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Wednesday, April 30, 2008

Debt & The Death of Democracy

For those not familiar with the International Monetary Fund(IMF), it is an international organization designed to help nations that are struggling under massive debt.

Though it is often looked down upon for the policies and demands it places on nations utilizing its services, the IMF is more than simply a debt relief agency. It is a guardian of democracy.

The IMF was conceived and created as a direct result of the sort of situation that developed in the early decades of the 20th century right here in Newfoundland and Labrador. The events that helped form the IMF speaks to the realities of our past and the province's current situation.

The following are excerpts from a “Gobalist” article available at:

http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=3088

THE IMF

What has been missing from contemporary debates about the IMF’s role is any memory of what the world was like before the Washington-based institution’s creation.

The most extraordinary debt restructuring of the pre-1945 era did not occur in Latin America. It was in a dominion of the British Empire, the country of Newfoundland.

During the early 1930s, Newfoundland experienced a form of political punishment and national humiliation for its debt problems which has never been surpassed by any other country with financial problems.

The British established settlements to exploit Newfoundland’s fishing resources after John Cabot explored it 1497. Newfoundland then became Britain’s oldest colony.

The King authorized the governor to establish the island’s first parliament in 1832.
That made it the second-oldest parliament (after Westminster) in the Empire.

In the late 19th century, Newfoundland was sovereign enough to negotiate trade agreements with the United States — and enjoyed all the other traditional trappings of sovereignty. However, the Newfoundland government went on a slippery path when it chose to borrow heavily.

First, it did so to finance military expenditures during the First World War, then to finance the construction of a railway — and to cover operating deficits throughout the 1920’s. By 1933, there was a public debt of over $100 million — and Newfoundland’s national income was just $30 million.

The Great Depression put Newfoundland over the edge.

The Newfoundland government turned to the British government for help. London obliged — by appointing a royal commission to investigate the country’s economic situation. The commission produced a report which condemned Newfoundland’s fiscal policies in the 1920s for creating an unsustainable debt burden.

Critics of the IMF, take note: The commission’s proposed solution to the crisis has no parallels in any other sovereign debt restructuring. The royal commission proposed that Newfoundland should give up both independence and democratic self-government.

The British government would establish a special six-man commission and royal governor to head the country.

The commission would not be responsible to the people of Newfoundland but to London — and the British House of Commons.

The notion that a self-governing community of 280,000 English-speaking people should give up both democracy and independence in order to avoid debt default was unprecedented.

The commission could not fundamentally transform the country’s economic situation.

The way out was offered by Newfoundland’s neighbor, Canada. The Canadians offered to take on 90% of the island’s debt if it joined the Confederation. On April 1, 1949, Newfoundland became a province of Canada.

Curiously, Newfoundland’s Parliament never ratified the confederation treaty. The treaty itself was an act of Britain and Canada, not Newfoundland. But that was because the British — who were essentially Newfoundland’s creditors — wanted it that way. Even if Newfoundland’s own representatives did not.

If the IMF had existed in 1933, it would have granted emergency debt relief to Newfoundland. The country would have never given up democracy or independence. Indeed, democracy is now a pre-condition for IMF aid.

But as no institution such as the IMF existed in 1933, Newfoundland was compelled to choose between democracy and default.

The story of Newfoundland during the 1930s continues to be a unique tale of how the British Empire coped with a debt crisis in a small country.

It is also a reminder of why in the aftermath of World War II the nations of the world created the International Monetary Fund. They did not want nations to ever again confront a choice between debt and democracy.

It is a legacy worth pondering as we contemplate the future…

6 comments:

Kath said...

How...Sad.

Anonymous said...

Boy, it never ends. Danny Williams says (to paraphrase) the province is glad to finally be moving off of equalization and, even though we have gotten raw deals on Lower Churchill, fisheries, etc. we are glad to be able to help out our weaker sisters in confederation.

Suddenly all the Ontario MPs and so on are pissed at the statement and Mike Duffy is calling Newfoundlanders "Uppity". Can you imagine, "Uppity"?

I believe that's the same word I've heard in relation to those with a dark complexion who say what they feel is right. As in "That's one uppity N..."

Welcome to the real Canada.

Calvin said...

http://www.thestar.com/article/420227

Bearing News outta Ontario Myles.Now we are not just ignorant, were "Uppity",OH my sweet God.

Awhile back Myles ,you made a bet saying that Harper would get that majority governement.Is that bet still on.

AHHHHH,seems I've been beaten to the punch.April 30, 2008 7:40 PM.Well,yes Virginia them there "NEW NEWFIES" are the most uppity bunch of N%$#@#$ I say I've seen in a long while.

Can you handle how this country really see's you.My question is ,do we have to fall to thier level or can we not rise above them ,and show them some good Newfoundland and Labradore manners.

Shame on you Prime Minister Wiiliams for saying this.It makes it even harder for all of us that have to live amongst thease people now.Likw we had to give them an excuse for hating us,shhhhesssshhhhhhh.Yet another fine excample of how Canada works.

NL-ExPatriate said...

Very interesting perspective and interpretation of our history.

As for the IMF a good read on that particular institution would be
Confessions of an economic hitman and Naomi Klein's, Shock doctrine; Disaster capitalism.
http://www.naomiklein.org/

Just some light dog days of summer reading LOL.

Calvin said...

Pardon me for constantly "Barking" on your Blog Myles ,didnt we offically join Canada as a Province on March 31,1949.

And ,did not the IMF rescue New Zealand because they were bankrupt for mostly the same reason.Britian showed her gratitude by not paying back her wartime debt to that colony as well.Zealand lasted until sometime in the year 1972( check that year ,please ) until the IMF came to its fiscal rescue.

All in All Britian didn't give too sqauts about the people she supposedly represented.Lets look at the Middle East and Palestine.Did they have the international authority to do what they did there.

Something to think about.

D.B. Cooper said...

Newfoundland wasn't the second oldest parliament in the Commonwealth.

It was one of the last British colonies in North America to get representnative government (1832) and one of the last to get self-government in 1855.

Take a look at what the IMF has done in countries that went bankrupt or almost went under.

Every time you bitch about Confederation, take a long hard look at what the IMF does to countries that can't pay the bills, that run up huge debts and then get stuck running their own affairs just like happened in 1933.