Global Debt Crisis: A Call for Jubilee

I. Introduction

Since the inception of the global Jubilee Campaign in 2000, we can celebrate important strides. The debt of 36 nations to the International Monetary Fund and the World Bank has been wiped out, with the proceeds going to fight poverty in these nations. Despite this important step, the global debt crisis continues to cripple poor countries. Countries in Africa, Asia, the Pacific, Latin America, and the Caribbean owe over $6 trillion, with debt in the poorest countries that received debt relief growing rapidly again. The global financial crisis of 2008-09 and the ensuing policy responses had and continue to have negative spillovers for the debt of developing countries. For many countries left behind by world leaders, the burden of repaying the debt continues to prevent them from providing adequate health care, education, and food for their people. This debt burden—often incurred illegitimately by dictators—inhibits the social and economic change that is needed to lift people out of poverty. Throughout the world there is a call for Jubilee, a call for debt cancellation in a Sabbath Year.

II. Biblical Foundation

Scriptures mandate periodically overcoming structural injustice and poverty and for restoring right relationships by forgiving debt and reforming land holding. In the earliest Sabbath traditions, consumption and exploitation of the land were limited by the Sabbath and the Sabbath year. People and animals were to rest every seventh day (Exodus 23:10-12). In the Sabbath year, there was to be release from debts and slavery and during the jubilee year, every fiftieth year, a restoration of all family lands (Leviticus 25). Fulfilling these commandments proclaims “the year of the Lord’s favor” (Isaiah 61:1-2), and anticipates “a new heaven and a new earth” (Isaiah 65:17-25).

Jesus emphasized this jubilee vision of proclaiming good news to the poor, release of the captives, sight to the blind, and liberation of the oppressed (Luke 4:16-19). He taught his disciples to pray for the forgiveness of debts (as we forgive our debtors) (Matthew 6:12 NRSV). Pentecost results in the voluntary sharing of possessions, so that “there were no needy persons among them” (Acts 4:34; Deuteronomy 15:4).

The Sabbath tradition of the jubilee vision is as relevant today as it was thousands of years ago. Debt bondage by the poorest countries to rich nations and financial institutions is today’s new slavery. The accelerating concentration of wealth for a few in the richest countries and the devastating decline in living standards in the poorest countries call for correction along the lines of the ancient Sabbath and Jubilee cycles. The social, political, and ecological costs of the debt crisis are intolerable and must be challenged and stopped. Only when we have implemented the Sabbath-Jubilee mandate can we “turn to God” and “rejoice in hope.”

III. Causes of the Debt Crisis

The causes of the debt crisis are complex. Colonialism tied the developing world’s economies to the export of agricultural, mineral, and other raw materials while creating a dependence on manufactured imported goods with higher and more stable prices than raw materials. When prices of raw materials are down, countries whose economies depend heavily on them for exports build debts to pay for basic imports. When they are up—as it has been the case recently—their apparently improved prospects lead them to contract large borrowing that cannot be paid back by relying on commodity exports alone and expose them to more debt when commodity prices swing back down again.

Another cause of the debt is the lack of transparency, accountability, and democratic processes in lending and borrowing practices. A growing number of governments is undertaking official audits to assess the legitimacy of debts. Odious debts can also result. When debts result from loans contracted without the knowledge or consent of the population, government officials used the money for personal purposes or to oppress their people, and these are facts that creditors knew or should have known, the resulting debts may be considered odious and creditors cannot legitimately expect their repayment. Examples of odious debt are money from loans stolen by the ruling elite of the then-Indonesian dictator Suharto; debts contracted by the apartheid regime of South Africa; and debts accrued during the dictatorial rule of Mobbutu Sese Seko in the Democratic Republic of Congo, Ferdinand Marcos in the Philippines, and the military junta in Argentina.

IV. Consequences of the Global Crisis—Everyone Loses

The World Bank and International Monetary Fund (IMF), the two main international financial institutions, lend money and reschedule the debt of poor countries. These loans to highly indebted poor countries come with conditions previously known as Structural Adjustment Programs (SAPs), however, and today most commonly referred as austerity. SAPs consisted of measures designed to help a country repay its debts by earning more hard currency, i.e., increasing exports and decreasing imports, and cutting budget deficits. While a few countries appear to have been helped by SAPs, poverty and inequality have increased in most countries due to the externally imposed programs. This is because, in order to obtain more foreign currency and cut budget deficits, governments implementing such policies usually must:

• reduce government spending, resulting in cuts in health care, education, and social services, forcing many people to go without;
• reduce inflation by limiting the money supply, oftentimes with contractionary effects on employment, credit and growth
• reduce or eliminate transportation and food subsidies — because of this, prices of essentials soar out of the financial reach of many citizens;
• reduce jobs and wages for workers in government industries and services;
• encourage privatization of public industries, which benefits the country’s business elite and foreign investors;
• broaden the tax base often by introducing regressive tax reforms, such as sales taxes or taxes on the poorest informal sector; and
• shift agricultural and industrial production from food staples and basic goods for domestic use to commodities for export, which results in a transfer of land holdings from small subsistence farmers to large-scale agribusiness, leaving many farmers with no land to grow their own food and few are employed on these new cash-crop farms.

Children and women bear the full costs of debt repayment. In addition, by concentrating on exports in order to repay their debts, poor countries strip forests and overexploit land and non-renewable resources, further aggravating serious environmental problems. Reports on the impact of debt repayment show that many indebted governments spend two to four times as much money “servicing,” that is, making timely interest and principal payments, their international debt as they spend on health care, such as basic medicines and clean water, and education combined.

These IMF and World Bank policies, by taking away indebted country’s sovereignty, undermine accountability by debtor governments, which in turn erodes local democratic institutions.

