Jubilee 2000: Parts 1 and 2

The campaign to cancel unpayable debt in the world's poorest countries

by Thomas E. Ambrogi

Toward Freedom magazine, May, 1999 & June / July, 1999 issues

Part 1

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 a 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. They chanted, "Break the Chains of Debt," calling for cancellation of the crushing deficits 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.

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 includes secular groups of every political stripe, all sharing a moral commitment to ensure a debt-free fresh start for the world's poorest nations. It draws its inspiration from the Year of Jubilee every 50 years described in Leviticus 25. But you don't have to be a believing Jew, Christian, or Muslim to rise to the vision of liberation that is projected in this remarkable movement.

Martin Dent, a political economist at the University of Keele, 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, getting access to finance ministers and bank presidents in order to share the 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 1996.

The international coalition that has since developed has organizing offices in some 60 countries on five continents. 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 which 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, 1999, in Cologne. Strong supportive calls for Third World debt cancellation have been issued by all world church bodies, including the Vatican, the US Catholic Conference and numerous national bishops' conferences, the recent Lambeth Conference, and the World Council of Churches Assembly in Harare.

Compared to the rest of the world, grassroots awareness on this issue is only in its infancy in the US. 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. The USA Campaign grew out of the Religious Working Group on the World Bank and the IMF, a coalition of some 40 Catholic and Protestant organizations which had been working on debt relief for several years. Its Steering Committee includes every major denomination and social justice organization and collaborates with the US Catholic Conference and the National Council of Churches. It hopes to develop similar working relationships in the Muslim and Jewish communities.

THE JUBILEE 2000 / USA PLATFORM

The "Jubilee" proclaimed in Leviticus 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 forty nine years.... And you shall hallow the fiftieth year, and proclaim liberty throughout the land to all its inhabitants." (Lev. 25: 8, 10)

The 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 calls for a return of all land to its original owners, the freeing of all slaves, and the release of all persons from their debts. It is this that relates the biblical notion of Jubilee to the call to break the chains of debt in the impoverished countries of the world.

The J2K platform addresses the debt of all impoverished countries, even if its focus is more narrowly on the 41 nations identified as Heavily Indebted Poor Countries (HIPCs). Several key ideas in the five 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 action is needed to recover resources that have been stolen by corrupt regimes. And, finally, cancellation must benefit ordinary people, and on terms that are agreed to in a transparent and participatory process that will break the cycle of future debt.

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 UN 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.

But the narrower focus is on the most impoverished, poorest, and most heavily indebted of the developing countries. The World Bank describes 41 countries as HIPCs. Of these, 33 are in Africa and owe about $214 billion in foreign debts, according to World Bank President James Wolfensohn. 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.

Impoverished countries have three kinds of debt:

1) Multilateral: This is debt owed to international financial institutions, such as the World Bank, the International Monetary Fund (IMF), or regional development banks, like the Inter-American Development Bank, or the African Development Bank. Forty-five percent of HIPC debt is multilateral. 2) Bilateral: This is debt owed to individual governments, like the US, France, and Japan. These governments meet in two groups: the Paris Group (US, Japan, and European nations) and the non-Paris Group (Asia and Eastern Europe). Forty-five percent of HIPC debt is bilateral. 3) Commercial: Owed to international commercial banks such as Citibank, this accounts for ten percent of HIPC debt.

STRUCTURAL ADJUSTMENT POLICIES

From the earliest days of the debt crisis, access to multi-million 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," or SAPs. 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, with the presumption that a relatively unregulated free market will bring growth that trickles down for the benefit of everyone. But the rapid introduction of SAPs 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 puts many small enterprises out of business and bankrupts many small farmers.

SAPs demand that real wages be reduced, taxes be increased, and "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 SAPs is borne disproportionately by the poor and their children. Drastic austerity is demanded in social spending and domestic policies to demonstrate an impoverished nation's "fiscal responsibility." This 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 former president of Tanzania, has cried out, "Must we starve our children to pay our debts?"

ORIGINS OF THE DEBT

The debt crisis first came to public attention in August 1982, 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 US, Europe, and Japan. When these banks found themselves awash in new money which they had to move, 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 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, HIPCs 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 US) were often more interested in gaining allies than in whether receiving governments really served their people or the money went to productive purposes. Billions were lent by Northern governments 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 lending: to Marcos in the Philippines, Mobutu in Zaire, Suharto in Indonesia, 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 which 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. With this in mind, 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.

