Free the slaves

For the world’s poorest countries debt burden is “the new slavery.” Jubilee 2000, a coalition of over 90 organisations including Oxfam, Christian Aid, and the British Medical Association, is demanding that those financial chains are broken as a celebration of the new millennium. By clamouring for the cancellation of the “unpayable” debt of the world’s poorest countries,¹ Jubilee 2000 has focused the spotlight firmly on the creditors: the world’s richest countries, the International Monetary Fund, and the World Bank.

Jubilee 2000’s campaign was officially launched in 1996 and gained prominence in 1998 when 70 000 supporters formed a human chain in Birmingham, UK, around the summit meeting of the G8 leaders—representing the world’s richest nations. Later that year representatives of 39 national Jubilee 2000 campaigns gathered in Rome and called for cancellation, by the year 2000, of certain forms of debt: unpayable debt, which cannot be serviced without placing an undue burden on impoverished people; debt where the principal has already been repaid and only the interest remains; debt for improperly designed policies and projects; and debt incurred by repressive regimes.²

The campaign has gathered an irresistible momentum, with support from a mixed bag of international celebrities. Rock stars Bono and Annie Lennox, former boxer Muhammad Ali, writer Harold Pinter, actor Ewan McGregor, Nobel Prize winners Adolfo Perez Esquivel and Amartya Sen, and the Pope are among the many public figures who have voiced support.

Jubilee 2000 estimates that there are 52 heavily indebted countries that need urgent debt relief, and most of these are in sub-Saharan Africa, Latin America, and Asia. Their total debt burden amounts to around $371bn, of which Jubilee 2000 wants $160bn-300bn cancelled now. If, for example, Britain were to cancel the debts owed to it by the poorest countries, British taxpayers would be worse off by just £2 ($3) a year each. Cancelling all the debts from these countries would still only amount to a cost, from creditor countries, of £12 ($20) per taxpayer.

Shifting the burden of debt may make little difference to the lives of people in richer countries, but it would emancipate the world’s poor. The World Bank estimates that 1.3 billion people live in absolute poverty, earning less than $1 a day.³ For the poorest countries debt repayments are mostly double the amount of earnings from exports, far exceed expenditure on health care, and outstrip what is received in aid or loans.⁴ For example, Uganda spends $2.50 per head annually on health, while $15 per head is spent on debt servicing.⁵ The net drain from the poorest countries to the richest countries is around $150bn a year (for every £1 sent in grants to developing countries, £9 come back in debt repayments, claims Jubilee 2000). The poverty gap has also widened by 30% over the past decade. Many experts argue that this disparity has accentuated the scarcity of resources, hunger, and death rates in the poorest countries—described as the “pathology of poverty.”⁶

Irresponsible lending, structural adjustment policies,⁷ providing insufficient aid (less than the UN target of 0.7% of gross national product), and support of regional wars are ways in which the richer countries have nurtured the debt crisis. The poorer countries too have contributed through poor governance, corruption, ethnic conflicts, underinvestment in health care, and neglect of women’s rights. None the less, precedents do exist to support the cancellation of debt: in the 1930s the United States turned a blind eye when Britain, France, and Italy defaulted on US debts; in the last century the United States took over Cuba and promptly cancelled Cuba’s debt to Spain; and after the second world war Germany was the recipient of generous debt relief.

Over the past decade the World Bank has attempted to ease the debt burden by launching its heavily indebted poor countries initiative.⁸ Critics argue that the criteria to qualify for this initiative are too stringent and take too long, effectively imposing six years of strict structural adjustment policies before debt relief is available, in which time poverty can deepen. So far seven countries have qualified for debt relief packages, and three more are expected to qualify soon, with the amount of debt relief for these 10 being estimated at $4.3bn.⁹ Only Bolivia and Uganda, however, have actually received debt relief so far, and the World Bank and International Monetary Fund have admitted that the countries who qualify are likely to end up paying more in debt servicing than before they received their debt relief. This is because such countries are currently repaying debt to the World Bank and International Monetary Fund while repayments to creditor nations under bilateral agreements are not being honoured. When the World Bank and International Monetary Fund debts are cancelled under the initiative, this will release cash reserves and oblige those countries to start repaying creditor countries. And, as if proving the cynics right, Uganda’s benefit has been short lived: a fall in coffee prices has rendered Uganda’s debt unsustainable again—only 10 months after it received assistance under the heavily indebted poor countries initiative.¹⁰

Earlier this year Jubilee 2000’s campaign cajoled a positive response from the governments of Britain, Canada, Germany, and the United States, as well as encouraging noises from the World Bank and International Monetary Fund. But recent reports indicate that the world’s poor are likely to be disappointed when the G8 countries meet in Cologne next week.¹¹ The International Monetary Fund is leading the campaign to draw back from the extent of debt relief that some of the G8 countries had been promising. It is offering a three year wait for debt relief rather than six, but countries still have to maintain structural adjustments for six years, with reapplication of the debt if they fail.

Cancelling debt for the world’s poorest people is a fitting way to welcome the new millennium. The world’s richest finance ministers should seize the opportunity when they meet next week. The rest of us should join the many worldwide events that Jubilee 2000 is holding between now and the G8 meeting in Cologne—for example, on 13 June supporters of debt cancellation will be linking arms across the River Thames in London. As the playwright Harold Pinter put it: “It’s actually a state of war. The powerful against the rest.”¹² Let’s end the war and set the slaves free.