Today, a growing part of the debt is owed to private, commercial lenders, which adds to the debt burden and its impoverishing impacts on people. Crises in countries like Argentina, several Caribbean and European nations, notably Greece, show that the world lacks adequate tools to properly restructure these types of debts. The consequences of private-led debt crises are no different from the crises that were driven by credits provided by public international financial institutions.

The debt burden carried by impoverished nations hurts everyone, including citizens of rich nations such as the United States. The environmental damage magnified by indebtedness, such as destruction of forests, has global repercussions. Growing poverty worsened by the debt is linked to the spread of disease. Indebted countries are forced to use scarce dollars for debt payments instead of importing goods and services. This directly affects jobs and incomes in the rich countries. Indebtedness creates the climate that fosters the production and trafficking of illicit drugs. Debt also causes an increase of economic migration. It should trouble the conscience of citizens of rich nations that people living in misery have to spend their money for debt servicing that they need for their own survival.

V. Principles to Guide Debt-Crisis Solutions

As Christians, our love of God and neighbor must be reflected by our actions within the global family. Thus, we affirm the fol- lowing policies and principles as necessary to ensure a just resolution to the debt crisis:

We need to examine patterns of greed that may cause us as individuals and nations to become debtors and lenders. Debt cancellation and relief should be fashioned in a way that benefits the poor and helps move debtor nations to sustainable human development.

The poor should not bear the burden of repayment and structural adjustment. Living standards of those least responsible and most vulnerable should not be sacrificed in order to meet external obligations. As put by the Guiding Principles on Foreign Debt and Human Rights, adopted by the Human Rights Council in 2012, “Debtor States should ensure that their level of debt servicing is not so excessive or disproportionate relative to their financial capacity and other resources as to amount to a diversion of their resources away from the provision of social services to all persons living in their territory and under their jurisdiction, including those pertaining to economic, social and cultural rights” (Principle 48).

Developing countries have the right to choose their own development paths without military or economic interference from out-side. They should not be forced to surrender their right to political or economic self-determination in exchange for relief.

The debt burden should be shared equitably among credit institutions and the debtor governments, corporations, banks, and elites that incurred the debt. Factors adding to and perpetuating the debt problem but beyond the control of debtor countries, such as previous US budget deficits, high interest rates, unfair commodity prices, and trade barriers, should be alleviated.

Long-term solutions should promote a more just international economic system and the restoration of revenues for poor populations through curbing illicit financial flows and corporate tax avoidance, in order to prevent such crises from recurring. New structures and mechanisms, involving participation and dialogue between creditors and debtors, including civil-society groups such as community and faith-based organizations are critically needed.

There is a need for a new just process of arbitration for inter- national debt cancellation, such as the introduction of an international sovereign insolvency law that ensures creditors share in the burden of responsibility for losses and debtors can get sufficient debt relief.

New mechanisms involving civil society must produce ethical, mutually responsible, and transparent solutions that not only satisfy requirements for economic efficiency, but also for the protection of basic human needs and rights as well as protecting of the environment.

Where funds are released through debt cancellation or other relief measures, civil-society organizations must be enabled to take part in determining how monies are reallocated for social priorities.

VI. Recommended Actions for The United Methodist Church

The United Methodist Church, as a covenant community committed to Christian discipleship and advocacy with the poor, must work toward “measures that would reduce the concentration of wealth in the hands of a few” (¶ 163, 2008 Book of Discipline). Thus, the General Conference of The United Methodist Church:

1. celebrates the worldwide movement to cancel the crushing debt of the world’s poorest countries and the participation of the General Board of Church and Society and the General Board of Global Ministries in the campaign;
2. recognizes even with the progress made to cancel the debt of impoverished countries, much more remains to be done: as debts are accumulating faster than they are being cancelled;
3. calls for the United States, governments of other leading industrial nations, private commercial lending institutions, and international financial institutions such as the World Bank and IMF to:
   • a. cancel the debts of the poorest countries to enable them to meet human development goals, beginning with the Sustainable Development Goals;
   • b. audit their lending portfolios, including loans made to middle-income countries, in order to assess the legitimacy of these loans;
   • c. support measures to promote accountability of debtor countries when debts are relieved; these measures must be determined and monitored by local community organizations, including churches, and other communities of faith, and representative organizations of civil society, to ensure that debt cancellation leads to a more just distribution of wealth;
   • d. promote the orderly resolution of debtor-creditor disputes in cases of crises, through mechanisms similar to a bankruptcy process;
   • e. use their powers to ensure that funds illegitimately transferred to secret foreign bank accounts are returned to debtor nations; and
   • f. engage, in consultation with civil society, in a process of global economic reform toward the development of responsible financing standards for a more just distribution of wealth and prevention of new cycles of debt;
   • g. promote progressive, transparent and accountable tax systems backed by fully supportive international-tax cooperation.
4. urges the General Board of Church and Society and the General Board of Global Ministries to:
   • a. work with annual and central conferences to become advocates for the above actions; and
   • b. develop and distribute resources to annual conferences and local congregations.
5. urges United Methodist theological seminaries to include Christian responsibility for economic justice, including the global debt crisis, as a necessary part of education for ministry; and
6. urges the General Board of Church and Society and the General Board of Global Ministries to continue public policy work for major reforms of the International Monetary Fund, the World Bank, the World Trade Organization, and other international financial institutions to promote equitable development through poverty alleviation, protection of the environment, openness, democracy, and human rights.

ADOPTED 1988
REVISED AND READOPTED 2000, 2008, 2016
RESOLUTION #4053, 2008, 2012 BOOK OF RESOLUTIONS
RESOLUTION #207, 2004 BOOK OF RESOLUTIONS
RESOLUTION #198, 2000 BOOK OF RESOLUTIONS

See Social Principles, ¶ 163D, E.

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