Book Excerpts Chapter 1: Christian Responsibility Chapter 4: Reducing the Debt Burden

These excerpts are protected by all U.S. and inernational copyright laws.
Copyright © 1999, by Jay R. Lawlor
Universal Publishers (uPUBLISH.com)
USA - 1999

 

 

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Chapter 1

Christian Responsibility

 

Will you strive for justice and peace among all people, and respect the dignity of every human being?

I will, with God's help.

From the Baptismal Covenant

The Book of Common Prayer

 

When we are baptized into Christ we gain new life through him and become members of his body and ministers of God's Word in the world. Through our baptism we join the priesthood of all believers and promise to live out that ministry by striving for justice and peace among all people, and respecting the dignity of every human being. The challenges of the world's poor and the dawn of a new millenium call each of us to witness to that baptismal promise in very real ways.

 

As we enter a new millenium we also embark on a Jubilee year. Jubilee is a call for the liberation of humanity that comes from God's revelation to ancient Israel. It challenges the injustices of society in order to bring about a just world for all. Both the Old and New Testaments clearly proclaim a Jubilee message.

 

In Leviticus 25, Israel is instructed to declare a Jubilee year every 50 years by releasing slaves, leaving the land uncultivated, and forgiving debts. Indeed, much has been said of Leviticus 25 in relation to the debt crisis (chapter 4). For Christians, we further understand God's call to observing a Jubilee spirit as it is made incarnate through Jesus Christ.

 

According to Luke's Gospel, Jesus began his ministry by proclaiming a year of Jubilee and restoration.

 

"The Spirit of the Lord is upon me, because he has anointed me to bring good news to the poor. He has sent me to proclaim release to the captives and recovery of sight to the blind, to let the oppressed go free, to proclaim the year of the Lord's favor." (Luke 4:18-19).

Jesus' ministry emphasized a Jubilee spirit -- "the year of the Lord's favor" -- by helping the poor and oppressed and working to create justice and peace for all. The Apostles modeled this in their ministries (Acts 2:43-47; 20:35) and Paul's teachings to the early Christian community in Corinth include an emphasis on social justice (1 Cor. 1:27-28; 2 Cor. 8:9,14).

 

How, then, are we -- as Christians entering a new millenium -- to associate these teachings with the problems of the modern world and formulate our responses to them? Our situations today are not that different from those of Christ's time or the early Church. The Gospel message and early Church teachings are as valid today as they were then (and the world needs the Church's message now, more than ever). The 1988 Lambeth Conference of Anglican bishops provides a good, modern summary of our Christian responsibility to the world's poor, neglected, and oppressed:

 

Christians are called to be faithful to Christ and to the Word of God where he always and unconditionally stands alongside the poor, the disadvantaged, and the oppressed. The people of God ought, therefore, to be the voice of those whose voice has been silenced and suppressed, speaking and acting not necessarily on a political party platform but out of Christian conviction about the God who demands justice and whose will is peace and reconciliation.

We often restrict ourselves by political and religious ideology, but God is not restricted. All we need to do to allow God's light to shine forth is to open our hearts and minds to the ways in which God is guiding us. We must see past those things that we create to separate ourselves from others.

 

Our Christian faith demands that we reach out and help those in need. We can provide hope and faith to a world that desperately needs it. Through our actions the light of God's love can shine forth into the places darkened by poverty and oppression. We are called to strive for justice and peace among all people and respect the dignity of every human being.

 

While our mission is to all people, let us take a moment to look at some examples of how these profound problems affect our brothers and sisters in Christ (we can see how "close to home" these problems hit). Between 40% and 50% of Christians live in the impoverished nations of the Southern Hemisphere (developing world). Approximately 53% (37 million) of the world's 70 million Anglicans live in the developing world (Figure 1-1). Of those 37 million, over 35 million live in Africa (Figure 1-2) -- a continent facing some of the greatest developmental challenges.

 

 

 

Figure 1-1: Anglicans by Region

Source: Calculations by author from data on the Anglican Communion web site (http://www.anglicancommunion.org)

 

 

 

Figure 1-2: Anglicans in the Developing World

Source: Calculations by author from data on the Anglican Communion web site (http://www.anglicancommunion.org)

 

 

Many of the poorest nations in the world are home to some of the largest Anglican populations. For example, 17.5 million Anglicans live in Nigeria (only the Church of England is larger, with 26 million) and 8 million in Uganda. Both of these African nations are categorized as low-income and severely indebted countries. If we compare Nigeria to the United States (one of the wealthiest high-income economies), we realize that the ECUSA (with 2.5 million members) is equivalent in size to only 14.5% of the Anglican Church in Nigeria. We can easily see the inequality even within our own Communion.

