And nothing is less important to the world’s big lenders than the gift of forgiving. Jubilee 2000 wants them to cancel unpayable debts of the poorest countries by the start of the millennium, which is not likely. But less dramatic relief is probably on the way. After all, the World Bank reckons the 40 poorest countries owe more than $200 billion, and the idea that this burden is morally wrong is catching on. The Wall Street Journal this month called repayment levels “obscene.” The Financial Times called the case for further relief “compelling.” Official British, American and German proposals to ease the burden were on the agenda when Finance ministers from the G-7 group of leading industrial nations met in Bonn over the weekend.
So why is debt relief suddenly such a big deal? In a world where loan overload is as routine as natural disaster, recent events have left the world’s poorest more burdened by debt than ever. Hurricane Mitch, for example, devastated two of the world’s weakest economies, Honduras and Nicaragua, which owe $10 billion between them. What’s more, the Asian crisis has reinforced the image of the greedy globobanker. What better time to repent than now? Eventhe pope has suggested debt cancellationas a fitting way to mark the new millennium.
That’s also the idea behind Jubilee 2000, which takes its name from the Old Testament’s call for debt forgiveness at “Jubilees” every 49 years. Launched two years ago, the activist group is now working in 42 countries. Nine staffers and a swarm of volunteers plot their moves in a cramped London office. When world leaders gathered for last year’s G-7 summit in Birmingham, England, they rallied some 70,000 people to form a human chain around the city center.
Leaders of Jubilee 2000 are harsh critics of the big creditors’ role in the developing world. In Tanzania, for example, one child in six dies before the age of 5, but the government spends four times more on servicing its debts than on primary health care. Money needed for health and education programs goes instead to rich international creditors, whose billions have often propped up crooked local elites, says Ann Pettifor, director of Jubilee 2000. “In the ’80s the West lent $8.5 billion to President Mobutu of Zaire, knowing full well he was corrupt,” she says. “Now the children, grandchildren and great-grandchildren have to pay.” The Jubilee 2000 solution: debts reckoned “unpayable” by independent arbiters should be written off, but with safeguards to ensure that the debtors won’t squander savings.
Not surprisingly, global lenders are a bit offended by the Jubilee 2000 world view. They don’t deserve all the blame. Vicious local wars, inept and corrupt local governors and collapsing commodity prices have added to the burden. What’s more, they say, canceling debt would only encourage richer countries to quit lending and to cut aid budgets, already at a record low.
Lenders offer their own solutions. In 1996 the World Bank and the IMF launched a Highly Indebted Poor Countries initiative, which promises to cut debt to a “sustainable” level for nations that show a sound economic track record over six years. That generally means budget cuts and free-market reforms, a process widely criticized as too slow and painful. The World Bank and the IMF have announced a review of their strategy.
In the end, the IMF and the World Bank are not private banks, and they share the Jubilee 2000 bottom line: keeping even the poorest nations solvent. “A year ago you couldn’t find anyone in the U.S. who was interested in debt relief,” says Tony Gaeta, an adviser at the World Bank. “It now has real resonance.” Even Germany, once firmly set against relief, has softened. It will chair the G-7 summit this summer in Cologne, where debt will be hard to ignore. Jubilee 2000 plans to be there with the largest petition in history: 22 million signatures, confirming that this is not just a celebrity cause anymore.
