The Crisis of Third World Debt

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The Crisis of Third World Debt

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Today 52 countries are listed as HIPC (Heavily Indebted Poor Countries) and the number of people in extreme poverty increases daily. Despite some forgiveness, the remaining debt burden still stands around $216 billion. Meanwhile, in those countries, millions of people are starving or sinking towards starvation. Why does the problem of debt remain, even after substantial relief? What are the enormous global challenges involved with forgiveness of debt, and what is the prophetic solution?

The Jubilee 2000 campaign to forgive HIPC debt

In 1990, a petition was started among students at Keele University to present to the UN secretary-general about the debt problem. Two thousand students signed it, and in 1993 a small charity, Jubilee 2000, was launched, drawing for its title the biblical injunction about debt forgiveness. It has amassed 20 million signatures and expects to surpass the 22.5 million mark of the largest petition ever, that of the anti-apartheid campaign. Its deadline is December 2000, and its object is to force agreement among international financial institutions that it is possible to cancel debt. But not all nations are in agreement that forgiveness of debt is the answer.

What is feared is that unresolved Third World debt will further widen the gap between the rich and poor, the "haves" and the "have nots." Some believe that to allow this to happen at a time of immense change through globalization and other fundamental shifts in societal attitudes would be dangerous for everyone. Jubilee 2000 aims to use its 20 million plus supporters as political leverage so a minimally decent life can be had for over one billion people, as they enter the new millennium. It's noble but prophetically doomed to failure. The real way (and revolutionary in man's view) is the biblical jubilee—but administered as God originally intended.

Bill Peters is cofounder of Jubilee 2000 and vice president of the Jubilee 2000 coalition. In an article on the Third World debt crisis, he suggests a radical solution is required. He gives reasons why urgent reforms of the World Bank and International Monetary Fund (IMF) are overdue (Round Table, Issue 354, April 2000, p. 195). Here are what he sees as stumbling blocks to the process.

Major problems

Balance the budget insistence: IMF guidelines often insist debtor countries balance their budgets in order to gain monetary assistance. This invariably leads indebted governments to cut back on easy targets like health, education and sanitation, and sets back immeasurably health and education programs carefully built up over the previous 30 years.

Switch to exports: Repeatedly, the 52 countries have been urged to switch, particularly in agriculture, from production for the domestic market to production for export. Aside from its effect on the domestic cost of living, this inevitably causes a swing in the trade of the economies involved.

Institutional optimism: The International Finance Institutions (IFIs), along with the IMF and World Bank, are too removed from the cultural problems of Africa and predict in rosy terms what they believe aid will accomplish. In 1988, the World Bank predicted that by 1995, sub-Saharan Africa would owe about $29 billion. In fact by 1995, sub-Saharan Africa's debt had risen to $129 billion.

Interest rates keep rising: For 41 HIPC countries, the first two years of debt relief they received was wiped out by rising interest rates on the remaining debt they owed.

Corruption: Although careful note is taken of corruption in IFI planning, large scale dishonesty by prime offenders, the leaders of nations, still goes unchecked. Bill Peters cites Zaire as a case in point. During the Cold War, Zaire was considered crucial for the balance of Western power in Africa. For decades, large amounts of IMF and World Bank (WB) funds were funneled there. Yet a very small percentage of this went into the Zairean economy (ibid., p. 201).

In a buttressing illustration, news reports about North Korea suggested upwards of 2 million people died of starvation, although hard-line communist authorities accepted overseas aid. It was diverted for troops instead.

Lack of independent audits of the IMF and WB: Peters further observed that there is no external audit of the IMF or WB in their dealings with HIPCs. He concludes that two organizations with the seeming power to do so much good or evil for other nations are still in a phase of self-regulation. Powerful contractors win bids and feasibility studies are produced at great expense, only to sit on shelves after the payment of hefty contractors' fees.

Although the debt crisis is mostly blamed on inflation and the West's demand for oil, corruption and major inefficiencies also play a big part. Then, too, there is the enormous vested interest of some 20,000 staff in highly paid jobs. Peters states why he considers a radical reform of the WB and IMF is overdue: "In 18 years of working on the problem of poverty and debt in the Third World, it has become clear to me that the inert mass of establishment figures and supporters of the status quo in world economic affairs forms the main obstacle to settling a major global injustice" (ibid., p. 204).

An example given was about a simple hut for a fish-farming scheme in Bangladesh. A 40-page project specification was generated in language the builders could not understand. Subsequently, no small contractor could compete. The contract went to rich "bully boys," locally called mastaans ("strongmen") who pushed up the costs.

God's jubilee—the real solution

One incentive for Israel's obedience to God's laws was the promise that they would enjoy such abundance that they could lend to other nations. Notice how God explains it: "For the LORD your God will bless you just as He promised you; you shall lend to many nations, but you shall not borrow; you shall reign over many nations, but they shall not reign over you" (Deuteronomy 15:6 Deuteronomy 15:6For the LORD your God blesses you, as he promised you: and you shall lend to many nations, but you shall not borrow; and you shall reign over many nations, but they shall not reign over you.
American King James Version×

And further: "The LORD will open to you His good treasure, the heavens, to give the rain to your land in its season, and to bless all the work of your hand. You shall lend to many nations, but you shall not borrow" (Deuteronomy 28:12 Deuteronomy 28:12The LORD shall open to you his good treasure, the heaven to give the rain to your land in his season, and to bless all the work of your hand: and you shall lend to many nations, and you shall not borrow.
American King James Version×

We can be grateful there are countries today that help other nations. Although sadly, it seems a political motive is too often at the foundation of their generosity.

In God's Kingdom, God's blessings, as well as the application of the biblical seventh year release of debt and the 50th year jubilee, will bring a time of prosperity starting with Israel and spreading to the other nations.

"Then you shall see and become radiant, and your heart shall swell with joy; because the abundance of the sea shall be turned to you, the wealth of the Gentiles shall come to you" (Isaiah 60:5 Isaiah 60:5Then you shall see, and flow together, and your heart shall fear, and be enlarged; because the abundance of the sea shall be converted to you, the forces of the Gentiles shall come to you.
American King James Version×

And again, "But you shall be named the priests of the LORD, they shall call you the servants of our God. You shall eat the riches of the Gentiles, and in their glory you shall boast.

"Instead of your shame you shall have double honor, and instead of confusion they shall rejoice in their portion. Therefore in their land they shall possess double; everlasting joy shall be theirs" (Isaiah 61:6-7 Isaiah 61:6-7 [6] But you shall be named the Priests of the LORD: men shall call you the Ministers of our God: you shall eat the riches of the Gentiles, and in their glory shall you boast yourselves. [7] For your shame you shall have double; and for confusion they shall rejoice in their portion: therefore in their land they shall possess the double: everlasting joy shall be to them.
American King James Version×

A cancellation of debt mechanism is coming. Observing the seventh year and the 50th-year jubilee, as God instructed, will accomplish this revolutionary change.

The current noble attempt by the Jubilee 2000 campaign doesn't have the power to bring the lasting changes that the biblical injunction for a millennial reality will achieve. WNP

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