2016-06-30
Suppose you were the richest person on the block, with the lushest lawn and a Mercedes in the driveway. Your neighbor's driveway held but a dented Yugo and his kids were hungry, so you made him a loan. Later you learned that he squandered most of the loan on himself, leaving his kids still impoverished. You demand the money back, but all he can pay is the interest. Years drag on, you get richer, the neighbor's kids have no shoes. You want to help the kids, but the father stills owes you money. Is there a way to end the stand-off?

This drama has been playing on the world stage for years--but the global stand-off is finally ending.

Late last month, White House and Congressional negotiators agreed to allocate $435 million toward a proposed $90 billion package of debt relief for impoverished developing-world countries. President Clinton signed this allocation into law early this month. The decision breaks an important logjam: It puts Congress on record as agreeing with the basic idea of Jubilee--that debts of the poorest nations, mainly in Africa, should be excused.

"The debt relief issue is now a speeding train," said Rep. Sonny Callahan, (R-Alabama), ranking member on the House committee that controls the foreign aid budget, after one of the votes. "We've got the pope and every missionary in the world involved, and they persuaded just about everyone here that this is the noble thing to do."

The agreement is a milestone achievement for the Jubilee 2000 movement. Founded by an unusual coalition of Catholic theologians, evangelical Protestants, and left-wing anti-globalization activists, Jubilee 2000--backed by figures as diverse as John Paul II, Pat Robertson, and the rock musician Bono--hopes to persuade Western nations to erase at least $90 billion and perhaps as much as $220 billion in developing-world debt. This might invigorate the economies of impoverished nations and, potentially, save millions of lives by allowing poor countries to shift funds from debt service to immediate needs, mainly health care.

Here's the background. Roughly from the 1960s through the 1980s, many developing nations acquired substantial foreign debt, through the World Bank and the International Monetary Fund and at times commercial banks as well. Some borrowing was used to finance important projects such as infrastructure improvements; some went to white-elephant projects; large chunks of the proceeds were simply stolen by the corrupt "kleptocracies" that run many developing nations.

Developing nations with growth economies, especially in Asia, have done relatively well in repaying their debts. But the 41 countries (33 of them in Africa) that the World Bank calls "heavily indebted poor nations" have found their economies hard-hit by debt-service payments. These nations have no realistic prospect of satisfying their creditors and are at best a generation away from establishing the sort of growth economies that would generate revenue--creating trade. In the poorest nations, foreign debt has become a factor in human misery; for instance, many African nations cannot afford AIDS drugs and debt repayment at the same time.

Realizing this, about five years ago both religious groups and anti-globalization activists began promoting the idea of a debt jubilee for poor countries. In Old Testament times and perhaps as far back as ancient Egypt, decrees of jubilee cancelled all debts of money and land at 50- or 70-year intervals.

It was once thought that biblical jubilees, described in Leviticus 25, were some kind of cyclical festival system. Lately, scholars have begun to argue that the jubilee was essential to the functioning of ancient economies. Archaic interest-charging systems were cumulative: Interest payments on money or land increased every year, meaning loans were essentially impossible to satisfy. Typically, farmers would borrow by mortgaging land or property at interest that rose 3% per annum; such loans could rarely be repaid, meaning the property would eventually default to the lender. This punitive system of borrowing is why the Old Testament and Qur'an call interest sinful. Jubilees, economists now believe, were devised in order to prevent all wealth of ancient desert societies from ending up in a few hands, stifling economic activity; cancelling debts reshuffles the economic deck, granting the disenfranchised an incentive to work hard and acquire property. The parallels to today's situation with the impoverished developing world are obvious.

In recent years the Jubilee movement has found its strongest backing from the Catholic Church, where John Paul II is an ardent supporter of debt relief as a moral imperative; from evangelical developing-world aid organizations such as World Vision, who see debt relief as a prerequisite for establishing growth economies in Africa; from an ever-increasing number of religious conservatives, who see debt relief as necessary to follow the biblical injunction to aid the poor (America is "under the judgment of God" because it is not giving enough to the world's impoverished, the popular revival preacher Tony Campolo recently said); from mainline Protestants, who have pressed the issue through the mainline National Council of Churches and through Church World Service; and from anti-globalization activists, who find anything having to do with the World Bank to be sinister.

