On Dropping the Debt

A note on the subject of debt relief, 12 May 2008

by the Bishop of Durham, Dr. N. T. Wright

In some of my writings and sermons I have emphasized the importance of cancelling Third World debts. A great deal of work at quite a high level of economic and financial expertise has been done on this and I have tried to draw on the findings of this, as part of the ‘Jubilee’ movement. I have been reading, discussing and writing about this for over ten years now, and I am quite used to meeting ‘the usual objections’. Recently, following Surprised by Hope, one or two people have taken me to task quite strongly. I don’t have time for a full answer, but I hope this will be a start.

The Caricature

The picture painted of, say, African governments, by critics of Jubilee frequently demonstrates a woeful ignorance of this complex and varied continent. There are indeed “tyrants and bullies”, but in contrast to the situation which applied thirty years ago, they are in a minority. And no one is asking for debt relief for them. Or rather, “Give them debt relief, Lord, but not yet!”.

As for the suggestion (made by one of my critics, tipping his hand after some fine-sounding phrases) that Africans are basically lazy . . . well, it’s hard to think of anything kind to say about that idea. No doubt some are, no doubt some aren’t, just like the rest of us. That is not the problem.

Incidentally, this is not to say that standards of governance in Africa are good – they are rarely so in impoverished countries. As the great economist Jeffrey Sachs has pointed out, corruption is a consequence of severe poverty as well as being one of its major causes. What is beyond debate is that governance has changed for the better, and markedly so, in many African countries.

The Responsibility

Poor country debt is often thought of as if the debtors had withdrawn a large amount of money from a cash machine, whereas international debts are actually incurred as a result of agreements between powerful elites. In other words, for every debtor there is a creditor, who bears part of the responsibility for the situation that results.

In the 1970s, for example, Western financial institutions loaned the best part of a billion dollars to Idi Amin of Uganda – a vicious psychopath and known to be such. By doing so, they not only saddled that impoverished country with a millstone of debt, but financed the dictator’s reign of terror. These actions were both financially irresponsible and morally reprehensible. After Amin’s fall, the debts were inflated by massive rates of compound interest (up to 20% p.a.!) resulting mainly from economic policies pursued by the developed world, not least as long-term results of the Bretton Woods agreement. At the same time, the bottom fell out of the market for Uganda’s main exports.

With reference to Liberia, the ‘neocon’ Paul Wolfowitz, when President of the World Bank, stated that: “It’s really unfortunate when you get a government with this kind of commitment and energy, ready to do important things and having absolutely zero responsibility for the debts, that they have to spend so much time and energy dealing with the creditors – who have a responsibility for having made loans [to corrupt dictators] in the first place.”

Note that Liberia, which now has the first democratically elected woman president in Africa, has “absolutely zero responsibility for the debts”! And that its situation is “really unfortunate”, which must be the understatement of the year!

The idea that we had any right to demand the money back from Uganda or Liberia, both of which have made real progress towards democracy, most of whose people were either children or as yet unborn at the time the debts were incurred, is an outrage to any sense of what is reasonable and right. But demand it back we did from Uganda, for twenty five long years, and we are still doing the same to Liberia (although it received interim debt relief in March). (We perhaps need to remind ourselves that if an individual gets too heavily in unpayable debt, they can declare bankruptcy, wipe the slate clean, and start over. A country, it seems, can’t do that.)

The Impacts

Only modest amounts of debt relief have been made available by the international financial community (the poorest countries still pay $100 million each day to the rich), and the financial benefits of that have been spread very thinly indeed. It would take a thousand years before the cost of current debt relief programmes equalled the cost of the Iraq war! However, it is already clear that it is a very effective method of development financing and this has been acknowledged by international institutions. The suggestion of one of my critics that to drop the debt is to condemn poor people to even worse conditions is straightforwardly contradicted by the evidence.

Here in North East England, Christian Aid received an unsolicited email from Dr Simon Challand, when he was working in southern Uganda with the Church Mission Society. He wrote that: “Debt relief means money stays in the country instead of pouring out to Europe and the US and there have been huge improvements in health and education… The Ministry of Health has just increased the grant to all the health centres by 85%... four years ago they got nothing. Many health centres are able to provide immunisation, growth monitoring, health education and antenatal care to remote rural areas… Everywhere you go you can see new classrooms going up to support the Universal Primary Education programme which gives every child 7 years of free schooling.” [Uganda used its first tranche of debt relief to improve basic medical provision and to abolish fees for primary school.]

Speaking in London on 17th October 2007 (UN World Poverty Day), Dr Asha-Rose Migiro, Deputy UN Secretary General, stated that, "My own country Tanzania would not have been able to send hundreds of thousands* of children to school and fund health services if not for the cancellation of debts and big aid increases in recent years. We cannot forget that the debt cancellation would not have happened if citizens and faith leaders in the UK and elsewhere had not awakened the conscience of their leaders through the Jubilee campaign". [*It's actually closer to two million children in Tanzania and, according to a recent report in leading British medical journal, The Lancet, the country is also on track to meet the Millennium Development Goal of reducing child mortality by two thirds.]

Mozambique has used part of its relief to introduce universal vaccination against the common childhood diseases. And so on.

Conditions for Debt Relief

There must indeed be conditions for debt relief, but the crucial ones are those involving transparency and accountability. The problem with the current conditionality regime is that it is both undemocratic and damaging. Conditions are imposed on indebted countries, often in the face of opposition from their governments, parliaments and people. They are all too often used to prise open poor country markets for the benefit of rich country corporations. And there is no right whatever of appeal to independent adjudication.

General Points

Christians frequently question whether we can expect fair and compassionate behaviour from unbelievers. Whether or not we should ‘expect’ it, all human beings everywhere still have this responsibility and are worthy of blame when they fail to live according to this pattern. The prophet Amos’ condemnation of Edom, not a member of the covenant community, for “stifling all compassion” (Amos 1, v. 11) is a case in point.

No one is saying Old Testament regulations can be applied in a simplistic manner to contemporary situations, but underlying moral principles have a universal relevance. The main one from the jubilee laws is that debt should not be allowed to cascade down the generations, consigning people to ever deepening misery and despair. Another, from the same source and from Nehemiah 5, vs. 1-13, is that it is never legitimate to enforce debt repayment at the cost of the essentials of life.

Just Imagine . . .

As a tail-piece, pause and ponder this (from the Jubilee Debt Campaign, ‘Make Poverty History’):

Just imagine that, when your uncle died, you discovered your family had inherited his debts...

Just imagine that the banks seized your home and much of your parents’ wages, forcing you all to live on a rubbish tip...

Just imagine that you were turned away from school, because the money had been used for debt repayments...

Just imagine that when your sister went to hospital to have her baby, they turned her away too...

Just imagine that, having only polluted stream water to drink, several of your brothers and sisters sickened and died...

Just imagine that you see your parents worn out by work and worry, and you know that you will inherit the debt...

This isn’t imagination! This is the tragic reality of the lives of hundreds of millions of young people in the poorer countries.

End this Madness - Drop the Debt!