In May 2024 I finished writing my master’s thesis on Global South Debt Cancellation. The thesis is called “Global South debt cancellation as a means to address climate breakdown - An exploration of possible pathways”. I explored how debt cancellation can be achieved, and how this can be used to feed into a long term strategy of the Debt for Climate campaign. By writing this blog I hope to communicate what I have learned from this research process and share the lessons with organisers at Debt for Climate. You can read the full thesis here. Building upon the work of my thesis, we published an academic paper, which you can read here.
In the thesis I first did a comparison of three different options to address the debt and climate crises. I compared debt restructuring (changing the loan contracts), debt for climate swaps (partial cancellation of debt in exchange for climate action) and debt cancellation (the abolishment of debt contracts). When I looked at these three options, it became clear that both debt restructuring as well as debt swaps did not challenge the existing (colonial/capitalist) power structures that were mainly responsible for these crises.
At the same time, debt cancellation could be a way to acknowledge the historical injustices that the Global North inflicted onto the Global South. The cancellation of debt could form the basis for creating a new international economic order. After looking at these options, I did a literature review and eight interviews to better understand five different aspects related to achieving debt cancellation.
Five interviewees were from the Global South. Two work in media, two at governments and one at an international financial institution. The three others are from the Global North, two of them work for civil society organizations and one for an international organization.
Here are the five different aspects I considered:
Actors & their roles
Arguments in favour and against
Enablers & barriers
Process
Safeguards & conditions
I looked at the sovereign debt restructuring regime in order to understand which actors are important for achieving debt cancellation. Afterwards, I looked at the Heavily Indebted Poor Countries (HIPC) initiative and what led to its creation, to get inspiration on how a more transformative initiative could be created in the present moment. At the end, I read some papers of authors that reflected on the Jubilee 2000 movement to see what movements like Debt for Climate can learn from their struggle for debt justice.
Literature review lessons
Analysing the existing literature was a difficult process, because I had to figure out what kind of topics were useful to study in order to understand how debt cancellation can be achieved. Also I had to reflect on which sources I used, because the World Bank and IMF have many researchers that write about debt, but that research is not focused on how we get to a future that is anti-capitalist and decolonial. However, a paper written by Callaghy from the World Bank Operations and Evaluation Department seemed useful as it described what led to the Heavily Indebted Poor Countries initiative. A lot of different factors contributed to the creation of this initiative and it is very difficult to say what was most important, but some of the factors of which I thought could be replicated were: key economists calling for debt cancellation; a G7 country taking leadership to create the initiative; and pressure by NGO networks and social movements. The New International Economic Order (NIEO), that was adopted by the UN in 1974, did not lead to significant changes of the global financial architecture, which is not surprising if you see that none of the ‘great powers’ endorsed the proposal. As the debt crisis is now intensifying again, it seems quite clear that the HIPC initiative that started in 1996 was not a transformative initiative. The HIPC initiative decoupled debt cancellation (as a means to create development) from the need for broader transformation of the economic order. A paper by Tan puts this into perspective, as she argues that the creation of this one-time initiative was also a means to prevent a more structural transformation of the debt system. Therefore, it seems important for Debt for Climate to embed the demand for Global South debt cancellation in the demand for more structural transformations, as they do with the narrative on forging an alliance for a revived NIEO. As well as that it is important to shed light on the financial debts in their political and historical context, such that no one ‘forgets’ who owes who.
Lessons from Jubilee 2000 (success + tensions)
It was very interesting to read about the Jubilee 2000 movement, which started in 1996 in the UK and mobilised people (mainly churchgoers) around the world for debt cancellation in the Jubilee year 2000. They were successful in the sense that they popularised the concept of Global South debt and put it on the international agenda. The improvements of the HIPC initiative are (at least partly) the result of the efforts of this campaign, which cancelled over 70 billion USD of Global South debt. This success can be contributed to:
The well-chosen strategic horizon of the campaign (the change to the new millennium)
High-quality analyses (and rise of NGO expertise) combined with public action
Matching the framing of debt cancellation to different cultural values (and making it more accessible through a shift from academic discussion to moral framings)
The effective influencing of policy gatekeepers (people in veto governance positions)
Effective (informal) leadership of the UK branch of Jubilee 2000
At the same time, there were tensions within the movement related to the organisational structure. This structure was non-formalised, which created a lack of accountability. Because there were big resource differences between groups in the South and the North, more power to shape the campaign and its demands were held by the UK and other Northern groups. There were differences in tactics as well as in discourses, which led to the split off of Jubilee South that had a more radical view on what should be changed. Thus it seems important for Debt for Climate to be mindful of these inherent power differences and try to overcome them. The Jubilee 2000 campaign did organise in-person international meetings, which were a good place to build relations of trust that are very important to overcome the challenges of an international campaign.
