasonable amount of Pakistan’s debt. The ADB claimed that the various debt re-scheduling exercises reduced Pakistan’s debt servicing burden in the period 2002-04 by US$2.9 billion, while the Ministry of Finance projected a subsequent reduction of US$8-11 billion over the following 15 years.[6]

As is underlined by the spectacular increase in the total external debt burden through the course of the Musharraf years, debt re-scheduling simply delays the inevitable, and in many cases, makes debt repayments more onerous due to the accruing of interest over time. Upon coming to power following the February 2008 election, the Pakistan People’s Party (PPP) faced an untenable fiscal crisis. The ‘successful’ policies of the Musharraf regime left the country on the verge of economic ruin. As a result, the elected government acquiesced to a new bail-out package from the IMF worth US$11.2 billion. The conditionalities accompanying this package have been expectedly harsh, the result of which is major price hikes in basic amenities, imposition of an even more regressive taxation regime, and an increase in debt repayments.

In fiscal year 2009-2010 alone Pakistan paid up to US$3.4 billion to its external debtors, the vast majority of which is interest being paid on long-standing loans. In less than three years since the demise of the Musharraf dictatorship, total external debt has increased from US$49 billion to US$55 billion. The re-scheduling of debt in the wake of 9/11, which was described as a major economic heist of the Musharraf regime, will actually result in a dramatic increase in debt repayments in years to come: by 2015-16, Pakistan’s external debt is projected to be US$73 billion. And this figure does not account for the prospects of new multi-billion dollar loans in the wake of the floods.

As such we believe that neither debt re-scheduling nor other similar piecemeal arrangements constitute a meaningful solution to Pakistan’s debt crisis. There is only one option: debt write-offs, the precedents for which have been outlined above. In the final analysis, the political will to demand a debt write-off is arguably what this country lacks. If it can be generated in the days, weeks and months to come, the IFIs and private commercial creditors can be forced onto the back foot, and the people of this country given some much needed respite.

[1] QAZI MASOOD AHMED, MOHAMMAD SABIHUDDIN BUTT, and SHAISTA ALAM, 2000, “Economic Growth, Export, and External Debt Causality: The Case of Asian Countries,” Pakistan Development Review 39(4): 591-608.

[2] Asian Development Bank, 2002, “Escaping the Debt Trap: An Assessment of Pakistan’s External Debt Sustainability,” Working Paper No. 1, Islamabad: Pakistan Resident Mission Working Paper Series

[3] Irving Brecher and S.A. Abbas, 1972, Foreign aid and industrial development in Pakistan. London: Cambridge University Press

[4] Mohammad Waseem, 1994, Politics and State in Pakistan, Islamabad: National Institute of Historical and Cultural Research.

[5] This threat has been underlined by Altaf Hussain’s recent statement calling for ‘patriotic generals’ to save the country from ‘corrupt politicians’.

[6] Asian Development Bank, 2002, “Escaping the Debt Trap: An Assessment of Pakistan’s External Debt Sustainability,” Working Paper No. 1, Islamabad: Pakistan Resident Mission Working Paper Series

Bangladesh: where the bosses lie for Eid

The President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Abdus Salam Murshedy announced this week that the garment bosses will pay their workers their annual bonuses before Eid this year.  I’ve never celebrated Eid in Bangladesh, but if it is at all like it is in other parts of South Asia, it’s a very big deal – and not having money to spend for Eid presents and festivities is pretty demoralizing.  During the strike that happened earlier this year, the bosses had threatened to delay the annual bonuses (partly to intimidate the workers, and partly to blame the workers for tighter profit margins).

Their announcement that they will pay out the bonuses now seems to imply two things.  First, the bosses clearly need to get back to work and another round of protests is something that they cannot afford right now – paying bonuses now is a down payment on labor peace later.  As it is, there is a fight within the mill owners about whether or not to pay the minimum wage increases, with the majority of the owners wanting to fight any wage increase at all.  Second, the more moderate unions are clearly feeling the heat from the organizing efforts of the more radical unions and they need to be able to deliver some tangible gains for selling out the garment workers – the bosses have been tapped to help out in this way.  There are already rumors circulating that the leftist unions are going to be organizing strikes and rallies after Eid.

