Forgiving the Debts?
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PAUL SOLMAN: The wind and chill of Washington this past weekend probably cut down the crowds, but leaders of Jubilee 2000 still mustered troops enough to carry out their plan — to encircle the Capitol, symbolically protesting the chain of debt that supposedly weighs down the world’s poor.
PAUL SOLMAN: Distinct from the anti-globalization protests, the Jubilee movement has a simple, targeted objective: to cancel the public debts of 52 of the world’s poorest places, mostly in Africa. 52 countries that, in all, owe some $350 billion to institutions like the IMF and World Bank, and countries like the US Around the once-extreme idea of “debt forgiveness,” Jubilee 2000 has built a surprisingly broad-based movement, from left to right. Alabama Republican Spencer Bachus — a staunch conservative.
REP. SPENCER BACHUS, (R) Alabama: I mean we are talking about something that everyone from the Pope John Paul to Billy Graham to Pat Robertson have all come to the same conclusion.
PAUL SOLMAN: From the left come activists like Bono, the Irish rock star, who got close enough to the Pope on this issue to actually make a gift to the Pontiff of his trademark rose-colored glasses.
Indeed, much of the impetus is religious. The Bible says Jubilee should be celebrated every 50 years, and include debt forgiveness, as the Lord spoke unto Moses, on Mt. Sinai: “And ye shall hallow the fiftieth year and proclaim liberty throughout the land… and ye shall return every man unto his possessions and ye shall return every man unto his family.”
JO MARIE GRIESGRABER, Jubilee 2000 Coalition: God knows that relations among people are largely shaped by economics.
PAUL SOLMAN: Jo Marie Griesgraber heads Jubilee 2000 in the US She says God ordered the canceling of debts to relieve the poor…
JOE MARIE GRIESGRABER: So that children who are sold into debt servitude and people who are in debt slavery would be free. Land that was held as collateral would be returned to the owner.
PAUL SOLMAN: Griesgraber, a former Maryknoll nun, says that Isaiah also suggested a Jubilee year, as did Jesus in the New Testament when he quoted Isaiah to open his ministry.
JOE MARIE GRIESGRABER: So Jesus’ whole mission is bringing about a year of jubilee. It’s a qualitatively different approach to justice. It’s a justice where the poor have the first claim. Did we clothe the naked? Did we give shelter to the homeless? That is how we’re going to be judged.
PAUL SOLMAN: While Griesgraber is a long-time liberal, Spencer Bachus has a zero rating from the American Civil Liberties Union, a perfect 100 from the Christian Coalition. But he too says Jubilee is key.
REP. SPENCER BACHUS: Particularly in the world today where the, where the difference in the haves and the have-nots is almost indescribable, that for us to have so much wealth and for us to be able to save lives in another country by forgoing a Big Mac sandwich or a Sunday newspaper and be able to collectively save hundreds of thousands of lives worldwide, it simply is a clear example of something we ought to do out of the goodness of our hearts.
PAUL SOLMAN: Jubilee’s advocates aren’t all cut from spiritual cloth. Harvard Professor Jeffrey Sachs argues in economic terms.
JEFFREY SACHS, Harvard University: I think by now it has become absolutely evident to everybody that these debts are unpayable and that to keep them on the books and to keep demanding repayment is utterly crippling these countries.
PAUL SOLMAN: Sachs first talked to the NewsHour about debt relief 13 years ago when he’d just begun to fight, and had advised Bolivia to default on its private debts, to commercial banks.
JEFFREY SACHS: I must insist that in new, fledgling democracy struggling with incredible economic hardships should not jeopardize democracy, should not jeopardize the health and well-being of very poor citizens to make good on commercial bank loans.
PAUL SOLMAN: In 1989, much of the third world’s debt to private banks was slashed through the Bush administration’s so-called Brady Bond program. But the debt to countries like ours, and institutions like the IMF only grew. Today — especially in Africa — many places are actually poorer than in the 80’s; in part, it’s argued, because they have to use their money for interest on their debts, instead of the basic investments in health and education they need for economic growth.
Consider, say Sachs and others, the case of Zambia, a nation of 10 million people, long a prized British colony for its one resource: Copper. And although landlocked, and stuck in the disease-ridden tropics, Zambia as recently as 1980 could still count on copper, valuable enough so that I remember reporting on it being stripped from buildings in Boston back then, and selling it for a dollar a pound.
But then came the world commodities glut, wire began being replaced by optical fiber – no fault of Zambia’s, but copper plummeted, and today it sells for 76 pennies a pound, less, when you count inflation, than half of what it sold for 20 years ago. No wonder, say Jubilee supporters, that Zambia’s government revenues — basically taxes –are only $600 million a year, while debt payments due are nearly $300 million. By comparison, if the US had to spend half its budget on debt service, we would be giving up the equivalent of Social Security, Medicare and every other entitlement program.
So, the argument goes, if Zambia’s debts are forgiven, it can spend the lion’s share of what it has on its people. And that brings us to a puzzling question. If debt service is such a no-brainer, why hasn’t it already happened? Well, one answer is Congress. It has yet to appropriate the money needed to cover the forgiveness of poor country debts to the US, and other creditors are waiting until it does.
