Tuesday, November 6, 2007
It all started when the oil producing nations decided to hike oil prices in the late 1970’s. Just like that, these mostly Middle Eastern countries had vast sums of money. And they needed a secure place to keep it, so they put it in Western Banks. Now, suddenly, banks had more money than they knew what to do with it. So, they loaned it out. They loaned it out to developing nations at absurdly low interest rates.
Much of this money went to fund pork-barrel projects, which gave business to Western development corporations. Some loans were used to purchase hard-line laissez faire policies and allegiances during the Cold War. But many of the projects failed. And so did many of the economic policies that were part-and-parcel of the loans.
Much of the money was borrowed by dictators who spent it on military and weaponry, which was used to oppress their own people. In South Africa, for instance, international lending institutions and creditors loaned the apartheid government more than $20 billion, which they put directly to use in bolstering the racist system. When Nelson Mandela came to power in 1994 after being awarded the Nobel Peace prize, he was forced to make payments on money that had been used to pay for his 27-year imprisonment!
But when South Africa and other nations tried to pay down their debts, they found that the low interest rates that they had been paying were all of a sudden double or triple what they had been! Interest rates went, often as high as 47%, according to an independent congressional investigation (the Meltzer Commission). Faced with failed projects and economic policies, many countries could not make the loan payments as they were scheduled. So, the IMF and World Bank happily loaned them more money to cover their payments – with certain conditions. The trap was set.
The economic conditions that the IMF and the World Bank demanded fell into three basic categories: privatization, government spending cuts, or the use of Western corporations for development projects. Many development projects are controversial, like water privatization – providing extremely clean water to the wealthy, and leaving the poor majority with less access to clean water than before. When foreign, Western corporations are contracted for these jobs, it makes one suspicious that these economic conditions set up by the IMF and World Bank are designed to help corporations rather than the improvised countries they should represent.
But government spending cuts are the most devastating of these. Many countries have been forced to cut government spending in the areas of health care and education, which destroys their capacity to combat rapidly expanding HIV/AIDS rates or to provide primary education to children. More than 27 million people in Africa are currently infected with the HIV virus. Debt repayment to wealthy creditor institutions like the IMF and World Bank should not take precedence over AIDS prevention or the education of children. After all, how can sick or uneducated people construct an economy that will provide a living wage to all?
Foreign aid to debt-ridden countries often goes towards debt servicing. Aid without debt cancellation, then, is like pouring water into a sink with an open drain. Debt cancellation, therefore, is an important prerequisite to effective foreign aid. This is why debt cancellation is so necessary.
By 1996, even international lending institutions had realized that debt relief was necessary, and formed the Heavily Indebted Poor Countries initiative (HIPC) order to assess the need for and provide debt relief. But little debt relief was actually realized by this bureaucratic process that forced countries to adopt more of the same old harmful economic policies before even being eligible to recieve relief.
In 2000, under pressure from a worldwide Jubilee movement under leadership of important moral voices like Pope John Paul II, the U.S. Congress authorized the cancellation of part of the debt owed directly to the United States.
But there are still 67 counties that need 100 percent debt cancellation in order come out of extreme poverty and meet the Millennium Development Goals. That’s why Jubilee USA is working on a Bill, HR 2634, that will ask Congress to pressure international institutions to cancel the debt and reform lending practices. The United States has the power to cancel the debt.
US Congress people make decisions as a result of phone calls and letters they receive from ordinary people. That’s why we are asking people who care about debt cancellation to call their representatives and ask them to cancel the debt. It doesn’t matter whether or not you are even able to vote, you can still call 1-800-839-5276, ask for your Senator or Representative, and tell them to support HR 2634. You can visit www.jubileeusa.org or email [email protected] for more information or to get involved in Chicago.