Posts Tagged ‘Uk debt’
Banking on Trust
Posted on: June 12, 2011
This article written by our Chairman John Nightingale has recently appeared in the June Bulletin of the Ecumenical Council for Corporate Responsibility (ECCR; www.eccr.org.uk/bulletin)’
In the 1950s bankers seemed respectable but dull, like clergy or policemen. As a student in the 1960s I opened a current and then a savings account confident that my money would be secure. When I worked for the churches in Nigeria in the 1970s, I presumed that the largely British-based banks would help with much-needed development. Poverty, political independence and corruption were issues, but hardly banking or international debt.
In the 1980s I joined the Christian Ethical Investment Group, concerned above all that my church should not be supporting apartheid in South Africa. Investment areas off-limits included tobacco, alcohol and armaments, but bank shares were usually regarded as respectable.
International debt
I was also dimly becoming aware of the international debt problem of poor countries. In the 1970s loans were made too readily from oil money suddenly available; they became hard to repay when interest rates rose dramatically during the credit squeeze of the 1980s. Banks had been heavily involved in the lending, but by the 1990s most of their debts to poor countries had been taken over by national governments or international agencies such as the International Monetary Fund and the World Bank.
Debts were rescheduled in one-sided agreements which often forced poor countries to privatise their public utilities or cut social and health programmes. It was clear that the poorest would never be able to repay their creditors, but billions of dollars were being spent each year in a vain attempt to do so.
Hence a campaign began for the cancellation of all poor countries’ debts at the second millennium, based on Jesus’ own promulgation of the year of Jubilee in his sermon at Nazareth as described in the fourth chapter of St Luke’s Gospel. With many others I took part in ‘human chains’ in Birmingham (1998) and Cologne (1999). But I would have been hard put to it to understand how the high street banks have been involved – until now.
Deregulation
The present financial crisis has led to the heart-searching ECCR report The Banks and Society: Rebuilding Trust.1 It has become clear that the deregulation of the 1980s has resulted in virtually unrestricted credit. UK banks no longer have to maintain a safe proportion of liquid assets (cash and central bank deposits) to loans; this was around 20% in 1968 but, according to the Wikipedia entry on ‘Reserve Requirement’, had declined to just over 3% by 1998.
Such a vast expansion of credit or ‘leverage’ was almost bound to lead to unwise loans and asset bubbles. However, few people, whether bankers, politicians or members of the public, complained at the time.
For the banks to have a monopoly in the creation of credit, as a public service, is immensely profitable; they gain interest on it. At the very least they ought to retain some public obligations – such as providing a nationwide banking network even in areas which are not particularly profitable. Some would go further and argue that the state should take over credit creation. But, in any case, the extent of leverage in the last decade has been irresponsible.
Tax havens and dodgy deals
The process has been aided by another aspect of British banking – its connection to an international system of tax havens which, according to Nicholas Shaxson on page 26 of his new book Treasure Islands, account for a quarter of global wealth.2 Tax havens like the Cayman Islands are attractive to investors both for their low taxes and for the secrecy they ensure through ‘blind trusts’, through which named solicitors buy shares within the City of London on behalf of their clients; because the relationship between lawyers and clients is confidential, the clients remain unnamed.
Many banks are involved. Shaxson says Barclays had 315 such subsidiaries two years ago. Many multinationals are able to manage their activities, for example by lending between subsidiaries, so that they pay where the rates are lowest rather than where their commercial activities actually take place. To change this practice is the purpose of the Tax Justice Campaign.3
Finally, banks have been financially involved in the activities of the UK’s Export Credit Guarantee Department (ECGD), or ‘Department for Dodgy Deals’ as described by the Jubilee Debt Campaign; further details can be found on the JDC website.4 The ECGD was originally set up to help small British companies operate in poor countries by underwriting their financial activities. However, in recent years it has been largely involved in export of arms and fossil-fuel technology, often with little regard for human rights, the environment or the risks of corruption.
Effect on the poorest
The classical spaces of Birmingham’s old banks have been turned into pubs and restaurants. Their replacements have the appearance of impersonal units primarily designed for the housing of terminals. Banking has become so specialised that bankers have little sense of the people involved in their borrowing and lending.