At the same time, the BGMEA and the BKMEA have been making statements to the press about how Bangladeshi textiles are not getting a “fair price” on the market and that it is the international markets that should be asked to pay more.  As I understand it, cotton prices have gone up this year (I’m sure the flood in Pakistan can’t be helping matters much) and there are chronic electricity shortages all throughout South Asia.  That, in addition to the minimum wage increase means that the prices for which these commodities sell on the markets have to rise to keep up with the cost of the inputs.  I haven’t found good data yet on the profits in the textile industry, yet, though I suspect that the bosses aren’t doing as badly as they’re claiming.  After all, the BKMEA and BGMEA have been working overtime to get contracts in countries like China and Japan and have big plans for expansion.  And, Murshedy’s speech was at a fancy Iftar party at a posh hotel in Dhaka.  The hand-wringing seems to be for show (learned by watching Sheikh Hasina) – I don’t believe a word of Murshedy’s concern for his female workers:

“I request you (buyers) to provide fair prices for our products so that we can make our workers happy, and jointly build a secured society and economy,” …  He said Bangladesh’s garment industry has reached this height following continuous support from the buyers. “Without your support 2.8 million under-privileged women could not come to the mainstream of the society.”

Interestingly (though I haven’t thought this aspect out fully), the minimum wage increase is going to have effects in the financial sector in Bangladesh.  In order to limit inflation, the Bangladesh Bank has imposed severe limits on the ability of banks to borrow money.  At the same time, a rampant increase in speculation on the stock market has meant that consumers are taking their money out of banks and investing in stocks.  At the moment, the banks in Bangladesh are more than a little worried about where the money to pay for the minimum wage increase is going to come from.

The ship-breaking industry is under fire from the government, which has been pursuing environmental legislation to limit the kinds of toxic materials that are brought into Bangladesh on these abandoned ships.  Bangladesh dismantles about 30% of the world’s abandoned ships and then uses the scrap metal in its steel mills (Bangladesh has no natural iron deposits and so it relies on recycling steel for its growing steel industry).  The problem is that the toxicity of the chemicals in the ships has already been responsible for more than 400 deaths, as workers dismantle the ships by hand without proper equipment, protective gear, or training.

“It is a nightmare situation, as a consequence, with no formal appointments or arrangements for workers’ minimum needs, such as safe drinking water, food, toilet, living conditions. They toil amid blinding smoke and dust, suffocating fumes and burning heat, a virtual hell on earth, according to one witness. Workers rip apart the dumped vessels — from ocean liners to dirty freighters or monstrous tankers, weighing from a few thousand tons to as much as 60- 70 thousand, and costing millions of dollars to the importer — armed with just a blowtorch and other rudimentary tools.”

(Incidentally, the working conditions are no safer in the re-rolling steel mills).  Workers went out on strike earlier this year when the government tried to impose a decree requiring all ships coming into Bangladesh to be certified as toxic-free, since that would mean essentially that they would be out of work.  This week, the Department of the Environment imposed fines for the first time on a ship-breaking firm that dismantled a ship carrying toxic chemicals.

The machinations of Bangladeshi capital

In order to put the labor unrest to bed, the Bangladeshi government has been holding meetings with labor leaders and industry heads to make sure that the garment industry can get back to business as usual as quickly as possible.  This time, they met with the Sramik Karmachari Oikya Parishad (SKOP), the largest trade union federation in Bangladesh, to get all parties to agree to a joint front against labor agitation in the textile mills.

I can only speculate about the thinking here, but my guess is that SKOP has made a calculation based on the following: 1) a sense of competition from more radical trade unions in the garment industry, 2) accepting the logic of the bosses that the profits really are under attack and so workers have to get back to work, and/or 3) the presence of unions directly allied to the Awami League (Jatiyo Sramik League) within SKOP affecting the decision-making calculus.  I don’t know enough about the history of SKOP to conclude, but my guess is that it is a fairly conservative formation.  The bosses, on the other hand, are trying to find ways of spreading the costs of the minimum wage increase around internationally.  The government continues to have fanciful aspirations of impossible growth rates, fuelled primarily by textile exports.  All of this depends on keeping the peace in the garment industry.

Part of the reason that they have to get the larger unions to agree to hold the workers back is because the other unions in the garment industry are continuing to organize (as are bosses who are trying to roll back the minimum wages increases that were won in July).  I argued a few days ago that it looked like the repression was taking its toll on the more combative unions, and I still think that this is true, but the conditions in the garment industry are pretty miserable, and it’s unlikely that workers will continue to tolerate them much longer.

