Can "The Force" Break the Chains of Debt?
Ewan McGregor, who plays Obi-Wan Kenobi in "The Phantom Menace" threw his support behind the tens of thousands of protesters who formed a human chain around the banks and bridges of the Thames river in London on Sunday. They had gathered to dramatize their call for canceling the debt of the world's poorest countries.But the rulers of the real life Empire -- in this case the G-7 nations of the US, Britain, France, Japan, Germany, Italy, and Canada -- are harder to dislodge than the most ruthless and calculating movie villains. At their Saturday meeting in Germany, the G-7 leaders once again served up crumbs for the world's poor.McGregor put it bluntly. "It's just insane -- there are kids starving to death and their countries aren't able to support them because they're too busy paying us back."He wasn't exaggerating. In the world's poorest and most heavily indebted countries, some four million children under the age of five will die this year from hunger and preventable diseases. Most of them could be saved with the money that their governments now pay in debt service to institutions like the International Monetary Fund (IMF) and the World Bank, as well as the governments and private banks of the richer countries.On Saturday the G-7 leaders agreed to expand their Heavily Indebted Poor Countries (HIPC) initiative, which was launched by the IMF and the World Bank in 1996. The initiative included 41 countries, but so far only two (Uganda and Bolivia) have actually received any debt relief.To understand how HIPC presently works, imagine that you are a low-wage worker in the United States with a huge credit card debt -- more than your annual income. You are barely paying your rent and putting food on the table, and whatever you have left over is going to debt service. But these payments are not even enough to stop your debt from getting bigger, as interest accumulates.Your credit card company steps in and offers to knock off 20 percent of your debt. Are you any better off? Not necessarily, if they are only cutting off part of the debt that you can't pay anyway. Your monthly payments stay the same, and your debt continues to grow.The HIPC initiative has offered just that scenario for the world's poorest countries, by proposing to cancel a small part of their unpayable debt. While the exact details of the G-7's agreement on Saturday are not on paper yet, they are talking about adding about $27 billion (net present value) in debt relief. This is still well within the completely unpayable portion of the poor countries' debt burden.The total debt of the HIPC countries is about $230 billion, which seems like a lot except that everyone knows that most of it cannot be paid. So we are really talking about little more than $100 billion that needs to be cancelled, along with the unpayable part.When their big banker friends were in trouble in the Asian financial crisis, it took only a few months for the G-7 leaders to come up with this kind of money.`This suggests that there is something more sinister at work than the IMF's fear of "moral hazard" -- economists' jargon for the idea that debt cancellation would create the impression that future loans need not be repaid.That something is power. Through their control over the debt, the creditor countries and their international financial institutions are able to determine the economic and often the political destiny of more than a billion people. That is why HIPC's crumbs are only dispensed after the IMF has certified that the subject country has gone through six years of "structural adjustment." This includes harsh, often enormously destructive conditions like the ones that have helped drag down the economies of Indonesia, Russia, and Brazil over the last two years."Power concedes nothing without a demand," wrote the famed abolitionist Frederick Douglass a century and a half ago. The demand that is growing and has forced this week's symbolic concessions from the G-7 is for the cancellation of the poor countries' debt. Like the movement that helped bring down apartheid in South Africa, it is driven by a righteous moral indignation at the complicity of the world's most powerful governments.The human chain in London on Sunday was organized by Jubilee 2000, an international coalition for debt cancellation that takes its name from the biblical concept of the Jubilee year, in which debts are cancelled every 50 years. What better time than the millennium for the rich countries of the world to realize that their first obligation to the world's poor is "not to give more, but to take less"?Mark Weisbrot is Research Director of the Preamble Center and a research associate of the Economic Policy Institute, in Washington, D.C.