Extract from Eureka Street
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- Vol 35 No 16
- How Pope Francis tried to rewrite the rules of the global economy
- Bruce Duncan
- 11 August 2025
In recent years, Francis had become increasingly distressed by the failure of the Sustainable Development Goals (SDGs), adopted by world governments at the UN General Assembly in 2015. Rather than reducing hunger and poverty in developing nations, economic hardship has been rising sharply — even in wealthier countries — undermining social cohesion and threatening political stability.
He had personally experienced the devastating economic collapse of Argentina in 2002 when it defaulted on debt of US$100 billion, the largest sovereign debt default in history till that time. The savage effects of the austerity programs imposed by the International Monetary Fund (IMF) plunged half the population into poverty, followed by the rapacious plundering by ‘vulture funds’.
As Archbishop of Buenos Aires from 1998 and a Cardinal from 2001, Bergoglio’s involvement with the Latin American Bishops Conference alerted him sharply to wider social and economic issues across the continent. He supervised the writing of the stunning Aparecida Document in 2007 denouncing poverty and injustice, and pledging the Church’s strong support for marginalised and Indigenous peoples.
Since becoming Pope in 2013, Francis followed in the social activist footsteps of his predecessors, combining a grandfatherly, folksy manner with powerful, punchy rhetoric and vivid images and analogies, like urging the Church to be a ‘field hospital’ for the wounded, and not a museum.
Francis build a coalition for economic reform
A remarkably cooperative relationship developed between Pope Francis and the Pontifical Academy of Social Sciences (PASS) and the Pontifical Academy for Sciences (PAS) as he searched for people with deep expertise in social, economic and environmental areas to guide him and the Church in response to pressing global issues.
Within ten months of his election, Francis released his first encyclical, Evangelii Gaudium, developing many themes of the Aparecida Document (the final statement of the 2007 Latin American Episcopal Conference, which called for a missionary, socially engaged Church that stands with the poor) but also drawing from other Vatican resources, notably the two Pontifical Academies. These groups played important roles in advising the Vatican, including in 2000 for the Great Jubilee, with close coordination in support of the UN Millennium Development Goals (MDGs) and the Highly Indebted Poor Countries (HIPC) Initiative launched by the World Bank and IMF in 1996 to reduce the debt of the poorest countries. Those programs helped some 35 countries successfully manage their debt and greatly improved living conditions for many millions of people.
Among Francis’s trusted advisers was Professor Jeffrey Sachs, coordinator of the MDGs, director of Columbia University’s Center for Sustainable Development and president of the UN Sustainable Development Solutions Network. Sachs was also special adviser to UN Secretary-General Ban Ki-moon to help promote the proposed SDGs. He had advised the Vatican for over three decades, dating back to John Paul II’s 1991 encyclical Centesimus Annus, and spoke at the Amazon Synod in 2019 (Sachs was appointed a member of Pontifical Academy of Social Sciences on 25 October 2021).
Another distinguished economist was Nobel Prize laureate Professor Joseph E. Stiglitz, who had been senior vice-president and chief economist at the World Bank from 1997 to 2000, and lead author of the 1995 Intergovernmental Panel on Climate Change. His many publications analysed the distortions caused by ‘market fundamentalism’ or neoliberalism, the power of special interest groups and transnationals, and the rapid growth in inequality. In his 2015 book The Great Divide: Unequal Societies and What We Can Do About Them the ‘the top 1 per cent of the world now owned nearly half the world’s wealth’. He deplored the collapse of moral values in banking and finance sectors especially.
These and other members of the Pontifical Academies worked diligently with wider networks, supplying the professional expertise for Pope Francis to sharpen his moral case to all people of goodwill about the multiple crises facing us. Particularly valuable was the involvement of one of the world’s top experts on climate, Professor Hans Schellnhuber, director of the Potsdam Institute for Climate Impact Research and a member of the Intergovernmental Panel on Climate Change.