The workers in Bangladesh can at least have some confidence that they have magical supporters.  Harry Potter star Emma Watson recently toured the slums in Dhaka (where the majority of garment workers live) and was horrified by what she saw:

‘I had some preconceived ideas but nothing prepared me for the reality. It was upsetting to see the conditions in which these people live, but I was incredibly moved by their spirit and friendliness in spite of such apparent adversity,’ contactmusic.com quoted her as saying.

‘Having seen the slums in Dhaka and the conditions in which these people live and work to produce ‘fast fashion’, I would say to those people that this is not the way we should be making clothes in the modern world,’ she added.

In another contradiction only capitalism could produce, ship-breakers in Bangladesh are caught between an industry that is poisoning them and an environmental movement that will cost them their livelihoods.  The Supreme Court of Bangladesh has had the foresight to impose strict environmental regulations on the highly toxic ship-breaking industry in Bangladesh, but has given no forethought to the effects that this will have on the workers there (the deaths of many of whom are the reasons that the environmentalists became interested in the issue in the first place).  The logical solution would be to give the workers jobs to clean up the toxic sites, but that doesn’t seem to have entered into the calculations.  The more likely consequence will be the shift of the ship-breaking industry to countries without environmental regulations (lose-lose).

The hazardous conditions are not unique to the ship-breaking industry; Bangladesh has notoriously high-rates of job-related deaths and workplace accidents:

In 2000, the International Labour Office estimated that each year 11,700 workers die in Bangladesh in work-related accidents. In 2005, it also estimated that another 28,600 die from diseases caused by the industries they work in and 8.9 million suffer from work-related injuries.

And because the Minimum Wage Board is now conducting a review of 12 other industries which haven’t had minimum wages adjusted in some cases for more than 20 years, it’s quite likely that there will be labor actions in other industries as well.  The pattern will likely resemble the one in the garment sector: labor action, modest minimum wage increase, split in the labor movement, repression.  We can only hope that the more combative unions learn the lessons of the garment industry strike and organize more effectively.

IMF “aid” means permanent indebtedness for Pakistan

The International Monetary Fund is talking about easing the terms of the loan it is granting to Pakistan, but the fact of the matter remains that it is still a loan with interest.  Adding to the already bloated $50-something billion dollar debt that Pakistan has, new loans will only mean that the country is permanently saddled with debt.  A third of Pakistan’s yearly budget goes to debt repayments, and this means that serious development projects that could benefit the people of Pakistan (40% of whom live below the poverty line) will never really happen.  Pakistani Finance Minister Abdul Hafeez Sheikh told reporters in the US that Pakistan wants to take the loans because, “We want to continue to demonstrate our resolve to take difficult decisions.”  What he means that the leaders will take the money while the poor will make the sacrifices – hardly a difficult decision.

Take, for instance, what Pakistan was asked to do in exchange for loans in 2008 (when the country was on the verge of defaulting):

Compelled to accept the help of the IMF, it has received so far a total of 11.3 billion dollars in loans with particularly harsh conditionalities: the sale of a million hectares of farmland, an end to government subsidies on fuel, an increase in the price of electricity, drastic cuts in social expenditures, etc. Only the military budget has been spared. Finally this loan has made living conditions even more difficult while jeopardizing the country’s sovereignty.

One of the other reasons to be suspicioius of the international aid agencies is because they’ve helped direct quite a bit of the construction of the irrigation network that threads through Pakistan now, and little of it has helped the current situation.  I’ve been trying to talk about the infrastructural issues in Pakistan, and doing a clumsy job of much of it (since I’m not an expert about them), but I found the following summary of the problem insightful and provocative:

Third, the way we have (mis)managed the Indus — and countless other rivers around the world — for the past century has provided various short-term benefits, but at a major long-term cost that we are now having to pay.  We have ended small- and medium-scale flooding on many rivers through building dams and embankments. But in doing so we have greatly increased the scale of, and our vulnerability to, very big floods. This is a really bad idea in an era when megafloods are becoming ever less “extreme” and ever more “normal.” Increasing resilience to floods in Pakistan, the US, and just about everywhere else is going to require reversing our river management mistakes through restoring rivers and floodplains, including by taking out embankments and dams.

