Parshat Re’eh – Radical Financial Reform

Parshat Re’eh introduces one of the most radical economic and social mandates of the Bible. We are commanded:

“Every seventh year you shall practice remission of debts. This shall be the nature of the remission: every creditor shall remit the due that he claims from his fellow; he shall not press his fellow or kinsman, for the remission proclaimed is of God.”[1]

This law appears to unfairly relieve the borrower of responsibility whereas the following verses specifically instruct us to lend wholeheartedly to those in need.[2] How can the Torah simultaneously encourage us to lend money and then cancel all debts?

Remission of debt is described in the Torah as “withdrawing one’s hand.”[3] Rabbi Yaakov Tzvi Mecklenburg explains this terminology:

“The word yad (hand) is added is because it symbolizes power, the upper “hand”, rulership and hegemony…because the lender is like the master of the borrower and his control is over him. [As it says in Proverbs[4]] “A borrower is the slave of the lender”.[5]

The commandment of shmitat kesafim, relinquishment of debts, attempts to recalibrate the balance of power. Shmitat kesafim circumvents the risk that persistent debt may become paralyzingly burdensome on individuals or even entire communities. The Torah envisions lending as type of aid to the borrower – indeed Rambam considers it the highest form of tzedakah.[6] When a debt becomes persistent and overburdening, it no longer fulfills its noble purpose and in such a case the Torah advocates shmita. Rav Hirsch emphasizes that borrowers are still duty bound to repay creditors if and when they can, the policy of shmita is designed to prevent the “hand” of the lender from gaining too much control over the life and livelihood of the borrower.[7]

Many Third World nations are victims of the paralyzing effects of debt servitude. Over decades these states have accrued billions of dollars in debt to wealthy countries, international financial institutions such as the World Bank and the IMF, and private lenders. Much of the debt is considered ‘unpayable debt,’ such that the governments do not have the resources to service the loans while providing for the basic needs of their citizens. To add insult to injury, much of the debt is also ‘odious debt’—loans taken out by corrupt and oppressive regimes such as South Africa’s Apartheid governments and former Congolese dictator Mobutu. In numerous countries in the developing world, citizens are now saddled with the debts of their former, and some cases current, oppressors.

Some debt reduction programs technically lower the amount of debt owed, but maintain the drastically lopsided power relationship between lender and borrower that shmitat kesafim intends to redress. Debt reduction by the IMF and World Bank usually comes with strings attached. Countries receiving reductions in their external debt must agree to undergo Structural Adjustment Programs (SAPs), lender imposed conditions aimed at reducing the borrowing country’s fiscal imbalances. SAPs may demand the privatization of state utilities such as water and electricity, trade liberalization, reducing government subsidies, or focusing economic output on exports such as commodity crops. Cutbacks, such as charging citizens for previously free programs, may improve the borrowing country’s balance sheet, yet at the same time hurt those who cannot afford to pay for basic services.

John Perkins, a former consultant involved in brokering large loans to developing countries, has alleged that the wealthy lending countries knew that the loans would never be repaid. Rather, their intention was to force indebted countries into granting access to resources, as well as political, military and economic cooperation.[8]

Fortunately, there has been some progress. Thanks in part to the work of the Make Poverty History and Jubilee campaigns, the past decade has seen the debts of some developing countries reduced. Since 2001, when the Tanzanian government began using its debt service savings to eliminate school fees, over 3 million new students have enrolled in schools.[9] Debt relief in Mozambique allowed 500,000 children to be vaccinated.[10]

The relinquishment of debts is not a utopian vision. Indeed, following the devastating earthquake World Bank canceled all outstanding debts owed to it by Haiti. Global financial powers, however, should not wait for exceptional circumstances: a perpetual but equally deadly toll is taken by human-induced long term poverty. It is long past seven years. Now is the time to call on our elected officials to support a shmitat kesafim, a genuine cancellation of debt which restores the independence and dignity of borrowers.


[1] Devarim 15:1-2
[2] Devarim 15:7
[3] Devarim 15:3
[4]  Mishlei 22:7 – The complete verse reads: “The rich rule over the poor, and the borrower is servant to the lender”
[5]  Haketav Vehakabbala on Devarim 15:2-3. R. Mecklenberg was a 19th Century Rabbi and biblical commentator
[6]  Rambam, Mishneh Torah, Hilchot Matanot Ani’im 10:7
[7]  Rabbi S. R. Hirsch on Devarim 15:2
[8]  See Perkins, John, Confessions of an Economic Hit Man, Plume, 2006
[9]  One, http://www.one.org/c/us/issue/186/
[10] Jubilee USA Network, http://www.jubileeusa.org/truth-about-debt/why-drop-the-debt.html