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Goal for 2000: unchaining slaves of national debt


On May 16, 1998, representatives of the eight wealthiest nations in the world -- known as the Group of 8, or G8 -- held their annual summit meeting in Birmingham, England. An astounding throng of 70,000 people from all over the United Kingdom was assembled there by the Jubilee 2000 Campaign, to create a human chain seven miles long around the conference center and to raise the chant of “Break the chains of debt,” calling for cancellation of the crushing debt of impoverished countries by the year 2000.

It was the first audible cry of a roar for justice that is beginning to be heard in every corner of the world, and that calls for echoing action in the churches of the United States.

The Jubilee 2000 -- or J2K -- Campaign is a coalition of unprecedented international breadth and vitality that has grown dramatically around the world in the past two years. The campaign has its roots in communities of faith, but it includes secular groups of every political stripe, all sharing a moral commitment to a debt-free fresh start for the world’s poorest nations.

It draws inspiration from the Year of Jubilee every 50 years described in Leviticus 25. But you don’t have to be a believing Jew or Christian to rise to the vision of liberation projected in this remarkable movement.

An English political economist at the University of Keele named Martin Dent first had the idea of linking the debt crisis to the concept of Jubilee and the millennium. In 1990, he began to circle the globe alone, gaining access to finance ministers and bank presidents to share debt cancellation tables and the Jubilee vision he had worked out. He finally raised enough initial funding, and the first tiny Jubilee 2000 office was opened in London in April of 1996.

The international coalition that has since developed has organizing offices in some 60 countries on all five continents. Each national office shares a common logo of breaking chains and is exchanging ideas on the Internet. The first international conference of Jubilee 2000 was held in November 1998 in Rome, with 38 national J2K campaigns and 12 international organizations represented.

That conference agreed to coordinate a Global Chain Reaction that will work toward a target of 22 million signatures -- the biggest petition in history -- to be delivered as part of an international event at the next Summit of the G8 countries on June 19 in Cologne, Germany.

Strong calls for Third World debt cancellation have been issued by all world church bodies, including the Vatican, the U.S. Catholic Conference and numerous national bishops’ conferences, the recent Lambeth Conference and the World Council of Churches Assembly in Harare, Zimbabwe.

Compared to the rest of the world, grassroots awareness on this issue is in its infancy in the United States. The Jubilee 2000/USA campaign was launched in June 1997, at the annual G8 Summit held in Denver. A national office was opened in early 1998 in Washington, and an excellent education packet is being distributed widely as an organizing tool in religious and community groups around the country.

The U.S. campaign grew out of the Religious Working Group on the World Bank and the IMF, a coalition of some 40 Catholic and Protestant organizations that had been working on debt relief for several years. Its steering committee includes every major denomination and social justice organization in the faith community. The committee collaborates with the U.S. Catholic Conference and the National Council of Churches and hopes to develop similar working relationships in the Muslim and Jewish communities.

The Year of Jubilee

The context for the economic and political renewal being proposed lies in the “Jubilee” year as proclaimed in Leviticus 25, which called for a comprehensive remission of obligations to take place on every “Sabbath’s Sabbath.”

“You shall count seven weeks of years, seven times seven years, so that the period ... gives 49 years. ... And you shall hallow the 50th year and proclaim liberty throughout the land to all its inhabitants.”

The ram’s horn call to Jubilee is an urgent mandate for overcoming the systemic structures of injustice and poverty. It is intended to bring a new beginning for all, to restore justice and equality and to protect and nurture the land. It is remarkable that the first call is for liberty of the land itself.

In Chapter 25, we hear God say, “You shall grant a redemption of the land.” It is a year of solemn rest, a fallow year for the sake of the land, when “all its yield shall be for food” and not for profit. And for the inhabitants, all leased or encumbered or forfeited land shall be returned to its original owners: “Each shall return to his property”; slaves shall be redeemed and set free; and each community member shall be released from all debts.