Francis kept a close eye on the drafting process for a new encyclical, and some two hundred people were consulted. Laudato Si’: On Care for Our Common Home was launched in Rome on 18 June 2015, the landmark encyclical urging ‘for a new dialogue about how we are shaping the future of our planet’ (LS 14) and strongly attacked massive injustice and inequality resulting from the dominant economic system. It called us to listen to ‘the cry of the Earth and the cry of the poor’ (LS 49). There was enormous international interest in the encyclical, which not only focused the moral authority of the Catholic Church on the issues, but inspired many other churches and religious traditions to follow suit with similar documents.
Francis took his critique of the global economic system to the United States Senate and to a packed session of the UN General Assembly on 25 September 2015, where he urged greater efforts to reduce inequality and address the threat from climate change. He strongly endorsed the SDGs, asking wealthier nations to provide more substantial financial support. After his address, representatives of the 193 member states voted to approve the document Transforming Our World: the 2030 Agenda for Sustainable Development, and committed to implementing the Goals in an unprecedented global effort. Sachs later acknowledged that Francis also had a ‘huge role to play’ in the successful outcome of the Paris Climate Summit that December.
This intensive cooperation between scientists, economists, political networks and the Vatican, along with people of other religions, challenged all of us about how to transform our economies and societies so all can perhaps more modestly live a fulfilling life.
Yet despite the extensive international efforts to protect the environment, alleviate poverty and hunger, and reduce global warming, global progress was slipping on addressing climate change. The combined blows of economic crises, the COVID-19 pandemic, entrenched fossil fuel interests, geopolitical instability, and waning US leadership have pushed the world off course on both climate action and the Sustainable Development Goals.
What is to be done?
Pope Francis never stopped lobbying and advocating about the threats to the wellbeing of people and planet, and perhaps realising that his time was short, on 5 June 2024 asked the PASS experts to map out how to reform global economic systems and institutions. Stiglitz and his colleague Professor Martin Guzman (former Minister of Economy in Argentina) formed a Commission of Experts to sketch what needed to be done to reform the economic system. Stiglitz and Guzman were also co-presidents of the Institute for Policy Development at Columbia University. Stiglitz chaired the Jubilee Commission, which had more than 30 economists and specialists involved.
The Commission first met on 21 February 2025 at Columbia Business School in New York and on later occasions. Stiglitz and Guzman led the writing of their document, which was launched in the Vatican on 20 June 2025 as The Jubilee Report: A Blueprint for Tackling the Debt and Development Crises and Creating the Financial Foundations for a Sustainable People-Centred Global Economy. It offered a stringent critique of the global economy, declaring that ‘debt-distressed countries are sacrificing investments in education, healthcare, infrastructure and climate resilience’ to repay creditors, resulting in rising poverty, malnutrition and deepening social fractures.
The Report was relatively short at less than 16,000 words, marking ‘the first step in a broader initiative’ to stimulate wider public support to resolve current debt crises and galvanise efforts to achieve development goals. ‘It seeks to contribute to comprehensive rethinking of the global rules governing finance, taxation, trade, and the sharing of knowledge. At its heart lies a clear and urgent call to help build a global economy that serves people, especially the most vulnerable, and truly leaves no one behind.’
Instead of being implemented, the SDGs ‘are being repudiated by many governments in practice, and by some even in principle.’ Meanwhile in Africa, some 57 per cent of the population, ‘751 million people, including nearly 288 million in extreme poverty,’ live in countries that spend more on debt servicing than on education or healthcare. In the past decade, the average interest burdens on developing countries have almost doubled.
‘There is also a broader reason for the debt situation — the international community failed to address the flaws in the global financial architecture’ and to enable the international financial institutions (IFIs) ‘to take stronger measures to prevent and resolve these recurrent debt and development crises.’ (p. 3).
In addition, climate change is imposing a crushing burden on developing countries, even though largely the result of emissions from developed countries. ‘It is a profound injustice that those least responsible are now paying the highest price.’
