Jubilee for Beginners: Modern slavery and how to end
it
An article for the Oxford Student newspaper, 5th week, Michealmas 1998
Jubilee for Beginners: Modern slavery and how to end it
The chances are that sometime in the past year you have heard mention of the Jubilee 2000 campaign, a coalition of many respected aid agencies working for the cancellation of certain transnational debts. The campaign is well on the way to assembling the largest petition in history in support of its goal. To understand what the principle of Jubilee is, we must first examine some of the factual background to which it relates.
Not everything is black and white. Its important to bear this in mind when considering the situation of he 600,000 women who died last year during childbirth in the Majority World because they didn’t have access to basic medical help. Or the 1.4 billion people who earn less than 60 pence to live off from their day’s labour. These kind of statistics are nasty, but they don’t seem to shock us, we accept them as a disagreeable but unavoidable part of life, and anyhow there is very little that we as individuals can do besides giving the occasional tenner to Oxfam. However, would you be surprised by the fact that Mozambique, one of the poorest states in Africa with over 11% infant mortality, 60% illiteracy and an average income of $89 a year (about 1/400 that of an American) gives almost 30% of its public expenditure to the West? That’s one and a half times what it spends on health and education combined, and many times greater than the foreign aid that it receives. These kinds of figures are repeated right across Africa, Latin America and elsewhere. We live in a peculiar world in which the poor subsidise the rich. I’ll lay off the statistics now, and examine the way in which Majority World nations have become caught in an spiralling web of debt to the Developed World. The people of sub-Saharan Africa pay over $25 billion in debt-service ever year to Western governments and international institutions such as the International Monetary Fund and the World Bank. The background is not as confusing as you might expect, nor is the solution proposed by the Jubilee 2000 coalition very complex or hard to implement, so I encourage you to read on and make your own mind up.
The causes of the debt-crisis presently choking poor countries naturally vary from case to case, but certain key trends can be discerned. In the 60’s, about the time Harold Macmillan’s wind of change was sweeping across colonial Africa, the US government printed an awful lot of dollars to pay for its overspending. This led to a fall in the value of the dollar and consequently that of oil which was priced in dollars. In 1973 the oil-producing countries responded by raising their prices. Huge amounts of ‘petro-dollars’ were deposited in Western banks by OPEC nations, and interest rates plummeted. The banks desperately sought new investments, lending lavishly to Majority World governments at very low interest rates and without much thought as to how the money would be repaid - ‘governments can’t go bankrupt’ was a much used phrase at the time. At the same time the cold war superpowers were bargaining for influence, and many of the loans were used as political incentives for dictators such as Suharto in Indonesia and Banzer in Bolivia. Overall about a fifth of the loan money was spent on weapons, most of the rest lined pockets or was wasted on white elephant ‘development’ projects. Very little helped the poor. In fact education, health care and income in sub-Saharan Africa have all declined substantially in the last two decades, from what were originally low levels anyway. On 12 May 1997 the Financial Times revealed that during the 80’s, eight and a half billion dollars were lent in secret to Zaire’s dictator Mobutu by Western governments along with the IMF and World Bank, despite their own reports that the loans were being corruptly diverted. Since Mobutu’s overthrow, the people of the new Democratic Republic of the Congo are expected to repay these dishonest loans. Is it any wonder that the region has descended into civil warfare?
In the 80’s Western financial policies caused world interest rates to rise. The debts owed by the Majority World countries, representing loans which had brought the people no improvement in living standards or development, began to cut even deeper. In 1982 Mexico became the first country to default on its debts. The World Bank and IMF (which had been set up in 1948, respectively to rebuild Europe and to bolster weak currencies), stepped in with new loans to pay for the debt-servicing and an associated Structural Adjustment Program (SAP). This pattern has been repeated right across the Majority World. The situation has been accentuated by the fact that the earnings of Majority World nations have not increased much, despite (in fact, as a result of) ever increasing production and export, because world prices for raw materials have fallen since the 70’s; meanwhile prices for Western manufactured goods have risen. As a result the IMF and World Bank have become the main creditors with about 50% of the total $2 trillion debt owed to them (this is called multilateral debt), 35% is owed to Developed governments (bilateral debt, since it involves two parties), and the rest is owed to private banks. The SAP conditions include: less spending on health, education, social services and food subsidies; the devaluation of currency which results in lower export earnings and increased import costs; cuts in jobs and wages for government employees; the sale of public industries to foreign investors, and so on. The end of colonialism in Africa and elsewhere could have seen new hope for the poor. Instead the burden of debt-service and associated SAPs have made the poor poorer, destabilised countries, and provided the Developed World with an efficient system of very cheap raw materials and labour, sometimes referred to as neo-colonialism.
