FORGIVENESS OF DEBT?

I recently spent some splendid time as a guest of the World Political Forum, the brainchild of ex-Soviet leader, Gorbachev, which brought together a number of major players from the 1980’s.

Remember sunglass-wearing Polish General Jaruzelski, who made one of the most fateful phone calls in history, telling Gorbachev the election was a landslide loss? Gorbachev changed the world by saying, “accept the result”. Jaruzelski complained that bureaucracy in Poland had tripled. Curious point to make by an ex-Communist leader, I thought.

I felt like I was a visitor locked in a newsreel of the ‘80’s, what was I doing with these aging, fading, balding, overweight heroes and villains? Then I saw my reflection in the mirrored hall. I understood. I, too, have a great future behind me. Gorbachev is a truly historic figure. He changed the world, one of the best known people in the world, respected, admired everywhere but Russia. His place in history is assured, but with all politicians that’s never enough. Now he has assembled a star line-up to address the major issue facing the world. Poverty; despair, humiliation, desperation, and the evil it does to individuals makes it the breeding ground for violence, true throughout history. The world has got better since Gorbachev was Soviet leader, Eastern and Central Europe is mainly free, Latin America once completely dominated by dictators is now democratic except for Cuba. Life expectancy has gone up by 20 years, and infant mortality down by 2/3rds. Literacy has exploded. However there are clear exceptions despite much progress. There are unacceptable irregularities and injustices. The top 225 rich individuals have a total wealth equal to over half the world’s population. That means each of them have assets equal to the wages of 30 million people. Four and a half billion people live on less than a dollar a day, 30,000 to 50,000 people die every day due to malnutrition, lack of access to clean water and health services. For 15 years, per capita GDP and annual income per inhabitant have decreased sharply in 54 countries, which together account for 12% of the world’s population. 30 years ago, per capita income of sub-Saharan Africa was 1/6th of that of OECD countries, while today that ratio is 1/40.

Debt hangs around poor countries’ necks like a noose. Much of this money was lent during the cold war to prop up gangsters and criminals, total developing country debt is nearly $3,000 billion. Should a newly democratic country like Kenya, Nigeria, even Brazil and Argentine, pay for commitments made by others? Vietnam actually honoured debts and loans made by the government they overthrew after a devastating war. This raises an interesting question about debts in places like Iraq. The great economist, John Maynard Keynes, stormed out of the Versailles Conference in 1919 to write his pamphlet warning of the economic consequences of peace, saying “Vengeance I dare predict will not limp” Perhaps we have learnt, in 1876 the French and British seized Egypt to force loan repayments, and German, Italian and British warships shelled Venezuelan ports to force loan payments in 1902. Programmes to reschedule and cancel loans have been on the global agenda for a decade.

A hated word among aid agencies is ‘conditionality’. That is, rules and agreements as to how extra income is used. I disagree. If properly done through transparent trusts to manage grants and new incomes, this could satisfy both sides. No more excuses either from the West.

What else to do? The economies that have done the best are those that have introduced open trading systems, accountable politicians, professional, honest public service, clean tax, customs, police services, independent courts, and property rights. No two democracies have ever gone to war, and there has never been a famine in a democratic country. The wealthy countries need to live up to their own promises. Development aid, despite promises for a generation of .7% of GDP, has actually dropped. Opening agriculture trade would mean 5 times more for Africa than present aid donated by governments. Remember the U.N. Millennium Conference, when over 100 world leaders promised to halve poverty by the year 2015? At present progress it will take another 150 years to reach that noble target. The world is now so integrated, information so instantaneous, borders so porous, that everyone, everywhere, will pay a terrible price as desperate people seek desperate solutions if we fail. And failing we are. The time-bomb ticks, it can be defused.