The International Debt Burden in the Light of Church Social Teachings - Essay Example

THE INTERNATIONAL DEBT BURDEN IN THE LIGHT OF CHURCH SOCIAL TEACHINGS International Debt The Jubilee year was meant to restore equality among all of the children of Israel, offering new possibilities to families which had lost their property and even their personal freedom. On the other hand, the jubilee year was a reminder to the rich that a time would come when their Israelite slaves would once again become their equals and would be able to reclaim their rights." 1 The Pastoral Circle: First Step It is year 2007. It is time for "communities of salt and light"2 to once more read the signs of the times, to see, to reflect, to judge and hopefully to act for their global brothers and sisters, using the social teachings of the Church as anchor and guide. In year 2000, the Church celebrated the Jubilee Year in the context of an escalating global debt crisis, mindful of the terrible price that the world's poor were paying for debts contracted by their governments without their knowledge, much less their consent. They are still paying, with blood, sweat and tears, seven years after Jubilee, despite the global movement against this debt burden. International Debt 2 Jubilee USA3 has already stated, "don't owe, won't pay!" But despite the defiance, in real life, the poor are still paying for debts of the rich, and will continue to do so as long as their leaders and governments bow down before dictates of powerful multinationals and multilateral agencies including the IMF, WB and WTO. This is one almost overwhelming obstacle that the global poor have to overcome to free themselves from immoral and illegal debts. The Church's social teachings consider us all as members of the human community that have the right to human dignity and common good. But at the same time the Church "takes sides" by proclaiming its preferential option for the poor, especially vulnerable sectors such as women, children, and the elderly. This is especially true regarding the issue of debt. The overwhelming majority of people in poor countries suffer when so much of their resources are automatically channeled to debt servicing, instead of being used to fight poverty, ensure the delivery of basic services and generate more jobs, to mention only a few much needed programs. International Debt 3 For the poorest of the poor, debt was and still is literally a matter of life and death. Of all continents, Africa is probably the worst hit by the combined blows of poverty and debt, two problems that feed off each other. Africa managed to score a few victories in improving the people's health and lives, only to slide back due to structural adjustment programs imposed by the IMF-WB as a condition to approval of more loans for poor countries. "While many African countries succeeded in improving their health care systems in the first decades after independence, the intervention of the World Bank and IMF reversed this progress. In Kenya, for example, child mortality was reduced by almost 50% in the first two decades after independence in 1963. Across sub-Saharan Africa, the first decades after independence saw significant increases in life expectancy, from an average of 44 years to more than 50 years. In the 1980s and 1990s, however, African governments had to cede control over their economic decision-making in order to qualify for World Bank and IMF loans. The conditions attached to these loans undid much of the progress achieved in public health. The policies dictated by the World Bank and IMF exacerbated poverty, providing fertile ground for the spread of HIV/AIDS and other infectious International Debt 4 diseasesConsequently, during the past two decades, the life expectancy of Africans has dropped by 15 years." 4 No Relief from Debt Relief Many people pinned their hopes on debt relief, specifically on the Heavily Indebted Poor Countries (HIPC) initiative, which was set up for countries whose debts were quadruple their yearly export earnings that were usually channeled to debt servicing. Unfortunately, the HIPC initiative was essentially a self-serving strategy by debtor institutions and countries to enable indebted countries to pay their debts, and not to enable them to fight poverty and improve their lives and future. In fact, a WB study "has found that countriesunder the Enhanced Heavily Indebted Poor Countries (HIPC) initiative .are once again at risk of unsustainable debtalthough the enhanced HIPC initiative has reduced US$18 billion worth of debt in 18 countries." 5 The countries' new loans offset whatever gains they may have made. Critics have pointed out the weaknesses of the HIPC initiative: the reductions offered to indebted International Debt 5 countries are too small, take too long to process, and are contingent on various conditions (additional concessions given by poor countries) such as the implementation of IMF-WB's Poverty Reduction Strategy Papers. Much of the money that indebted countries "save" via the initiative still go toward servicing their other debts (again!) and into the deep pockets of corrupt politicians, while some are actually used for health programs and the like. The deficiencies of the HIPC were apparent even to WB and IMF officials. "Even Joseph Stiglitz, the World Bank's Chief Economist and Vice President, in January, 1998 called their structural adjustment HIPC initiative "misguided", calling for a more humble approach to macro-economics and a commitment to honor promises made in social sectors."6 International Debt 6 Odious and Illegitimate Debts Creditors, whether multilateral or bilateral, pressure poor countries to honor even "odious and illegitimate debts" on pain