The Jubilee Report noted that as part of the Millennium Jubilee of 2000, Pope John Paul II strongly supported debt relief for poorer countries and the HIPC Initiative, which resulted in large-scale debt reductions of some US$130 billion. But the current crises demonstrate that major reforms in the global financial system are again urgently needed.
The Report proposed ‘first, to offer practical and principled recommendations to address the current crisis’; second, to reimagine international financial architecture ‘capable of preventing future crises and enabling sustainable, inclusive development.’
It calls for ‘a new economic model centred on strengthening long-term investment’.
The ability of states to mobilise domestic resources has been undermined by international tax avoidance, illicit financial flows, the under-taxation of corporate profits—especially involving multinational firms—the unfair exploitation of extractive resources, and the heavy repatriation of dividends. Yet responsibility cannot lie solely with external actors. In many cases, domestic political and economic elites have also played a role—by failing to strengthen public institutions, by tolerating or enabling rent-seeking behaviour, and by avoiding reforms that could have built greater resilience and accountability.
The asymmetries between developing and developed countries ‘are not just economic; they are historical and political, preserved by an international order shaped by the most powerful and structured in ways that favour them.’ ‘The colonial era left behind economic structures geared toward the extraction and export of raw materials and heavy dependence on imported consumer goods.’
Countries relying on primary commodities are charged higher interest rates in international credit markets, further increasing risks of default and constraining investment. The high mobility of capital has destabilised many developing countries, with sudden movements in interest rates in richer countries and financial crises prompting sudden capital flight from the Global South.
The influence of market-driven ideology
The Report highlights that the ‘excesses of deregulation — especially capital account liberalisation — removed key tools that developing countries once used to manage volatile financial flows. From the 1980s onward, market-driven ideology encouraged governments to open their economies and borrow abroad in hopes of establishing credibility, gaining market access, and boosting investment.’
Despite their mission being to prevent collapse and support growth, IFIs ‘have repeatedly bailed out private creditors and imposed austerity on debtor countries to ensure repayment to creditors from advanced economies.’ IFIs have ‘systematically provided a de facto bailout for private creditors and are doing so now. Such bailouts encourage excessive lending and/or lending of the wrong kind’, contributing to the development crises. The global financial system is thus failing to meet the needs of developing countries. Nor does it protect them from external shocks, ‘global interest rate hikes, commodity price spikes, or climate-related disasters.’ ‘The current architecture has evolved primarily around the interests of creditors and not the needs of people or the planet.’
Sovereign debt crises
Given the huge imbalances of power, information and incentives, the Report calls for a new sovereign debt resolution mechanism, similar to what countries have for corporate bankruptcies.
Meanwhile, prevailing legal systems — notably those of England and the United States, the major jurisdictions for the issuance of government international bonds — permit specialised financial speculators, known as vulture funds, to purchase defaulted debt on secondary markets and sue for full repayment. This financial play turns a society’s suffering into a source of profit. Under current rules, a handful of speculators can effectively hold tens of millions of people hostage.
The Report also underlined the urgency of climate investment, since the consequences of climate change greatly increase hardship and undermine development. ‘Addressing this gap is not simply a question of distributive justice; it is also a matter of global economic efficiency and stability.’
Complicating the picture, major new creditors have emerged, often resulting in costly legal claims, as in the case of Philip Morris suing Uruguay for its anti-smoking legislation.
In the section on ‘Principles for resolving the debt crisis’, the authors recognise that there is ‘no one-size-fits-all’ solution, since the situation of debt-distressed countries varies, but they identified four inviolable core principles:
(a) No net transfers out of debt-distressed countries.
(b) No bailouts of private or bilateral creditors, since it is unjustifiable to use public funds in this way and distorts incentives to negotiate sustainable debt deals.
(c) Debt restructuring should be timely and ensure the debt is sustainable, lest it result in greater debts later.
(d) Restructuring should ensure all creditors are treated equally and not favour private creditors.
