Forgive us our bad debts--many of which were made fraudulently to developing countries.
Ecuador's new president, Rafael Correa, pledged during his campaign to reduce the nation's external debt burden. Now he could have played the game according to the existing rules and sought debt relief through renegotiation of Ecuador's many loans. Instead he has launched an unprecedented, comprehensive audit of the nation's $10.6 billion debt.
Correa suspects, a suspicion shared by many economists, that it won't prove too difficult to demonstrate that a lot of that debt is essentially fraudulent. That discovery could lead Correa and Ecuador into some unexplored territory in the world of international banking, to a place where a single phrase has long haunted the guilty sleep of global moneylenders: "debt repudiation."
It's the kind of startlingly obvious notion that dare not speak its name in the hallowed halls of international credit where vast sums of money and power are transferred across continents at the click of a keyboard: What if they just didn't pay? What if the impoverished nations of the developing world, struggling to feed and educate their citizens, simply turned their back on the crippling debt they've assumed over decades of international borrowing?
The church has in recent years been active in pressuring First World lenders to forgive debt in the developing world in efforts ultimately aimed at allowing poor nations to invest in social services such as education or health care. But repudiation offers a more potent, and perhaps ultimately more just, tool toward relieving the crushing burden of debt. To the average mortgage-paying American-trained to treat debt servicing as sacrosanct-the idea of not paying a debt seems deeply unfair to the banks and institutions that over the years agreed to extend a fiscal helping hand to developing world governments and businesses, helping them build bridges, highways, and more. Surely these kind folk deserve to have their capital, along with a decent interest, returned to them?
Well, maybe not. The interest paid on many such debts has already achieved indecent levels, and more evidence is gathering that some bankers essentially colluded with local elites in green-lighting shaky loans that were quickly looted. It turns out to be difficult to put your finger on exactly where many loans ended up, how they were used, and who ultimately in justice should be responsible for paying them back. "Show us the money," is the bald demand of leaders in a newly assertive developing world.
It seems impossible that billions of dollars, which over the years have been moved into the developing world, could be unaccounted for, but, as books like The Blood Bankers and Confessions of an Economic Hitman (both Thunder's Mouth Press) document, while debt may be transferred to the impoverished world, frequently the actual money never is.
Many "loans" reside comfortably ensconced in posh zip codes in New York and Zurich, within easy reach of the kleptocrats, finance ministers, and corporate criminals who pilfer them and the bankers who assist them. But the responsibility for the debt often is passed on in the form of increased taxes and reduced public services to the working people least capable of enduring that burden in the developing world.
Every so often a newly emerging political leader threatens to repudiate such odious debt, but all have backed down under heavy pressure from international bankers and those who carry their water in Washington. It appears finally, however, that one nation may be ready to risk it all in an effort to reduce its crushing debt burden.
Ecuador deserves support as it embarks on this new strategy. Debt has been the modern mechanism of a continued colonialism during the last century. As we begin a new century with a more mature understanding of solidarity, here is one small, just thing we can do to promote the common good of people on both sides of international debt.
It is only right to repudiate immoral if not fraudulent debt and the exploitation and misery that lurk just behind it. You can bank on it.