of damaging their credit standing and failing to qualify for more loans from international finance institutions (IFIs). The term "odious debts" was used by Alexander Sack, a former Tsarist Russian minister who believed that debts should generally be honored by government except for "odious debts." If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State...This debt is not an obligation for the nation; it is a regime's debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power.7 Debt relief and cancellation advocates define odious debts as those incurred by corrupt and/or dictatorial governments which were used to enrich favored local and foreign groups and corporations, and to quell opposition by their political opponents and general International Debt 7 population. In many cases it turns out that G7 countries8 still approved odious loans, even when they knew how these loans would be used, in order to obtain concessions and cement the loyalty of the local government. The following are just a few examples of odious debts: US support for a project under the Marcos dictatorial regime in the Philippines that would have built and operated a nuclear plant right over a fault line; Japanese support (during the corrupt and repressive Suharto regime) for an aluminum project in Indonesia that would benefit Japanese aluminum exporters; UK support for a UK company operating in Kenya and charging the country five times the amount usually charged for consultancy services.9 Debt relief advocates believe this previous knowledge and complicity of G7 countries is enough legal and ethical bases for debt cancellation. More than enough, if we factor in the nature of the regimes that contracted the debt, the obvious lack of consultation with the people, and how the loans were used. International Debt 8 The anti-debt clamor resounded at the World Social Forum held in January 2007. Anti-debt forces in attendance called for 100 percent debt cancellation of what they called illegitimate debts. Wangari Maathai, Nobel Peace laureate and guest at the WSF, asked world leaders: "How can you punish the poor citizens, who were never consulted about the loans, which were used to oppress them, strengthen the ruling and cooperating elites, and exploit resources at the expense of the health, environment and welfare of the people These debts were not only poorly transacted but are illegitimate." 10 Debt and Poverty Debt has proved to be one of the main obstacles to poverty reduction and elimination. Governments, who use export earnings for debt servicing, pressure and convince local farmers to shift to export crops that increase production expenses, require fertilizers and pesticides that damage the health of people and of the environment, and destroy the ability of farmer households and communities to sustain themselves through their own International Debt 9 crops and livestock. The sudden drops in prices of export crops often drive poor farmers into bankruptcy instead of what government promised to be lucrative ventures in raising cotton or temperate vegetables such as lettuce and carrots. To attract investors, salaries are kept low and laborers are maintained as "permanent casual workers." Many workers, including those in the local bureaucracy, lose their jobs and never get any other gainful employment due to the IMF-WB demands for liberalization, privatization and devaluation. Without jobs, with little bargaining power, unorganized and often harassed, workers and their rural counterparts are paying for debt with no hope of ever making it, except for possible migration to greener pastures as overseas contractual workers. Debt is sucking dry the resources of poor nations and making rich powerful nations and institutions even richer and more powerful. Debt kills. As of 2005, the poor peoples of the world had already paid creditors to the tune of $550 billion for loans totaling $540 billion. Yet they still have to pay $523 million more for both principal and interest. This is global usury.11 Poor countries usually pay from 20 percent to as much as 40 percent of export International Debt 10 earnings to pay for debts, while EU countries like France and Italy refuse to pay more than 4 percent. Paying off these debts can kill even innocent children. Extrapolating from UNICEF data, as many as 5,000,000 children and vulnerable adults may have lost their lives in sub-Saharan Africa as a result of the debt crunch since the late 1980's. The United Nations fears another 3 million children will die in the poorest countries of sub-Saharan Africa by 2015, the target for the Millenium Development Goals to cut poverty by half. Some 11 million children die each year around the world, not just Africa, due to similar conditions of poverty and debt.12 Debt reduction initiatives (such as the HIPC proposed and supported by IMF-WB and G7 nations) have not worked and will not work. The initiatives are an example of too little, too late, and too hard. After all these programs were designed by creditors to benefit themselves, and not poor borrowers. A 2001 report by Drop the Debt exposes the following: "After HIPCthe 22 countries will owe more to the WB and IMF than to the next 17 biggest creditors put together." International Debt 11 "The World Bank and IMF are the biggest remaining creditors to the poorest countries." "Independent accountants have confirmed they (WB and IMF) could write off 100 percent of the debts of HIPCs without impeding their ability to function. "If the G7 countries were to fund the write off of the WB and IMF's debts from HIPCs, it could effectively cost each of their citizens one dollar per year.13 Total and Immediate Cancellation. What is needed is total cancellation of all