Considering Debt Relief |
While framing debt relief in terms of a Jubilee placed the
issue into a spiritual context, many economists believed that debt relief was a
necessary component to insure the future development of poor nations. Debt
service payments were crippling most poor countries. With a general loan
forgiveness, the money that otherwise would go to lenders could be directed to
development programs. With a clean slate, development would also lead to
greater trade and make these countries productive members of the global
economy. Moreover the structure of the debt meant that without forgiveness,
indebtedness would only grow. Most countries were not even keeping up with their
interest payments -- leading to greater and greater indebtedness.
But others argued that debt relief was not the proper tack to take to help poor nations. They noted debt relief would not necessarily go into development projects; indeed, there were many examples of poor countries spending money on their military or on the aggrandizement of their leaders. Others worried that debt forgiveness would create a “moral hazard” in that countries would once again run up their debt with the belief that when worse came to worse, they could expect another bailout.
Links
Read the transcript of a PBS discussion about the pros and cons of debt relief.
This Powerpoint slide show discusses the advantages and caveats to debt relief.
This extensive report documents the debt and economic condition of many of the HIPC (Highly Indebted Poor Countries) in Africa.
Jubilee 2000/USA chief economist Jeffrey Sachs offers an analysis of the financial feasibility of debt relief.
This analyst at the Heritage Foundation argues against the Jubilee 2000 program.
This BBC story also makes a case against debt relief.
Photo: Children in Malawi hauling water by Lars Plougmann from London, United Kingdom. This file is licensed under Creative Commons Attribution ShareAlike 2.0 License.