The Jubilee Blog

Postwar Germany: A Model for Debt Relief Today

by Ted Walsh

A Special Thank You to Nick Dearden, whose piece in the Guardian inspired this blog

Few countries are better examples of economic strength in a weak international financial system than Germany. As the largest economy in Europe with high economic standing, Germany is often in a position to prescribe economic policies within the Eurozone for countries teetering precariously on the verge of defaulting on their debts. What makes Germany’s situation remarkable is the fact that 60 years ago, the post-war German economy was in ruins.  As such, Germany’s rise to economic prominence is of significant relevance to heavily indebted countries today.

The Lesson From Greece: Debt is a Global Problem

 

by Jerry Williams

As rising budget deficits force world governments to trim domestic spending, painful austerity measures are being implemented across Europe. One of the countries hit hardest by conditions imposed by lenders has been Greece, which continues to be rocked by the ongoing debt crisis that has shaken both the national and global economy. Many countries around the world have learned that austerity cuts have had a detrimental impact on domestic economies, and Greece is no exception.

Jubilee USA Urges Business and Political Leaders at World Economic Forum to End Corporate Tax Avoidance and Support Responsible Solutions to Debt Crisis

WASHINGTON - January 24 - Heads of state, financial ministers, celebrities and representatives from many of the worlds most powerful corporations are meeting in Davos, Switzerland for the 2014 World Economic Forum. This year's theme of the forum is "The Reshaping of the World: Consequences for Society, Politics and Business." The Forum has focused on income inequality, the impacts of low economic growth and climate change. In advance of this year's forum Oxfam International released a report that noted that the world's 85 richest individuals have as much wealth as 3.5 billion people or half the world's population.

"When one out of five people in the world lives in extreme poverty, it's critical to tackle the issues being discussed at the forum," noted Eric LeCompte, Executive Director of Jubilee USA Network, a religious anti-poverty organization. "It's important for leaders in Davos to reflect on the policies that are responsible for perpetuating extreme poverty."

The Link Between Debt Relief and Education

Secondary School Enrollment.
source: UNICEF

by Elena Gillis

External debt has a significant impact on the overall economic and human development of nations. This is more obvious in the case of Heavily Indebted Poor Countries (HIPCs), where efforts to repay external debt undermine the effectiveness of internal development strategies.  As governments focus their revenue primarily on repayment of the external debt and its interest, they necessarily take money away from the citizens who pay the taxes and, as a result, under-invest in infrastructure and social services.

One of the most detrimental areas of under-investment is education. A country’s level of education determines the success of future economic growth and its sustainability. First, for education systems to be effective, they have to be available to the majority of the population. In many cases in developing countries, K-12 education is only available in large cities, and the cost of this education is so high that average citizens cannot afford to send their children to school. In addition, the opportunity cost of sending children to school also increases the high costs of education, since the lack of income keeps children at home and also contributes to child labor, which is seen as a vital source of income in many struggling families. In many counties, especially those with high rates of adult unemployment, families have to rely on money provided by their children. Simply making education mandatory and child labor illegal may strip the families of this miniscule income and make the family, including the children, temporarily poorer as a result. The entire system and infrastructure have to be reformed before such laws can reap benefits. As a result, attaining debt relief for these countries will enable the governments to invest the revenue that they get from their taxpayers and international donors into social development projects, particularly education, which is mandatory for sustainable economic growth.

Pope Francis Makes Poverty Statement With Selection of New Cardinals

by Bemnet Yohannes

On Sunday, January 12, Pope Francis selected 19 new cardinals, 16 of whom are able to vote in the next papal conclave because they are younger than the age of 80.  Much has been made about the fact that none of the 16 cardinals is from the United States, and only one, a Canadian, is from North America.  Meanwhile, more than half of these 16 cardinals are from countries in the global south (South America, Africa, Asia).

The question “what does the selection of these particular cardinals mean”? has been on the minds of many in the aftermath of the Pope’s selections.  The answer, as can best be ascertained, is that the Pope is both sending a message about the importance of issues of global poverty and attempting to ensure that the next Pope feels the same way about those issues that he does.

50 Years Later, War on Poverty Still Being Waged

by Andrew Dusek

This month marks 50 years since President Lyndon B. Johnson declared an unprecedented war on poverty in his first State of the Union Address. The war on poverty—characterized by the array of social welfare programs Johnson signed into law—has met with mixed reviews from historians, politicians and the general public alike. 

It is important to use the anniversary of Johnson’s pivotal declaration to reflect on how much progress has been made combating poverty in the past 50 years. To be sure, progress has been made: few Americans currently lack electricity or indoor plumbing. Infant mortality rates and the number of children who contract diseases such as measles have significantly decreased while college graduation rates and the number of women in the workforce have increased.[i]

Despite notable advancements, however, the state of the labor market for low-wage workers remains poor and spiraling inequality keeps the poverty rate in America persistently high. The poverty rate has fallen only to 15 percent from 19 percent in two generations[ii], and approximately 46 million Americans live below the poverty line.[iii] The approaches to combating poverty that were successful in the 1960s cannot be easily applied to challenges today. At the time President Johnson launched his crusade, economic growth was viewed as the rising tide that would lift all boats. Although it is true that economic growth lifted many people out of poverty at the time, the benefits of economic growth were more broadly distributed. Most of the gains from economic growth in 2014 benefit the few at the top of the income ladder, which only exacerbates the growing wealth gap that President Obama has called the “defining challenge of our time.”

 

Supreme Court to Hear Objection to Predatory Hedge Funds Targeting Argentine Assets Outside of United States

Predatory Hedge Funds Temporarily Seized an Argentine Naval Vessel in 2012

 

The Supreme Court will review a lower court's order for banks to give information on Argentine assets, including those assets held outside of US jurisdiction, to a group of hedge funds seeking to collect from Argentina's 2001 default. Additionally, the High Court will review if it is legal for these predatory hedge funds to target assets for collection outside of a US jurisdiction.
 
"This is good news for countries around the world. The Supreme Court’s action could make it less profitable for hedge funds to engage in predatory behavior," noted Eric LeCompte, Executive Director of the religious antipoverty campaign, Jubilee USA. "In a few months, the Supreme Court will consider a more important appeal related to this case that will impact the world's poorest countries."
 
Argentina is expected to appeal to the US Supreme Court by mid-February in response to a US 2nd Circuit Court ruling ordering the country to pay $1.33 billion to predatory hedge funds. The precedent the case sets will hurt poor countries in financial distress and could allow a small group of hedge funds to target assets that benefit vulnerable populations. At the same time, debt holders who restructured their debt with Argentina have hired lawyers to help negotiate the dispute between holdout hedge funds and Argentina. Nearly 93% of debt holders restructured their debt with Argentina after the 2001 default. The majority of bondholders are concerned that their settlements could be disrupted if hedge funds win the final ruling.
 
"We agree with the concerns of the restructured bondholders," said Eric LeCompte, "We join the IMF, World Bank and White House in denouncing this extreme hedge fund behavior that takes advantage of the world's poorest people."