The Sabbath and Jubilee codes are also spelled out in Deuteronomy 15, especially in the call for every creditor to release what he has lent to his neighbor.

Although there is no evidence that the Jubilee program was ever carried out, the theological premise of all these texts is that Jubilee restructuring of the community’s assets is to remind Israel that the land belongs to God and that they are strangers and sojourners in the land, an Exodus people who must never return to a system of possessive slavery over one another.

Isaiah 61 appropriates the Jubilee vision in the prophetic call to “bring good news to the poor and liberty to the captives” and to proclaim “the year of the Lord’s favor.” It was this text that Jesus of Nazareth chose, above all others, to define his mission and inaugurate his ministry in Luke 4. And it is this bold and central affirmation that relates the biblical notion of Jubilee to the mission to break the chains of debt in the impoverished countries of the world.

The J2K platform addresses the debt of all impoverished countries. The campaign believes that, as a minimum, debt relief should be offered to the 40 nations identified as “heavily indebted poor countries.” Several key ideas in the five specific points of the platform should be highlighted.

First, the call is to definitive debt cancellation -- not just reducing or rescheduling debt service.

Second, only unpayable debts are under consideration.

Third, the cancellation must not be conditioned on the drastic policy reforms currently demanded by structural adjustment programs, which perpetuate poverty and environmental degradation.

Fourth, there must be recognition that both lenders and borrowers are responsible and that joint creative action is needed to recover resources that have been stolen by corrupt regimes.

Finally, it must be cancellation that benefits ordinary people and on terms that are agreed to in a transparent and participatory process that will break the cycle of future debt.

Scope, size of debt crisis

Debt relief is an urgent matter of justice, not a plea for charity. The debt burden in the most impoverished nations is both economically unsustainable and morally unacceptable. Impoverished countries are economically trapped into making unending and compounding interest payments on their debts. This requires them to divert large amounts of scarce resources from health care, education and food security, ensuring that any real economic development will be impossible.

Furthermore, ordinary people did not benefit from many of the loans that gave rise to this debt, but, under the rules of the global economic game, they bear the principal burden of repayment, keeping both them and future generations unjustly chained in dehumanizing poverty.

Until one sees how foreign debt touches lives, it remains only an academic debate among economists and ministers of finance. The J2K Coalition aims to make sure that it is seen as more than that. Ethical analysis, rooted in human dignity, is as fundamental as economic analysis in solving the debt crisis.

The overall global debt of all developing countries, according to United Nations statistics, was $567 billion in 1980 and $1.4 trillion in 1992. In that same 12-year period, total foreign debt payments from Third World countries amounted to $1.6 trillion. This means that, having already paid back three times over the $567 billion they had borrowed, far from being less in debt, in 1992 they owed 250 percent more than they owed in 1980.

There are 40 countries that are described by the World Bank as “heavily indebted.” They owe about $213 billion in foreign debts, according to World Bank President James Wolfensohn. Thirty-three of them are in Africa.

Many African countries spend four times as much servicing debt each year as they do on health care and education for their citizens. It is reliably estimated that for every dollar given in development aid, three dollars come back to rich countries in debt-service payments.

The debt that is held by impoverished countries is of three kinds:

  • Multilateral debt is owed to international financial institutions, such as the World Bank, the International Monetary Fund or regional development banks, such as the Inter-American Development Bank or the African Development Bank. Forty-five percent of debt owed by heavily impoverished nations is multilateral.
  • Bilateral debt is owed to individual governments, such as the United States, France and Japan. These governments meet in two groups: the Paris Group (United States, Japan and European nations) and the non-Paris Group (Asia and Eastern Europe). Forty-five percent of debt owed by heavily impoverished nations is bilateral.
  • Commercial debt is owed to international commercial banks, such as Citibank. Ten percent of heavily impoverished nations’ debt is commercial.

From the earliest days of the debt crisis, access to multimillion-dollar loans from the World Bank and IMF was made contingent on a country’s agreement to carry out a drastic program of economic “liberalization.”