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Part 2

In the past two years, a coalition of unprecedented international breadth and vitality has grown around the ~ world. Known as Jubilee 2000, or J2K, it has roots in communities of faith but includes secular groups of every political stripe, all sharing a moral commitment to ensure a debt-free fresh start for the worlds poorest nations. The first international conference of Jubilee 2000 was held in November 1998 in Rome, with 38 national campaigns and 12 international organizations represented. That conference agreed to coordinate a Global Chain Reaction which will work toward a target of 22 million signatures-the biggest petition in history -scheduled for delivery as part of an international event at the June 1999 Summit of the G8 countries in Cologne.

IS IT PRACTICAL?

Jubilee 2000 doesn't call for the cancellation of all debt, but rather all debt that is unpayable. Declaring a debt unpayable is not simply about determining whether it can physically be paid. The calculation grid is far more complex than a simple balance sheet.

Unpayable foreign debt is that which would cost such human suffering to repay that no honorable creditor would exact it. Debt should also be declared unpayable whenever the cost of debt service is more than the financial resources needed for 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 which are incompatible with human dignity."

The most urgent unpayable debt is that of the 41 nations the World Bank and the IMF declared to be Heavily Indebted Poor Countries (HIPCs). The J2K campaign is 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 HIPC debt can't and won't be repaid, and it's senseless to believe otherwise. These countries can't 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 is the most practical way to reduce poverty and restart HIPC economies, as well as to protect the global environment-which undergoes enormous degradation under the pressure to develop export markets to finance debt repayment.

Because the face value, or official amount, of these debts will never be repaid, their true market value is only a fraction of their face value. HIPC bilateral debts to the US government, for instance, are heavily discounted, generally worth only about 1015 percent of the original loan. Donor nations and lending institutions will not suffer greatly 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 been well repaid over many years of debt servicing.

There are numerous precedents for debt relief, including cancellation. In 1953, Germany negotiated an accord in which, in addition to having about 80 percent of its war debt written off, it was required to use

only three to five percent of export earnings to pay back the rest of its foreign debt. HIPCs are currently required to use 20-25 percent of their earnings for debt repayment. Ironically, Germany now sits on the IMF Board, which enforces that stringent demand on HIPCs. In the late 80s, creditor countries canceled about 50 percent of Poland's debt, as the Iron Curtain began to crumble. In 1991, the US forgave $7 billion in debt which Egypt owed, in gratitude for Egyptian assistance in the Gulf War.

A Stanford University study substantiated that the US government bailout of the Savings & Loans in the early 90s will cost taxpayers $1.36 trillion. Most are unaware of just how generous they've been in canceling that debt, or that they're paying depositors 100 percent of their loss rather than only up to the $100,000 maximum usually covered by the Federal Deposit Insurance Corporation (FDIC). No argument can be made that, as a nation, we simply can't afford HIPC debt cancellation. The question is political will, not economic possibility.

IMPACT ON RICH COUNTRIES

Cancellation of crushing international debt is simply the right thing to do. At the same time, however, in an increasingly globalized world there are many practical reasons why it's in the enlightened self-interest of industrialized nations to relieve the debt of impoverished countries.

First, a major governing principle of the capitalist economic system is the need for ever-expanding markets. The huge debts of HIPCs and the rigid imposition of Structural Adjustment Program (SAP) austerity frequently leads to social conflict, political instability, and government repression. Add crumbling infrastructures and a poorly educated and unhealthy workforce, and it's 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 US dollars usually results in lax environmental protection and the misuse of natural resources. Unmanageable debt service easily translates into eroded and toxically depleted soils in the rush to raise cash crops, polluted and over-fished waters, clear-cut rain forests, and unregulated mining practices. Environmental damage on such a scale doesn't respect national borders, and rich countries must realize that the impact is felt in their own backyards. 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, and the focus of one's analysis continually widens. Migration patterns, for instance, are directly related to economic possibilities wiped out by the demands of debt repayment. As the president of the Latin American Bishops Conference 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 high international debt, the major drug-producing nations need hard currency from drug-consuming countries like the US. The sale of cocaine and opium produces that, and the cycle of the drug fix continues.

