Cover
story
Goal
for 2000: unchaining slaves of national debt
By THOMAS E. AMBROGI
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 worlds
poorest nations.
It draws inspiration from the Year of Jubilee every 50 years
described in Leviticus 25. But you dont 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
Sabbaths 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 rams 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 communitys 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 Lords 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
countrys 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 states 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
nations 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 Polands 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 ones
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 its 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 nations 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 countrys 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 governments
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 countrys 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 Nicaraguas 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 Germanys 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
administrations 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 Gods 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
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