The first major victory for the Jubilee movement came in 1999, when President Clinton and the other G7 leaders, at a summit at Cologne, agreed to cancel outright $27 billion in developing-world debt, and to seek funds to forgive about $90 billion in international loans owed by the poorest nations. Clinton became a convert to the Jubilee idea, saying, "As the richest country in the world, we have a moral imperative to help the very poorest nations." Clinton made appearances with Jubilee supporters, memorably having Pat Robertson and Bono to the same White House session on the issue. (It's not known whether Robertson is a U2 fan, but surely he must have asked Bono for advice on where to buy earrings.) Clinton also stressed, in negotiations with Congress, that debt relief for nations without economic growth was supported by economists.

This initial victory for the Jubilee movement came following a fusillade of grassroots tactics, including petitions, human chains at the summit, constant lobbying, and, at one point, a Jubilee musical touring the United States and European Union as street theater. It wasn't Rodgers and Hammerstein, though it seemed to make the point.

But the agreement made at Cologne wasn't funded; the Congressional deal for $435 million in payments represents the first installment. Eventually, the United States would have to put up from $1 billion to several billion dollars, an amount at least to be matched by European Union nations. (Because forgiving loans is essentially the same as prepaying a mortgage, the cancellation price is much lower than the book value of the loans: It is expected to cost roughly $10 billion to erase the $90 billion debt.) Until last month, it appeared Congress might not support debt relief for the developing world. Now that has changed.


Even as the Jubilee movement acquires momentum, many issues remain. Activists are dismayed by the realization that the cash Congress has just earmarked will not actually go to developing nations, but to the World Bank, IMF, or commercial institutions, as their loan-cancellation charges. This is seen by some activists as more evidence of conspiracy, though the underlying purpose--freeing impoverished nations from their indebtedness--is still obtained. If I had a mortgage I couldn't cover, and you decided to pay it off for me, I would be the beneficiary, even though you would actually write your check to my bank. A more substantial concern is that a round of debt relief will simply make possible a new round of kleptocracy; once existing loans of impoverished nations are cleared, the countries will be able to take out new loans, whose proceeds the corrupt classes will once again steal. This is a leading concern of Congressional critics of debt relief, and it cannot be dismissed. Jubilee supporters contend that since democracy is on the upswing in most developing nations, including most of Africa, theft from the public purse should decline in years to come. We can hope. The World Bank and similar institutions have instituted new accountability programs for developing-world loans. (This is one reason debt-relief funds will go directly to banks: You could pay off my mortgage by giving me a check and telling me to sign it over to my bank, but then you'd dangle before me the temptation to filch.)

Realistically, debt relief for impoverished lands is likely to lead in at least some degree to a new cycle of theft by poor-nation elites. The question is whether the theft can be kept under control so that most of the money will benefit the impoverished.

But while concern for further graft is a legitimate worry about the Jubilee concept, excusing loans as a precedent is not. Some have argued that debts should not be relieved because a bad example would be set. Yet the precedent already exists, and it is mainly positive. West Germany developed into a peaceful, democratic, and prosperous state partly because the Allies effectively cancelled its war debts in 1953 to allow the country's economy to recover. (East Germany, milked dry by the former Soviet Union, lagged behind partly owing to crippling international obligations.) Poland's economy has begun to bounce back, partly because the United States cancelled billions in Polish debt in 1991. In that same year, the United States cancelled $7 billion in debt owed to it by Egypt, to thank Cairo for supporting the Gulf War coalition; this debt cancellation is one of the reasons Egypt remains the leading Islamic advocate of Israeli-Palestinian peace.

Considering the strong moral arguments for debt relief for the most impoverished nations, and broad religious support for this idea, the chances of a larger Jubilee seem likely to increase. This should remind us of something else history says of the Jubilee--that the leaders who proclaimed them were beloved.

Wise kings, ancient history tells us, tried to time their coronations with Jubilee years, since the economic deck would be reshuffled (allowing new factions to be grateful to the new king), and the regent who signed Jubilee decrees would always be popular with subjects. America needs to be popular in the world; we could buy ourselves some love, and do a very good deed, by leading the Jubilee to fruition.

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