This array of monetary, budgetary, market and trade reforms have together come to be known as “Structural Adjustment Policies.” The package varies in detail from country to country, but the main policies include: reducing the state’s role in the economy, lowering barriers to imports, removing restrictions on foreign investment, raising taxes, eliminating subsidies for food staples and for local industries, reducing spending for social welfare, cutting wages, devaluing the currency and emphasizing production for export rather than for local consumption.

Liberalization means freeing the economy from government control, in the presumption that a relatively unregulated free market will bring growth that trickles down for the benefit of everyone. But the rapid introduction of such programs is terribly traumatic to a people already limping under the crushing burden of foreign debt, as the history of every impoverished country has clearly shown.

If all state-owned enterprises are privatized -- such as electricity, transport and communications -- many low-wage workers are likely to lose their jobs. When the national currency is devalued to make exports cheaper on the world market and unlimited foreign investment is encouraged, and tariffs and import quotas are lowered, local producers rapidly lose control of their own economy.

Abolishing subsidies for local industries, raising interest rates and restricting credit will put many small enterprises out of business and bankrupt many small farmers.

Structural adjustment policies demand that real wages be reduced, that taxes be increased and that government spending for health and welfare be reduced, all in order to balance the budget. And, finally, agricultural and industrial production must be shifted from food staples and basic goods for domestic use to export products that will bring in hard foreign currency.

UNICEF regularly documents how the cost of such policies is borne disproportionately by the poor and their children. The austerity demanded in social spending and domestic policies, in order to demonstrate an impoverished nation’s “fiscal responsibility,” translates most directly into fewer social services for the poor, the elimination of consumer subsidies for basic food staples and public transportation, schools without teachers or textbooks, and health clinics without nurses or medicine. As Julius Nyerere, the great former president of Tanzania, has cried out, “Must we starve our children to pay our debts?”

The debt crisis first came to public attention in August 1982 when Mexico announced it could not pay the interest and principal due on its foreign debt. Some 25 other developing nations in Africa, Asia and Latin America (including Brazil, Argentina and Venezuela), soon followed Mexico or threatened to do so. This was all unthinkable -- countries just did not go bankrupt -- and the issue of unrepayable debt has hounded the international community ever since.

Among many other complex factors, much of the debt crisis can be traced back to 1973-74, when the OPEC countries quadrupled the price of oil. Oil-exporting countries had a surplus of $433 billion between 1974 and 1981, so they deposited it in commercial banks in the United States, Europe and Japan. When these banks found themselves awash in new money, there was a rush to encourage -- even push -- developing countries to borrow, often at very low and variable rates of interest.

In 1979-80, OPEC again doubled the price of oil. In the early to mid-1980s, there was a worldwide collapse of commodity prices, especially copper, and many African countries also suffered a severe drought that resulted in one of the worst famines of this century. When variable interest rates skyrocketed to more than 20 percent in just a few years, impoverished nations found themselves in an impossible position, far beyond what they had bargained for when they took their original loans.

During the Cold War, donor governments (such as the United States) were often more interested in gaining allies than in whether receiving governments really served their people or whether the money went to productive purposes. Billions were lent by Northern governmental and multilateral creditors to repressive or irresponsible Third World governments for reasons the majority of their people neither knew about nor agreed with and from which they derived no benefit.

Many projects were poorly designed or badly planned, buildings and power stations that were never completed and roads that led to nowhere. It was often wasteful misspending that left behind no productive capacity to repay the loans.

Even the most notorious corruption did not discourage the lending: to Ferdinand Marcos in the Philippines, Mobutu Sese Seko in Zaire, Suharto in Indonesia, Anastasio Somoza in Nicaragua. It was well-known by creditor banks that little of this money ever reached the people, and that most of it was being siphoned into Swiss bank accounts or wasted on repressive and self-serving military adventures.