Is the situation hopeless? In fact there has been an increasing current of hope running through the last half of the 90’s. While the actual situation of the poor is not yet changing for the better, governments and international institutions are beginning to discuss policies unthinkable a decade ago. The creditors have at last begun to admit openly that much of the Majority World debt is in fact ‘unpayable’, it never can or will be paid back; in fact they had recognised this for years and on paper had written off up to 95% of it. In one sense most of the debt has been paid back - on the 10th June last year Clare Short explained in the House of Commons that Costa Rica has repaid over 7 million pounds on the 4 million loan it borrowed from Britain in 1973, yet it still owes another 1 million due to compounded interest. There is another sense in which the debts might be considered ‘unpayable’, and that is a moral sense. Surely it is immoral for creditors who lent dishonestly to Mobutu to expect the Congolese people, finally freed from his control, to pay them. The governments who borrow and spend loans are not those who have to pay most of them back, in fact the people are the ones who foot the bill and who have no say in the matter. It is often argued that cancellation of debts invokes ‘moral hazard’, encouraging future debtors to borrow with no intention of repaying. In fact cancellation reduces moral hazard. With any loans to governments, even for good projects, there is hazard because later governments will be the ones to foot the bill - it is as if you had to pay for huge loans your parents had taken out and which might not have been used to benefit you in the least. With the case of governments this is even starker, since the future government is often the opponent of the one which took out the loan - a democracy finances in retrospect the dictator it overthrew. Cancellation of debt reduces the moral hazard in the future because it discourages creditors from lending irresponsibly (as they did to most Majority World countries).
So what measures are actually being taken? Well, following an initiative of the Commonwealth Finance Ministers, the IMF and World Bank began considering debt relief strategies. In the past they had only rescheduled debts - new debts for old. In October 1996 the Highly Indebted Poor Countries (HIPC) Initiative proposed partial debt relief for 41 of the poorest countries, reducing their debt to sustainable (i.e. payable) levels. This sounds like a start, and it is, but only a very very small step in the right direction. The criticisms made of HIPC are that it is too little, too harsh and too slow. Too little because when complete it offers only to reduce debt to about 200-250% of export earnings and annual debt-service payments to 20-25% of export earnings (which is more than most poor countries spend on health and education). There are some very clear and surprising historical precedences which show that HIPC's ‘sustainable’ level is far too harsh. After the 1st World War, historians generally agree that a major reason for the rise of Hitler was the incredibly harsh war reparation costs placed on Germany by the victorious allies. However, the Dawes plan, which set the amount Germany was to pay the allies from 1924-9, worked out at about 13.2% of its export earnings. That’s half the level HIPC expects the world’s poorest countries to pay. After the next war, Germany was going to be charged about 10%, however in 1952 Hermann-Josef Abs successfully convinced the allies that this was intolerable, and so they wrote off two-thirds of the debt, and from 1953-1978 Germany paid an average of 4% of its export earnings. Similarly Britain repaid its 2nd World War debts to the US at about 4% export earnings. More recently in 1971 the Paris Club (a group of Developed World creditor governments who control most of the bilateral debt and support HIPC) set Indonesia’s repayment level at 6%, after 20% had been considered and rejected as far too unsustainable. Christian aid has estimated that even if HIPC runs its full course, it will tackle only 6.4% of the total Majority World debt. HIPC is too slow because it requires up to six years of ‘good economic behaviour’ through the implementation of SAPs before even the little relief offered will be provided. Gordon Brown MP attempted to put some fresh impetus into HIPC at the Commonwealth Finance Ministers Conference in Mauritius during September 1997. He proposed the goal of having ¾ of the HIPC counties reaching the ‘decision point’ (which is the start of the six year good behaviour period) by 2000. It is good to see Britain taking some initiative - but, as a major colonial power, we have a special duty to our old subjects and our efforts so far, from a government which included tackling global poverty in its manifesto, have been pathetic. Sweden and Norway, on the other hand, are getting behind Jubilee 2000 explicitly, cancelling debts owed to them at a rate which is making the Paris Club governments feel uncomfortable, as has been seen over the past few weeks in the case of Bolivia.
