Economist magazine calls for caution on British announcement, but credits progress to Jubilee 2000

A leading editorial in the Christmas edition of the Economist has said the British Government could afford to go even further on debt relief, and has credited Jubilee 2000 for the progress that has been made so far.

The comments made in an editorial entitled “Do you believe in fairies?” were made in one of the most highly respected economics magazines. The editorial praises the British Government for moving forward on debt, but highlighted many of the limitations in the British initiative.

“At a time of year celebrated in much of the world as a season of goodwill—and one, moreover, capped by millennial fervour—politicians could be expected to come up with the odd grand gesture. Few come grander than that unveiled by the British government this week: “Britain ends third-world debt,” blurted one newspaper headline. If only. Like so many Christmas presents, the content of this one does not live up to the wrapping,” the editorial notes.

The Economist then goes onto support three arguments that Jubilee 2000 have highlighted which limits the potential effectiveness of the British debt initiative. Firstly, it argues that much of the debt that is being cancelled is not being paid anyway and merely shifts the debt burden amongst the creditors with little or no benefit to the debtor country. Secondly, it points out that current debt initiatives fail to consider the commercial value of the debt and therefore exaggerate the supposed generosity of each initiative. These two points were both highlighted in a report by Jubilee 2000, “Unfinished Business” which was put together for the Autumn meetings of the World Bank and IMF this year.

Thirdly, the editorial points out that the initiative is tied to a lengthy debt relief process which appears to be generous and ignores the fact that we also benefited from the loans:

“While marvelling at this generosity, it is also worth recalling that—as for many rich countries—most of Britain's poor-country debt is made up of export-credit guarantees. These were originally subsidies not just to the impoverished buyer, but also to the rich-world seller,” the editorial states.

The Economist goes onto call for new safeguards to ensure that resources released by debt relief are invested properly, and that future loans and aid are more closely monitored.

The editorial argues that debt cancellation is necessary and credits Jubilee 2000 for much of the progress that has been made so far: “As a group, the 50 or so poorest countries in the world spend more than twice as much on debt service as they receive in overseas aid. That does not make sense.”

“To some extent, the competition to take political credit for debt relief is an inevitable response to the “Drop the Debt” campaign, whose famous cheerleaders include pop stars, sporting heroes and holy men.”

It finally concludes: “Debt campaigners are right that the new century ought to bring a new deal between rich and poor countries, and that the rich can afford to do more for the world's poor. Debt relief is an important way of helping them.”

• For the full editorial. “Do you believe in fairies,” Economist, 25-31 December 1999