7. Success of the Jubilee 2000 Campaign and its impact on IMF policy

Initiated in 1999, the Jubilee 2000 organized a coalition of civil society organizations to demand the cancellation of the debt of poor countries and denounce the role of the IMF and the World Bank as financial executors of rich countries. This led to the creation of the Heavily Indebted Poor Countries Initiative (HIPC).

The HIPC programs and the Multilateral Debt Relief Initiative (MDRI) have provided relief of over $100 billion in debt to 37 countries, 31 of them in Africa. Despite the relief, these countries' debts have grown again due to factors such as the COVID-19 pandemic, food inflation due to the war in Ukraine, and high interest rates in Western economies.

Thanks to its impact on the subsequent IMF programs of debt relief, the Jubilee 2000 campaign is usually considered a success. But it didn’t solve the systemic causes of the debt crisis that had grieved the Global South since the early 1980’s. In fact, similar causes are having similar effects in the current debt crisis. 

So what happened in the eighties  ?

In 1979, the Iranian revolution created a shockwave across the world by sharply reducing the supply of oil. It caused a major increase in the cost of energy, while the following war between Iraq and Iran kept the oil price high, and other oil producing countries seized the opportunity to speculate on the price of oil.

The result was a global economic contraction, but the effects were different if you lived in the North or the South of the planet. The rising cost of energy implied inflation. Everything suddenly cost more to produce. In the South, because investments in infrastructure had been financed with external debt to public creditors (countries lending to other countries), it meant that debt was more expensive to pay, on top of the increased cost of production. In other words, inflation of prices and decrease in economic growth. In the North, where the USA was the financial center around the Atlantic, it meant an escalating inflation on consumer prices that needed to be controlled, while the contraction of the economy was costing millions of jobs. This situation, with high inflation and slow or negative growth, is known as stagflation. 

At the time, the single person in charge of the response to this crisis was Paul Volcker, the chairman of the US Federal Reserve. To counter the spiraling inflation, Volcker increased the key interest rate of the Federal Reserve. By doing so, Volcker made it more expensive to borrow, which mechanically decreased demand for goods. In the West, where central banks were all following the lead, the immediate effect was a recession, job losses and budget austerity. However, in a couple of years the crisis was contained in the USA, as consumers and production adjusted to the new prices. The Federal Reserve lowered interest rates progressively and inflation was stabilized. 

In the Global South, the story is quite different. After the shock of the oil price increase of 1979, the Federal Reserve interest rate jump dramatically increased the cost of debt servicing. While developed countries were adapting their economies to the new reality, the value of currencies in the Global South was dropping because they paid their debt in dollars, which value was going up because of high interest rates. In the South, the value of the goods produced was going down, but they needed to sell these goods in order to pay their debts, which was going up. Many countries went into technical default, like Mexico, Zambia and Argentina. They were unable to pay a debt that had skyrocketed because of a sudden increase of oil prices. In effect, by raising the interest rate, the US Federal Reserve transferred the burden of the crisis to the Global South, who didn’t have the same financial tools to control inflation and relied on the International Monetary Fund (IMF) and the World Bank (WB) to salvage their economies. Their response was drastic and destructive. 

Under the pretext of getting the defaulting countries out of debt, the IMF and World Bank imposed new loans conditioned with so-called Structural Adjustment Plans. Countries had to cut spending in public services like infrastructure, health and education, while opening their economies to foreign investors and basically turning their land into cash crops, where the yield of the harvest was going to the investor, as opposed to the farmer. In Latin America, this period is known as the Lost Decade. Instead of helping defaulting countries, the IMF and WB destroyed their economies. Growth was often negative, with wages going down and prices going up. In this kind of situation, the informal economy becomes prevalent, a wealthy minority dominates while crime and prostitution flourish. Many felt betrayed by the governments who had followed the instructions of the IMF and WB. Essential infrastructure was in disarray, schools and hospitals left without budget, in favor of payment to financial institutions controlled by countries whose economies were thriving by the end of the 80’s. The winners of the free market doctrine applied by the IMF and WB were the US and European transnationals who traded the raw materials bought at cheap price in the South to be processed and transformed in the West, such as cocoa for Belgian chocolate, or bauxite used in the aluminum of Coca-Cola cans.     

This was the background of the debt cancellations that resulted from the Jubilee 2000 campaign. It was initiated in the 1990’s by UK faith-based organisations, but the foundation of the demands and arguments against the IMF and WB were formulated in the 1980’s by organisations based in the Global South, such as the Kenyan Human Rights Commission, or the Confederation of Indigenous Nationalities of Ecuador. 

The Jubilee 2000 managed to coalesce a vast movement in the West, with pop stars and politicians joining the call for debt cancellation while a democrat, Bill Clinton, was occupying the White House. 

The movement for debt cancellation that originated this campaign gave birth to a few organisations that are still active today. The Committee For the Cancellation of Illegitimate Debt (known as the CADTM) was created in Belgium in the early 90’s, in support of the Global South. NGOs like Debt Justice and the “dad’s” (Afrodad, Latindad, Eurodad and the APMDD in Asia) were all created on the base of the activist network of the Jubilee 2000. 

This article is the seventh in a series dedicated to the timeline of debt cancellations in history.