It’s morally right to forgive debilitating Third-World debt

Kenneth Einar Himma
The Seattle Times
September 16, 2004
When someone can’t pay his or her debts without compromising vital needs, we allow the person to declare bankruptcy. The underlying principle is that it’s wrong to hold people to debts they can’t pay without harming themselves – even if debt relief encourages irresponsibility.

The Jubilee Act, currently in Congress, applies this sensible principle to international debts. It asks the International Monetary Fund (IMF) and World Bank to cancel debts that poor developing nations can’t pay without harming their citizens.

While we want borrowers to behave responsibly, one-time debt cancellation is the right thing to do.

Poverty in our world usually means having less than the average person; poverty in the developing world always means something far worse.

It means real misery. It means going without education: 275 million children in the developing world today will never learn to read or write. It means going without food: 800 million people don’t have enough to eat. It means going without water: 1 billion people lack safe drinking water. It means dying young: 15 million children die from malnutrition every year.

Exacerbating these challenges are the debts these countries owe to affluent nations. African nations annually pay about $15 billion in debt service on an outstanding debt of $230 billion. That is $1.30 in debt service for every $1 in foreign aid.

These numbers are small compared to our $2.3 trillion federal budget, but the impacts are devastating. African nations spend about one-quarter of the cost of debt service per year on health care. In some nations, health-care spending is $7 per year per person – a fraction of what is needed to deal with the HIV crisis there.

Education expenditures in Africa have decreased dramatically, forcing schools to close or charge exorbitant fees. The result is a work force that is less knowledgeable, less skilled, and more likely to be left further behind in an increasingly competitive global economy.

Many of these loans were recklessly made to corrupt and illegitimate regimes. In some cases, banks were so eager to unload excess cash they ignored evidence that funds were being embezzled or used to commit human-rights violations.

The people shouldn’t be held responsible for loans made to an illegitimate regime that lacks their consent. Further, when banks make loans they know will be used for wrongful purposes, they shouldn’t expect repayment from the people.

President Bush wants to cancel $120 billion in Iraqi loans because of the unfairness in requiring the new Iraqi regime to pay back Saddam Hussein’s debts. But many of the loans to African nations were taken by rulers no more legitimate than Saddam. It is no more fair to impute these debts to those nations than it is to impute Saddam’s debts to Iraq.

Not every loan is tainted, but we have moral views about helping people that apply to all these debts.

Nearly everyone is appalled by the idea of someone who could save a life at insignificant cost but fails to do so – such as when someone witnessing a murder does not even call 911. The feeling is that we are obligated to help when we can save lives at so little cost. These judgments imply that we have an obligation to alleviate life-threatening poverty when we can do so at small cost.

Canceling $230 billion in loans costs little. The Jubilee Act would finance debt relief with existing IMF and World Bank resources. But assuming U.S. citizens have to bear the cost, it would be $80 per citizen per year – about two pairs of jeans – for 10 years. Sharing the cost with the European Union reduces it to $31 per person per year for 10 years – or a movie with snacks for two people.

And debt cancellation can make a difference. After receiving debt relief, Uganda adopted measures that tripled school enrollment and thereby improved its citizens’ ability to provide for their basic needs. Debt forgiveness is no panacea, but it can help alleviate life-threatening poverty.

Luck plays a disturbing role in determining who has what. Had my parents lived in a developing nation, I would be living in severe poverty instead of earning a comfortable living. For most of us, being born into the affluent world instead of the developing world is the difference between comfort and misery.

There is nothing wrong with being lucky, but sometimes it’s wrong to keep all you have lucked into. If the global distribution of wealth were determined by merit, then maybe we would owe no special responsibilities to developing nations. But luck plays a larger role: Not even our best citizens could escape life-threatening poverty if born into it. When luck plays that kind of role, those who are lucky have an obligation to those who are not.

Kenneth Einar Himma is an associate professor of philosophy at Seattle Pacific University. He formerly taught at the University of Washington. He is on the steering committee of Jubilee Northwest, which is promoting passage of HR 4793, the Jubilee Act.

Categories: Africa, Debt Relief, Odious Debts

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