Global Debt Crisis: A Call for Jubilee
Since the inception of the global Jubilee Campaign in 2000, we can celebrate important strides. The debt of twenty nations to the International Monetary Fund and the World Bank has been wiped out, with the proceeds going to fight poverty in these nations. Despite this important step, the global debt crisis continues to cripple poor countries. Countries in Africa, Asia, the Pacific, Latin America, and the Caribbean owe over $2 trillion to rich nations and international financial institutions. The poorest countries in the world are still among the most heavily indebted, owing around $380 billion. For many countries left behind by world leaders, the burden of repaying the debt continues to prevent them from providing adequate health care, education, and food for their people. This debt burden-often incurred illegitimately by dictators-inhibits the social and economic change that is needed to lift people out of poverty. Throughout the world there is a call for Jubilee, a call for debt cancellation in a Sabbath Year.
II. Biblical Foundation
Scriptures mandate periodically overcoming structural injustice and poverty and for restoring right relationships by forgiving debt and reforming land holding. In the earliest Sabbath traditions, consumption and exploitation of the land were limited by the Sabbath and the Sabbath year. People and animals were to rest every seventh day (Exodus 23:10-12). In the Sabbath year, there was to be release from debts and slavery and during the jubilee year-every 50th year-a restoration of all family lands (Leviticus 25). Fulfilling these commandments proclaims "the year of the Lord's favor" (Isaiah 61:1-2) and anticipates "new heavens and a new earth" (Isaiah 65:17-25). Jesus emphasized this jubilee vision of proclaiming good news to the poor, release of the captives, sight to the blind, and liberation of the oppressed (Luke 4:16-19). He taught his disciples to pray for the forgiveness of debts (as we forgive our debtors) (Matthew 6:12). Pentecost results in the voluntary sharing of possessions, so that "there was not a needy person among them" (Acts 4:34; Deuteronomy 15:4).
The Sabbath tradition of the jubilee vision is as relevant today as it was thousands of years ago. Debt bondage by the poorest countries to rich nations and financial institutions is today's new slavery. The accelerating concentration of wealth for a few in the richest countries and the devastating decline in living standards in the poorest countries call for correction along the lines of the ancient Sabbath and jubilee cycles. The social, political, and ecological costs of the debt crisis are intolerable and must be challenged and stopped. Only when we have implemented the Sabbath-jubilee mandate can we "turn to God" and "rejoice in hope."
III. Causes of the Debt Crisis
The causes of the debt crisis are complex. Colonialism has tied the developing world's economies to the export of agricultural, mineral, and other raw materials while creating a dependence on imported goods. This export-oriented and import-dependent economic arrangement sunk poor and debtor countries even more into debt. For decades, prices for agricultural, mineral, and most raw materials have steadily declined in relation to the cost of manufactured goods. Poor countries that still depend on these exports find themselves increasingly disadvantaged in the global marketplace and often deeper in debt. Declining commodity prices between 1986 and 1990 alone cost Africa $50 billion in export earnings, more than double the funds received in foreign assistance from all nations.
In the 1970s, the oil-producing nations deposited billions of dollars in Western commercial banks. In turn, many banks aggressively marketed their loans to developing countries who were short of cash, facing high oil costs, and eager to borrow. Banks' normal loan-review procedures were often abandoned in the rush to lend large amounts of money quickly. Some of the loans went to productive uses, such as water purification and sewage systems, education and health programs, and subsidies for basic food staples. However, a large percentage of the money has supported militarization and, sometimes, repressive regimes and corrupt leadership.
By the mid 1970s, developing countries, encouraged by the West to grow cash crops, suddenly found that they were not getting the prices they used to for the raw materials they sold. The reason: too many countries-advised by the West-were producing the same crops, so prices fell. Soon after, US interest rates began to rise dramatically and oil prices rose again. This led to a global recession that depressed demand and commodity prices of products from developing countries. Receiving less for their exports and forced to pay more on loans and imports, indebted countries had to borrow more money just to pay off the interest.
