Jubilee Justice

In this series on "Jubilee Justice" written by Sr. Ann Oestreich, we invite you to learn more about the crushing burden of debt on the world's poorest countries. We also encourage you, your family, friends, and students to join with others who are trying to do something about the debt crisis. A set of helpful resources is suggested. This list will remain there throughout the series. If you know of other appropriate resources on this topic, please tell us so that we can add them to the list.

Listen to the words of Pope John Paul II speaking about the Jubilee Year 2000:

Christians will have to raise their voices on behalf of the poor of all the world. The Jubilee is an appropriate time to give thought to reducing substantially, or cancelling, the debt which seriously threatens many nations.

I. What is International Debt?
From time to time, countries find it necessary to borrow money for a variety of reasons. These might include the need to finance the building or rebuilding of infrastructure (roads, bridges, etc.), to fund health services and education, to provide public services, to purchase weapons, or even to refinance former loans that are coming due. When a country needs to borrow money, it can approach private commercial banks, international financial institutions (such as the World Bank and the International Monetary Fund), or other governments. Loans to individual countries are administered in a way common to all of us: countries must agree to pay back the principal and to pay interest on the loans they take out.

Although the process that a country goes through to obtain a loan may look familiar to us up to this point, it is very different from what an individual person goes through to take out a loan. If a person borrows money in the form of a loan, he or she receives the money directly and can use it for the purposes that will be beneficial to them. However, if a country borrows money, the citizens of that country are often not aware of the purpose of the loan or the terms and conditions attached to it.

In some cases, governments have borrowed money for projects that have benefited their citizens. At other times, loans have been made to governments that have not been administered in a just manner and have been used to enrich a small, elite group of people.

In many cases, especially regarding loans made to the world's poorest countries, financial conditions beyond the government's control made repayment of the loan impossible. Countries do not have the option of declaring bankruptcy, as individuals do, so countries must continue to struggle to pay off their debts. At the international level, it is the creditors who decide whether and under what conditions a country is required to pay its debt.

II. How Did the Debt Crisis Come About?
The beginning of the international debt crisis is usually said to have begun in 1982 when Mexico announced that it could not keep up the payments on its foreign debt. This sent shock waves through the international financial community because they feared other countries would do the same.

The immediate cause of the crisis occurred in 1973 when the members of the Organization of Petroleum Exporting Countries (OPEC) quadrupled the price of oil and invested the money in commercial banks. The banks, seeking investments for their new funds, made low interest loans to developing countries, often without appropriately evaluating the loan requests or monitoring how the loans would be used. Due to the irresponsible practices of creditors as well as debtor governments, much of the money borrowed was spent on programs that did not benefit the poor. However, with large amounts of money available for low interest loans, this was a good time for developing countries to borrow.

In 1979, OPEC raised oil prices a second time. This price hike was responsible for high levels of inflation in the United States and other industrialized countries. It also precipitated a sharp rise in interest rates worldwide. When Ronald Reagan assumed the presidency of the U.S. in 1981, he began a huge military buildup that necessitated high levels of government spending. The U.S. government found itself in the position of needing to borrow large amounts of money to pay for the military buildup and other government programs. Thus, from 1979 on, the market shifted from being one that favored the borrower to one that favored the creditor.

By 1982 the pressure of high levels of interest became too much for the developing countries to manage and Mexico became the first country to declare a moratorium on interest payments. The fear that other countries would follow suit marked a dramatic change in the policies of international lending institutions toward the developing nations. These policy changes, called Structural Adjustment Programs (SAPs), have been responsible for deepening debt and crushing poverty in the world's most indebted poor countries.

(To be continued)

Sr. Ann Oestreich, IHM, serves as Congregational Justice Coordinator for the Holy Cross Sisters of Notre Dame, Indiana.

RESOURCES FOR JUBILEE 2000 AND DEBT RELIEF:

Banking on Life and Debt, a 30 minute video
Maryknoll World Productions
P.O. Box 308
Maryknoll, NY 10545-0308
1-800-227-8523

Proclaim Jubilee, a 9-minute video
Bread for the World
1100 Wayne Avenue Ð Suite 1000
Silver Spring, MD 20910

Hard Cash, a 17-minute video
Jubilee 2000/USA
P.O. Box 29550
Washington, DC 20017
(202) 783-3566

Pillaged Lives: Third World Debt and Global Institutions, an excellent educational tool on CD for use on computer
Social Justice Committee of Montreal
1957 deMaisonneuve O. Suite 320
Montreal, 2C H3HIJ9
(519) 933-6797

Education Packet on Debt Relief
The Jubilee 2000/USA Campaign
P.O. Box 29550
Washington, DC 20017
(202) 783-3566

Good Materials for a Focus on Debt Relief
Catholic Campaign on the Debt
Department of Social Development and World Peace
3211 Fourth Street NE
Washington, DC 20017-1194
(202) 541-3381

For more information, you can visit the web site Jubilee 2000 at http://www.j2000usa.org