Illegitimacy of Debt and the Philippine Sabbath Year Campaign

Freedom from Debt Coalition (FDC)
#11 Matimpiin St., Brgy. Pinyahan, Quezon City 1100 Tel.: +63-2-9211985; Telefax: +63-2-9246399


The Illegitimacy and Immorality of Debt For a long time, international and even national discourse on debt was dominated by the issue of impacts of debt servicing, looking into the grave impact of debt payments on the provision for basic services and other development needs of the country. The discourse revolves around the issue of debt “sustainability” or affordability – What level of debt servicing will allow a country to still finance basic social services such as health, education, etc.? For several years, debt campaigns in the South, and now also in the North, have asserted another framework which: 1) takes into account the issue of impacts, but broadens the discourse to raise other critical questions about debt, and 2) does not reduce the rationale for debt cancellation to an issue of affordability even if this is set on higher, human development and human rights standards. Debt campaigns are now working to change the terms of the debate to a broader framework that raises the question of illegitimacy of the debt. Illegitimacy of the Debt – Debt and Democratic Standards The term and general concept of illegitimate debt is not of recent origin. During the global debt crisis of the 1980’s, debt campaigns in the South raised the issue of illegitimate debts, using various descriptions – onerous, fraudulent, immoral, odious etc. Even earlier, in the 1927, an international doctrine on odious debt (one category or type of illegitimate debt) was developed by Alexander Sachs. According to Sachs: “When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection… this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime… The lenders have committed a hostile act against the people, they cannot expect a nation, which has freed itself of a despotic regime, to assume these odious debts, which are the personal debts of the ruler.” So far, the most comprehensive definition of legitimacy in the context of financial transactions, including loan and aid transactions, had been formulated by Jubilee South – Asia Pacific Movement on Debt and Development (JS-APMDD) Coordinator and Freedom from Debt Coalition (FDC) Vice President Lidy Nakpil. According to her, the concept of legitimacy essentially is a broad concept that touches on the principles of: • • • • • HUMAN RIGHTS and SUSTAINABLE HUMAN DEVELOPMENT JUSTICE and FAIRNESS ACCOUNTABILITY AND RESPONSIBILITY SOVEREIGNTY of PEOPLES and NATIONS DEMOCRACY - DEMOCRATIC RIGHTS AND PROCESSES

Those loans which violate the above principles are deemed to be illegitimate – or unacceptable. This violation occurs in the elements necessary in the acquiring of the debt and its impact, which includes the intention, the means, and the effects. These elements include: • ILLEGITIMATE PROCESSES. This includes debts contracted in manners that violated procedures and requirements mandated by constitutional and related national laws – either laws of the lender or of the borrower or both. This also includes debt transacted with processes involving bribery, fraud, coercion, misrepresentation, etc. ILLEGITIMATE TERMS and CONTRACTUAL OBLIGATIONS like usurious interest rates and other onerous provisions.


ILLEGITIMATE PURPOSES and ILLEGITIMATE USE OF THE FUNDS. Loan-financed projects and policies which had considerable negative impact on communities, people's livelihoods and well-being, and the environment, and where funds were wasted through corruption, mismanagement, and failure of the project, should be deemed illegitimate. We can also include successor debts, or debts contracted to repay illegitimate debts, in this category. ILLEGITIMATE ORIGINS. This includes loans which were originally contracted by private corporations but became public debts because of public guarantees. ILLEGITIMATE IMPACT OF DEBT SERVICING, particularly its impact on the survival, basic needs, and human rights of peoples of the South – especially the rights for adequate healthcare, education, shelter, livelihood, and safety, its impact on South economies which are, on the onset, already vulnerable to external shocks, creditor demands, dynamics of financial markets, and its impact on the environment. ILLEGITIMATE PRACTICE OF USING DEBT, DEBT RELIEF, and ACCESS TO CREDIT as LEVERAGE FOR IMPOSING CONDITIONALITIES. This includes gross violations of political and economic sovereignty of the people and of democratic principles and processes. The damaging effects of the conditionalities should also be considered.

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But it doesn’t stop at illegitimate cases of loans alone. The concept of indebtedness of Third World countries, in itself, is arguably illegitimate. At this point, it is crucial to note that international financial transactions are conducted in the context of grossly unequal power relations with the powerful countries shaping agreements in their favour. We then have creditors exploiting the vulnerabilities of South countries – vulnerabilities which the creditors themselves are responsible for during the era of colonization. It is not a coincidence that most of the "debtor" countries are former colonies, and for the majority of them the biggest bilateral creditors are their former colonial powers. The system that created the "indebtedness" is illegitimate, the debts themselves are illegitimate, and the impact of debt service is illegitimate. Consider too that the debts have actually been paid many times over by the people of Third World countries, in financial terms, as well as in economic, social and environmental terms. Immorality of the Debt – Debt and Structural Sins If the system of debt in place is illegitimate, and its effects in violation of people’s right to decent living, how do we evaluate it using our framework of morality and ethics, given that it is not just a sin of one individual? Albert Nolan, in his book God in South Africa: The Challenge of the Gospel, offers us an alternative perspective on the nature of sins: “The personal and the social are two dimensions that are present in every sin. All sin is both personal and social at the same time… All sin is personal in the sense that only individuals can commit sin, only individuals can be guilty, only individuals can be sinners. However, all sins also have a social dimension because sins have social consequences… Sins become institutionalised and systematised in the structures, laws and customs of a society.” In this view, societal phenomena brought about by existing social structures, such as apartheid and slavery, becomes a collective sin – a sin of the whole society. Collective or social sins are thus a result of the result of the accumulation and concentration of many personal sins, of commission or omission, against the common good and its exigencies in relation to the whole broad spectrum of the rights and duties of citizens.


