The Vultures Are Gathering Once Again

Early in 2010 the anti-poverty movement scored a remarkable victory. Led by the Jubilee Debt Campaign a coalition of charities, faith groups and NGOs persuaded parliament to pass legislation preventing so called vulture funds from perusing 'heavily indebted poor countries' through the British courts.

What these vulture funds were doing was breathtakingly cruel. They would approach a country or company that was sitting on a 'third world debt', usually a debt inured in the 1970s when interest rates were sky high, to 'buy' the debt at a bargain price (usually 10% of it's face value). It may seem strange today but at that time there was so much money sloshing around in the West that rich countries used heavy-handed tactics to sell loans to the rulers of poor, often corrupt countries. However these loans were not to provide health or education programmes for the poor but for worthless status symbols or other large scale projects with no lasting benefit for the population. With ever-increasing interest rates it became impossible for these poor countries to keep up their repayments and the debts escalated at an amazing rate, even though they were paying vastly more in interest payments than they were receiving in aid.

Forty years later those corrupt or misguided rulers are long gone but their people suffer the consequences for debts that they had no part in, indeed most had not even been born. If a corporation can't repay its debts it goes bankrupt but a country can't do that so these gigantic debts remained payable by people who played no part in their creation. A major campaign in the 90's exposed this situation and, to their credit, many Western countries forgave the most heavily indebted countries their debts. However, some un-payable debts remained on the books of creditor countries and although there was no prospect of them being repaid they remained a technical asset - which is where the vulture funds came in.

If somebody owes you £1,000 which you know you will never see and somebody else comes along and offers you £100 to 'buy' the debt you will probably accept the offer and think yourself lucky that you have recovered £100 of the debt. This is exactly what the vulture funds did. They bought up poor country debt at a tiny fraction of its book value and then sued that country for the full amount. If they were successful their 'profit' could be over 1,000%! It is hard to think of anything more obscene but it was happening in Britain – until the law was changed to make it illegal for court action to be taken against the Highly Indebted Poor Countries (HIPC). The mentality or 'worldview' which countenances this practice also thinks it perfectly reasonable to pay a bonus of £1m to a man who already receives an excessive salary. The same mentality tells priests that they shouldn't meddle in politics but stick to religion! But three of the world's religions (Judaism, Islam and Christianity) already have a tradition of debt forgiveness through their common scriptures and the jubilee Debt Campaign united faith groups, atheists, and humanist to put an end to this pernicious practice.

But now it seems the vulture funds have returned – this time they have Greece in their sights. According to the Quaker publication “The Friend” a number of funds have started buying up Greek debt. By refusing to agree to a write down these companies will receive either full payment from the Greek Government or the insurance money that results from a default. The Jubilee Debt Campaign warns that ‘the lives of millions of people’ could be ‘decided by a handful of super-rich speculators’. They call for broad debt cancellation and a crackdown on vulture funds. One battle has been won but the war is far from over.

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