 

There should be no doubt that we have a responsibility to ensure the God-given rights of every human being. The question we need to ask ourselves is not, "Should we respond?" but, rather, "How do we respond?" For the sake of those who have no voice, we must respond loudly and with action. Each member of the Body of Christ must join with each other member (and with those of other faiths) to achieve justice and peace in our world.

 

 

 

Discussion Points/Questions

 

1. What does that Baptismal Covenant and Christian responsibility mean to you?

2. How should the Baptismal Covenant and an understanding of Christian responsibility guide our attitude and actions toward the poor and oppressed?

3. With the majority of Anglicans now living in the developing world (particularly Africa); how might that shape our thinking about development programs?

 

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Chapter 4

Reducing the Debt Burden

 

 

Much attention has been given to the debt crisis since the late 1980s. Despite all the attention there still remains a serious crisis and widespread misunderstanding about the debt burdens of many nations. Of concern is the fact that such debt diverts funds -- and attention -- away from basic services such as food, health care, education, sanitation, and development programs.

 

Two important points need to be made. First is that development programs cannot properly succeed unless there is significant debt relief for the world's poorest countries. Second, debt relief alone will not solve the developing world's problems. Significant debt relief is a crucial step in tearing down a major obstacle that stands in the way of allowing development efforts to take root and grow.

 

As mentioned in chapter 1, efforts to eliminate debt draw inspiration from Leviticus 25. Many religious groups have made strong statements in support of debt relief. Following are excerpts from some of the statements:

 

…we recommend a strong campaign for debt cancellation, collaborating with organizations already committed to this campaign based on the following conditions: true democratization, respect for human rights, demilitarization, [and] redirecting money thus saved for the benefit of so-called ordinary people.

"Final Communiqué," 7^th General Assembly, All Africa Conference of Churches (AACC) - October 1997.

…Christians will have to raise their voice on behalf of all the poor of the world, proposing the jubilee as an appropriate time to give thought, among other things, to reducing substantially, if not canceling outright, the international debt which seriously threatens the future of many nations.

Pope John Paul II, "As the Third Millennium Draws Near" (November 14, 1994).

…To affirm the concern expressed in the memorial of the Minneapolis Area Synod about the crushing debt burdens of many developing countries and the need for comprehensive international action to assist them to move to a position of sound economic growth and stability…

The Evangelical Lutheran Church in America Churchwide Assembly (August 1997).

…The repayment of debts and interest at the expense of the basics of life for the poor cannot be tolerated. Debt service should be limited to a reasonable percentage of national budgets or national production…In other cases, lenders should give debt relief in whole or in part-particularly for the poorest countries.

Presbyterian Church (U.S.A.)

…The problem of the global debt crisis today, as in the biblical communities, is that the debtors no only pay with their lives, but also with the lives of future generations. Part of God's creation has been diminished, the covenant broken…

United Methodist Church "Global Debt Crisis" Resolution (1988).

The Anglican Communion/Episcopal Church has been actively involved in debt relief efforts. The Archbishops of Canterbury and Cape Town have led discussions on world debt that have included other faiths and key development agencies (such as The World Bank). The Episcopal Church has twice adopted resolutions supporting debt relief (General Convention 1994 and 1997) and the debt crisis was a major topic of focus at the 1998 Lambeth Conference of Anglican bishops. The bishops strongly supported a resolution calling for significant debt relief in the world's poorest countries (please see Appendix B for the General Convention and Lambeth resolutions).

 

 

 

Jubilee 2000

 

A worldwide movement for the cancellation of debt is the Jubilee 2000 Coalition. This coalition has formed a global campaign that is working to raise awareness about the debt crisis and to urge governments and international banks to forgive the unpayable debt of the world's poorest nations by the end of the year 2000.

 

Jubilee 2000 proposes ... A one-off cancellation of the backlog of unpayable debt for the world's poorest countries - which either cannot be paid, or can be paid only with enormous human suffering. This wouldn't be setting a precedent for canceling all debts repeatedly. Rather, it would be a once-only gesture to mark the millennium, a gesture showing that creditors and debtors alike have made mistakes and that the slate needs to be wiped clean. The procedure for agreeing this debt relief should be undertaken by an independent body, perhaps under the UN. The procedure will be open, transparent and fair. This would change millions of lives, without taking away the responsibility of debtors to pay their future debts.

