The Debt Debate!
While victories have been achieved in the struggle for debt cancellation, DDCI believes progress is too slow and the roots of the debt crisisnhave not been recognised. For example, most governments, and financial institutions, such as the World Bank and the IMF, have refused to recognise the concept of unjust or illegitimate debts. What arguments have they put forward and what has been the response of the debt cancellation campaigners?
Argument One: 'Enough is Being Done'
Governments Say: Existing Debt cancellation mechanisms have delivered billions of Euro to poor countries.
Campaigners Say: True, but it is too slow, comes with unfair strings attached, and it does not benefit enough countries or target enough lenders.
Argument Two: 'Bad Debts are the Borrowers Fault'
Governments Say: The responsibility lies with the borrowers for misusing money or borrowing unwisely.
Campaigners Say: The burden of irresponsible lending cannot only lie with the borrower as it currently does. For example, in national laws, it is the responsibility of the creditor to exercise 'due diligence' when they give a loan to an individual. There are guarantees against extortionate interest rates and penalty charges. And, should anything go wrong, national bankruptcy procedures ensure a resolution to avoid a run on the borrower's assets. We need similar structures for international lending.
Argument Three: 'Lender confidence would be eroded'
Governments Say: If debts are cancelled on the basis of being illegitimate, lender confidence will be damaged. Then lenders will stop investing in poor countries, hence denying them much needed resources.
Campaigners Say: This argument was also made before the current debt cancellation arrangements were put in place and they have not had a negative impact on the Southern countries' ability to borrow. In reality, investors invest in a country when they can expect a reasonable return.
Argument Four: 'It's more realistic to concentrate on future responsible lending, not on the past'
Governments Say: The area of illegitimate debts is too complicated. We should focus on the future so that further debt crises can be averted.
Campaigners Say: We agree that standards of responsible lending must be established. However, if 'rich' country governments want to have credibility in discussing responsible lending, they must also look at their own record on past lending and the ways in which this has contributed to the debt crisis. By cancelling illegitimate debts, the international community sends a strong message to creditors that irresponsible lending practices have serious consequences.