Monday, November 30, 1998
International debts hinder growth of developing nations
DISASTERS: Governments try to repay loans but cut vital services
in process
By Fr. Giles L. Asbury
Natural disasters are an unfortunate part of life. Hurricanes,
earthquakes and floods have plagued humankind from our earliest
history. The Hebrew scripture tells us that Joseph rose to power
and prominence in Egypt because he helped the Egyptians prepare for
and meet the challenge of a drought and the resulting famine.
We cannot prevent natural disasters, but one of the
characteristics of faithful and compassionate governance is to
respond to the need of those who have been the victims of any sort
of natural cataclysm. After the 1994 Northridge earthquake,
agencies of local, state and federal government, as well as private
organizations, helped the citizens of this city recover from the
unprecedented damage that we received. In the end, UCLA received
hundreds of millions to repair the damage caused by this
earthquake.
Hurricane Mitch was a disaster of almost immeasurable
proportions. It has been said that it was the most profound
disaster that has ever occurred in Central America. We are shocked
into silence by reports of more than 10,000 dead and thousands more
still unaccounted for.
But one of the contributing factors in this disaster was the
inability of governments to respond to the medical and relief needs
of the disaster victims. In both Nicaragua and Honduras, medicine,
doctors and health care workers were not available to meet the
demands brought about by wind, rain and flood. The budgets for
national medical care and support had been slashed to meet the
demands for the repayment of these nations’ international
debts.
Honduras and Nicaragua are two of the most highly indebted
nations in the Western Hemisphere. Both are forced to pay almost
one million dollars a day to service their international debts. To
meet these demands, government services have been slashed, medical
care cut to the bone, and improvement of infrastructure such as
roads and bridges greatly reduced. The very institutions that were
most needed by the people in this catastrophe were victims of
another unprecedented disaster called international debt.
The burden of international debt and debt service is one of the
most serious problems affecting developing countries around the
world. These debts have accumulated over the decades and now
threaten to crush any hopes of economic development or future
growth.
The scandal of international debt had its beginnings in the
1970s, when banks and governments lent lavishly, at low interest
rates, and without careful consideration of how the debtor nations
would use the funds or repay the debt. About 20 percent of these
loans went to purchase weapons, other loans supported showcase
development projects that made little impact upon the lives of the
people, frequently the money went to keep oppressive governments in
power. Few of these funds had an appreciable positive impact on the
lives of the citizens of these debtor nations.
In the mid-70s prices on commodities that debtors used to repay
the loans fell and interest rates began to increase. Debtor nations
earned less than ever on their exports and paid increasingly large
percentages of their gross national product to service their loans.
Many nations had to borrow additional funds just to make their
interest payments.
Over the years, nations tried to default on these loans and were
forced to seek the assistance of the International Monetary Fund
(IMF) to create plans to assist in rescheduling the payment of
their obligations.
The IMF created a scheme called Structural Adjustment Programs.
These programs forced debtor countries to spend less on education,
health and social services; devalue national currencies; cut back
on food subsidies; cut wages and employment for workers in
government industries and services; privatize or sell public
industries (often to transnational corporations); and move from
subsistence agriculture of staple foods to large scale farms
growing export products.
All of these measures had a devastating effect on the poor of
the world. Cuts in education and health services meant that
campaigns against illiteracy were curtailed, reduction of health
services meant the reappearance of diseases that were thought to
have ended.
The devaluation of currency meant that each person’s income
bought less, access to government services was decreased, and cuts
in government employment and the privatization of industry meant
fewer available jobs for growing populations. Finally, the shift to
large-scale export agriculture drove many off their farms to the
cities or toward illegal emigration and reduced the food available
to feed families.
Each year, the developing nations pay the West three times more
in debt repayments than they receive in aid. It has been said that
this debt burden is a scandal that, in numerical terms, makes the
international slave trade of earlier centuries look like petty
crime.
In some African nations such as Mozambique, debt obligation is
equal to 50 percent of the national budget (compare this to the
United States’ 14 percent share of the budget). In Mozambique the
annual average income is $80 and the per capita share of the debt
is $223 (almost three years of each person’s total earnings.)
When an individual or a local government cannot pay its debts
they take refuge in bankruptcy. When Orange County was devastated,
because of losses on poor investments, it declared bankruptcy and
slowly recovered its economic stability. There are no provisions
for such measures internationally, and debtor nations will be
burdened with the effects of these unpayable debts for decades into
the future.
The International Jubilee 2000 campaign calls for a case by case
process leading to a one time cancellation of the backlog of
unpayable debts owed by the world’s poorest nations by the year
2000. Many people express reluctance at this ambitious goal. They
say it is overly idealistic and that the relief would be squandered
by corrupt dictators or remote bureaucrats. To prevent this
possibility, creditors will set conditions that must be met before
debt relief will ensue.
At the All Africa Conference of Churches, Archbishop Desmond
Tutu called upon debtor nations to meet four conditions in order to
receive debt relief: democratization, respect for human rights,
military reduction, and a commitment to use the money realized from
relief for the needs of ordinary citizens.
Achievement of this goal would make an appreciable difference in
the lives of hundreds of millions of the world’s poorest citizens.
It would permit us to begin a new millennium on a more equal
footing and give the majority of the world’s inhabitants a chance
to join in the celebration of a new century and a new
millennium.
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