 

In June of 1997, some forty Protestant and Catholic organizations in the United States formed Jubilee 2000/USA -- of which the Episcopal Church is an active member. As part of the worldwide Jubilee 2000 movement, Jubilee 2000/USA works to motivate the U.S. government to support cancellation of debts for the world's poorest nations. They are currently working on legislation to be introduced into Congress and are urging the President to make debt cancellation a high priority in his administration.

 

 

 

Leading Economist Calls for Debt Relief

 

Not only is there a moral imperative and a clear Christian response to the debt crisis, but Harvard economist Jeffrey D. Sachs has long stated that there should be debt forgiveness for the poorest countries. In an article for The Economist, Professor Sachs wrote: "…the agony of the debt crisis that began 20 years ago should be ended, by simply canceling most of the debt owed by the poorest countries."

 

 

 

How the Debt Crisis Began

 

It is generally accepted that the debt crisis began in the summer of 1982 when Mexico defaulted on its external debt payments. However, the problems that led to the crisis can be traced back to the early- and mid-1970s. The growth of the Eurodollar and the OPEC oil shock resulted in tremendous bank lending (mostly by private-sector banks) to developing countries. As we entered the late-1970s export revenue for these nations was growing and international interest rates were low.

 

Developing countries took out more loans from commercial banks in the industrialized world. Most international bankers saw little risk in lending to governments as it was generally believed that a country could not default on a loan. The fact of the matter is that countries do go bankrupt, but they do not have any of the protection afforded to individuals and companies.

 

Recession hit many developed nations in the late 1970s and the demand for developing world exports fell and they were left with debt payments greater than their export earnings could cover. It was only a matter of time before resources would run out and a nation would default on their loan payments. This occurred in the summer of 1982 when Mexico defaulted on their external debt payments. Other nations soon followed and the developing world plunged into crisis -- many nations' economic progress being thrown back almost twenty years.

 

 

 

Initial Response to the Debt Crisis

 

Once the international community realized that there was a crisis, emergency loans were sent to Mexico. Many believed that a global recovery from recession would allow the developing nations to grow out of debt trouble with a resurgence of economic growth. These proved to be very optimistic forecasts as a series of global economic events prevented growth in debtor nations to fuel recovery in their countries. The situation worsened and the crisis continues as we enter a new millenium.

 

 

 

Impact of the Debt Burden

 

The crushing debt experienced by many of the world's poorest nations is a form of bondage or slavery. This, simply, is a crime against humanity and calls for compassion and justice. The poorest of the world's poor are trapped by debt that diverts scarce funds away from food, health services, sanitation, and education. Without such basic necessities they struggle to survive as basic safety nets cannot be provided and development programs are hampered.

 

In its April 1997 report, Oxfam International states that:

 

Debt repayments have meant health centers without drugs and trained staff, schools without basic teaching equipment, and the collapse of agricultural extension services…for many millions of families in poor villages and urban slums, the daily consequence is that they are unable to maintain health and nutritional standards, and unable to keep their children in school.

The strict level of repayment required by the IMF means that aid received from wealthier countries, such as the United States and Great Britain, is often used to finance debt payments rather than pay for health care, education, or other social services. Additionally, high debt levels discourage foreign investment in the developing countries -- an important aspect for economic growth and participation in the global economy. Mismanagement of debt programs by the IMF has further entrenched nations in poverty.

 

The poor of the developing world are enslaved by their countries' debt, but we all feel the impact of the developing world debt burden. Countries that are heavily indebted are forced to overuse soil and produce more crops on less land in order to grow much-needed cash crops. Deforestation is accelerating at alarming rates and illegal dumping of pollutants into the air and water are increasing, and the numbers of endangered or threatened species are rising. Each of these actions has global ramifications as they add to the environmental degradation that affects everyone who lives on the planet.

 

 

 

Level of Debt

 

According to the Global Development Finance 1999, total external debt for all developing countries was $2.3 trillion in 1997. Preliminary figures for 1998 show developing world debt at $2.5 trillion. Since 1990, $992 billion has been added to the developing world's debt burden (1998 preliminary figures).

