Larry Fink is a Democrat. And not just any Democrat – he’s one of the US political party’s biggest donors. He also happens to be CEO of BlackRock, the world’s largest asset manager, which controls assets more than twice the size of the combined GDP of all African economies.
Estimated to be one of the 30 richest people in the world, Larry has increasingly been lauded for his rhetoric on climate change. In January, he told Blackrock clients the twin crises of climate change and Covid-19 demonstrated the need for a ‘sustainable’ approach to investment, and he has ‘great confidence in the ability of businesses to help move us out of this crisis and build a more inclusive capitalism.’
But his company’s approach to the debt owed to it by low-income governments is far from sustainable.
BlackRock is one of several big banks that has been making huge profits off debts owed to them during the pandemic. Along with private creditors like HSBC, JP Morgan Chase, and UBS, they’re set to make profits of anywhere from 75 percent to 250 percent on these loans if paid back in full.
These debts have a huge impact on governments’ ability to respond to Covid-19. At the start of the pandemic, 64 countries were spending more on external debt payments than on public health. Now, the amount that African governments owe to private creditors alone could vaccinate the continent three times over.
Yet the response from governments of rich countries so far has been to kick the problem further down the road – and to ask big banks like Larry’s nicely to offer debt relief.
This approach is, quite clearly, never going to resolve the crisis. Ahead of key international meetings between G20 finance ministers this week (7-8 April), and G7 finance ministers next month, the international Left needs to show solidarity with the Global South and demand an end to this corporate debt trap.
The Looming Crisis
While European and North American leaders turn their attention to ‘build back better’ agendas and domestic recovery packages, the Secretary-General of the UN warns that much of the Global South faces a ‘coming debt crisis’ with ‘catastrophic consequences for people’s lives’ – and these big banks are partly to blame.
Many countries in sub-Saharan African are particularly exposed. One third of the total debt owed by Chad, Ethiopia, and Zambia is to private creditors based in the UK alone, most of them in the City of London. Yet while these countries have requested urgent debt relief, that has so far been ignored.
Zambia owes 59 percent of its upcoming debt payments to private banks and speculators. In November, the country defaulted on its payments after a meeting of their biggest creditors declined to negotiate – and it’s likely to default again this month. That puts Zambia—a country of nearly 18 million people—at risk of being sued, possibly in English courts, for their failure to pay.
This highlights perfectly the unjust, neocolonial nature of the global debt system. Big banks see low-income countries as riskier investments, so offer loans at a higher rate of interest than to wealthy countries. When a crisis like a pandemic hits, it threatens their return.
So the banks can turn to politicians and judges in the Global North to protect them. The City of London, the British judiciary, and Parliament are all within a few miles of each other. Collectively, the power they wield over countries in the Global South via the debt system rivals that of their former colonial empires.
Often those debts are illegitimate to begin with. Recent reports found that 80 percent of Sudan’s £861 million debt to the UK was actually accrued through interest. Dominic Raab’s response? To force Sudan to implement more brutal austerity measures in return for just £40 million in UK aid.
Demanding the Impossible
Despite his rhetoric, Larry Fink and his pals in the City aren’t going to drop debt without a fight. Covid-19 has reawakened the global anti-debt movement, which is building pressure on governments and multilateral institutions to tackle private creditors – and taking the fight to BlackRock, HSBC, and JPMorgan themselves.
And so far, it seems to be working. The heads of the IMF, the World Bank, and the UN have now all recognised the need for the private sector to participate in debt restructuring. But it is still the rich countries in these institutions that have the power to say no.
In the UK, Labour has argued just last week for legislation to prevent governments being sued by speculators and vulture funds for missed debt payments. And government ministers have offered warm words on using the UK’s Presidency of the G7 to ensure private sector participation.
Yet any top down solution to the problem, without significant pressure from below, is likely to be insufficient, or voluntary – or just too late. It’s vital that alongside growing movements for race and climate justice, the issue of the colonial, corporate debt trap is not forgotten.