The Bretton Woods sting

Mobutu Sese Seko (now deceased) left in a hurry for his villa on the French Riviera. During the three decades that he ruled as president of Zaire, the deposed military strongman allegedly siphoned over $4 billion from his own people. In his wake, Mobutu left the resource-rich African nation in the throes of poverty, neglect and debt.

The International Misery Fund

The ‘booty’ was largely money loaned to Zaire by multinational financial institutions, like the World Bank and the International Monetary Fund (IMF). Some church analysts believe those same institutions share the blame for the increasing debt of developing countries, including Zaire.

For years these institutions have known that a lot of the money that went to Zaire went into Mobutu’s pockets, says Barbara Kohnen, policy advisor on international economics and human rights at the U.S. bishops’ conference. That was responsible for building up a lot of the debt of Zaire today, but they (institutions) haven't taken any responsibility, she said in an interview.

How serious is the debt in ‘developing’ countries? According to Kohnen and other experts it has reached crisis proportions. The United Nations Development Programme (UNDP) reported this year that one-quarter of the world's people are worse off now than they were 15 years ago.

The gap between the rich and the poor is growing everywhere in the world, says Canadian Jesuit economist, Fr. William Ryan.

Through modern technology, he points out, billions of investment dollars can be transferred anywhere in the world at lightning speed. It’s a big crap game, he said. And for the poor countries, only about one per cent can play.

The Structural Assistance Programmes introduced more than a decade ago were supposed to level the playing field. But Third World debt still managed to leap from $650 billion in 1980 to about $2 Trillion today. As well, indebted countries are paying almost three times as much in interest charges alone than they receive in development assistance.

Changing the rules

Rocketing interest rates in the early 1980s coupled with a drop in the value of exportable goods forced at least two dozen developing countries to declare that they can’t pay even the interest on their debts.

Consider Brazil’s experience. In 1976 it took out loans at 6.25 per cent interest. Five years later the rate had risen to 21.5 per cent, the cost of imported products increased and the price of exported products dropped. Today, thousands of poverty-stricken ‘street children’ and a high infant mortality rate testify to a country struggling to free itself from the straitjacket of debt.

To meet their payments, many Third World governments have been forced to cut back on health and education spending, sell food products abroad while those at home go hungry, or plunder their own country’s resources.

Add to that drastic cuts in development aid by some of the world’s richest countries. Canada’s aid package, for example, is expected to drop from $3.1 billion in 1995, to $2 billion by the end of the century.

Debt, the Grim Reaper

The combination of less development aid, inflation, higher interest rates and low commodity prices have produced devastating results. External debt has killed more Latin Americans than all the wars in Central America, the Latin American Council of Churches reported. And the UN children’s agency, UNICEF, blames 10,000 deaths each week on the debt of developing nations.

As Canadian Catholic theologian, Father Andrew Myre, pointed out only two years ago at the Inter-American Religious Conference in Santo Domingo, the poor have never been so numerous, so deprived and so exploited.

But while the effects of debt are apparent, the solutions aren’t as clear. At least not in a global economy believed by many, including Pope John Paul II, to be fuelled by greed. It is a world where immense wealth and greed coexist with scandalous poverty, he told an audience in Rome.

The simplest solution - and the least popular in the boardrooms of the world's financial empires - is the one proposed by the pope and other religious leaders: the forgiveness of debt by the Jubilee Year 2000. In biblical times, jubilees spelled debt forgiveness, the release of slaves and the return of land to those who most need it to feed their families.

In his 1994 apostolic letter, Tertio Millennio Adveniente, the pope calls on foreign creditors to consider reducing if not cancelling outright, the international debt which seriously threatens the future of many nations.

A backhanded favour

A step in that direction was made in April when Uganda, classified by the World Bank and the IMF as one of the 41 ‘Heavily Indebted Poor Countries’ saw its debt cut by $338 million. However, the amount is less than 20 per cent of the country’s total debt, the deal is fraught with disadvantageous conditions and it won’t take effect until next year. It is helpful, but it is still a long way from where we would like to see the initiatives going, said Kohnen, of the USCC’s Office of International Justice and Peace. But what may be most significant about the HIPC initiative is not that part of Uganda’s debt is being forgiven but that, for the first time, the major lending institutions have recognised that a debt problem exists.

Why is the financial community not taking larger strides in the area of debt forgiveness? After all, the banks have virtually no hope of recovering money owed to them until the most heavily indebted nations can gain a toehold on their economies.

The ‘real reason,’ says Kohnen, is that they have to protect their preferred creditor status. It’s the highest ranking for financial institutions, she added. But to keep it, They need to show that when they make a loan it will be repaid in full.

Joe Gunn, director of the social affairs office of the Canadian bishops’ conference, agrees. The rules of the international community have to be lived by. The problem is, he adds, the institutions really defend the people that the money goes to, more than the people that are struggling to get out from under the debt.

Perpetuating poverty

The lending institutions argue that they’re not responsible for the massive debt of the poorest nations. All they did was make loans to poor governments who knew full well they would have to pay it back.

True. But critics note that the banks also encouraged the poorer countries to borrow massive sums of money in the 1970s and were aware of the risks involved. Added to which, loans were given to shaky military regimes that used aid money to buy arms. Funds were also handed to corrupt politicians like Zaire’s Mobutu and former Philippines president, Ferdinand Marcos.

And because many loans are secured on the country, not on those in power, the people are left to foot the bills when leaders like Mobutu and Marcos flee with the billions destined for development.

This debt was imposed on our people, a Latin American church official said of his own country's debt. They did not participate in the decision and they have not benefited from the loans. They bear no responsibility for incurring the debt, nor for its repayment.

Part of the solution to the problem of Third World debt, however, may lie in changing the public’s perception that it is the wealthy nations that have been subsidising the Third World, instead of the other way around.

So who’s to blame?

After 500 years of colonialism, the plundering of natural resources, the uprooting of over 40 million Africans to be used as slaves and the continuing use of cheap ‘sweatshop’ labour, it could be argued strongly that the Third World’s ‘debt’ has been repaid, not once, not twice, but over and over again.

Add to the above: excessive interest rates ($160 billion paid in interest alone by developing nations in 1992), made-abroad inflation and the transfer of capital from the South to the North by the wealthy elite of the Third World and one may ponder the question: who is it that stands in need of debt forgiveness?