Cold War collusion and corruption left behind a dreadful heritage of now unpayable debt in Third World countries. In similar circumstances today, the leaders of post-apartheid South Africa call the unjust burdens they have inherited “odious debt” and declare that in justice it should simply be written off.

Debt resulting from theft by oppressive elites creates complex ethical, economic and political challenges when the question of debt cancellation gets serious. But it simply reaffirms the undeniable principle that responsibility for the foreign debt crisis lies not only with the debtor nations but with debtors and creditors alike.

It was with this in mind, for instance, that African countries asked Jubilee 2000 to use the word impoverished rather than poor to describe them, arguing that developing countries are actively being impoverished by the international political and financial system.

As we have seen, J2K is not calling for the cancellation of all debt, carte blanche, but rather of debt that is unpayable. Determining a debt to be unpayable is not simply a bottom-line exercise of determining whether a debt can physically be paid or not. The calculation grid is far more complex than a simple balance sheet.

Unpayable foreign debt can better be defined as debt whose repayment would cost such human suffering that no honorable creditor would seek to exact it. Debt should also be declared unpayable whenever the cost of debt service is more than the financial resources needed to achieve significant human development.

A 1987 Vatican statement on the ethics of debt cancellation put it another way: “No government can morally demand of its people privations that are incompatible with human dignity” (“At the Service of the Human Community: An Ethical Approach to the International Debt Question”).

The most urgent unpayable debt is that of the 41 nations that are declared by the World Bank and the IMF to be heavily impoverished nations. The J2K campaign is both simple in its call and sophisticated in its analytical approach, with a careful focus on specific countries and specific debts. The reality is that almost all of the debt in these countries cannot and will not be repaid, and it is senseless for creditors to believe otherwise.

These impoverished countries cannot develop healthy economies as long as millions of their people are being denied basic health care and education and earn wages so low that they can barely survive. Cancellation of this crushing debt burden is the most practical way to reduce poverty and restart impoverished economies, as well as to protect the global environment -- which undergoes enormous degradation under the pressure to develop export markets to meet the demands of debt repayment.

True market value

Because the face value, or official amount, of these debts will never be repaid, the true market value of the debts is only a fraction of their face value. Bilateral debts of impoverished nations to the U.S. government, for instance, are heavily discounted, generally worth only about 10-15 percent of the original loan. Donor nations and lending institutions will not suffer to any great extent by writing off these debts, since contributions needed would be based on true market value.

In effect, Western governments received what they paid for -- support in the Cold War -- and they have already been well repaid over many years of debt servicing.

There are numerous precedents for debt relief, including cancellation. In 1953, Germany negotiated an accord with the Allied powers in which, in addition to having about 80 percent of its war debt written off, it was required to use only 3 to 5 percent of export earnings to pay back the rest of its foreign debt. Impoverished nations are currently required to use 20-25 percent of their earnings for debt repayment, and it is ironic that Germany now sits on the IMF Board that enforces that stringent demand.

In the late 1980s, creditor countries cancelled about 50 percent of Poland’s debt, as the Iron Curtain was beginning to come down. In 1991, the United States forgave $7 billion in debt that Egypt owed, in gratitude for Egyptian assistance in the Gulf War.

Here at home, a Stanford University study showed that the U.S. government bailout of savings and loans companies in the early 1990s will cost the American people $1.36 trillion over the 40-year life of the bonds that have been floated to make good those irresponsible and illegal transactions in junk bonds. Most American taxpayers are unaware just how generous they have been in cancelling that debt for the S&Ls, or that they are paying depositors 100 percent of their loss rather than only up to the $100,000 maximum usually covered by FDIC, the Federal Deposit Insurance Corporation.

No argument can be made that, as a nation, we simply cannot afford the money required for debt cancellation in the impoverished nations. The question is political will, not economic possibility.

J2K supports the cancellation of crushing international debt because the biblical calls to Jubilee and to care for the poor are compelling, and because it is simply the right thing to do. At the same time, however, in an increasingly globalized world there are many practical reasons why it is in the enlightened self-interest of industrialized nations to relieve the debt burden of impoverished countries, and these reasons have their own persuasive power.

