I was on the fence on this one for a while – we are talking about wiping (or not) $40 billion of debt owed by 18 of the world's poorest countries. Both options have very real effects on people who have little input in decision making since most of these states lack fair representative governments. Thus, on the one hand, if debts are forgiven the countries may or may not invest in programs that alleviate poverty, and the other hand, if the debts remain these countries will most likely not invest in the said programs. Therefore, I am willing to bet on the slim chance that money saved via debt relief will be put into good use. A good example given in the text is that of Tanzania, where freed up monies were used to fund educational programs that enabled about 1.5 million kids attend school.
Nevertheless, I think the notion that debt relief is an economic necessity and an obligation of humanity is correct. To begin with, current governments that qualify as a Highly Indebted Poor Country (HIPC) may have played little or no role in spiking their country’s debt; it may have been the work of dictators who were accountable to no one as they engaged in shady deals on shoddy projects.
Some argue, however, that foreign aid to Least Developed Countries (LDCs) is better than debt relief as it has a more direct effect on various socio-economic programs that improve living conditions. I disagree with this theory. I think that foreign aid is essentially “liquid cash” that is prone to abuse and mismanagement. And most of these countries employ extremely inefficient methods in raising taxes/tariffs. Furthermore, the little that is raised is often lost in the bureaucratic machinery. Therefore, in order to balance their budgets, most LDCs have become dependent on foreign aid. Foreign aid has been tried and yielded mediocre results; HIPC program is relatively new which might be just what LDCs need.
NOTE:
Except where noted, the ideas in this article are adopted from a course text book (below) for general discussion purposes.
Rourke, T. John. 2008. International Politics on the World Stage. 12th ed. New York: McGraw-Hill.
Hi Moses,
ReplyDeleteI couldn't agree more with your assessment. Foreign aid is not a solution at all. I think a "conditional" debt relief program for impoverished nations is by far the best option. I think foreign aid has had dismal results in Africa and elsewhere. Most of the foreign aid money never gets to the social programs needed by the impoverished population of third world countries. Crooked politicians get a hold of the money, and there is no accountability. A conditional debit relief program, however, means that governments will not be getting extra money, and their loans will be forgiven as long as they use the savings towards social programs. There will always be corruption, and ways to get around it, (i.e. the possibility of using the savings to benefit a few crooked politicians). However, by not injecting new money, I believe governments will be more willing to comply. There is not an easy solution to this.