The authors insist that bailouts can worsen a country’s situation by delaying restructuring and providing perverse incentives for the private sector. The IMF may also have ‘contributed to the problem of perverse capital flows.’ There ‘should be a “no bailout from international financial institutions” condition, especially for the IMF.’ ‘Instead of providing bailouts, the IMF should signal clearly that it will support only those country programs in which private creditors bear appropriate responsibility.’ Otherwise ‘there can be no hope of realigning global finance with the goals of development and economic stability.’
The new debt crisis
To address challenges of debt reduction today will require objectives like those of the 1996 HIPC Initiative. However, the sober reality is that many debt-distressed countries will likely ‘not regain access to international capital markets at sustainable rates for years.’ Accordingly, the Report urged ‘in most cases maturities should be extended by at least 20 years’ to allow time for recovery. This makes ‘official “bridge” financing even more imperative—and the contributions of the richer countries.’
The authors strongly oppose austerity policies, which ‘almost never’ work in attempts to reduce debt. Instead, they argue for increased growth in GDP consistent with the SDGs. ‘The principles laid out in this section reflect a broader moral imperative: to place the well-being of people and the planet above short-term financial gain.’
The authors acknowledge that ‘Debt-for-nature swaps can be a valuable tool’ but should not ‘divert scarce resources from urgent needs like poverty reduction or investments in infrastructure... Above all, these agreements must be transparent and aligned with national development strategies. Importantly, debt-for-nature swaps are not substitutes for restructurings of unsustainable debts.’ To ‘reduce the risk of politically motivated and short-term lending that often leads to debt crises’, the Report recommends that lending/borrowing and debt restructurings be transparent with broad societal support, including of national legislatures.
Regulating capital flows
A ‘fundamental source of the dysfunction of global debt markets’ is that capital moves procyclically to developing countries, but countercyclically to developed ones, forcing poor countries to bear the risk burden of global shocks. The Commission did not find any simple solution to this fundamental problem. The Report argues that reforms must include broader ‘structural changes in global financial markets’ with regulations governing capital flows. Countries ‘have the right, and indeed the responsibility’ to regulate capital flows.
‘The most important reform would be the creation of an international bankruptcy court, akin to the bankruptcy court in most countries, for adjudicating fair and efficient debt resolution.’ The authors warn that it ‘will be extremely difficult’ to insulate governance ‘from the dynamics of power.’ However, ‘an international mediation service could be created based on the United Nations Basic Principles on Sovereign Debt Restructuring Processes approved by the UN General Assembly in 2015’. (p. 15).
The Report cautioned that credit rating agencies (CRAs) have performed badly and contributed to the 2008 US financial crisis, but still have enormous influence. ‘Conflicts of interest abound, perhaps contributing to CRA’s poor performance and perhaps explaining the accusations of fraud that were levelled against them in the 2008 US financial crisis.’ (p. 16). ‘In spite of complaints against the CRAs for decades, little has been done. But one partial remedy is the creation of a global public credit rating bureau and legislative reforms that allow this public rating body to serve as a substitute for the private rating.’
Reforming the IMF and Special Drawing Rights
IMF-supported programs have often emphasised reducing imports and imposing fiscal austerity in times of recession. ‘Such policies exacerbate poverty, stall climate action, and erode social trust.’ The IMF has also ‘often imposed unacceptably high interest rates on those countries most in need of help’.
The Report strongly recommended that the IMF create more Special Drawing Rights (SDRs), ‘a global reserve asset that works as a form of financing.’ Regularly issuing additional SDRs ‘could simultaneously promote development, help address climate change, and strengthen global aggregate demand and macroeconomic stability.’ But SDRs need ‘significant reform’, since ‘allocations are tied to IMF quotas, meaning that the lion’s share goes to advanced economies that need them least.’ ‘A coalition of the willing could create a new monetary fund that could issue its own SDRs’ to support global public goods.
In the lead-up to the 4th International Conference on Financing for Development, the Government of Spain proposed the creation of a Multilateral Support Fund to reduce unsustainable debts—a trust fund at an IFI, backed by SDRs, to facilitate debt buybacks. This initiative, a ‘Jubilee Fund’, represents a promising step toward addressing the current crises.