REP. SONNY CALLAHAN, (R) Alabama: Speaker, I yield myself such time as I may consume.
PAUL SOLMAN: Congressmen like Alabama Republican Sonny Callahan, oppose outright forgiveness, because he thinks the debtors will repeat the sins of their past.
REP. SONNY CALLAHAN: When the people who borrowed the money that were running these countries at that time absconded, they didn’t spent it on the bridges, they didn’t spend it on health care; they took the money, and they put it in Swiss banks. So now they want us to forgive the debt. Well, maybe that would be the right way to go if they would agree not to borrow any more money.
PAUL SOLMAN: Economist Steven Hanke elaborated.
STEVE HANKE, Johns Hopkins University: These are corrupt tyrants in most cases that have gotten this money, and either put it in their own personal bank accounts or it’s been squandered on unproductive investments. The pitch, of course, by these rock stars and whatnot as they’re running around trying to promote this, is all the money is going to go into schools and hospitals, you see. The money will either go into private accounts of the politicians or the cronies, or military equipment. Those are the only categories that it is not going into schools and hospitals, believe me.
PAUL SOLMAN: This is the nub of the anti-Jubilee case: The money will be siphoned off by those in power, as it so often has been in the past. But to Jeffrey Sachs, that’s a chance worth taking.
JEFFREY SACHS: When these broad-brushed arguments are made about Africa, I shudder at the ignorance of them.
PAUL SOLMAN: Sachs points to President Obasanjo of Nigeria, who’s just inherited the ruination of military rule.
JEFFREY SACHS: Now he is a new democratic leader of the 120 million population that is suffering unbelievably, where public health spending is less than $3 per-person per-year right now. It is something even unimaginable for Americans, and yet then you hear opposition say, “why should we give it to the crooks?” And so forth. If people would actually look at the realities, we can save democracies, we can help consolidate fragile reform-minded governments in these regions.
PAUL SOLMAN: To advocates like Sachs, the list of Jubilee countries speaks for itself. The CIA rates most of them republics or democracies like Ghana, Nicaragua, Senegal. But Professor Hanke thinks most of the poorest countries are republics in name only, and says cases like Mexico and Russia prove that even so-called democracies are no insurance against corruption.
STEVE HANKE: There really aren’t any stable rules in these places, and look at Russia. We went from communism to democracy, but we certainly never eliminated corruption. Everyone knows what the situation has been in the 90’s in Russia, or Ukraine. Right now we’re investigating Ukraine. What in the world did they do with the IMF money at the central bank in the Ukraine? And that’s only the tip of the iceberg. This is one example.
PAUL SOLMAN: To Hanke, debt forgiveness is foreign aid in disguise, and foreign aid, he says, breeds corruption, deeper dependency, deeper poverty. His answer is also simple: Free markets.
STEVE HANKE: If these poor countries have good projects and they want to invest in them, they can go to market and get the money. This is not a problem.
PAUL SOLMAN: There is enough money out in the world for almost any project?
STEVE HANKE: There is a huge pool of capital around always looking for good projects. So if these countries could get their act together as you imply, get civil rights, get political freedom, get the role of law installed, have a sound monetary system, they could go to the market, and the market would be more than happy to lend them all the money they’d want for good projects that we’re going to have a good, solid rate of return.
PAUL SOLMAN: The Jubilee folks think such talk is well down the road, and that private markets will never lend them money for health and education. But they do admit money without strings attached can be a recipe for corruption.
JEFFREY SACHS: I have always said from the first day, that I have advocated this from the early days of Bolivia through Poland, through this Jubilee 2000 initiative that it is right and fair to put the challenge on the other side, to say, “look, we don’t cancel the debt so that it can be ripped off and taken to Switzerland; we cancel the debts because you are striving to recover from horrendous conditions. Show us how, in a monitorable way, in a realistic way, you could use whatever savings are achieved to get out of this horrendous disastrous situation.
PAUL SOLMAN: As one might expect the acting managing director of the IMF, Stanley Fischer, agrees that conditionality is crucial.
STANLEY FISCHER, Acting Managing Director, IMF: It’s generally agreed that we should only forgive the debt reduction if it’s going to be well-used, which means if the country is pursuing a reasonable set of policies and those policies are being negotiated and put into place.
PAUL SOLMAN: We leave the final exchange to our economists, both of whom are fervent believers in economic growth. But, says Steven Hanke, the religious tradition he finds relevant here is that of Father Flanagan.
STEVEN HANKE: You’ve seen the movie “Boys Town,” and you know about Father Flanagan and so forth. Well, that’s tough love — he got the boys in shape with tough love, and I’ll get these economies in shape with tough love, too. It’s not foreign aid that has ever made some economy hum, believe me. The foreign aid leads to corruption and contaminates the whole system, because a lot of these socialist policies are actually put in place as part of the aid packages.
PAUL SOLMAN: Jubilee’s reply comes from Professor Sachs.
JEFFREY SACHS: Tough love is right, but it has to come with love, and what that means, in a practical financial sense, is reforms absolutely, but real help absolutely — reforms will not pay their own way when you are utterly bankrupt, even starving, and without the most basic human needs being met. You need the help, alongside the reforms.
PAUL SOLMAN: That, in essence, is what the debt forgiveness movement is all about.