 

The majority of the debt (77% or $2 trillion in 1998) is long-term (maturity of more than one year and owed to nonresidents of the country). With such high levels of long-term debt, many developing nations cannot even afford to service the debt (payments due each year on the loan). In severely indebted, low-income nations; long-term debt is approximately 82% of their total debt. For the most impoverished nations in the world, a vast majority of long-term debt (83%) is owed to international financial institutions (e.g. the IMF and World Bank) and foreign governments (see next section on "Types of Debt").

 

 

 

Types of Debt

 

The developing countries hold three types of debt: Bilateral, Multilateral, and Private. Bilateral debt is money owed to governments and government agencies (e.g. central banks). Multilateral debt is owed to international financial organizations such as the IMF, World Bank, and regional development banks. Private debt is money owed to commercial banks and other private creditors.

 

While long-term debt for all developing countries is largely owed to private creditors (55%); the most severely indebted, low-income nations owe mostly bilateral (54%) and multilateral (29%) debt. Of the forty nations classified as Highly Indebted Poor Countries (HIPC), multilateral and bilateral debt is each 45% of total debt and private debt is only 10%. While we must encourage private creditors to offer debt relief to developing countries, relief for the poorest nations -- with the greatest debt burdens -- relies mostly on the political will of creditor governments and multilateral organizations.

 

 

 

Figure 4-1

Share of Debt in Severely Indebted, Low-Income Countries

Source: Global Development Finance 1999 (Washington, DC: The World Bank, 1999) - downloaded from The World Bank web site (http://www.worldbank.org/gdf99.html).

 

 

 

Declining Aid

 

Figures from the Global Development Finance 1999 show that while debt has grown by almost $1 trillion since 1990, aid to developing nations has declined by almost $9.5 billion since the mid-1990s. Grant aid has declined by $3 billion between 1997 and 1998 alone. In 1991, grants to developing countries totaled $35.3 billion. Grant aid fell to $23 billion in 1998 -- its lowest point of the last ten years.

 

 

  

Figure 4-2: Declining Grants to Developing Countries

Source: Global Development Finance 1999 (Washington, DC: The World Bank, 1999) - downloaded from The World Bank web site (http://www.worldbank.org/gdf99.html)

 

 

The ratio of debt payment to grant aid received has more than doubled since 1990. Preliminary figures for 1998 show that developing countries spent nearly $13 on debt payments for every $1 they received in grant aid. Despite borrowing less than they paid back, developing world debt still increased $149 billion in 1998 (while aid declined by nearly $3 billion).

 

Developing countries spend nearly $13 on debt payments for every $1 they receive in grant aid (1998 preliminary figures).

 

Official Development Assistance (ODA) from the Organization for Economic Cooperation and Development's (OECD) Development Assistance Committee (DAC) confirms a decline in aid to developing countries. Between 1996 and 1997, total ODA to developing countries fell $7.1 billion from $55.4 billion to $48.3 billion. This decline is largely due to DAC countries giving a smaller proportion of their GNP to aid.

 

The United Nations set a target of ODA at 0.7% of a DAC country's GNP (ODA/GNP ratio). The total ODA/GNP ratio for all DAC countries is currently 0.22% (Table 4-1), using 1997 figures. This falls far short of the 0.7% target. Only four out of the 21 DAC nations are meeting or exceeding the 0.7% ODA/GNP ratio (Denmark, Netherlands, Norway, and Sweden). The United States' ODA was only 0.09% of GNP in 1997.

 

We must seriously evaluate the debt and aid systems when an impoverished nation is making debt payments thirteen times greater than what it is receiving in grants. There are serious problems when the total debt stock of the poorest nations increases by $149 billion and ODA from the wealthiest nations declines by more than $7 billion. This is especially troubling as strained resources force many developing nations to use the aid they do receive for required debt payments, rather than to fund social services and development programs.

 

 

Table 4-1: ODA to Developing Countries in 1997

DAC Donor	ODA (Mil. $)		ODA/GNP (%)
Australia	1 061	0.28
Austria	527	0.26
Belgium	764	0.31
Canada	2 045	0.34
Denmark	1 637	0.97
Finland	379	0.33
France	6 307	0.45
Germany	5 857	0.28
Ireland	187	0.31
Italy	1 266	0.11
Japan	9 358	0.22
Luxembourg	95	0.55
Netherlands	2 947	0.81
New Zealand	154	0.26
Norway	1 306	0.86
Portugal	250	0.25
Spain	1 234	0.24
Sweden	1 731	0.79
Switzerland	911	0.34
United Kingdom	3 433	0.26
United States	6 878	0.09
Total DAC	48 324	0.22

Source: 1998 DAC Report - OECD Development Assistance Committee web site (http://www.oecd.org/dac/htm/dacstats.htm).

