Debt Relief

Forgiveness of debt would help rid poverty

Remember the UN millennium conference, when over 100 world leaders promised to halve poverty by the year 2015? At present progress it will take another 150 years to reach that noble target.

I recently spent some splendid time as a guest of the World Political Forum, the brainchild of ex-Soviet leader Mikhael Gorbachev, which brought together a number of major players from the 1980s.

Remember sunglasses-wearing Polish General Wojciech Jaruzelski, who made one of the most fateful phone calls in history, telling Mr. Gorbachev the election was a landslide loss? Mr. Gorbachev changed the world by saying, “accept the result.” The general complained that bureaucracy in Poland had trebled. Curious point to make by an ex-communist leader, I thought.

I felt as though I were a visitor locked in a newsreel of the 1980s – what was I doing with these ageing, fading, balding, overweight heroes and villains? Then I saw my reflection in the mirrored hall. I understood. I, too, have a great future behind me.

Mr. Gorbachev is a truly historic figure. He changed the world and is one of the best-known people in the world, respected and admired everywhere but Russia.

His place in history is assured but as with all politicians that’s never enough. Now he has assembled a star lineup to address the major issues facing the world. Poverty; despair, humiliation, desperation and the evil it does to individuals makes it the breeding ground for violence, true throughout history.

The world has got better since Mr. Gorbachev was Soviet leader. Eastern and central Europe is mainly free, Latin America, once completely dominated by dictators, is now democratic except for Cuba. Life expectancy has gone up by 20 years, and infant mortality down by two-thirds. Literacy has exploded.

However, there are clear exceptions despite much progress. There are unacceptable irregularities and injustices. The top 225 rich individuals have a total wealth equal to over half the world’s population.

That means each of them has assets equal to the wages of 30 million people. Four and a half billion people live on less than a dollar a day, 30,000-50,000 people die every day due to malnutrition, lack of access to clean water and health services. For 15 years, per capita GDP and annual income per inhabitant have decreased sharply in 54 countries, which together account for 12% of the world’s population.

Thirty years ago per capita income of sub-Saharan Africa was one sixteenth of that of OECD countries, while today that ratio is one-fortieth.

Debt hangs around poor countries’ necks like a noose. Much of this money was lent during the Cold War to prop up gangsters and criminals. Total developing country debt is nearly $3000 billion. Should a newly democratic country such as Kenya, Nigeria, even Brazil and Argentina, pay for commitments made by others?

Vietnam actually honoured debts and loans made by the government it overthrew after a devastating war. This raises an interesting question about debts in places like Iraq.

The great economist, John Maynard Keynes, stormed out of the Versailles Conference in 1919 to write his pamphlet warning of the economic consequences of peace, saying “Vengeance, I dare predict, will not limp.”

Perhaps we have learned. In 1876 the French and British seized Egypt to force loan repayments and German, Italian and British warships shelled Venezuelan ports to force loan payments in 1902. Programmes to reschedule and cancel loans have been on the global agenda for a decade.

A hated word among aid agencies is “conditionality.” That is, rules and agreements as to how extra income is used.

I disagree. If properly done through transparent trusts to manage grants and new incomes, this could satisfy both sides. No more excuses either from the west.

What else to do? The economies that have done the best are those that have introduced open trading systems, accountable politicians, professional, honest public service, clean tax, customs, police services, independent courts and property rights. No two democracies have ever gone to war and there has never been a famine in a democratic country. The wealthy countries need to live up to their own promises.

Development aid, despite promises for a generation of .7% of GDP, has actually dropped.

Opening agriculture trade would mean five times more for Africa than present aid donated by governments.

Remember the UN millennium conference, when over 100 world leaders promised to halve poverty by the year 2015? At present progress it will take another 150 years to reach that noble target.

The world is now so integrated, information so instantaneous, borders so porous, that everyone, everywhere, will pay a terrible price as desperate people seek desperate solutions if we fail. And failing we are.

The time-bomb ticks but it can be defused.

Mike Moore is former secretary general of the World trade Organisation.

Mike Moore, National Business Review (New Zealand), November 4, 2004

Categories: Debt Relief, Odious Debts

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