First, a major governing principle of the capitalist economic system is the need for ever-expanding markets. The huge debts of impoverished nations and the rigid imposition of structural adjustment austerity frequently lead to social conflict, political instability and government repression. When this is added to crumbling infrastructures and a poorly educated and unhealthy workforce, it is unrealistic to expect foreign investment and market development.

Greater political stability and economic possibility would make lower income countries better markets for goods and services and more attractive to corporate investors.

Second, the need to repay foreign debt in hard currencies like U.S. dollars usually results in lax environmental protection and the misuse of natural resources. Unmanageable debt service easily translates into soils that are eroded and toxically depleted in the rush to raise cash crops, into waters that are polluted and overfished, into clear-cut rain forests and unregulated mining practices.

Environmental damage on such a vast scale does not respect national borders, and rich countries must realize that the impact of this damage is also felt in their own backyard. The debt burden carried by impoverished countries has global repercussions and impoverishes us all.

To call for Third World debt cancellation is in effect to take on all the major social and economic issues at once, and the focus of one’s analysis continually widens. Migration patterns, for instance, are directly related to economic possibilities that have been wiped out by the demands of debt repayment. As the president of the Latin American Bishops’ Conference has recently said, “When there is no development in the South, migrants will continue flowing north, because it’s a situation of despair.”

International drug traffic is likewise related to the debt crisis. To repay their high international debt, the major drug-producing nations need hard currency from drug-consuming countries like the United States. The sale of cocaine and opium produces that hard currency, and the cycle of the drug fix continues.

In 1996, there was a major shift by the IMF and the member nations of the World Bank when they announced the “Heavily Indebted Poor Country Initiative.” The event was historic because the Bretton Woods institutions, for all the 50 years of their existence, had never considered writing off or rescheduling the debts owed to them. The intent of the initiative was to reduce a debtor nation’s overall burden to a “sustainable” level, and that was in itself groundbreaking in the long history of international debt negotiations.

Too little too late

But many nongovernmental organizations and faith-based groups view the initiative as flawed in its design and intent. The criteria to qualify are too strict, the amounts offered are too small and the length of time required to prove credit-worthiness is too long, so that the whole process is simply too little and too late. Furthermore, in addition to continuing to insist on an array of structural adjustment programs, the initiative is intended only to restore a debtor country’s ability to repay its loans, without any real consideration of debt cancellation.

In November of 1998, the peoples of Central America suffered the ravages of Hurricane Mitch, which wiped out decades of painful development effort. There are a few hopeful rays of light in steps that have been taken by the international financial community to address this disaster.

Nicaragua and Honduras, among the poorest nations in the hemisphere, with nearly half their people living below the poverty line, are the focus of most international attention. Honduras owes about $4.1 billion to international creditors, which is almost one-third of the government’s total revenue last year. It takes $400 million a year to service that debt.

Nicaragua owes about $6.1 billion, the highest per capita debt in the world. That takes $254 million a year to service, which is about 52 percent of all its export revenue and almost three times the country’s spending on health and education combined.

Honduras needs to rebuild more than 170 bridges destroyed by Hurricane Mitch and to build new housing for more than 2 million homeless persons. Whole villages were washed away. Whole banana plantations -- not just their crops -- were washed away. There will not be another banana for export from Honduras for at least two and probably three years. Chiquita Banana and United Fruit shareholders will no doubt come down on their feet with tax writeoffs, but thousands of campesinos will have no work whatever for months and perhaps years ahead.

George Bush came down right away and offered condolences, but no mention of possible debt cancellation. Hillary Clinton visited the area in mid-November, announcing a two-year moratorium on U.S. debt repayments -- offering to postpone, but not cancel, $54 million that the two countries were scheduled to repay through the year 2000.