Four pathways to achieve debt cancellation
Through the literature review and interviews, I found four different approaches that could lead to debt cancellation. As Debt for Climate, I think it would be strategic to decide which of these pathways should be pursued in order to work towards justice. I will explain the pathways below and discuss some of the pros and cons.
Multilateral Debt Resolution Framework
This is a pathway in which a framework to deal with debt restructuring (and cancellation) is agreed and implemented internationally. For this pathway, a new independent body/organisation should be created that implements the framework. In the past, this pathway has been tried without success, due to the large power of Global North creditors in maintaining the current system. In this system, countries in debt crisis (or at risk of it) are dealt with individually and in an improvised way. Governments of the Global South were hesitant as well to advocate for such a framework in the past, due to concerns of this framework limiting their sovereignty. This approach is probably very time consuming, as it requires creditor and debtor states to agree on a single framework. Eurodad promotes such a framework as part of a proposal for a UN convention on sovereign debt. As Debt for Climate we could consider whether we expect this reform of the international economic order is worthwhile to pursue or whether we see more potential in the other pathways.
Audit & repudiation
Another pathway is to assess the legitimacy of debt contracts via a debt audit and then repudiating (e.g. refusing to pay) the illegitimate debts (that are found with the debt audit). This process, which leads to more transparency and accountability, requires an in-depth analysis (debt audit) of each specific debt contract of a single country. Looking into how the debt contract was created and how the money has been used. The Committee for the Abolition of Illegitimate Debt (CADTM) proposes debt audits with citizen participation as part of their strategy. Whether there is potential for a large-scale initiative where multiple Global South countries do this at the same time requires further investigation. The threat of repudiation by doing a debt audit is a possible pathway to debt cancellation as it exerts pressure on the creditors to seek for compromises. This pathway is less of a structural solution to the debt crisis as compared to the one before, but will still force creditors to take responsibility for the handing out of bad loans.
Hegemonic debt cancellation
Many of the people I interviewed were talking about the IMF and the World Bank as possible organisations that could take the lead in achieving debt cancellation. These institutions have a lot of power and can more easily convince countries and other creditors to join an initiative. However, interviewees also mentioned that these institutions are far from willing to cancel debts, let alone support unconditional debt cancellation. As with the two previous pathways, the US and UK should be on board when debt is cancelled through this pathway, because over 95 percent of sovereign bonds fall under their legal system. The role of China would also be significant as they have become a big lender over the last decades. Through the research, I found that these organisations will probably only start considering total Global South debt cancellation in a scenario where the debt crisis gets completely out of control and even in this case they will only conditionally cancel debt. We can learn from the HIPC initiative, that a hegemonic debt cancellation initiative will probably not change the balance of power. There is a big risk that the cancellation of debt will be used to create more policies that benefit Global North capitalists. So it will be difficult to get debt cancellation via this pathway and at the same time move towards true self-determination.
Global South default
A collaborative default, such as Thomas Sankara proposed in 1987, is another pathway that could lead to debt cancellation. When doing this and demanding a payment of a climate debt as well as demanding reparations for colonialism (both historically and the ways it is present today) this collaborative default holds the potential to start acknowledging these injustices. For this pathway it is essential that Global South nations form an alliance, to overcome the risks of doing it as a single country. A collaborative default could potentially create ways to support each other when there is less access to financial markets as well as increase the pressure to force creditor states to the negotiation table. This option breaks with the current power balance, and therefore its consequences are hardest to predict. However, by forming a united front against debt, Global South countries could form a powerful alliance that protects their self-determination.
What’s next?
I think it is difficult for me to say how this information should be used in the Debt for Climate campaign. So I thought I would just write down a few questions that I think are important or interesting for people organising with debt for climate to consider.
Can we use this research to improve the strategy of Debt for Climate?
Are there lessons from the Jubilee 2000 campaign that we are risking to learn again?
How do we integrate that debt cancellation should be part of broader transformations towards self-determination and a just transition?
Which of the pathways do we hope (most) that will succeed?
Are the things we are doing now in line with achieving debt cancellation via that pathway?
Where lie the strengths of our movement and how does this relate to our role in the broader web of tactics that are being employed for working towards debt and climate justice?
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