In 1982, Mexico, Brazil, and other middle-income countries announced that they were about to default on billions of dollars in loans. Banks suddenly stopped new lending to developing countries. By late 1980s, the crisis had eased for most middle-income countries, as a result of some debt restructuring by commercial banks, intervention by international financial institutions, and export growth. However, the poorest countries continue to struggle under heavy unpayable debt burden and are essentially bankrupt.
Today, debt campaigners across the globe are increasingly focused on the origins of much of the debt of countries in Africa, Asia, and Latin America. Campaigners in these regions are questioning whether much of the debt is really owed. A growing number of governments are undertaking official audits to assess the legitimacy of debts. Debts are odious if they result from loans contracted without the knowledge or consent of the population or if government officials used the money for personal purposes or to oppress their people. In cases where borrowed money was used in ways contrary to the peoples' interest, with the knowledge of the creditors, the creditors may be said to have committed a hostile act against the people. Creditors cannot legitimately expect repayment of such debts. Examples of odious debt are money from loans stolen by the ruling elite of the then Indonesia dictator Suharto; debts contracted by the apartheid regime of South Africa; and debts accrued during the dictatorial rule of Mobbutu Sese Seko in the Democratic Republic of Congo, Ferdinand Marcos in the Philippines, and the military junta in Argentina.
IV. Consequences of the Global Crisis-Everyone Loses
The World Bank and International Monetary Fund (IMF)-the two main international financial institutions-lend money and reschedule the debt of poor countries. However, these loans to highly indebted poor countries come with conditions known as Structural Adjustment Programs (SAPs). SAPs consist of measures designed to help a country repay its debts by earning more hard currency (i.e., increasing exports and decreasing imports). While a few countries appear to have been helped by SAPs, poverty and inequality have increased in most countries due to the externally imposed programs. This is because, in order to obtain more foreign currency, governments implementing SAPs usually must:
- reduce government spending, resulting in cuts in health care, education, and social services-many people are forced to go without;
- devalue the national currency, which increases the cost of imported goods and increases taxes, especially regressive sales taxes;
- reduce or eliminate transportation and food subsidies-because of this, prices of essentials soar out of the financial reach of many citizens;
- reduce jobs and wages for workers in government industries and services;
- encourage privatization of public industries which benefits the country's business elite and foreign investors; and
- shift agricultural and industrial production from food staples and basic goods for domestic use to commodities for export, which results in a transfer of land holdings from small subsistence farmers to large-scale agribusiness leaving many farmers with no land to grow their own food and few are employed on these new cash crop farms.
Children and women bear the full costs of debt repayment. In addition, by concentrating on exports in order to repay their debts, poor countries strip forests and overexploit land and nonrenewable resources, further aggravating serious environmental problems. Reports on the impact of debt repayment show that many indebted governments spend two to four times as much money "servicing"-that is, making timely interest and principal payments-their international debt as they spend on health care (such as basic medicines and clean water) and education combined. These IMF and World Bank policies, by taking away indebted country's sovereignty, undermine accountability by debtor governments, which in turn erodes local democratic institutions. In short, IMF and World Bank policies do more harm than good. The debt burden carried by impoverished nations hurts everyone-including citizens of rich nations such as the United States. The environmental damage magnified by indebtedness, such as destruction of forests, has global repercussions. Growing poverty-worsened by the debt-is linked to the spread of disease. Indebted countries are forced to use scarce dollars for debt payments instead of importing goods and services. This directly affects jobs and incomes in the rich countries. Indebtedness creates the climate that fosters the production and trafficking of illicit drugs. Debt also causes an increase of economic migration. It should trouble the conscience of citizens of rich nations that people living in misery have to spend their money for debt servicing that they need for their own survival.
V. Principles to Guide Debt-Crisis Solutions
As Christians, our love of God and neighbor must be reflected by our actions within the global family. Thus, we affirm the following policies and principles as necessary to ensure a just resolution to the debt crisis:
- We need to examine patterns of greed that may cause us as individuals and nations to become debtors and lenders. Debt cancellation and relief should be fashioned in a way that benefits the poor and helps move debtor nations to sustainable human development.