I can’t recommend enough the work by Daanish Mustafa which explains the social and ecological consequences of the massive irrigation network in Pakistan and its relationship to flooding in the country.

At the same time, the American military’s efforts have not made things substantially better.  Even though the troops are dispensing aid in some places, most Pakistanis are talking about the fact that the flood control priorities have put American interests above Pakistani ones:

Mr. Ejaz Jakhrani, Minister of Sports explained that “if the water was not diverted, the Shahbaz Airbase would have been inundated.” He was assigned to protect it, former Prime Minister Mir Zafar Ullah Khan Jamali saying that doing it meant demolishing the Jamali bypass and letting the town of Dera Allahyar drown. He added that “if the airbase was so important, then what priority might be given to the citizens.” He blamed “minister Jakhrani, DPO and DCO Jacobabad for deliberately diverting the course of the floodwaters toward Balochistan.”

Media reports said in 2001, the Musharraf government gave America control of Shahbaz to wage war on terrorism, the presence of army soldiers during the Jamali bypass breach a clear sign “that the Pakistan army (was) ordered to save the airbase.” It meant flooding out hundreds of thousands of people, now stranded on their own without help.

At least one index of the cozy relationship between the American and Pakistani army during the last several weeks has been the shift in the tenor of how Pakistan is described.  Military attacks have continued almost unabated while the flooding has been going on, and it prompted the Americans to announce their deep respect for the Pakistani army’s support:

“The collaboration, the cooperation, the support, the protection, and the friendship and I use that word very deliberately extended to us by our Pakistani partners has been nothing but impressive,” Army Brig. Gen. Michael Nagata told Pentagon reporters during a video -teleconference.

Ali Sethi had a fabulous piece in the New York Times talking about just how much the American military looms over all of the decisions made about the flooding in Pakistan:

The answer came in evasive, fragmented sentences: there was an airbase on the Sindhi side of the highway. This was where the military’s newest F-16 fighter jets were parked. But local residents believed that the base also housed the notorious American drones used to kill Islamist militants in the mountains. If true, this meant that the military was getting tens of millions of dollars a year in exchange, none of which trickled down to the local population.

The armed forces were going to save the base at all costs, he explained. But they didn’t want to draw attention to their own role — or to their interest — in the diversion of the water. Hence the presence of the land-owning politician; if there was any fallout, he would take the blame, and the soldiers would appear to have acted on his personal wishes.

The commissioner and then the police officer departed for the highway, leaving our TV crew behind in the room. Could we break the story we had just heard?

“I don’t think so,” said one reporter. “You don’t want the intelligence agencies to come after you.” The last time he had broken such a story, he said, a whole team of officers from the feared Directorate for Inter-Services Intelligence had come to see him in his office.

In addition to the American military, people with close connections to politicians are also finding that their property is preserved and their rehabilitation is happening faster, leaving those without connections in the lurch:

But the elected representatives were busy submitting proposals for losses in their areas only, while people were still trapped and seeking help for evacuation and rescue operations. These representative MPAs had not even visited the flood-hit areas of their districts concerned from where they had been elected. The people have started suffering from psychological ailments due to the unjustifiable distribution of food among the affectees. On the other hand, gastroenteritis has killed more than 11 people in Balochistan, including women and children, but the provincial Health Department has devised no plan so far to stop such epidemic diseases throughout Balochistan.   The politicians have been busy in hatching conspiracies against each other, but the issue of flood is left ignored. Now is the time to support our brothers and sisters, but unfortunately the elected representatives have left the masses in the lurch.

Near Thatta, where the flooding has just hit again, the pattern is repeated.  Canals are breached to preserve prosperous areas, while poorer areas are seen as expendable:

Also, Kirthar Canal breach has inundated at least 150 villages, as breach at SM protective embankment was persistently broadening. The flood torrent sustained mounting pressure at Loop Bund, as the population living near the dykes started mass exodus towards Thatta for safer places. The breach that was caused in Loop Bund to spare Daro, Bhuttoro, Banu and Sajawal the inundation is rapidly entering catchments area. While, the floodwater, forcing out of a third breach at Loop Bund in the other part of dyke, is fast-paced gulping Kot Aalimon and Laiqpur.