It is as if police operations were conducted by computers or drones without thought of international consequences. By contrast, policing today puts much more stress on the officer on the beat and shows much more awareness of the global context. Maybe the banks can follow that lead. I find myself applying to them, as to all of us, Gandhi’s test: Think what effect what you are doing will have on the poorest person on earth.
Canon John Nightingale (johnnightingale@btinternet.com) is a member of ECCR’s West Midlands Group and Chair of Jubilee Debt Campaign Birmingham.
Notes
1. http://www.eccr.org.uk/banksandsociety
2. Nicholas Shaxson, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens, Bodley Head, 2011.
Over the years we have often asked for students and visitors from “the south “ and in particular those from indebted countries to come to our meeting and talk about their own country.
At our last meeting on May 18th Moses who is from Fiji came and listened to some very passionate exchanges by local campaigners.
Here he shares his view from the back row of our meeting.
“Its really promising that support exists in both Houses of Parliament on the need to attack toxic debt. Thanks to work already done by London staff and local JDC members.
What bugs me however is the way ECGD works. I don’t know what the bill’s intention but if it does not ensure the change that ECGD needs to stop the creation of unnecessary debt, we may miss desired outcome of our campaign.
Some projects that ECGD underwrite are basically hazardous to the environment and are damaging s to human rights So UK’s rhetoric on the environment and rights of people especially the poor is rather shallow and does not really measure to what the country does in practice.
Campaigners may widely understand and agree that the past practice of allowing UK business/multi-nationals to pursue projects in developing countries with extensive ECGD cover is dangerous. Yes it is when not reviewed and effectively scrutinised.
Transparency and accountability of ECGD decision-making should be demanded if a sustainable impact on UK’s toxic debt dilemma is achieved.
Is the ECGD obliged to consider ethical issues of humans and the environment when underwriting projects?
Does it have any influence over the kind of projects that UK companies sign before they are under-taken?
Who scrutinizes this and is it effectively monitored?
I may be ignorant here but I sense that overhauling the system that creates toxic debt in the first place is as important as writing them off. Always best to attack the root cause and support in the House of Lords and House of Commons must be exploited for this. Simply, its time to bring the ECGD and the Business Secretary under the ethical lens”
Moses
Hilary Oliver, Fair Trader, Ombersley Rd Methodist Church, Worcester gives apersonal impression of the meeting in Worcester
A colourful, lively and good-humoured meeting took place at St Andrew’s Methodist Church, Worcester, on September 15th, when Michael Foster 
(Minister for International Development and MP for Worcester) and Nick Dearden, (Director of the Jubilee Debt Campaign) 
gave key speeches on Forgiving Debts and Towards Responsibility in the Market Place.
Jubilee Debt Campaign supporters from Birmingham and Worcester were joined by local leaders and representatives from Christian Aid, Trade Justice and many denominations of other Worcester churches. Paul Jackson, (newly appointed to a Chair in Birmingham University’s International Dept,) was also present, as a member of Ombersley Rd Methodist, Worcester, as was another member, Dot Johnson, whose tireless and inspirational campaigning work has recently led to a Christian Aid award. All combined to make a united, committed and very informed audience.
The meeting was ably chaired by the Revd John Johansen-Berg (International Director of Community for Reconciliation who interspersed stories, examples and particular situations, at relevant times, from his own years of experience.
Nick Dearden mesmerised his listeners with words that freely flowed both with passion and with detailed knowledge. While citing the predicaments of so many developing countries, he acknowledged gratefully his belief that our Government IS convinced of the necessity of Debt Cancellation of unpayable debts. He assured us of the enormous impact of the Debt Relief Scheme and that debt cancellation money has NOT been used to line the pockets of dictators but to increase, for example, the number of teachers and midwives and improve rural infrastructure.
Last January, the Vulture Fund Campaign began and by July, the Government had already consulted JDC on how these could be stopped. (DfID had put pressure on the Treasury.) Nick now wanted to see expansion to countries other than those who also benefit from debt relief.
