Thursday, Jun 21, 2018
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Debt forgiveness one step in easing global poverty

ADVOCATES of a frontal assault on world poverty achieved an important success last week when British Prime Minister Tony Blair succeeded in persuading President Bush that $40 billion of the external debt of 18 poor countries should be forgiven.

The matter is not completely on track yet in that the heads of state of the developed countries of the G-8 nations, who will meet in Gleneagles, Scotland, July 6-8, must still agree to the measure. At the same time, Mr. Bush was a hard sell and the most influential member of the G-8 and his agreement, backed by Mr. Blair s strong argument for taking the step, should make the matter a done deal.

There are lots of wrinkles in the current attempt to meet the problem of global poverty. Some of them are still far from being ironed out, even though debt forgiveness was very important and a very visible issue. What was occurring was that poor countries particularly those which were trying to get on the right track were spending huge chunks of their revenues to service their debts. At the very worst, poor countries were using money that they would otherwise have been spending on their schools and hospitals to pay the rich international institutions that held their debt.

It was unjust; it was also unwise in global terms if the overall intention was to raise the standard of living and the competitiveness of the countries of the world with weak economies.

But debt forgiveness is not all. Tony Blair would argue and George Bush would apparently not agree that another step that needs to be taken is a doubling of direct aid to African and other poor countries with struggling economies. Mr. Blair during his visit to Washington last week argued both for debt forgiveness and for a significant rise in U.S. aid to poor countries, especially in Africa. He got the debt forgiveness but no new commitments on aid. Mr. Bush points out that his administration has tripled U.S. aid to Africa, but it is a fact that it is a puny amount, a tiny fraction of the U.S. military budget and the cost of the tax cuts for the rich, for example.

Another area that needs work, particularly if the poor countries are to become self-sustaining, is for the United States, the European Union, and Japan to stop subsidizing their own agricultural production an area where some of the poor countries might eventually compete effectively, increasing their exports to the developed world, enabling them to pay their own bills.

Which brings us to another problem. The 18 countries whose debts are eligible for forgiveness are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia. Four are in Latin America; the other 14 are in Africa.

Some of these countries have had bad moments in recent years. A few of them are having bad moments right now. Bolivia is one case in point. Its government is in major turmoil as the second president in 20 months has just been ousted and masses of demonstrators are demanding that the country s oil and gas assets be nationalized.

The Ethiopian government s victory in May s elections is contested, 20 people have been killed in conflict in the capital, and the leader of the defeated opposition is currently locked up.

On the other hand, there is a decent argument that says that one of the reasons for the precariousness of some of the governments concerned is the high level of poverty, indebtedness, and other economic rot.

That line of argument points to the need for the exercise of considerable care in new lending to countries on the list. It must be directed to productive, employment-creating enterprises, as well as to meeting critical social needs such as education for the future.

We will leave for another day the question of the countries that are considerably worse off than the 18, whose debt was not forgiven because, at this time anyway, their circumstances are such that there wouldn t be any point: They wouldn t be able to use either the forgiveness or new lending effectively in any case.

All in all, forgiving the debt was the right thing to do. Giving countries a second chance is international generosity at its best. But the road ahead will have to be scanned carefully for barriers to development.

Dan Simpson, a retired diplomat, is a member of the editorial boards of The Blade and Pittsburgh Post-Gazette.

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