The Politics of Debt


The Millennium is first of all a Christian celebration, so it is appropriate that the main churches have mounted a campaign to have it marked by a determined effort to relieve the indebtedness of the world's poorest states. It is inspired by reference to the Book of Leviticus and by an admirable tradition which calls for land to be restored, slaves freed and debts cancelled at the most significant dates in the Christian calendar. A lively international movement will ensure that more and more is heard on this subject before the year is out.

The facts of indebtedness sit alongside those of poverty and plenty in a standing condemnation of world inequalities. It is reckoned by the United Nations Human Development Report that 1.3 billion people, nearly one-fifth of the world's population, are living in absolute poverty on less than one dollar a day, a figure that could increase to 1.7 million by 2015. At the same time the indebted states repay to the richest states many times what they receive from them in development aid.

The complexities at play in the policy debate on indebtedness are partly captured in the cynical description of development assistance or aid as the process whereby poor people in rich countries give money to rich people in poor countries. Indebtedness usually happens when rich institutions in rich countries press rich rulers in poor ones to borrow in order to buy more arms or luxury goods from them, or to develop their economies so as to trade profitably on world markets dominated by the richest states. Globalisation of economic activities and liberalisation of capital flows makes this easier and generally is of advantage to lenders rather than borrowers when things go wrong; they also raise the threshold price of entering the system for those excluded from it. The policy debates about debt revolve around how best to tackle these structural inequalities. There are no easy answers. Even those most sympathetic to radical debt cancellation have to answer such questions as what is meant by unpayable debts; what checks are there in the proposal to stop misappropriation and corruption; and what rewards are there for countries which have behaved responsibly within the established policy parameters set out by the World Bank and the International Monetary Fund? The Group of Seven industrialised countries will be the object of much lobbying at its June conference in Cologne, which is expected to make decisions on the matter, following a German initiative.

The Government has agreed to debt relief of £31.5 million over 12 years, £17 million of which is to be disbursed this year, under the Bretton Woods Agreements (Amendment) Bill now going through the Oireachtas. The measure is contested by the Labour Party and non-governmental organisations who say it commits this State to severe and unacceptable cutbacks in social programmes under the IMF's Enhanced Structural Adjustment Facility.