Given its illegitimacy, it is clear that the debt system, culture, and practice is immoral and thus, a social sin. Even within the framework of morality and ethics, all of us will be held accountable and responsible if we will allow the perpetuation of such a system. From this perspective, the eradication of the debt problem is a matter of justice – not merely of forgiveness nor charity. Ways Forward The primary strategic call on debt is 1) for the creditors – the total and unconditional cancellation of the debt, and 2) for the indebted countries of the Third World, which we also call the “Southern” countries – the repudiation or non-payment of the debt. This involves, of course, an effort to assert the international recognition of the concept of debt illegitimacy and immorality. One of the most concrete campaigns launched was the Jubilee campaign, which aimed for the repudiation and cancellation of debts of the Southern countries. Jubilee 2000 was an international coalition movement in over 40 countries calling for cancellation of unpayable third world debt by the year 2000. The Jubilee South network which we mentioned earlier is part of this Jubilee campaign. The Jubilee 2000 movement coincided with the Great Jubilee, the celebration of the year 2000 in the Catholic Church. The concept was inspired by the biblical idea of the year of Jubilee, the 50th year. In the Jubilee Year as quoted in Leviticus, those enslaved because of debts are freed, lands lost because of debt are returned, and community torn by inequality is restored.

Philippine Sabbath Year Campaign The Jubilee Debt Campaign The observance of the Jubilee year in 2000 was translated into a global campaign that pursued a vision of liberation and fullness of life for all. It highlighted various issues and called upon the leaders, governments and institutions for urgent and concrete actions on the deepening problems of poverty, injustice, inequality and inequity. Among these issues was the debt. The problem of indebtedness of poor and developing countries was seen as one of the reasons that deprived citizens of these countries of the fulfilment of their basic human needs, led to the intensification of poverty and failure of these countries to develop. Hence, various debt campaigners world-wide came together for a global campaign – the Jubilee Debt campaign – and pursued a collective push for debt relief and policy reforms directed to lending institutions and governments to demand an end to the debt bondage. In the Philippines, the Jubilee Debt campaign was pursued towards the repeal of the Automatic Appropriations on Debt Service and non-payment of onerous, fraudulent and behest debts incurred during the Marcos regime. The Freedom from Debt Coalition and various faith-based organizations actively campaigned around these calls through massive popular education work, and through a signature drive which aimed to pressure the Philippine Congress to take concrete and positive action. The global and national efforts on the debt have presented the potential of concerted efforts towards a realization of a goal. The Jubilee Debt Campaign at the global level succeeded in putting the debt issue as a main agenda in the discourse of poverty reduction. Lending governments and institutions were forced to develop and extend debt relief initiatives, albeit limited and self-serving, such as the Highly Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). The Jubilee Debt campaign likewise paved the way for a strong global movement on the debt involving campaigners from the South and North.


The Philippine Jubilee calls on the debt has remained an uphill battle due to the realities of the Philippine political system and apparent subservience of government to foreign dictates resist any policy reforms that run counter to the ruling class and foreign interests. However, the participation and support of the faith-based groups have succeeded in highlighting the debt issue among the public, including government. But the battle has yet to be won. Whatever momentum that was achieved has been immediately doused by an overpowering majority bent on protecting their self interests. Seven Years Hence The year 2007 marks the seventh year after the celebration of the Jubilee year. In the scriptures, the seventh day or seventh year is as significant as the observance of Jubilee. This is referred to as the Sabbath year, which prompts one to reflect on issues such as debt. To quote one particular passage: “Every seventh year we will forgo working the land and will cancel all debts.” Nehemiah 10:30 This passage became the inspiration of the Jubilee debt campaigners in the United States in defining their campaign theme for 2007. Named as the 2007 Sabbath Year Campaign, Jubilee USA’s debt campaign will call on political leaders for the adoption and passage of the Jubilee Act (H.R. 2634), a legislative agenda that calls for cancellation of debts of 67 impoverished countries, among others. The 40-day Cancel Debt Fast is the central event of the 2007 Sabbath Year. It is during this time when individuals, congregations and local organizations fast for a day or more and meet with their member of Congress seeking support for the Jubilee Act. It is also during this period when debt advocates from around the globe will be engaging in solidarity actions. In the Philippines, the moral dimension of the debt problem has not fully resounded in the various discourses towards resolving the country’s problem of indebtedness. It is seen that the observance of the Sabbath Year as an opportune moment for gathering the various faith-based groups in renewing their commitment on the debt advocacy and become a strong voice in pushing for significant policy reforms on the debt. The 2007 Philippine Sabbath Year Campaign is… a comprehensive debt campaign to be launched by a strong faith-based constituency composed of various institutions, communities and lay people of different religious denominations. focusing on the relationship of debt and morality/faith and how the relationship is intertwined in the concept of illegitimacy of debt. also marking the year as a start for a continued advocacy on the debt that will span beyond 2007. General Thrusts of the Campaign: Building a strong network of constituents among faith-based groups. Promoting and popularizing the moral dimension of the debt issue to the public. Pushing for concrete policy reforms on the debt. Major Engagements: Massive education sessions. Push for legislative agenda (i.e. Congressional Debt Audit, Repeal of Automatic Appropriations Law). Hold a “Church Unity Congress” during the Week of Action in October.


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