The debts owed by third world countries to first world a countries a major sourceof theirpoverty. Most of these countries have debt that was incurred by colonial governments, and then later by corrupt regimes. Not only were these governments undemocratic, but many of them benefited the same Western countries that now want to be repaid.
Furthermore, the entire debt of the third world is only $2.1 trillion. This might seem like a large sum (well, I suppose it is), but it is dwarfed by the amount given to the largest banks during the Wall Street bailouts. Forgiving even half of this would greatly help the world’s poorest, those who lack the even the most basic things in life. In doing so, it would also create the opportunity for the development of more robust social structures, preventing the kinds of horrors we’ve come to associate with the third world.
That’s why I’ve phrased the debate question in the negative. Of course, those who differ may proffer alternative positions, but given the history it is difficult to see how any moral argument could be made for not doing so. (There’s also room for pragmatic considerations, but the credit-based consumer glut that’s been created in the U.S. necessitates consumption by people in other countries.)
It creates a moral hazard. If the countries that the money is given to know that that they never have to pay it back, then they’re likely to waste the money rather than invest it in projects that will become profitable, and they’ll become stuck in a cycle of dependency on foreign aid and never raise themselves out of poverty.
Where do you figure the amount “given” to wall st. banks? TARP was something like 600B and it was not “given”, it was exchanged for shares of preferred stock.
600B is much less than 2.1T. To “dwarf” 2.1T it would have had to be about 10 trillion or so. Not even close.
Many banks have already bought back the preferred stock from the gov’t and the gov’t has actually earned a profit on the interest and conversion options which were sold. The government could lose hundreds of billions on fannie and freddie, but it has selfish reasons for propping them up. Their debt is owned by other financial institutions and if that goes under then the country could enter a depression. Besdies, Fannie and Freddie took on a lot of their junk mortgages at the insistence of the gov’t who thought it only “fair” that poor people should buy homes even if they couldn’t afford it.
I would be in favor of “forgiving” it for countries that absolutely couldn’t pay if we could somehow guarantee that we would never give or loan any money again. But that seems unlikely.
So, your argument is pragmatic, not moral. Fair enough. But many in these countries don’t even want the IMF loans because they are aware of the strings that are attached; in other words, they would rather have no financial support and be able to manage their own affairs, than have onerous debt and the required “restructuring.” That’s the argument from democracy.
The other reason is that this very debt is a significant cause of their poverty. I’m sure there are gradations of policies that can be entertained, such as partial relief and jettisoning the privatization requirements–it’s not all or nothing matter policy-wise. But, as I said, there is no moral justification for this.
Because people invest private money into these countries. I do, for one. I buy ETFs that have exposure to “Emerging World” sectors. This injects capital into their economies so they can start businesses that hopefully (for us both) flourish.
You may call it “forgiving debt”, but it’s really “defaulting on debt”. Do you know what happens when countries default on their loans? No one wants to loan them money anymore. It’s the same as if you or I declare bankruptcy. We can’t get loans anymore because no one trusts us to pay it back. Forgiving a country’s debt stings its “credit rating” in the same bad way.
No private loans= no new businesses = no climb out of poverty. See?
In the U.S., if John borrows a loan from the bank, and then becomes bankrupt, he can file for Chapter 11 and have the debt cancelled.
The position of the IMF and World Bank seems to be that if Bob borrows money in John’s name, uses for his ends, and then leaves John bankrupt, John is still on the hook for the money.
That’s the essence of the situation, distilled to a mundane example.
The white rulers took out loans before handing over the government to the entire populace. There was no democracy at that time, so the people never chose the loans, but the country is currently on the hook for them.
That’s just the full size of exposure the gov’t taken on to help support the banks, its not “money given to the banks” in any meaningful sense.
I think you need to use an actual example, and maybe it’ll be more convincing. What specific country took out loans
I’m actually not totally unsympathetic to your point of view, if the IMF loaned 100 billion to the Dictator of Berzerkistan, and he pocketed it and ran, then you might have a decent argument. After all, the IMF does have some responsibility to make sure the money its dolling out isn’t just going to enrich a couple corrupt dictators or buy him some attack helecopters so he can mow down the local peasents, and if they didn’t do that, then I think there’s a decent argument that the new gov’t of the country shouldn’t be held responsible.
But the OP as posted is too vague. All debt to all third world countries didn’t happen like that, I think you need to give a specific example of debt A to country B where the case seems strongest that it should be forgiven, and we can discuss that.
You mean because women didn’t yet have the right to vote? I suppose that could be argued.
But in this case, there is also a coinciding of race and class that make the situation different. Blacks did not receive the full benefits of the labor during apartheid, yet they now have to pay back the loans that benefited only the white minority. And, the agreements reached during the changeover preclude them from instituting policies that could remedy the economic aftermath of the institutional racism.
But, again, the situation is somewhat different because the U.S. has no such debts, and certainly none that demand that our government conduct itself in a specific way. And, the fact that South Africa had a majority that was ruled by a minority, not the other way around.
Right, but the debt is owed by the country, not the particular government. The money was still borrowed by South Africa. If the government at the time chose to use that money to only benefit a minority of the people, that’s not the fault of the lenders. If the South African government in 1950, say, found a new diamond mine, mined and sold all the diamonds in it off and then used the money to benefit only the whites, then when the government became black controlled, that doesn’t mean that the diamonds should be given back to the new South African government.