G7 owes $13 trillion to Global South
As leaders meet in Japan they've got bills to pay for climate damage and broken aid promises.
G7 leaders meet this week in Hiroshima, Japan. The G7 still represents just under half the world’s GDP, making them a pretty powerful bunch.
Amongst headlines of a looming debt crisis in the Global South, it would be easy to think that rich G7 countries are the creditors to the world’s poorer ones. The opposite is in fact true.
This week’s Equals Bulletin looks at how decades of broken promises on aid and environmental damage overwhelmingly caused by these wealthy countries make them massive debtors to the Global South.
Forget charity, rich countries owe the rest of the world big time.
Broken aid promises. Back in 1970, countries including the G7 promised to spend 0.7% of their national incomes on aid. They’ve fallen woefully short of this promise, leaving unpaid a total of $4.49 trillion to the world’s poorest countries —not even half of what was promised. Oxfam’s satirical ‘big heads’ gathered in Trafalgar Square in London on Wednesday to highlight inaction by the G7 in the face of the worsening hunger crisis in East Africa.
Economic costs of loss and damage. Oxfam estimated that the G7 owes low- and middle-income countries $8.7 trillion for the devastating loss and damages their excessive carbon emissions have caused, especially in the Global South. G7 countries are also falling well short of their share of the $100 billion a year promised to help countries cope with climate change. The poorest countries have been footing the G7’s carbon bill and are owed that money.
Bottom line. This gives a debt of $13 trillion. Even this amount is an underestimate. It doesn’t include losses to tax dodging by G7 corporations operating the Global South or any estimate of reparations due to slavery and colonialism. Whichever way you look at it, G7 countries are the debtors to the rest of the world.
Half of the debt repayments from the Global South are going to the G7 and their private bankers. The G7 likes to present the debt crisis in developing countries as the fault of China and downplay their own role and notably debts owed to private creditors. These are the hedge funds, bondholders, etc., who have lent money to countries across the Global South at usurious rates. Almost all private creditors operate under either London or New York law. Some are owned by billionaires like Larry Fink, head of Black Rock. None of them has agreed to participate in granting debt relief, insisting instead that debts are repaid in full, even if this means closing schools and hospitals.
Building on amazing analysis by Debt Justice, we calculated that countries in the Global South will pay $232 million a day in debt repayments to the G7 and their bankers through 2028. Over half of all debt repayments from the Global South head in this direction.
Private wealth, public squalor. G7 countries like to plead poverty but there is plenty of money at home if they choose to look in the right places. The G7 is home to 1,123 billionaires with a combined wealth of $6.5 trillion. Their wealth has grown in real terms by 45 percent over the past ten years. A wealth tax on the G7’s millionaires starting at just 2 percent, and 5 percent on billionaires, could generate $900 billion a year. That is a big pile of cash that could feed a lot of hungry people.
Throwing fuel on a burning planet. The German government, the first G7 government in history to have the Greens in power, is leading the charge to water down G7 commitments on climate. This is despite the G7 agreeing to speed up phase-out of fossil fuels earlier this year.
At the G7 summit in Germany in 2022, they agreed language suspending a previous commitment to end public financing for fossil fuels on a temporary basis — so they could justify massive subsidies to build new gas terminals. The German government is this year seeking to further extend this. The G7 is using the war in Ukraine to yet again delay getting out of fossil fuels as the world hurtles toward the 1.5 degree redline.
Food billionaires make out like bandits while hunger kills two people every minute. 258 million people across 58 countries are currently experiencing acute hunger, up 34 percent over the last year. In East Africa alone, drought and conflict have left a record 36 million people facing extreme hunger, nearly equivalent to the population of Canada. Oxfam estimates that up to two people are likely dying from hunger every minute in Ethiopia, Kenya Somalia and South Sudan.
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The fortunes of the world’s 260 food billionaires have increased by $381 billion since 2020. Synthetic fertilizer corporations increased their profits by ten times on average in 2022. According to the IMF, the 48 countries most affected by the global food crisis face an additional $9 billion in import bills in 2022 and 2023.
Scope for Hope
The US National Security Adviser gave a remarkable speech calling time on neoliberalism and the Washington Consensus. Read about it here.
Something to read and listen to
On climate and inequality — people are more likely to be killed in floods in unequal countries.
The WHO published a new Health Inequality Data Repository. Eliminating wealth-related inequality in under-five mortality could help save the lives of 1.8 million children.
Danny Dorling, professor of Human Geography at the University of Oxford, posits that Britain has perhaps reached ‘peak’ inequality on The Prospect Podcast.