December 2004

Sarah Anderson
Global Economy Program
Institute for Policy Studies

"Debt Boomerang" Report Documents the Impacts of Impoverished Country Debts on the United States

Debt Cancellation Abroad Would Benefit American Jobs, Environment, Health, and Security

Financial leaders gathering at the World Bank and International Monetary Fund on April 22-23 have an opportunity to build on the momentum of last year's G-8 debt agreement by extending debt cancellation to the 50 or so other countries that are also drowning in unmanageable debts.

According to "Debt Boomerang 2006," a new report by the Institute for Policy Studies, this would be both the right thing to do and in the interest of people in the United States.

While the impacts of these debts are most direct and life-threatening in the Global South, they also boomerang back to the United States, costing jobs, undermining health and security, and contributing to global warming.

A summary of key findings is below.
For a full copy of the 40-page report:
http://www.ips-dc.org/boomerang/DB2006.pdf

IPS's Debt Boomerang research is part of a collaborative project with other allied organizations to raise awareness of the impacts of impoverished country debts on the United States. Our goal is to mobilize broader support for debt cancellation among the general public and local elected officials. Some of our key partners in this work include: 50 Years is Enough, Africa Action, Enlaces America, the Ethiopian Community
Development Council, and Jubilee USA.

For toolkits, a sample city council resolution, and other "Debt Boomerang" materials: http://www.ips-dc.org/boomerang/index.htm

Key Findings of "Debt Boomerang 2006":

IMPACTS OF IMPOVERISHED COUNTRY DEBTS JOBS
On Impoverished Countries
Manufacturing wages dropped in 69% of heavily indebted countries in the 1990s, compared to only 35% of other low- and middle-income countries.
The World Bank and IMF routinely require debtor countries to limit pay for government employees and to "privatize" state enterprises, which results in mass layoffs.

On the United States
Declining wages in heavily indebted countries boomerang back to Americans through increased competition with cheap imports and job loss to lower wage countries. The burden of debt also means less money to buy U.S.-made products. Heavily indebted countries' share of U.S. exports dropped from 11.1% in 1980 to 7.7% in 2003.

HEALTH
On Impoverished Countries
Nearly 70% of heavily indebted countries spent more on debt interest payments than on public health in 2002. Systematic under-investment in health has crippled their ability to respond to the AIDS epidemic that killed 2.2 million sub-Saharan Africans in 2003, to fight diseases like tuberculosis and malaria, and to provide routine preventive care. A severe "brain drain" of frustrated health professionals is one more link in a vicious cycle that incapacitates impoverished country health systems.

On the United States
U.S. taxpayers contribute several billion dollars per year to help heavily indebted governments fight diseases. This aid is vital, but the problems are still severe, and sometimes boomerang back. There were 15,000 new tuberculosis cases in the US in 2003, and more than 1,000 Americans per year contract malaria in developing countries. Weak health infrastructure in impoverished countries also increases the odds that diseases like avian flu will spread to the United States.
GLOBAL WARMING
On Impoverished Countries
Extreme debt burdens pressure governments to exploit resources for export. Heavily indebted countries make up 15 of the top 20 deforesters. Climate change is already damaging agriculture and contributing to the spread of disease.

On the United States
The US needs to change its own energy practices to reduce climate change, which is causing more intense storms like Katrina. But our response should also include debt cancellation to allow poor countries more flexibility in handling their resources.

GLOBAL INSECURITY
On Impoverished Countries
Heavy debts make it more difficult for governments to prevent and recover from war and conflict. They also make it harder to afford a social safety net, leaving the poorest more vulnerable to criminals, from traffickers to terrorists.

On the United States
Debt-linked poverty doesn't always lead to violence. But, combined with other factors, it can create more fertile recruiting grounds for terrorists and other criminals who often operate across borders.

IMMIGRATION
On Impoverished Countries
Millions of people in heavily indebted countries lack the rights to access to adequate housing and income that would allow them to stay in their home country. Those who wind up as undocumented workers in the US are vulnerable to employer abuse and painful separation from family.

On the United States
The U.S. government response to immigration pressures has created a negative boomerang effect. As much as $3 billion has been spent annually on anti-immigrant measures -- 3 times what was spent on U.S. vocational education and workplace health and safety.

"Debt Boomerang 2006" is based on a sample of 77 countries that owe a combined total of $1.25 trillion to rich governments and institutions like the World Bank and International Monetary Fund. Sixty-seven of them need debt cancellation to achieve the UN Millennium Development
Goals, while the other ten are saddled with "odious" debts accumulated under dictatorships. Included in the sample are the 17 countries that, under a 2005 G-8 agreement, are scheduled to receive cancellation of debts to the International Monetary Fund, World Bank, and African Development Bank in 2006.

The Institute for Policy Studies is an independent center for research linked to activism founded in Washington, DC in 1963. For more information on IPS, see: http://www.ips-dc.org.

For a full copy of the 40-page "Debt Boomerang 2006" report:
http://www.ips-dc.org/boomerang/DB2006.pdf