What exactly is the Jubilee principle? Well the name comes from a series of passages in the Old Testament (Leviticus 25 and Deuteronomy 15) which laid down some practical guidelines for the people of Israel to put social justice into the heart of their nation’s life. Every 50 years trumpets are to be sounded across the land on the Day of Atonement. The land is left fallow to recuperate, slaves are freed, all debts are cancelled and any land which has been sold over the previous 50 years returns to its original family. This mechanism prevented the gap between rich and poor growing too great and restored families which had fallen on hard times. It also reflected the view that the land belonged to God and people only had the right to make use of it as long as they were good and just stewards. It is unknown whether Jubilee was ever celebrated in Israel. Whether it was or not, the principle of Jubilee offers hope for a way out of the sufferings that have been produced by uncontrolled capitalism. It is a principle which is now supported by people of many religious viewpoints who share a common desire for a just world. The modern call for Jubilee was sounded by the African Council of Churches in 1990 and subsequently became the Jubilee 2000 coalition which was launched in Britain in April 1996 and thereafter in many other nations. Jubilee 2000 calls for ‘a one-off cancellation of the backlog of unpayable debt for the world’s poorest countries - which either cannot be paid, or can only be paid with enormous human suffering… a once-only gesture to mark the millennium, a gesture showing that creditors and debtors alike have made mistakes and the slate needs to be wiped clean’. This Jubilee should be overseen by an independent body (perhaps the UN) in an open, transparent and fair way.
One important question to ask is, what will become of all the money that would have been paid as debt-service? The creditors would like us to believe the last-ditch rationalisation that it would somehow be squandered by corrupt governments. In fact it could be argued that many of the Majority World nations now have deeper democracies than our own. However there are still nasty regimes about, and Jubilee 2000 insists that the debt cancellation take place in an open way (unlike the secret way many of the loans were arranged), so that the huge funds released will go to benefit the poor who for so many years have been suffering the burden of the debt. Jubilee will also see an end to the SAPs, and export driven Majority World economies. In turn this will probably see a long over due rise in the value of their products. There are many scares which will need healing, but when the Majority World is freed from its chain of debt, humanity will at last be able to begin effectively tackling the problem of poverty. If the political will cannot be found to break the yoke of debt, then as we enter the new Millennium economic globalisation and increased population pressure will further intensify the sufferings of the poor billions. The West will suffer too as the poor nations continue in deforestation, overfishing and drug trafficking to meet the pressure of debt-service payments; furthermore, warfare and the flow of refuges is likely to increase. A very good comparison is often made between the debt-crisis and the African slave trade. Just as plantation owners in the Americas opposed the end of slavery, so the creditors and multi-nationals who extract huge sums from the poor nations strongly oppose an end to the debt. However slavery was ended in 1833 through the lobbying efforts of thousands of British citizens. The world has grown, and the pain and suffering brought about by Majority World debt exceeds that of the slave trade by many orders of magnitude, but information and communication are more freely available today, and there is no reason why 2000AD should not be a truly landmark date for civilisation.
If you are excited and challenged by the prospect of Jubilee, the first thing you can do is sign the Jubilee 2000 petition, which is aiming to become the largest ever with over 22 million signatures. The next thing is find out the solid facts about debt and Jubilee, check out whether the figures I’ve been quoting are correct. Everything used in the writing of this article can be found on the Internet. The main source is http://www.oneworld.org/jubilee2000/, and I’ve put additional information and links on http://users.ox.ac.uk/~ball0368/jubilee.html. Oxford University Third World First is running a campaign this term, and you can find out more by contacting Sasha.Blackmore@Balliol.ox.ac.uk. Oxford is probably the most influential institution in Britain, which itself is the crucial first domino needing to be set in motion before Jubilee can gain momentum. We really can make a historic difference!