The Jubilee Debt Campaign still exists, as it has just been a starting point to “address the iniquities of the global economy to the developing world”.
One hundred billion dollars of debt has been cancelled so far, but a further 400 hundred billion is still needed to allow developing countries to achieve the Millennium Development goals for their people. So many are still spending more on repaying debts than on their education budgets and so on.
(A wry note was added here that not so long ago, this would have seemed a colossal sum of money, but is now viewed somewhat differently since the credit crunch and staggering amounts seen re the banking market. . . !!!)
The idea is that debtors and creditors should come together with neutral arbitrators to allow the debtors a voice to find a just, fair method and amount of repayment.
(Again, this last year of debts suddenly faced by ourselves, has clearly shown it’s not the debtors who have necessarily been the irresponsible ones, but those giving the loans in the first place!)
Loans will still continue to be a necessity of course, but with radical restructuring to ensure not ending up back in the first place. Nick cited Norway (with its shipping business) as an example to follow; it has started the ball rolling with 100 million dollars of debt cancellation. Sustainable development must be the new way to go, he concluded.
Mike Foster picked up on this and agreed that the aim must be fair and sustainable development in the midst of global recession and climate change. He outlined the Government’s and Department’s policies, targets and recent practices. At Copenhagen, they will call for a global fund of 100 billion dollars per year to help developing countries through.
But how best to do this? And how best to empower those on the ground to force a more enlightened and transparent government where needed? Questions from the audience prompted further discussion and comments from both speakers.
Some of the points raised included:
- What about aid delivered via general budget support to corrupt systems? What happens when it is via the Food Programme instead?
– Sector-based budget support can direct more specific funding but the problem is, it’s the donors then holding Governments to account, rather than their own people. Except that, of course, the provision of schools, clinics etc may enlighten people and thus lead to more control over the economic and financial workings of their country.)
- Can we have some good news to convince the man on the street and encourage all us “little me”s in the battle to win hearts and minds?
– Haiti’s debt relief at last; Ecuador and Bolivia’s participatory budgeting;
– The Bank of the South as an alternative to the World Bank
– Public attitude to Fair Trade has changed; where once seen as a charity it is now viewed as smart business sense (about 70% of households now make a conscious decision to buy Fair Trade and the F/T label has reached £1 billion of certified income.
– All the “little me”s banded together DO make a difference; especially at events like G8 Birmingham human chain and Gleneagles Summit.
– The postcard campaigns DO work but individual, personal letters are far more effective. It is much better, for example, to ask your MP to ask the relevant Minister about your concerns, rather than simply demand an Early Day Motion on . . . (and beware of circular e-mails, especially with “fill in your name here” un-deleted!!)
And so, finally, what now?
Well, we will be watching with anxious interest the outcomes at Copenhagen, the progress of the Government’s stated policies and yes, Mr Foster, we will still be flying the flag with our rainbow scarves (despite another of the MP’s tips, that these would pre-alert any otherwise unsuspecting politician as to the issue with which they’re about to be confronted!!)
Go for it Gordon
Posted on: November 13, 2008
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It’s a bad day for some again, we see people losing jobs, homes, and their faith in the money system. Fuel and food prices are exploding everywhere but the poorest are suffering most
None more so than in developing countries have been facing their own debt crisis for more than thirty years, because of the same problems that have created poverty here – enormous debt burdens, which have led to loss of jobs , and will soon lead to our government cuts in welfare spending and public services. In the midst of huge riches we are becoming all to aware of poverty on our door step.
Now more than ever it is important that we stand in solidarity with the world’s poorest peoples, I just hope Gordon Brown will remember his many promises in the past to cancel the debts of the worlds poorest countries. When he attends the important international meeting this coming week.
Debt Campaigners protested outside the mansion House Dinner this week will bells and clocks stressing he should respond to the “Wake Call” for those in around the globe not just wealthy bankers.
You can sign the petition calling on Gordon Brown to call time on greed at http://www.jubileedebtcampaign.org.uk/greed
Jubilee Debt Campaign Birmingham 