The Economist, no great friend of the poor, concurs:

Overall 1.2m homes have been damaged or destroyed. Some 800,000 people remain cut off from all help. Even where the government or aid agencies are present, the help is patchy at best, with many left to fend for themselves. Now dark (and plausible) accusations are circulating: the well-connected chose which areas were purposefully flooded to relieve pressure elsewhere; aid is being diverted to constituencies of powerful figures; woefully feeble flood-protection infrastructure was left badly maintained.

The consequences of all of this are that the flood control infrastructure has been wrecked:

More than 150 major irrigation structures have been damaged or breached across the country during the floods and an assessment is in progress to estimate their repair and reconstruction cost.

According to a preliminary report prepared by the Federal Flood Commission, floods have affected an area of 130,000 kilometres, damaged one million houses, rendered 14 million people homeless and affected 4.4 million acres of cropped area.

And Mohsin Hamid, who has been up until now very good on the flooding, published a piece in Dawn which was oddly liberal in its tone (defending the state and the army working together, calling on people to pay their taxes, etc.).  He did make the following point poignantly:

No, the real narrative of Pakistan is one that has nothing to do with the outside world, or geopolitics, or conspiracy theories. The real narrative of Pakistan is the story of a country where a fabulously wealthy elite, as well as a large and growing middle class, refuse to commit sufficiently to helping the majority of their brothers and sisters who remain desperately poor.

The suffering of the Pakistani majority is usually concealed behind sordid dramas enacted by our venal politicians, hypocritical nonsense about our country’s eternal blamelessness, and carefully choreographed nationalistic, ethnic, and sectarian myth-making. But the floods have washed away these illusions and confronted us with our hungry, wet, fearful truth: Pakistan is a land that lets its people suffer.

Social inequality worsens the impact of the floods in Pakistan

The flooding in Pakistan is likely to get worse in coming days, as there are reports that more rains will hit the country and the already ravaged infrastructure will be ill-equipped to deal with the water.  The Indus river is already at a 50-year high (though in part this is because of silt and sediment raising the riverbed) and there are worries that it will only rise higher.  There are already reports of hundreds of thousands of people who have been stranded because of the flooding with no way to access resources other than airlifts.  And as the flooding gets worse, it will be harder to get resources to the people who need them the most.

The flooding and the response to it have revealed openly what has been a quiet secret: that Pakistan is cleft from top-to-bottom in the most perverse arrangement of economic and social power which allows the poor to be treated no better than flotsam and jetsam.  There is open anger everywhere at local and central government officials.  Here’s how Riaz Ahmad put it:

‘Cities like Mianwali and Charsadda have been allowed to drown in order to save dams and hydroelectric stations. The reason is that these have either already been privatised or are earmarked for sell-off.  Military installations have been saved, but entire villages have been submerged because budget cuts have meant the loss of vital riverbank defences.  And forests and jungles have been plundered by millionaire-owned timber businesses.  This has created soil erosion and the destruction of natural defences that can prevent flooding.  Local and national governments have awarded the contracts for this kind of work, knowing the dangers.’

In some instances, government intervention has merely made things worse, as in the villages in Dadu district where government officials warned locals that there would be floods and told them to evacuate, but provided no transportation.  The result was panic.  In other instances, you have the open conflict between private efforts to save farmlands and the state-led efforts to shore up the infrastructure.  What is really being concealed in this conflict is the competition between large-landowners who are connected to the state and those who are not.  The result of fights like this will be the unplanned but totally predictable devastation of poorer villages caught in the middle.

The effects will be felt most acutely by poor farmers who are dependent on the rural economy to survive – and the flooding has decimated this year’s crop.  Here’s how Khalid Bhatti and Rukhsana Manzoor put it:

“If we include the figures of Sindh and Khyber province, the total goes up to more than 2 million acres. This is massive damage. Sugar cane, rice and cotton crops have been badly damaged. Agriculture experts are saying that farm production in Pakistan, Asia’s third-largest grower of wheat and the fourth biggest producer of cotton, may decline by 20 to 30% because of this damage. The losses to agriculture and livestock would have a spill over effect on industry and commercial activities to a great extent. This is because agriculture continues to play a central role in the national economy. Accounting for over 21% of GDP, agriculture remains by far the largest employer, engaging 45% of the country’s labour force.”

