Bill Calls for Canceling Poor Nations’ Debt

Proposal Based on Jewish Tradition of Sabbatical Year

By Rebecca Spence

Published March 16, 2007, issue of March 16, 2007.
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In biblical times, the existence of the Sabbatical year was a boon to anyone plagued by the habit of overspending: Every seven years, all debts were forgiven, those literally enslaved to their debts were freed and community members were set back on equal footing.

Now, in a fresh twist on an ancient Jewish tradition, a network of anti-poverty activists is using the Sabbatical year that begins in 2007 to shine a spotlight on a distinctly modern bind: the billions of dollars owed by poor nations to the World Bank and the International Monetary Fund.

Jubilee USA — a Washington-based alliance of some 80 religious, human rights, labor and environmental organizations — is calling on Congress to push for debt cancellation for 67 developing nations in Africa, Latin America and Asia. Jubilee’s proposed legislation, which it hopes will be introduced in the House of Representatives by the end this month, is part of the activist coalition’s broader campaign to pin a new wave of global debt relief to the Torah’s commandment that “every seventh year you shall practice remission of debts.”

While the fight to relieve developing nations of billions of dollars owed to the world’s most powerful lending institutions has been waged since the 1990s — with considerable success — the battle was never fully won, advocates for debt relief say. Many countries that were promised debt forgiveness in previous initiatives have yet to see it born out, advocates argue, leaving those countries shackled by monthly payments and unable to invest in much-needed education, infrastructure and health care programs. In sub-Saharan Africa, where an estimated 25.2 million people are infected with HIV/AIDS, billions of dollars now funneled to the IMF and the World Bank could be used to combat the ballooning epidemic, they say.

“When countries receive debt cancellation, they invest the money they would otherwise be spending in debt service to fight AIDS and put kids in school,” said Jacob Feinspan, senior policy associate at American Jewish World Service, which is a member of the Jubilee USA network. “Mozambique has been able to double the number of HIV testing and counseling centers because of debt cancellation,” said Feinspan, who is also a Jubilee board member.

But some critics — including the German government — contend that granting blanket debt relief leads to a lack of accountability and encourages irresponsible borrowing practices. Others argue that “debt relief” is merely cosmetic. Developing nations haven’t paid on their debts since the 1970s, critics say, which means that debt relief does nothing to free up extra resources. In fact, according to some critics, debt cancellation initiatives are merely a means to slip increased foreign aid — in the form of new loans that accompany debt relief — under the taxpayer’s nose, without subjecting the aid package to the usual legislative scrutiny.

“Debt relief is a pseudonym for a massive, unauthorized increase in new aid,” said Adam Lerrick, a scholar at the conservative American Enterprise Institute and an economics professor at Carnegie Mellon University. “This image of an African farmer laboring in the sun to pay this foreign debt is a fiction,” he said.

Still, Lerrick contends that international lending institutions should write off the debt, but for a different reason: The debts, not having been paid for decades, are simply worthless.

In recent years, the United States has played a leading role in securing debt relief. In 1999, the G-8 summit partially abolished the debt of 23 African countries, in large part due to American urging. That same year, an earlier measure known as the Heavily Indebted Poor Countries Initiative was strengthened, resulting in 38 countries receiving some debt cancellation. Then, in 2005, the Bush administration was out front on a measure that resulted in 100% debt relief for 40 countries, including Ethiopia, Uganda and Bolivia.

The new legislation would include those nations already covered in previous initiatives and would add 27 new countries — among them Nigeria, Kenya and Sri Lanka. Known as the Jubilee Act, the bill is sponsored by Democratic Rep. Maxine Waters of California and by Republican Rep. Spencer Bachus of Alabama.

“The U.S. has the largest controlling share on the IMF and the World Bank boards,” said Debayani Kar, Jubilee’s director of policy and communications. The Bush administration “has taken some steps,” she said, “but we want them to go further.”

The huge debts that saddle developing nations are largely an outgrowth of economic policies of the 1970s and ‘80s, analysts say. Some trace it back to the 1973 oil crisis, when OPEC members deposited vast amounts of their newfound wealth into commercial banks. In turn, the banks rushed to invest their new funds by lending to developing countries. Critics say that part of the debt is therefore due to irresponsible lending by wealthy nations’ financial institutions, which assured local governments that their economies could grow their way out of the debt.

Furthermore, advocates for debt relief say, some of the debts were accrued by dictators who, in many cases, used the financing to oppress their own population. They point to dictator Mobutu Sese Seko in the Democratic Republic of Congo and to the infamous father-son dictatorship of Francois and Jean-Claude Duvalier in Haiti as prominent examples of repressive leaders who racked up what is known in international law as “odious debt.”

Jubilee USA was founded in 1997 as an offshoot of a British coalition, Jubilee 2000, which successfully battled for the first round of international debt relief in advance of the millennium. In the United Kingdom, Christian groups joined forces under the banner of the biblical Jubilee Year, which occurs every 50 years and is much like the Sabbatical year — which Jubilee calls the “Sabbath year” — but takes place on a grander scale. Debt relief quickly emerged as a cause célèbre, with rock stars like U2’s Bono trumpeting the issue.

While Jubilee USA took its cue from a network of Christian social activists in Europe, the American alliance has brought Jewish groups under its umbrella. The Jubilee 2000 effort was supported by the American Jewish Congress, Hadassah and the American Jewish Committee, among other groups. In recent years, AJWS has remained particularly active in its efforts to promote debt relief, and the Religious Action Center of Reform Judaism has also continued to press the issue.

According to AJWS’s Feinspan, after the coming Rosh Hashanah, when the Jewish New Year of 5768 begins, the international relief organization will go more public with its debt relief efforts. AJWS is now working with Jubilee to put together a Jewish version of the “Jubilee Sunday” programs, which were created to address debt relief at church services.

In the Jewish community, Feinspan said, tying the push for international debt relief to the Sabbatical year does more than just pay lip service to the biblical tenet. “In working with synagogues,” he said, “we’ve found that the Sabbath year resonates and gives them a reason to refocus on the issue seven years since Jubilee 2000.”

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