Multilateral development banks
The Report argues that the multilateral lending system ‘must be profoundly reformed’, by ‘reimagining the structure, incentives and governance of multilateral finance to ensure it truly serves people and the planet.’ To do this, the Multilateral Development Banks (MDBs) will need increased capital contributions from shareholder countries, especially the richest. The Report also proposed creating a global climate fund to help countries particularly vulnerable to climate change, and a further fund to help stabilise commodity markets.
The authors believe the MDBs remain the most helpful forms of development finance, along with the IMF with its preferred creditor status. (p. 7). But lack of political will and other concerns have forced MDBs to rely on private capital markets. The Report urges that governments should remain the primary source of funds to MDBs. Nevertheless, private capital markets have effectively helped fund regional development banks at low interest rates. ‘Multilateral lenders, especially MDBs, should become pillars of a reimagined global financial safety net, providing stable, long-term, countercyclical finance to developing economies.’
Echoing the views of London economist Professor Mariana Mazzucato, the Report urges that MDBs adopt ‘a mission-oriented approach, proactively supporting countries and regions that pursue clear, strategic development goals.’ ‘Public finance should be transformative. That requires embedding directionality into MDB operations: using debt, public investment, and concessional finance to drive long-term missions such as decarbonisation, health equity, or digital inclusion.’ The objective is not just to increase GDP ‘but to grow with purpose: to sustainably increase the wellbeing of all citizens.’
Vulture funds
The Report especially targets vulture funds. ‘One of the most harmful distortions in sovereign debt markets is the practice of predatory litigation by so-called vulture funds—specialised financial actors that purchase distressed sovereign debt on secondary markets at deep discounts with the intent of litigating for full repayment.’
It argues that legal systems are constraining equitable and timely debt relief, especially in ‘creditor countries—particularly in New York State and England, where the majority of sovereign bonds from developing countries are issued.’ ‘Statutes should be introduced or amended to limit the ability of vulture funds to recover windfall profits from distressed debt, especially in cases where good-faith restructuring efforts are underway.’
The Report recommends that developing countries use local currency and deepen their own capital markets, especially by creating ‘an IMF or MDB facility designed to purchase or lend against the local currency debt of developing countries in distress.’ Such measures ‘could reduce currency depreciation and capital flight.’
‘Continuing to pay unsustainable debts may appear to avoid conflict in the short term, but it is, in reality, the worst of all possible paths. It perpetuates stagnation, erodes public trust, and destroys the hope that debt resolution should help to restore. It simply kicks the can down the road’, leading to ‘deeper economic and social crises’.
The Report called urgently for a coalition of the willing to help ‘reform the entire architecture of the global economy and the systems that shape opportunity and distribute risk across the world: the rules for taxation, for trade, and for the creation and diffusion of knowledge.’ ‘In this Jubilee year we ask the world to extend a hand to the people of countries in distress... It is time for a HIPC II.’
The Report was also supported by the Grand Imam of Al Azhar, Ahmed Al-Tayyeb, recognising that we are all in this together.
Surprisingly, the Report does not consider cooperatives, which occupy such a giant place in the history of Catholic and other social movements, most notably the Mondragon cooperatives in Spain, along with tens of thousands of large and small cooperatives around the world. One might also have expected some attention to the European ‘civic economy’ tradition espoused by Professor Luigino Bruni (Lumsa University, Rome) and Professor Stefano Zamagni from the University of Bologna. Zamagni was president of PASS from 2019 to 2023 when Sr Helen Alford O.P. took on that role. And what we can learn from Islamic finance and banking, which forbid taking interest on loans? As David James pointed out in his recent Eureka Street article, the Report does not consider the role of equity capital markets to share risk and profits as an alternative to current debt markets.
However, the Jubilee Report condenses an enormous amount of research and expertise into immediate practical steps that the world can take to build better economic systems that can carry us through these crisis years to a more promising future for coming generations. I imagine Pope Francis would see it as a new beginning, shining a light for the way ahead.
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