And the unevenness of the social consequences will mean that the rich who have the resources to survive the crisis will be able to buy up land on the cheap once it is over while the level of rural poverty will only go up.  Bhatti and Manzoor go on to say:

“The small farmers and peasants will suffer the most from this disaster as feudal lords and big farmers will transfer the burden of disaster onto the shoulders of peasants and poor farmers. Feudal lords and big farmers have shifted their families to safe places in the cities but peasants and small farmers are suffering and facing the miseries of life because they have no means to move out of the affected areas. They have no place to go and are forced to live under the open skies. Poor people have been left with nothing and at the mercy of the state machinery for rescue and relief. They have lost their livelihoods and shelter. Now, the real problem will start for them when authorities start to the pay compensation and reconstruction money. They will be asked to provide ownership documents to get compensation for their destroyed homes and livelihoods which they can not provide because these lands belong to the feudal lords. These peasants have been working and living on those lands for generations but they do not own the lands. The destruction of crops means that they will be left without any food reserves or money for months to come. The government will offer cheap loans and other facilities to the feudal lords and big farmers, but nothing will be offered to poor peasants and small farmers. They will be left at the mercy of private money lenders and feudal lords to be fully exploited. These private money lenders and feudal lords will offer loans to these peasants and small farmers at very high interest rates. These peasants will be forced to work like slaves for feudal lords just for few thousand rupees. This disaster will further impoverish the hundreds of thousands of already extremely poor peasants and farmers.”

And the inequality in Pakistan produces criminal behavior.  For instance, there are worries now that professional “land-grabbers” are posing as flood victims and hoping to capitalize on government assistance to claim land that is not theirs.

Meanwhile the UN made the totally rational and yet completely unreasonable suggestion that people not live in areas prone to flooding, ignoring the fact that these are the few places that landlords will provide for poor peasants who can’t afford to live in the bigger towns or cities.  The World Bank and the IMF are renegotiating the terms of their loans to Pakistan, diverting moneys from development projects towards relief efforts.  But as Pakistan is already paying back loans to the tune of $3 billion a year, it’s likely that the long-term effects of these international loans will be the further indebtedness of Pakistan’s economy.

One of the effects of the crisis has been the thorough humiliation of the civilian government which has been at best inept at worst craven in its response to the flooding.  In fact, Asif Ali Zardari seems hell-bent on pressing the claim that the Taliban will take advantage of the situation in Pakistan as cover for what are clearly embarrassing revelations of his government’s incompetence.

The primary beneficiary has been the Pakistani Army which is almost always seen as the best recourse to the failures of the civilian government.  And Altaf Hussain, the leader of the MQM, has even called for the army to take power in Pakistan.

At the same time, the US continues its operations along the border with Afghanistan and continues to rely on support from the Pakistani army.  And Dan Feldman, Deputy Special Representative to Afghanistan and Pakistan, had the following to say about the pattern of American assistance to Pakistan:

We’re also, as we’ve briefed before, providing millions of dollars of in-kind and technical assistance, including the temporary bridges, expanding preexisting programs in flood-affected areas, the halal meals, and a range of other things. We’re looking at ways that we can redirect already existing funds through Kerry-Lugar-Berman and others to meet the needs of flood victims as soon as possible, so programs for livelihood, for clinics, rebuilding schools, infrastructure that we had already planned, which can be redirected to get to flood victims as quickly as possible.
This is also in addition to the high-impact, high-visibility projects that the Secretary announced while in Pakistan just last month which will continue to come out of Kerry-Lugar-Berman funding.
What this implies is that the US will continue to offer aid for “high-visibility, high-impact” efforts (read winning hearts-and-minds) that will result in quick, image-improving exercises.

New Red Indian in Japanese

I confess, I think that this is pretty cool.

Snehal Shingavi


Socialist Project












For the rest of the article, click here.

Textile strike rocks Bangladesh

My piece in Socialist Worker on the garment workers’ strike in Bangladesh:


Snehal Shingavi analyzes the battle shaking Bangladesh’s textile industry–and the international manufacturers who set up shop there to take advantage of low wages.

August 24, 2010

Striking garment workers who gathered to protest low wages flee police firing tear gas and rubber bullets

Striking garment workers who gathered to protest low wages flee police firing tear gas and rubber bullets

OVER THE past month, Bangladesh’s textile industry–one of the most exploitative in the world–has been rocked by strikes and protests.