 

 

 

Heavily Indebted Poor Countries (HIPC) Initiative

 

In 1996, the World Bank and IMF launched the Heavily Indebted Poor Countries (HIPC) initiative as a way to address comprehensive debt relief for the poorest countries of the world. The HIPC is a coordinated plan to address bilateral, multilateral, and private debt. Through the initiative, the IMF and World Bank work to provide debt relief that brings the level of debt in a country to sustainable levels. The HIPC has generated considerable attention as it has become the main tool through which the World Bank and IMF carry out comprehensive debt relief efforts.

 

To qualify for debt relief under the HIPC Initiative, a country must face an unsustainable debt burden and meet specified conditions for economic reform -- through IMF and World Bank programs.

 

 

 

The initiative is designed as a period of reform and then relief. Under IMF-World Bank reform, the debtor country pursues what is called a Structural Adjustment Program (SAP). The SAP includes measures such as reducing government spending and raising interest rates in order to restructure the economy to promote sustainable growth. The debtor country must also receive concessional debt rescheduling (adjustment to the terms of the original loan) from bilateral creditors.

 

After the debtor country has established three-years of economic reform, the World Bank and IMF make a commitment to provide debt relief. The goal is to offer a debt relief package that will ease the debt burden to a sustainable level. A debtor country may be considered to achieve external debt sustainability when it is able to meet its current and future external debt payments in full, without recourse to debt relief, rescheduling, or the accumulation of arrears.

 

There are currently some 40 HIPC countries that owe approximately $170 billion (in 1996 dollars). Through other debt relief efforts, HIPCs received approximately $25 billion in relief between 1990 and 1996. Under the HIPC initiative, Bolivia and Uganda have received debt relief packages totaling $1.4 billion. The HIPC has committed a total of $4.7 billion in debt relief for five additional countries.

 

While the HIPC has had some success, it has significant flaws in both design and implementation. As Professor Jeffrey D. Sachs states "The current strategy, known as the Highly Indebted Poor Country (HIPC) initiative, is too slow and too stingy." There is considerable debate surrounding the HIPC and following is a list that summarizes the shortcomings of this program:

• Eligibility is too closely linked to IMF-World Bank SAPs that place a tremendous burden on those living in poverty.

• Too few countries are considered poor enough or indebted enough to qualify for participation. Of the 80 severely and moderately indebted developing countries, only 40 are included in the HIPC initiative. Even among the current HIPCs, only seven of the forty countries have received debt relief commitments. Christian Aid estimates that only 6.4% of the debt of the world's most impoverished nations will be relieved.

• The goal for a country's "sustainable" debt level of 20%-25% of their export revenue and a total debt stock of no greater than 200%-250% of annual exports is set too high. These ratios fail to adequately account for the degree of human suffering under such debt conditions. There is a precedent for more favorable terms. In 1953, Germany negotiated terms in which only 3-5% of export earnings would be used to pay debt. In the 1960s, Indonesia was exempted from normal debt payments. During the 1980s, Poland's debt was cut in half.

• The time required for SAPs and debt relief implementation is too long. It takes a minimum of two to three years and upwards of six before debt relief funds are released.

 

While the idea of the HIPC is commendable, the policy and implementation are tragically flawed and only add to human suffering. As we enter a Jubilee year, let us focus greater attention on significant relief that releases the most impoverished nations from the burden of unpayable debt.

 

 

 

Discussion Points/Questions

1. What was your understanding of the debt crisis before reading this chapter? Now (if different)?

2. Most of us have experienced debt of some level at one time or another in our lives. Imagine that the amount of interest that you had to pay on your debt each year was 80% of your gross income (this is the situation of the poorest nations classified as severely indebted). What could you afford? What would you have to give up? Could you afford adequate levels of food, clothing, shelter, and health care?

3. The Church is part of the Jubilee 2000 effort; how may we use our role in Jubilee 2000 more effectively? Can you think of other ways that parishes, dioceses, and the entire Church can raise awareness about debt forgiveness?

 

 

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