Not Forgiving Debts
This was written for the Church Times February 2005
The debt forgiveness campaign has taken a steady move forward this week with the G8 summit and its commitment in principle to cancel debts of the poorest countries. It is encouraging that Gordon Brown has led the way in addressing the issue amongst finance ministers, and the work to come will test the real strength of the resolutions. The campaign is now a broad one, but its roots were in the biblical principle of debt cancellation, echoed in the Scottish version of the Lord’s prayer: ‘forgive us our debts as we forgive our debtors.” Forgiving the debts of the poor, not least of poorest countries in Africa is a very high priority. The link between debt and poverty has long been clear. Currencies quickly become depressed by repayment burdens, and annual debt repayments can take half the export earnings in some countries. Nevertheless, the cancellation of three hundred billion dollars of debt is a substantial undertaking, and will need to be done with care about how the new resources are used. And debt forgiveness will not close down other issues of trade fairness and openness, or exploitation and global slavery. These all will have to be addressed if African and worldwide poverty is really to be cut in half.
There are some interesting economics which surround this kind of decision. The link with the Marshall Plan after 1945 is often drawn. Then, the United States gave help to the devastated countries of Europe which enabled them to rebuild and recover much more quickly. The trade benefits and export buoyancy also allowed the United States to enjoy a level of growth that would not have otherwise happened. Giving and writing off debt proved of benefit to the giver. This process is not some kind of magic. It grows from the interdependence of our economic activities. At the same time, the costs of debt forgiveness are real, and the decision has to be one of principle. The motive has to be concern for our neighbours and not self-interest.
The Marshall Plan was a long time ago, and this week the United States was in different mood, deciding against participation in the process of cancelling debt. Given the size of the American economy, this is a major set-back. There is also a deep irony embedded in this decision. For the United States is by far the world’s greatest debtor. Their debt is not directly owed to the IMF or other international agencies, but is the accumulated debt resulting from trade deficit. The figure is some $4 trillion and is running at an astounding annual rate of half a trillion dollars. This is big, resulting from the United States’ demand for goods and energy to support an affluent lifestyle. And although the dollar has lost about a sixth of its value recently, this kind of deficit will not easily shrink. As long as investors worldwide are prepared to hold their investments in US dollars the debt can be sustained. If they are not, the dollar will slide further and disinvestment in the United States could be considerable.
Jesus told a salutary story of a great debtor who refused to forgive the debt of small debtor when he himself was not having to pay anything back. The double standard brought condemnation and disaster. It’s a parable which has a frightening relevance. Where the richest nations are the world’s greatest debtors, and the richest of all is not prepared to forgive the debts of the needy and exploited, something seems amiss. And the effects of the decision could reverberate in world affairs for years to come.
Oxford
February 2005
