Ann Pettifor is a familiar and dauntingly effective figure in the latter-day Sin Cities of the world. She directed the Jubilee 2000 campaign from its inception in 1995 — the movement that channeled the worldwide demand for an end to repayment of debt by the world’s poor nations.
Jubilee is a biblical concept, based on the idea that a clean slate should be created every 50 years to prevent usurious debt from accumulating in a few rich hands and to allow poor people a fresh start. So obvious was the need that the campaign collected no less than 24-million signatories to an international petition.
Now, out of the offices of the London-based New Economics Foundation, Pettifor has launched the Jubilee Plus movement for an international bankruptcy framework to institutionalise the handling of international debt. In effect, this would put nations on the same footing as you or I when we get into debt.
For example: when you lend money to someone and they can’t repay you, does your bank clobber the debtor for you? If you make a silly loan to a feckless or corrupt associate, can you call on your government to bail you out? No. You would have to swallow hard, take the loss and vow to think harder about your loan policies.
But if you were a government or large corporation, or a bank or even the World Bank/International Monetary Fund (IMF), the combined clout of the world’s international financial institutions would spend millions ensuring you get your money back — if the debtor is a poor country. They would force it to do whatever it takes to ensure repayment with current interest. “Whatever it takes” means starvation if necessary for the dependants of your debtor. It certainly means they will get little, if any, schooling, health, transport, welfare or other normal components of human rights and economic development.
You would also be able to insist — through that financial coalition — that your debtor implement your idea of good housekeeping from then on. They and their dependants/ electorate would have no right to decide how they run their affairs. Fair enough, you might say: if people get into debt they should take the consequences.
The origins of the debt crisis are sometimes forgotten. When the Organisation of Petroleum Exporting Countries cartel tripled the price of oil in 1973, money was sucked out of the world economy, threatening recession, into the oil-producing countries’ banks. These in turn invested most of it in Western financial institutions. Grossly over-liquid, they in turn looked around for investment opportunities. Poor countries, especially in Africa, were the obvious targets. Loans were offered and eagerly accepted at low interest rates, on the grounds that the resultant investments would easily repay the loans.
The rest is history. Interest rates rose, the investments failed, later corrupt deals were made with subsequent desperate and sometimes corrupt governments, and countries were manacled by vicious terms for endless repayment. Jubilee 2000 succeeded in naming the problem and shaming some governments. But the G7 countries as a whole agreed to “forgive” only $100-billion of the $2-trillion outstanding — and that only when debt was “unpayable”, and that over seven years.
Meanwhile, countries have started to go bankrupt. The definition of “unpayable” has deepened. Argentina, for instance, has been paying despite forcing its people into angry, pitiful penury. But now it has to pay $73,5-billion before April 2003. This is 322% of annual export earnings, and 27% of gross domestic product. “Unpayable” even in the language of the most callous of creditors.
Since 1995 the Jubilee movement has talked about an international bankruptcy framework, until recently to no avail. The IMF, on behalf of itself and other creditors, would not give up its role as debt bailiff. But now, unexpectedly, the IMF has shown signs of accepting reality. It is fed up with bailing out creditors who have taken silly decisions without risk to themselves. Its deputy director, Anne Kreuger, announced in November last year that the IMF is seeking an international financial architecture to resolve debt crises.
The Jubilee Plus framework is based on Chapter 9 of the United States legal code. As in that code, the debtor and creditors would together choose an ad hoc body. It would be charged with assessing the legitimacy of the debts, and seeking a solution that is fair, transparent, and leaves the debtor able to start afresh. It would guarantee participation by all stakeholders, including the citizenry affected.
More radical opinion has it that Drop the Debt is still the only fair way to go, and countries should simply refuse to pay. In the end such unilateral action will happen if proper discipline is not introduced for both lenders and borrowers.