RESPONSES TO THE CRISIS

In 1996, there was a major shift by the IMF and the member nations of the World Bank when they announced the HIPC Initiative. It was an historic event, in that the Bretton Woods institutions, for all 50 years of their existence, have never considered writing off or rescheduling debts owed to them. The intent of the initiative was to reduce debtor nations' overall burden to a "sustainable" level.

But many NGOs and faith-based groups say the initiative is flawed. The criteria to qualify are too strict, the amounts offered too small, and the length of time required to prove credit-worthiness too long. In short, the whole process is simply too little, too late. Furthermore, in addition to continuing to insist on an array of SAPs, the HIPC Initiative is intended only to restore a debtor country s ability to repay its loans, without any real consideration of debt cancellation.

In November 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 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, almost one-third of the government's revenue last year. It takes $400 million a year to service that debt. Nicaragua owes about $6.1 billion, almost $1300 per person, the highest per capita debt in the world. That takes $254 million annually to service, about 52 percent of all its export revenue and almost three times the country's spending on health and education.

Honduras needs to rebuild more than 170 bridges destroyed by Hurricane Mitch, and build housing for over two million homeless. Whole villages and banana plantations-not just their crops-were washed away. There won't be any Honduran banana exporting for at least two years. Chiquita Banana and United Fruit shareholders will no doubt land on their feet with tax write-offs, but thousands of campesinos won't have work for months or years.

George Bush came down right away and offered condolences, but didn't mention possible debt cancellation. Hillary Clinton also visited, announcing a two-year moratorium on US debt repayments-an offer to postpone, but not cancel, $54 million that the two countries were scheduled to repay through 2000. Then, in December, a crisis consultation was called in Washington between the affected countries and the Paris Club ministers of finance, including the US. Word came in January that the Paris Club agreed to forgive 80 percent of Nicaragua's debt, consider a similar reduction for Honduras, and postpone for three years all payments on their loans. Full details are hard to come by, but it's an historic event and should be saluted as such. It will free over $400 million for reconstruction, and hopefully set 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. Given Germany's regrettable history of foot-dragging on this issue in World Bank / IMF deliberations, and that Schroeder will play host to the next G8 meeting, his initiative should be encouraged. This is the same meeting to which the J2K Campaign hopes to bring 22 million signatures on a worldwide petition with the same objectives.

And, finally, at the 1999 World Economic Forum in late January, bringing together 2000 movers and shakers of the international financial community in Davos, Switzerland, Vice President Al Gore made a similar plea for a debt-relief plan. Without giving any details, he pledged a new US-led initiative to eliminate the debt of developing countries, relieving them of their current burden of interest payments. According to the New York Times, Gore promised that the next Clinton budget would include "significant new US funding" to pay off debts of HIPCs, many in Africa. But further news reports never mentioned the initiative. It may be hoped, however, that Gore's pledge implies administration support for debt cancellation legislation that will be introduced in the 106th Congress this year.

KAIROS FOR A NEW WORLD ORDER

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

The hidden blessing in the debt crisis may be that it will force the world toward a new global order. There is more than a hint of this in the realistically ambitious goals of Jubilee 2000. Achieving the goal of debt cancellation in the most impoverished countries would put the world on the road toward creating humane alternatives beyond self-interest. It would also encourage 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 HIPC debt cancellation is achieved, it will force a widening range of revolutionary political and economic initiatives. Traditional SAP requirements will be replaced with adjustment programs that better meet the needs of the poor and promote participatory and equitable human development. This will force the governments of developing nations to ensure support for basic needs such as education, nutrition, and health care, prevent environmental degradation, reduce inappropriate levels of military spending, and effectively seek recovery of resources that were diverted to corrupt regimes. Most important, it will prompt them to develop democratic, transparent processes whereby debts will not be canceled or new loans ever assumed without popular debate and the participation of civil society.

The millennium is a key moment, 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. The J2K Coalition has demonstrated 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 urgently needed, especially in US churches and wider faith communities. 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 Amorogi is a theologian and a human rights advocate from Claremont, California. His article first appeared in the National Catholic Reporter.

Reforming the System

Jubilee 2000 Campaign