As global economic recovery remains a subject of uncertainty and scrutiny in the wake of the financial crisis, it is high time to remember some actors whose perennial crises are now all the more severe. Despite predictions that the economies of the poorest nations would be insulated from the global recession by their lack of integration, in reality, these economies have been profoundly shaken.
Even as foreign aid levels have declined, there are growing fears that poor countries with unsustainable debts will find themselves under increasing pressure to pay, regardless of the consequences. For countries like the United States, which have the resources to counteract this debt crisis, the time to act is now.
But why should the U.S. do so? Does America not pay billions to these countries already?
The image of the U.S. as a generous donor of global aid is deeply ingrained for many Americans. In a WorldPublicOpinion.org survey last year, a majority of Americans estimated that median U.S. aid contributions made up 25 percent of the national budget and felt that this number should ideally be 10 percent.
In reality, U.S. aid commitments make up less than 1 percent of annual government expenditure. Promises of aid made by U.S. politicians, such as Bush's extravagant President's Emergency Plan for AIDS Relief, often go far beyond actual commitments.
But situated amongst media dialogues that cast the U.S. as the "leader of the free world," and other exceptionalist notions, this discrepancy is not surprising. Throughout the American media and the rhetoric of American politicians, the assumption that the U.S. is and should be a generous source of positive input is ubiquitous.
Unfortunately, these assumptions glaze over the extent to which loans from the U.S. and institutions over which the U.S. holds power now entangle many low-income countries. The burden of these loans — loans that are, in the words of former World Bank chief economist Joseph Stiglitz, undemocratically imposed on governments — is truly astonishing.
The roughly $13 billion in debt servicing paid on a yearly basis by African countries alone is greater than the value of aid coming in to those countries. This high price of debt comes at the expense of government services, including health care and education, thus only exacerbating problems that aid supposedly addresses.
To be sure, much has been said about this and little has been done. In 1999 under the Heavily Indebted Poor Countries program, and again in 2005 under the Multilateral Debt Relief Initiative program, the G-8 countries, the International Monetary Fund and the World Bank wrote up a list of 40 countries with what it deemed to be unsustainable debts, or national debts greater than 150 percent of gross domestic product. Yet even this debt forgiveness came with strings attached, including requirements that heavily indebted countries cancel or privatize social services and further liberalize markets to qualify for debt forgiveness.
Unsurprisingly, even of the most heavily indebted countries that qualified for the Heavily Indebted Poor Countries and Multilateral Debt Relief Initiative programs, many refused to do so. For these countries, it is not clear that the costs associated with IMF-mandated structural adjustment — a strategy that has already failed them — are worth the benefits of freedom from debt.
While it may seem that this issue is far beyond our power as students, administrators, staff or faculty, the collective political will of informed people is not insignificant. Since the early 2000s, the Jubilee Movement, an international coalition of mostly faith-based organizations, has been advocating debt cancellation without regressive demands for structural adjustment. The U.S. wing of this movement has been supporting legislation in Congress that would effectively engage the U.S. in ending abusive debt relationships.
Specifically, the Jubilee Act — which became mired in the Senate when it last came up for a vote in 2008 — calls upon the Treasury to facilitate debt cancellation of heavily indebted countries. In contrast with past debt-forgiveness regimes, the Jubilee Act requires only that funds diverted from debt servicing go to poverty-alleviation programs.
Witnessing the cuts now being pushed by Republicans in Congress and by state and local governments across the county, it may seem untimely to call on the U.S. to cancel debt or divert limited financial resources towards developing countries. But researchers from the global Jubilee Movement have demonstrated that debt relief does not need to come out of the reserves of the wealthiest countries. Rather, the IMF, which bears responsibility for pushing many of the problem loans in the first place, could sell portions of its gold reserves to cover much of the cost of debt relief.
While the Jubilee Act enjoys bipartisan support from 26 Senate and 53 House co-sponsors, Rhode Island's legislators are conspicuously absent. In the midst of a Congressional session that may wreak havoc on U.S. government programs and commitments at home and abroad, it would be a great relief to see this bill back on its feet.
Ian Trupin '13 is a COE concentrator who just learned how to ride a tandem bicycle.