- The poor should not bear the burden of repayment and structural adjustment. Living standards of those least responsible and most vulnerable should not be sacrificed in order to meet external obligations. Developing countries have the right to choose their own development paths without military or economic interference from outside. They should not be forced to surrender their right to political or economic self-determination in exchange for relief.
- The debt burden should be shared equitably among credit institutions and the debtor governments, corporations, banks, and elites that incurred the debt. Factors adding to and perpetuating the debt problem but beyond the control of debtor countries-such as previous US budget deficits, high interest rates, unfair commodity prices, and trade barriers-should be alleviated.
- Long-term solutions should promote a more just international economic system in order to prevent such crises from recurring. New structures and mechanisms, involving participation and dialogue between creditors and debtors, including civil society groups such as community and faith-based organizations are critically needed.
- There is a need for a new just process of arbitration for international debt cancellation, such as the introduction of an international insolvency law, which ensures that losses and gains are equally shared.
- New mechanisms involving civil society must produce ethical, mutually responsible and transparent solutions, which not only satisfy requirements for economic efficiency, but also for the protection of basic human needs and rights as well as protecting of the environment.
- Where funds are released through debt cancellation or other relief measures, civil society organizations must be enabled to take part in determining how monies are reallocated for social priorities.
VI. Recommended Actions for The United Methodist Church
The United Methodist Church, as a covenant community committed to Christian discipleship and advocacy with the poor, must work toward "measures that would reduce the concentration of wealth in the hands of a few" (¶ 163, 2008 Discipline). Thus, the General Conference of The United Methodist Church:
- celebrates the worldwide movement to cancel the crushing debt of the world's poorest countries and the participation of the General Board of Church and Society and the General Board of Global Ministries in the campaign;
- recognizes even with the progress made to cancel the debt of impoverished countries, much more remains to be done: 9 out of 10 people in the developing world saw no benefit from the 2005 debt deal at the G8 Summit in Gleneagles, Scotland; and debts are accumulating faster than they are being cancelled;
- calls for the United States, governments of other leading industrial nations, private commercial lending institutions, and international financial institutions such as the World Bank and IMF to:
- cancel the debts of the poorest countries to enable them to meet human development goals, beginning with the Millennium Development goals;
- audit their lending portfolios, including loans made to middle-income countries, in order to assess the legitimacy of these loans;
- support measures to promote accountability of debtor countries when debts are relieved; these measures must be determined and monitored by local community organizations, including churches, and other communities of faith, and representative organizations of civil society, to ensure that debt cancellation leads to a more just distribution of wealth;
- use their powers to ensure that funds illegitimately transferred to secret foreign bank accounts are returned to debtor nations; and
- engage, in consultation with civil society, in a process of global economic reform toward the development of responsible financing standards for a more just distribution of wealth and prevention of new cycles of debt.
- urges the General Board of Church and Society and the General Board of Global Ministries to
- work with annual and central conferences to become advocates for debt cancellation and relief, for new structures and mechanisms involving participation and dialogue between creditors and debtors, that is open and transparent and includes civil society;
- develop and distribute appropriate curriculum and study materials to annual conferences and local congregations; and
- organize and assist speaking tours on the human impact of the global debt crisis.
- urges United Methodist theological seminaries to include Christian responsibility for economic justice, including the global debt crisis, as a necessary part of education for ministry; and
- urges the General Board of Church and Society and the General Board of Global Ministries to continue public policy work for major reforms of the International Monetary Fund, the World Bank, the World Trade Organization, and other international financial institutions to promote equitable development through poverty alleviation, protection of the environment, openness, democracy, and human rights.
REVISED AND ADOPTED 2000
revised and readoopted 2008
resolution #207, 2004 Book of Resolutions
resolution #198, 2000 Book of Resolutions
See Social Principles, ¶ 163D and E.
From The Book of Resolutions of The United Methodist Church - 2008. Copyright © 2008 by The United Methodist Publishing House. Used by permission.