“Proclaim liberty throughout the lands and to all the inhabitants thereof, it shall be a jubilee for you.” – Leviticus 25:10. In the Judaic tradition, during the Jubilee year, debts were forgiven and land that had been sold to repay debts was returned to the original owners. “What was sold shall remain with the purchaser until the year of jubilee; in the jubilee, it shall be released, and the property shall be returned.” – Leviticus 25:28. In both Judeo-Christian and non-Biblical traditions, there has been an understanding that forgiveness of debt, when that debt becomes so onerous that one cannot ever get from under it, is both fair and practical.
Julius Nyerere, former President of Tanzania, asks, “Must we starve our children to pay our debts?” As Jubilee USA Network notes: “In the world’s most impoverished nations, the majority of the populations do not have access to clean water, adequate housing, or basic health care. These countries are paying debt service to wealthy nations and institutions at the expense of providing these basic services to their citizens. The United Nations Development Program estimated in 2003 that 30,000 children die each day due to preventable diseases. Debt service payments take resources that impoverished countries could use to cure preventable diseases. Debt cancellation frees up resources to reverse this devastating reality.” And, in many cases, the debt has already been paid, or would have, had the interest rates been reasonable.
The primary argument against debt jubilee is the notion of moral hazard; i.e., “situation where the behavior of one party may change to the detriment of another after the transaction has taken place.” People who enter into contracts should fulfill contracts, lest others be tempted to renege as well. Too often though, the original loan was consummated without the borrower having all the information. Or that the borrower is a nation that generated debt under a previous regime. This writer submits that when debt is essentially fraudulent, then debt forgiveness is both the logical and the only remedy.
People of the Christian faith often ask God to “forgive us our debts as we forgive our debtors.” To me, that suggests that the way to show God’s love involves showing much more compassion than many financial institutions have shown to their customers. The United Church of Christ, for one, “has joined with other faith communities and organizations to call on governments to cancel the debts of poor countries and restore just economic relations between nations.”
Many US householders understand this concept on a micro-level. They buy a house, lose their job, and, instead of the banks agreeing to negotiate interest rates with the borrowers, the lenders choose to foreclose. And this mass seizure of homes has forced cities such as Cleveland, Ohio to raze some of its housing stock, since banks, by their nature, are ill-equipped to actually protect and take care of the buildings in their ownership. How much more reasonable and mutually beneficial it would have been if money lenders had been able to agree on a lower interest rate with homeowners,as some of the largest banks have finally been forced to do.
The business magazine Forbes asked last year if a debt jubilee might help kick start the American economy. As any good accountant will tell you, debt or credit which cannot be paid back is never an asset; it is always a liability.