Social and Pastoral BulletinNo. 89

Why a Jesuit Network for Debt and Development?
There has been a preferential option in the Society of Jesus throughout its history and especially since GC32, for the poor. With Centers and individual Jesuits throughout the world working directly with the poor, the Society is a natural network for collaborative action. Yet our collective voice has been relatively silent on international issues.
JDRAD's contribution to the debt and development debate is distinctive in that:

*Our training and convictions permit us to make a distinctive contribution both at ethical and theological levels, and in the human sciences.
*With centers and actors throughout the world, we are placed to link the experiences and insights of our Southern members, who live and work directly with the poor, to actions of influential lobbyists, commentators, and actors in the North.
We are a large group with a broad range of skills, on-the-ground experience, and much to contribute to wider global efforts. Working together we can maximize our resources, strengthen our global efforts, and effect a real and positive change.

International Debt. The Wider Concept
One of the greatest obstacles to human development is international debt. Massive debt servicing which diverts scarce resources away from social sectors, together with rigid economic adjustment programs imposed by creditor institutions, have increased poverty for millions of the world's poor.
A system which demands that the poor repay the debts of the rich is not purely about economics. It is about rights, responsibilities and justice.
JDRAD challenges this system - its economic, social and environmental costs - and most fundamentally, its ethics. The activities of our members, both on-the-ground and at a research level, focus on exploring alternative systems where integral human development, the right of all peoples, can be achieved.

The debt problem is but one symptom of a wider malaise, a global economic system polarized in favor of a rich minority which disenfranchises the poorer majority. Many Northern governments seem content to maintain and support trade relations and financial structures which concentrate wealth in the industrialized world, while excluding the poorest nations from a share in global prosperity. Many Third World governments, for their part, maintain systems of income and land distribution which exclude poor people, and concentrate public investment in areas which maximize returns to the wealthy, neglecting the poor. The current trend towards redistribution of regulatory and legislative powers to transnational institutions fuels a growing fear that responsibility and accountability now stop short at a select group of shareholders.

JDRAD joins with a growing number of groups which question this ethos. Our mission is to mobilize the Jesuit voice to contribute alongside other churches and NGO groups on debt and development issues, issues which are critical to a committed option for the world's poor. JDRAD produces Country Profiles, Working Papers on Selected Topics, A Monthly Update / Newsletter, A Website, Articles for National and International Publications and Contributions to National and International Conferences and Debates.

JDRAD operates from the Jesuit Centre for Faith and Justice, Ireland. The full-time coordinator, Miss Niamh Gaynor just visited Japan, February 99, to make fresh contacts with member groups and representatives of Jubilee 2000 Japan.

(JDRAD - Ireland: 26 Upper Sherrard Street, Dublin 1 / Fax:353-1- 8364377 /
In order to explore possible ways out of the debt trap that affects many of the world's poorest countries it is important to understand how the crisis came about - who was responsible and to whom were they accountable; what are the consequences for the poor - who is now paying and how is this affecting them.

There is in fact not just one debt crisis, but two. The first occurred in Latin America in the early 1980's and was a systemic crisis which threatened collapse of the entire world's financial system. Much like the recent Asian Crisis, which also threatened collapse of the system, it elicited an immediate and coordinated response from the richer countries of the world. The second debt crisis, largely an overhang from the first, is currently costing lives and livelihoods in Africa and in a number of other countries.

The root causes of both crises are manifold and complex. They are systemic - in that macroeconomic decisions were taken in the North without any reference to their consequences for people in the South; political - in that loans in the Cold War period encouraged strategic alliances; and economic - in that commercial banks, flush with petrodollars, rashly provided loans with little risk analysis. Real interest rates were low or negative and it was relatively easy to take out loans. Many of these were poorly invested in large-scale infrastructure projects which yielded little return, in arms purchase, in corrupt regimes. . . Problems arose towards the end of the '70's as a number of structural factors made repayments increasingly expensive and difficult, among them; rising oil prices which led to the adoption of tight monetary policies. Interest rates rose sharply, commodity prices fell, and currency values fell against the dollar. In 1982 when Mexico announced it could not pay and others followed suit, threatening collapse of the world's financial system, the problem became a crisis.
While resultant action to this first crisis by governments, the World Bank and the IMF which allowed repayments to continue, and avoided collapse of the financial sector, produced mixed results, their response to the current crisis has been wholly inadequate, and in many cases has exacerbated the problem.

The current situation is that many countries are in bondage to foreign creditors and the victims of this bondage are the poor, who played no part in precipitating the crisis.

Lack of money is the most significant cause of poor health and education services in the poorest countries. Inadequate services are costing lives - most often, the lives of the poor. Current lending by the international financial institutions is conditional upon the implementation of Structural Adjustment Programs (SAPs) which advocate cuts in government spending and economic liberalization policies being adopted. While efficient governments spending within their means, and efficient markets, are worthy objectives, SAP programs have often been implemented at a pace that cuts public spending savagely, ensuring that short term pain of cuts in education and health becomes long term pain of less educated and healthy which undermines future economic progress. Similarly, market liberalization has often been implemented in a sudden way which wipes out indigenous industry rather than via a more gradual approach that leaves time for the investment needed to adapt. Due to these factors SAPS have increased poverty by escalating prices while reducing household income and denying basic services. Moreover, they have been instrumental in the erosion of national and local autonomy, giving the World Bank and IMF a place at the economic policy table of indebted countries, whilst at the same time denying a place for popular society.
Many countries cannot afford to repay their debts. Efforts to do so are destroying the lives of the poor. Increased external control over their economies is undermining the rights of communities to shape and control their destinies. In the commercial world, if a bank makes a loan to a business which subsequently goes bankrupt, the bank pays the price for its poor judgement and loses its money. Yet in the current system, of which we are all a part, when countries go into debt it is the poor who pay the price for the poor judgement of others. This is unjust and it is wrong.

"Debt servicing cannot be met at the price of the asphyxiation of a country's economy" (footnote I : At the Service of the Human Community: An Ethical Approach to the International Debt Question, Pontifical Commission "Justicia et Pax", 1986). The first responsibility of all governments is to ensure the well-being of their populace. In instances where loan servicing is harming the well-being of the populace, governments and institutions have a moral obligation to cease servicing debts/demanding repayments, in favor of assuring basic needs. Debts, whose service is harming the populace, should be canceled. In addition, in line with the Jubilee 2000 campaign's call for debt cancellation, JDRAD supports the cancellation of debts which in real terms have already been paid due to external factors such as commodity price falls or interest rate increases, and debts incurred to strengthen repressive regimes. Cancellation totals and conditions should be determined on a country-by-country basis, by both parties (debtor states and creditor states & institutions) involved.
JDRAD sees this cancellation as part of a more open and participative process which demands greater accountability and responsibility from elected representatives, and allows for the full and meaningful participation of popular society in decision-making. This process, the modalities for which need to be enshrined in international law (an arbitration procedure with equal debtor and creditor representation), would provide a role for popular society in working in partnership with government in negotiating the amounts to be canceled, deciding the optimal allocation of resources freed following cancellation, as well as monitoring future lending plans and budgetary expenditures.

The debt crisis affects everyone, in particular the poor. It is a symptom of a financial system which denies basic securities of food, shelter, health and education to billions, thereby stifling personal and cultural development. It also denies a role to communities in shaping their future. Human dignity is respected only when as much autonomy as possible is vested in the community. The current system divests communities of such autonomy. JDRAD holds that debt cancellation must form the first step towards an alternative economic world order, one that returns power, basic rights and dignity to the poor.