The level of repression used against the Bangladeshi textile workers, largely women, exposes the dark underbelly of globalization in Asia. Textile manufacturers have been flooding into the country in the last several years as workers in other countries, especially China, have successfully fought for higher wages. When the textile bosses came to Bangladesh, the minimum wage was less than 10 cents an hour.

The strikes began in mid-July when a massive general strike in the ready-made-garment industry shut down the capital city of Dhaka.

The immediate reason for the strike was the increase in the cost of basic commodities in Bangladesh, especially foodstuffs, which have quickly outstripped wages that haven’t risen since 2006, the last time that textile workers went on strike. Textile workers get 1,887 takas a month (roughly $25)–most economists put the basic income needed to survive in Dhaka at around 8,000 takas.

Even though the police attacked the strike and forced the workers back to work, the protests scared the ruling Awami League party into offering a minimum wage increase to 3,000 takas a month (roughly $42) at the end of July.

The workers had originally demanded an increase to 5,000 takas, and in disgust with the meager increase, the protests continued. The workers set up barricades and roadblocks, set fire to cars, and marched through the streets.

The mainstream press was predictably up in arms over the actions of the workers (calling it, in most instances, a “rampage”). They were less inclined to notice the excesses of the Bangladeshi police or of the bosses, who were lobbying to resist even this pay increase another 4 months, giving some of them enough time to move or threaten to move.

The textile mill owners shut down some 250 factories and asked for police support to crush the strike. Some 100 workers were injured in the clashes that followed, in which police used tear gas and water cannons against the strikers. There were also some fairly serious attacks on children who live in the area.

The government even called out the Rapid Action Battalion, an elite police unit that normally deals with organized crime and terrorist threats, to go after the workers. Unsurprisingly, there will be no investigation into the workers’ claims that the bosses are the ones involved in organized crime to terrorize the workers. The workers were eventually forced back to work with some vague assurances that wage increases would be forthcoming sometime in the next three months.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufactures & Exporters Association (BKMEA)–the two main organizations of textile mill owners–have both said that they will not raise wages higher than the 3000-takas level mandated by the government, and that it is the government’s responsibility to enforce discipline on the workers.

More than 4,000 workers were arrested, and others were later rounded up after the police used television footage to identify strike “leaders.” Key leftist figures associated with the strike’s more radical wing have been arrested or threatened with arrest.

Mantu Ghosh, head of the Communist Party of Bangladesh (CPB)’s Narayanganj division and affiliated with the CPB-led Garment Trade Union Center, was detained earlier in the month. Mahbubur Rahman Ismail, president of the Narayanganj branch of the Bangladeshi Socialist Party and connected to the Garments Sramik Sangram Parishad, said that his offices and home were raided by the police.

Some of the more recent protests seem to have been a response to this direct attack on the workers’ leadership. This has also become a new point of organizing for the left in Bangladesh, organized in the Ganatantrik Bam Morcha, which has issued demands calling for the release of the arrested garment workers and their leaders.

It’s also clear that the protests are not spontaneous, at least not in the way that the media is describing them, nor are they work of terrorists, as the bosses have claimed. In reality, they are the result of some painstaking work by the leftist unions.

– – – – – – – – – – – – – – – –

THE BOSSES have been desperate to get the factories back to work and get police protection for their investments.

Part of the reason is that the protesters have been targeting textile factories and have inflicted some serious damage. But the more important reason is that a slowdown in production in one of the most high-paced industries has a devastating effect on profits. The Bangladesh garment manufacturers are already claiming losses of around $113 million. That includes losses from lost work, damage to garments and property damage. Already, the textile manufacturers are threatening to leave Bangladesh, a country which they just moved to from China, citing the low cost of Bangladeshi labor as the primary factor.

This is why the attacks on the labor unions are so important for the state and for business in Bangladesh. It gives them some wiggle room in a tense economic situation. Part of the way police are making their case against the unions in Bangladesh is by torturing labor activists into making confessions against their respective organizations. As the New York Times reported:

[L]abor and human rights advocacy groups said at least one worker has told his colleagues that he was tortured into giving false evidence against himself and other labor leaders before he escaped from custody. Advocates also said that they were worried about the safety of people arrested in recent days.