debts. It is moral, legal, and can be done, despite the IMB-WB prophets of doom. More and more people are no longer willing to kill themselves to pay the IMF-WB-G7 that exercise such life and death power over all poor peoples of the world. Such extreme and lingering injustice surely makes the angels weep. Total debt cancellation can be done, as shown by Focus on the Global South, a global NGO. In 1999, developing country debt (not counting the former Eastern Bloc) was placed by the World Bank at $2,060 billion, less than 6 percent of total world debt ($37,000 billion). The debt of former Eastern bloc countries was calculated at another $465 billion. The International Debt 12 public debt of Belgium is approximately $250 billion, the public debt of France is $750 billion, the national debt of the United States is $5,000 billion, U.S. household debt is $6,000 billion, and the national debt of Japan at $2,000 billion. In contrast, the total debt of the 41 HIPC countries is approximately $200 billion (less than one percent of world debt). It is difficult to imagine how canceling the $200 billion owed by the HIPC would seriously affect the market that Mr. Wolfensohn [head of the World Bank until mid-2005] is so worried about.14 Church Teachings and Third World Debt Based on Church social teachings, the preferential option for the world's poor must be a prime consideration in deciding what stand and steps it should take regarding debt, seven years after the Jubilee year of 2000, in the face of still widespread poverty, injustice, and conflict. "It is clearly conveyed in Jesus' words that whatever we do unto the least of our brothers and sisters we do unto Him, and it has more recently come to light in liberation theology. Those members of society with the greatest needs require the greatest attention and response. By assisting those who are most vulnerable, an option for the poor strengthens the entire community, for the deprivation and powerlessness of the poor wounds the International Debt 13 whole human community. Such wounds are healed only by a greater solidarity with the poor and marginalized."15 It is then contrary to Church social teachings for creditors to make the poor pay national debts especially when they were not consulted and did not agree, not because of a desire to escape responsibility as citizens, but from governments' failure to hold itself accountable to the people. So onerous an obligation prevents the poor from devoting their resources to their own welfare and the welfare of all poor communities. It deprives them of the most basic right, the right to life itself, and the right to life with dignity. It denies them the means to sustain themselves and help their brothers and sisters. Taking on the debt burden is especially unjust when the loans were used to enrich unjust leaders and oppress and exploit the people they govern. Governments and institutions must expect to be judged by these principles: upholding the interest of the weakest members of our communities and being just and honorable in our dealings with other peoples. Debt cancellation, by itself, will not end poverty. Poverty is a global problem and will be solved by people's global action and organizations. Debts can be canceled but governments can negotiate for more loans. Poverty is deeply rooted in history, beliefs and structures. But whatever solutions are proposed, they must affirm the claim and right of the entire global community (and not only a powerful few) to the world's resources. Any solution must also uphold our common duty to protect, enrich and preserve our world for untold generations to come. We are stewards of this world, not its monarchs or owners. "Catholic Social Teachingcalls us all to see that the goods of creation are destined by God for the welfare of the whole human communityThe Church views the current debt situation as a factor contributing to the erosion of the international common good and calls for governments and institutions to actively seek solutions that assure human dignity, protect human rights, and accomplish the international common good." 16 BIBLIOGRAPHY Adams, P., The Doctrine of Odious Debts, Chapter 17, Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy. Accessed 8 March from: http://www.probeinternational.org/probeint/OdiousDebts/OdiousDebts/index.html Colgan, A., Hazardous to Health: The World Bank and IMF in Africa, Africa Action Position Paper, April 2002. Accessed 8 March from: http://www.africaaction.org/action/sap0204.htm Mulama, J., Debt the Illegitimate Legacy of Africa's Dictators, Inter Press Service, 26 Jan. 2007. Accessed 8 March from: http://www.zmag.org/content/showarticle.cfmSectionID=2&ItemID=11957 Putting Life Before Debt, CIDSE and Caritas Internationalis. Accessed 8 March from: http://www.cidse.org/pubs/finaldebteng.html Note: This guide was initiated by a working group of CIDSE and Caritas Internationalis. Shah, A. Heavily in Debt Poor Countries Initiative is Not Working. Global Issues. Accessed 8 March from: http//www.globalissues.org/TradeRelated/Debt/HIPC.asp Shah, A., Scale of the Debt Crisis. Accessed 8 March from: http://www.globalissues.org/TradeRelated/Debt/Scale.asp Skeletons in the Cupboard: Illegitimate Debt Claims of the G7. Eurodad. 9 February 2007. Accessed 8 March from: http://www.eurodad.org/articles/default.aspxid=760 Tertio Millennio Adveniente, Pope John Paul II. 1994. Accessed on March 8 from: http://www.catholicculture.org/docs/doc_view.cfmrecnum=5502 Transfer of Wealth - Debt and the Making of a Global South. Chapter 4. Focus on the Global South, October 2000. Accessed 8 March from: http://www.focusweb.org/the-transfer-of-wealth-debt-and-the-making-of-a-global-south-2.html Read More