Orders of the Day — International Monetary Arrangements Bill

Part of the debate – in the House of Commons at 6:27 pm on 11th July 1983.

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Photo of Robin Cook Robin Cook , Livingston 6:27 pm, 11th July 1983

We have had a distinguished debate tonight, destinguished not merely by those who took part but by those who did not take part. The right hon. and learned Member for Hexham (Mr. Rippon) first drew attention at an early stage to the complete absence from our councils of any representative—even a humble, silent representative—on the alliance Benches. We have not had an intervention from those Benches since he spoke.

At one point, I took the opportunity to nip out and consult the alliance manifesto. I found that it pledged support for Additional finance for the developing world … through fresh issues of international money. Then, for the more technically minded SDP voter—I am most grateful that the hon. Member for Truro (Mr. Penhaligon) has finally graced us with his presence—international money is defined in brackets as "Special Drawing Rights." Later in the same document we find that the alliance committed itself to support the principles of the Brandt Report, and in particular the proposals for increased credit through the international institutions. As we have seen tonight, whatever the alliance may have said to the electorate, it has no intention of using undue exertion to support those principles in our debate. One can only conclude that, despite the fine rhetoric of the manifesto, the alliance has concluded that there are no votes in resolving the debt crisis of the Third world. That is a pity, because many jobs in Britain undoubtedly hang on that debt crisis.

The most obvious characteristic of the speech of the Economic Secretary was his possibly over-complacent confidence that the debt crisis is under management and will come under control. One is tempted to recall the precedent set by the new governor of the Bank of England who, in a statement at about the time of his appointment at the turn of this year, announced that the debt crisis was over. Only 24 hours later, he learnt that Brazil had been obliged to announce that it planned to defer any debt service payments for 1983. That unfortunate conjunction obliged a Treasury official to say, with great tact, that the governor-designate was a man two or three years ahead of his time.

The Economic Secretary's observation that the debt crisis is under control fails to measure up to the scale of the problem. The scale is horrendous. It does not matter whether we measure it by reference to the banks or by reference to the countries that are in debt. The New York banks alone have now committed themselves in loans to the three principal countries of Latin America to the equivalent of nine times their combined capital base, and a number of the countries that are in debt now owe sums equivalent in total to five years' entire export earnings of those countries. In the case of Brazil, debt servicing alone will soon cover the entire revenue obtained from export sales.

As some of my hon. Friends have hinted, what we are contemplating is the consequence on a global scale of the monetarist fetishism whose similar consequences on our own domestic stage we have debated rather more frequently. Some harsh things have been said about the clearing and commercial banks who have indulged in a lending spree during the past seven years. The most imprudent action by the commercial banks in the 1970s was to assume that the major industrial powers would continue to act rationally. In 1979, some of the major Governments ceased to behave rationally. The figures show that the mounting debt total was perfectly manageable until 1979. Between 1975—the year of the first oil increase, which gave rise to the petro-dollars—and 1979, the total increase in the Third world debt, measured as the ratio of debt to export, increased from 37 per cent. to only 50 per cent. That was a tough increase, but a manageable one. Between 1979 and 1982, interest rates doubled and the ratio increased from 50 per cent. to 75 per cent., placing a totally unmanageable and crippling burden on the countries involved. That burden did not arise from fresh borrowing. It arose from borrowing to cope with the increase in interest rates which was the consequence of the monetarist experiment of the major industrial powers. We must recognise the very substantial contribution that the Western powers, and especially our own Government, have made towards creating the problem.