The Bangladeshi High Court had to order the police not to torture labor leader Mantu Ghosh, exposing what are certainly ordinary practices for the Bangladeshi police. This, of course, should make one wonder about the fate of the thousands of other laborers who were arrested. Home Minister Advocate Sahara Khatun has already said that she will punish everyone involved in the protests that took place in mid-August.

The garment industry is clearly Bangladesh’s most important export industry, accounting for some 80 percent of the country’s total exports, and the largest, employing some 3.5 million workers. That means that the fortunes of the Bangladeshi economy are intimately tied to this one industry.

In fact, it was the structural dependency of Bangladesh that prompted Bangladesh to try to attract textile manufacturers to the country in the first place. (The other way that Bangladesh makes a dent in its large trade imbalance is from its other major export: workers it sends to work overseas.) Textiles only account for about 5 percent of the economy, but they play a very large role in driving Bangladesh’s growth.

As a result, no matter which party is in power, it needs to woo the garment industry. This accounts for the vacillating position of the ruling Awami League, which relies on workers for votes, but has to do the bidding of the factory owners if it wants to keep the economy afloat in the short term.

– – – – – – – – – – – – – – – –

THE GLOBAL economic downturn has put a squeeze on the profits of the textile industry in Bangladesh, and it is looking to survive the problem by squeezing wages. As the garment industry is the largest industry in Bangladesh, employing some 3.5 million workers, and responsible for most of the country’s exports, it’s unlikely that the state will intervene on the side of labor decisively.

But the garment workers haven’t disappeared quietly. On August 14, for instance, 4,000 garment workers blockaded the Dhaka-Sylhet highway, leading to a standoff with the police that lasted four hours.

Their demands included the implementation of the government-mandated wage increase in August (rather than November which is when the minimum wage increase is supposed to take place), an eight-hour workday (workdays are currently between 11 and 15 hours long), and an end to intimidation by factory owners (who have routinely used thugs to attack the workers). The protesters also demanded the immediate release of Mantu Ghosh.

In an amazing show of solidarity, young workers, teachers, artists and writers formed a human chain at Shahbagh in Dhaka to demand that the garment workers receive a decent wage, and that the police stop the “capture and torture” of garment workers and union leaders.

In addition to coercion and repression, the state is also attempting to use divisions inside the labor movement–there are more than 60 unions in the textile industry–to its advantage. Most unions in the industry are illegal and are forced to operate in secret with shoestring budgets.

The new plan, it seems, is for Bangladesh to attempt to expand the base of workers that are represented by the government-backed unions. Labor Minister Khandker Mosharraf Hossain has announced plans to get trade unions into the ready-made-garment industry. This would be good news for one of the most thoroughly exploited labor forces in the world–were it not for the fact that the unions are being set up to help the bosses keep production running rather than to help workers advocate for their interests.

The government is hoping that the minimum wage increase will seem like a better option than indefinite protests by workers who are already feeling the pinch. Unions like the National Garment Workers Federation are doing the bosses’ bidding in this instance by backing the 3,000 takas minimum wage and encouraging workers to return to their jobs.

This is a nakedly opportunist move: Increase the size of the unions in order to ensure the interests of the factory owners. After all, according to the government, it’s because there are too few labor unions in the factories that the protests became violent–and not because of the sweatshop wages and conditions that persist in Bangladesh.

The strategy is clearly designed to squeeze out the more radical sections of the union movement by making the government-backed unions larger and more “representative”–thus completing the pincer action on radicals who are already facing prosecution from the courts.

At the same time, the state is also committed to isolating the international labor movement, which has set up a number of NGOs to help textile workers organize. Arguing that labor unrest has been the work of outside agitators, the Bangladeshi government has criminalized working in unions as a foreign national and begun closing down offices. Many of these NGOs were set up by unions in the West in order to win better wages for Bangladeshi workers and improve the lot of workers in other countries.

The attack on NGOs in Bangladesh must also be putting a squeeze on the resources that unions could rely on in order to expand their organizing. The NGO Affairs Bureau closed down some 334 NGOs in the last four months, alleging support of militancy in many cases.

Even though the protests have gotten smaller and attacks on the unions continue, it is clear that the current stalemate is unsustainable. Workers cannot survive on the low wages that are offered in Bangladesh, and as long as the textile industry exploits its workers ruthlessly, the Bangladeshi working class will continue to fight back.