Columnist Vijay Prashad: Coronavirus and the virus of debt

  • Health workers walk through the grounds at a makeshift COVID-19 testing facility in Hanoi, Vietnam, March 31. Vietnam set up its first makeshift facilities for fast coronavirus testing in residential areas in an effort to detect early infections. AP FILE PHOTO

  • Vijay Prashad. SUBMITTED PHOTO

Published: 7/13/2020 1:29:05 PM

Last week, I spent time on the phone talking to people in Laos, a small landlocked country in Southeast Asia. Laos shares a long border with China, where the coronavirus was first detected in late December 2019. Goods and tourists travel regularly across that border. What startled me was the knowledge that neither Laos nor Vietnam — another country that borders both Laos and China — have had any fatalities from the virus. Doubts about the numbers were quickly dispelled by representatives of the International Red Cross and Red Crescent Society; it is impossible to hide the numbers, they said, and Laos is certainly not burying its dead in secret. Not one person in Laos and Vietnam has died due to COVID-19.

It is remarkable that these poor countries, Laos and Vietnam, which both border China, have not had any deaths from the virus, while rich countries, like the United States, have been so devastated by it. Part of the reason why Laos and Vietnam have been able to tackle the virus is that their socialist governments have taken a scientific attitude towards testing, contract tracing and treatment.

The administration of U.S. President Donald Trump, on the other hand, has taken a hallucinatory attitude towards the virus; as recently as late June, Trump was talking about this virus as if it were nothing other than a common flu. If you are not serious about a pandemic and do not send a strong message to the public about the methods needed to break the chain of the infection, you will see the devastation that is currently being caused in the U.S. sunbelt. It is likely that more people will die from this virus in Florida than have died from it in China.

Till debt do us part

This is only half the story. The other half is tragic. During the coronavirus recession, economic activity — so closely integrated through the pathways of globalization — have collapsed. Growth rates are being forecast into negative territory as half the world’s population struggles with unemployment and hunger. These are truly catastrophic times, as pandemics of hunger and hopelessness compete with the pandemic of the coronavirus.

Even though it is clear that this coronavirus recession is not the fault of countries that have been integrated into the global supply chain, they are nonetheless being punished. Debts of the developing countries have grown, defaults are in the cards and serious debt relief is off the table. The U.S. Department of the Treasury has been ruthless in its disregard by calls from developing countries to either suspend debt payments or cancel debt obligations and to increase the International Monetary Fund’s Standard Drawing Rights (SDRs). The SDRs are the IMF’s currency, and their increase would allow these states to have liquidity when they are perishing under debt obligations.

An official at the Ministry of Finance in Laos told me that his country has been able to overcome the coronavirus, but it cannot overcome the virus of debt. This year itself, Laos is obliged to pay $900 million in debt service; this is the amount of interest on the debt, not the debt itself. However, the foreign exchange reserves held by Laos are merely $1 billion. Laos will not be able to import necessary goods — including medical supplies to maintain its control of the coronavirus — if it pays the full interest obligation. The Trump administration has taken a cruel line against any form of relief to countries like Laos, whose governments have so deftly handled the crisis.

Silence in the United States about the behavior of the U.S. Department of the Treasury in these discussions is maddening for people in countries like Laos. The treasury department has said that both private and public creditors can make their own decisions about debt suspension; there should be no universal discussion and decision on it. No creditor is going to provide debt relief on their own; they require governments to bring them to the table and force an agreement. Otherwise, from Argentina to Laos, we will see a wave of defaults, a wave of renewed austerity, cuts to public health budgets and then powerlessness before the next virus.

The United States government has made very poor decisions about its own cuts to public health and its own management of this pandemic. Now the U.S. government is punishing states such as Laos who have made important strides to control the virus.

Vijay Prashad, who lives in Northampton, was born and raised in Kolkata, India. He is the director of Tricontinental: Institute for Social Research.

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