Jubilee Debt Campaign Birmingham

Posts Tagged ‘World Bank

 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.

3.      www.taxjustice.net

4.      www.jubileedebtcampaign.org.uk

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One of the wonderful things about being part of a global movement are the messages that land on the door mat or come into the inbox of my computer.

This one has to be my favourite for the year

Dear Supporter,

My home country, Zambia, received debt cancellation in 2005.  This meant that my fellow citizens were able to access health care after years of paying expensive fees enforced by the IMF and World Bank.  Debt relief also meant 4,500 more teachers in Zambia – giving the country 4,500 more reasons to be hopeful for our children’s future.  As a debt policy officer with Jubilee Zambia, I have monitored where those debt relief dollars have gone and continued to press my government to engage in responsible borrowing.

Thanks to the work of the Jubilee movement, 31 other countries have also received this life-giving debt relief.
Priva Hang’andu
Jubilee Zambia

This message from the other side of the world is reassuring us that  we are making a difference.

My question is  how such inspiring words can stir you into action in 2011?

Would you for example :-

1.  Be a “thought donor”. Give us your thoughts and ideas for the JDC multifaith project.

2.  Be  a “time donor”. Come to our events or help in other ways by giving your time.

3.  Be  an” energy donor”. Give us some of your get up and go or even your money, in 2011

Season’s Greeting.

Audrey Miller


This blog is by Nick Dearden, of Jubilee Debt Campaign

Recent events in Iceland may have completed that countries transformation from free market, credit-fuelled billionaire playground to champion underdog. The Icelandic Parliament’s offer to the UK and Dutch governments earlier this week that it will pay back its debts but only at a level it can afford, could provide an invaluable model for how indebted nations can start putting the needs of their people ahead of the desires of the global financial markets.

Iceland has become synonymous with the financial crisis after nearly a decade of drinking neo-liberal kool aid. Around 2000 Iceland went on a deregulation and privatisation binge, totally reforming its financial sector, dropping bank reserve requirements, raising interest rates sharply, sucking in foreign capital and encouraging massive borrowing. It lived the dream being promoted by most European capitals at the time. So many millionaires flew into tiny Rejavik that a local politician demanded limitations on planes coming into the country.

Such a highly indebted financial system was, unsurprisingly, an early victim of the credit crunch, even though Iceland was not invested in sub-prime loans. Their situation was certainly not helped by Gordon Brown – proponent of the very policies Iceland had slavishly followed – who designated the country a terrorist state last October in order to seize Iceland’s banking assets in the UK. His attempt to derive popularity amongst investors at home neatly side-stepped the failure of UK authorities to adequately regulate UK investment.

The enormous anger that followed in Iceland toppled the government, and since then has radically reduced support in Iceland for the country’s membership of the EU. Most recently ordinary citizens have pushed members of the ruling coalition and opposition parties into opposing the enormous repayments being demanded by the British and Dutch governments.

That is the background to the decision earlier in the week of the Icelandic Parliament – the Althing –that it would repay its debts, but only at a rate it could afford. That is defined as spending no more than 4% growth in GDP to repay UK debts (and 2% for Dutch debts).

This decision, if implemented, is historical. Michael Hudson, Professor of Economics at the University of Missouri, has said that it is the first agreement “since the 1920s to subordinate foreign debt to the country’s ability to pay”. Hudson is referring to the 1920s debate that raged over capping Germany’s First World War reparations repayments. Keynes argued at the time that insisting on debt repayments beyond a level which also allowed the country to grow would inevitably mean forcing Germany to sell its assets or alternatively to borrow more money. He predicted the subsequent  anger and discontent caused in Germany, which led straight into World War II.

But the situation which Iceland is trying to deal with is one which has faced scores of developing countries for decades – countries with less responsibility for the current mess than Iceland. Many countries still have to pay unreasonable levels of debt by selling off assets, skewing their economy towards unsustainable export trade and foregoing their right to development.