Then, in December, a crisis consultation was called in Washington between the affected countries and the Paris Club ministers of finance, including the United States. Word finally came in early January that the Paris Club has agreed to forgive 80 percent of Nicaragua’s debt, consider a similar reduction for Honduras and postpone for three years all payments on both countries’ loans.

Full details of all this are still hard to come by, but it is a historic event and should be saluted as such. It will free more than $400 million for reconstruction in the area. Advocates of Jubilee 2000 hope it will serve as an example for future deliberations on the Jubilee cancellation of debt.

Still more promising are two broader initiatives on the international scene. In mid-January, German Chancellor Gerhard Schroeder launched his own proposal for alleviating the burdens of the most indebted nations, calling on the G8 nations to make this a priority at their June summit in Cologne.

Given Germany’s regrettable history of foot-dragging on this issue in World Bank/IMF deliberations, and given the fact that Schroeder will play host to the next G8 meeting in Cologne, his remarkable initiative should be applauded and encouraged in every possible political arena. This is, after all, the same June meeting of the G8 in Cologne to which the J2K Campaign hopes to bring 22 million signatures on a world-wide petition with the same objectives.

At the 1999 World Economic Forum in late January, which brought together 2,000 movers and shakers of the international financial community in Davos, Switzerland, Vice President Al Gore made a similar plea for a debt-relief plan for impoverished nations. Without giving any details, he pledged a new U.S.-led initiative to eliminate the debt burdens of developing countries, relieving them of their current burden of interest payments.

According to The New York Times, Gore promised that the Clinton budget being sent to Capitol Hill would include “significant new U.S. funding” to pay off debts of impoverished nations, many in Africa, but further news reports never made mention of such a budget initiative. It may be hoped, however, that the pledge made by Gore at Davos would imply the administration’s support for debt cancellation legislation, which will certainly be introduced in the 106th Congress this year.

The energy and speed with which the Jubilee 2000 Campaign has spread around the world is without precedent in international movements. The extraordinary human chain that is being forged around the debt crisis is a sign of something new afoot -- a significant new momentum and an international awakening that declares that new beginnings are indeed possible for the poor, if only the political will can be generated to make that happen.

The hidden blessing in the debt crisis may be that it will force the world toward a new global order, and there is more than a hint of this vision in the realistically ambitious goals of Jubilee 2000. To achieve the goal of debt cancellation in the most impoverished countries would put the world on the road toward creating humane alternatives beyond self-interest, economic systems in which conscious commitments to justice and compassion, rather than blind mechanisms or invisible hands, are counted on to make things right between peoples.

If significant cancellation of debt is achieved, it will by its very nature force a widening range of new political and economic initiatives that will be revolutionary beyond our imagining. Traditional structural adjustment requirements will be replaced with adjustment programs that better meet the needs of poor people and promote participatory and equitable human development.

A moment to grasp

This, in turn, will force the governments of developing nations to ensure support for basic needs such as education, nutrition and health care, to prevent environmental degradation, to reduce inappropriate levels of military spending, to effectively seek recovery of resources that were diverted to corrupt regimes, and -- most important of all -- to develop democratic, transparent processes unique to each nation whereby debts will not be cancelled nor new loans ever again assumed without popular debate and the participation of civil society.

The millennium is a key moment in time, a kairos, a moment that must be grasped. The Jubilee 2000 initiative clearly is poised to make a radical difference in our connectedness with a developing world that deserves more than the share it is getting of the riches of God’s good earth.

The J2K Coalition has already demonstrated that it has the potential to develop a broad convergence of political, economic and moral forces such as that which once ended slavery, and, in our time, apartheid. An effective political network is what urgently needs building, especially in the churches and the wider faith communities in this country.

The convergence will not hold indefinitely. For the sake of the brothers and the sisters, we dare not let the millennial moment pass us by.

Thomas E. Ambrogi is a theologian and human rights advocate who lives with his wife in Pilgrim Place, an ecumenical community of retired church professionals in Claremont, Calif.

National Catholic Reporter, March 26, 1999