There has been much discussion about the effects of debt upon the “third” world; and how it should be handled. Here is my proposal:
-each debtor nation will have its current debt converted into “payment in kind”, that is, instead of cash, it will be paid in copper, tin, copra, sugar, or whatever it is capable of exporting.
-these commdities will be converted into cash by the central banks of the creditor nations, and the debt paid off by the central banks. The commodities will be sold on the world matkets, and the proceeds go back to the central banks.
-now, every debtor nation has its debt wiped out! Now the fun starts!
Who here believes that these nations will now start to experience economic growth, reduce poverty, extend lifespans? I think that 15-20 years after such a debt forgiveness, they (or most of them) would be back in the same shape they are today!
Would massive debt relief actually help the third world? I think their problems run deeper tha debt. :eek:
What you propose is essentially what the IMF and World Bank did in the 1980’s: Stipulate that, instead of growing food or produce which is useful domestically, debtor nations must turn to “cash crops” such as coffee to try and pay back the interest on the interest on the interest of the original debts.
It didn’t work. The debts are too big, and in some cases the measures made things worse by causing actual starvation. You can’t eat coffee.
Now I happen to agree that a one-off, never to be repeated amnesty might not be better than some other options, such as taking their money and spending it for them, in their own country, on [u[infrastructure, but it sure beats another year of twisting the debt knife ever deeper.
If these countries were corporations, they would have declared bankruptcy and had their slates wiped clean decades ago. Should we make employees pay for their company’s folly for the rest of their lives, or should we absolve those born in Third World countries of the debt of past governments?
At the risk of sounding flippant, you are describing a chicken as a fowl. I don’t see how this solution is one bit different from having the Third World nations sell the stuff themselves and pay their debts in cash.
As a matter of fact, it’s worse; you’re adding the administrative trouble of asking the central banks to now take ownership of various exported commodities and sell them, something you would expect they do not have divisions to handle, whereas the Third World nations already have an infrastructure to sell that stuff. You’re adding layers of complexity, but I don’t see how you’re adding any benefit.
Probably in some cases, yeah.
While the parallel does not exactly work, it’s obvious these countries need some form of bankruptcy protection.
As a firm believer (note that I use “believer” as in “belief”) in the classical dichotomy and monetary neutrality, I’d say you’re spot on. I don’t see how this is any different from having the countries convert their payments into gold bullion, or even forcing them to redesign their money so it looks prettier. And if anything, we’re actually creating pointless inefficiencies that will be detrimental to either the lendors or the countries in question (or both).
It is my firm, unshakeable belief that there are no quick fixes that permanently solve the problems of the least developed countries. The only true solution is, one way or the other, productivity in these countries must increase. Either by creating more goods or services, or by increasing the real value of the goods and services they currently produce. Obviously there are other problems, such as massive central government corrpuption, that also need to be dealt with. But there is only so much that can be done so long as production in these nations is so catastrophically low. Any solutions that do not directly or indirectly result in greater production are simply going to be of marginal benefit at best.