Iceland is correct to assert that states in debt have rights that trump the rights of creditors to bleed their economies dry. When companies and municipalities become insolvent, they are protected by work-out laws – but no such work-out mechanism exists when it comes to countries.

If limiting Iceland’s debt repayments is right, the same must apply, to an even greater extent, to poorer countries. Lebanon spends over 50% of government expenditure in servicing debts, Uruguay 32% and the Philippines 31%. These states top a much longer list of developing countries who understand from experience the injustice of indebtedness better than any European government.

Iceland has led the way in standing up for the rights of debtors. It may be followed by a range of indebted Eastern European countries who are also currently having their economic policies dictated to them by the International Monetary Fund.

Jubilee Debt Campaign is a part of the Put People First platform.

For more background details read Michael Hudson’s article here.

This blog has been written by Christian activist  John Johansen – Berg who draws on his experience in campaigning against the evil of apartheid and how  this can link with  the Jubilee Debt Campaign of today. John  also tells of his own  action in India  and call for fundamental reform of financial institutions.

The experience of South Africa and the international movement in breaking the chains of oppression is a useful reminder that bringing about change may take decades and require huge efforts by many people, but the gain in a just and fair economic system is worth the effort.

The Jubilee Campaign was another step in the right direction in calling for the cancellation of the debts of the poorest nations. It is based on the biblical concept of Jubilee, forgiveness of debts, and brought in the note of celebration by circling the representatives of the international market in its meeting in Birmingham. It achieved great success in a short period of time. The weakness of this strategy is in the danger that the process begins again; new loans can be made with rising interest rates; the flow of wealth from poorer to richer countries has a nasty habit of reappearing.

Fundamental change is needed in the system. It is as basic as loving your neighbour, even your enemies, as Jesus taught. India is an example of loans made with strings attached. In the case of Indian agriculture it was a demand that farmers changed from the self-sustaining agriculture, which had proved successful for generations, to the production of cash crops. Companies in richer nations benefited by sales of patented seeds and fertiliser; the small farmer for whom the change was inappropriate ended in debt and this resulted in the suicide of tens of thousands of farmers. The response to this has to be the reform of the World Bank, the International Monetary Fund and the World Trade Organization. It has yet to be achieved though Gordon Brown says that he is committed to such reform. It needs an international alliance and a level of commitment akin to that which liberated the people of Southern Africa. My response was to initiate VIA (Village India Aid) which helps practically with support of projects which benefit the poorest sections of society and also makes representations for fundamental changes in the international economic system. Not months, but years, perhaps even decades of combined effort are needed to “Redeem the Markets” but the prize is well worth the effort. I suggest that this is the background for our shared concerns today and that it calls each one of us to urgent action.

John Johansen-Berg.  May 2009.

World Bank President Robert Zoellick warned Wednesday that Haiti is at a “tipping point” after a spate of destructive tropical storms, but offered no immediate debt relief for the chronically impoverished country.

Zoellick, ending a three-day visit, pledged long-term help to keep the desperately poor Caribbean nation from falling deeper into crisis but said the bank will not forgive its share of Haiti‘s US$1.7 billion in foreign debt for at least seven months.

Critics say forcing Haiti to keep making debt payments of more than US$1 million a week will hurt recovery efforts and further deplete meager resources in the Western Hemisphere‘s poorest country.

“It’s a humanitarian disaster down there. It’s kind of ridiculous that Haiti has to go through bureaucratic hoops,” said Dan Beeton of the Washington-based Center for Economic and Policy Research. “There’s no reason these institutions can’t just say, ‘OK, cancel it now.'”

Zoellick said Wednesday that Haiti is on track to have its World Bank debt canceled by mid-2009 once it has met qualifications such as addressing corruption and increasing public investment, but that debt cancellation is up to the bank’s shareholders.

Who is more deserving? We have bailed out the bankers but they will not help the people of Haiti?

Other bloggers writing about Haiti Debt include:

Shirley Pate from hcvanalaysis.


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This is the blog of the local group of the UK campaign calling for cancellation of international Debt.

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