The crowd of demonstrators forming a human barricade in front of the International Monetary Fund in Washington, D.C. on Sunday was neither starving, poverty-stricken, nor oppressed. Well, perhaps a little oppressed due to a few overly zealous D.C. police officers determined to try-out their new cans of pepper-spray. Anarchists and crazed hippies aside, the point is that a majority of the thousands of people who descended on Washington last weekend were not there out of self-interest. They were on a campaign to inform the country and the world about an issue that is relatively new to most Americans. The problem is that not everyone in the world is sharing in the fabulous wealth and prosperity generated by globalization and the dawn of the information age. To be realistic, the world is not going to get rid of poverty overnight. But an important first step that the U.S. and its allies in the IMF and the World Bank can take to create a stronger world economy and a better life for the billions of people in poverty-stricken countries, is through regulated debt relief.
The most often-used counter-argument to debt relief is that international lending is just like a marketplace, in which lender countries loan money out as an investment, and expect to be repaid. If we forgive the debt, we are essentially disrupting the market system and guaranteeing that the countries, whose debt is forgiven, will never receive another loan. A better way to think about the system would be to think of poor countries as corporations in Chapter 11. Just like a corporation when it declares bankruptcy, indebted countries need major reforms, as well as some debt relief.
Debt relief is not an idea invented by college kids dressed up in endangered sea-turtle costumes. While the protests were proceeding in the streets last Sunday, the IMF's 24-nation governing committee, "urged member countries and government-funded banks to speed up a program to forgive up to $28 billion in debt owed by desperately poor nations." (The Washington Post, 4/17/00) Contrary to conventional wisdom, this program does not mean the IMF and World Bank would simply tear up the IOUs from the poor nations, or Heavily Indebted Poor Countries (HIPCs) as they are often referred to. The IMF and World Bank would forgive the debt in small pieces. Over the course of several years, there would be an on-going analysis of what level of debt the countries could realistically repay, while the countries continued to pursue a program of monitored, economic reforms.
Keep in mind that by agreeing to forgive the 28 billion dollars, the member countries of the IMF and the World Bank have not suddenly decided to emulate Mother Teresa. The lending institutions have agreed to this program because it makes good business sense. If we demand that HIPCs repay all of their debt, there is a good chance that their governments will collapse completely and we will never see any of the money repaid. A step by step program of debt relief is the best way for the lending institutions to get at least some of their money back.
The question isn't really whether we should implement the debt forgiveness process -- but rather, what sort of conditionality we should put on continued debt relief or future loans. Some protestors last weekend were demanding unconditional and immediate forgiveness of all foreign debts. However, if they truly cared about the people living in the indebted countries, they would reconsider their demands. Obviously all of the HIPCs will be required to reform their economic and banking systems in order to receive continued debt relief. But in addition to having weak economies, many of these countries are guilty of widespread use of child labor, environmental destruction and well-documented human rights violations. Foremost, continued debt relief should be contingent on verification by independent organizations that a country has taken significant steps to ensure greater environmental protections (or sustainable development), that they no longer employ child labor and that their citizens have freedom of speech. These basic conditions are essential for providing at least minimal quality-of-life standards for the billions of people currently living in HIPCs.
It is in the long-term interests of the industrialized, lending countries to promote stability and prosperity around the world. This is the only way to cultivate new markets in a global economy. Furthermore, these markets will be much stronger if they are based on sustainable development systems and if the next generation of workers is well-educated (as opposed to being forced to go to work during their childhood.) Most importantly, in an age when the value of information is increasing at a geometric rate, there must be freedom of speech if businesses want to encourage foreign trust and investment. It is possible to rid the world of poverty, but only if there is compromise and dialogue rather than a battle between corporate and individual rights. The best way to start that dialogue is through a well-enforced program of debt relief.
