US Congress to address poor nations' debts

[CougarKing]

Very interesting and a step in the right direction, IMHO...

http://www.commondreams.org/archive/2008/04/15/8305/

Published on Tuesday, April 15, 2008 by One World.net

US Congress to Address Poor Country Debts
by Haider Rizvi

NEW YORK -The U.S. House of Representatives is likely to endorse a legislative proposal this week calling for the cancellation of debts owed by some of the world’s poorest countries.

The rights advocacy groups that have lobbied hard for the passage of the Jubilee Act for Responsible Lending and Expanded Debt Cancellation told OneWorld they had no doubts that a vast majority of lawmakers will vote in favor.

“We have very strong support in the House,” said Danielle Pals of the Jubilee USA Network, an umbrella group representing more than 80 religious denominations, development agencies, and human rights organizations from across the United States.

The Jubilee USA Network has been trying to convince U.S. lawmakers to pass the proposed legislation on debt cancellation for a long time. Like many other anti-poverty advocates, the group holds that the lending practices of international financial institutions are mainly responsible for the suffering of the poor in developing countries.

The House is expected to vote on the proposed bill this week, which coincides with the International Monetary Fund (IMF)/World Bank annual meeting, which was held this weekend in Washington, DC. The bill was already endorsed by the House Financial Services Committee earlier this month.

“We welcome the strong bipartisan committee support for this forward-looking legislation which, when passed, will help to ease the unjust burden of debt on some the world’s most impoverished nations,” said Jubilee’s national coordinator Neil Watkins.

The proposed legislation calls for “greater responsibility” in lending and borrowing in the future. Supporters of the bill say current lending practices are hampering development initiatives in many countries in Africa, Asia, and Latin America.

The legislation calls on the U.S. Treasury Department to negotiate at the IMF and World Bank for an agreement for debt cancellation for up to 24 additional poor countries that need financial help to meet the Millennium Development Goals (MDGs) set by world leaders in 2000.

The MDGs include a 50-percent reduction in poverty and hunger; universal primary education; reduction of child mortality by two thirds; cutbacks in maternal mortality by three quarters; the promotion of gender equality; and the reversal of the spread of HIV/AIDS, malaria, and other diseases.

If adopted by the U.S. Congress, the bill introduced by by Rep. Maxine Waters (D-CA) and Rep. Spencer Bachus (R-AL) would expand eligibility for 100-percent debt cancellation without harmful economic conditions to 67 impoverished countries in the global South.

Last October, the Jubilee Act was also introduced in the Senate by Sen. Bob Casey (D-PA), Sen. Dick Lugar (R-IN), and Sen. Chris Dodd (D-CT).

The proposed act prohibits the imposition of harmful economic and policy conditions as a condition of debt cancellation and calls for a new legal framework to restrict the activities of so-called “vulture funds,” the private companies that have been accused of debt profiteering at the expense of the world’s poorest people.

The act also mandates transparency and responsibility in lending from governments and international financial institutions.

Last September, scores of activists who supported the Jubilee Act participated in fasts for more than a month, moving a number of lawmakers on both sides of the political divide.

Jubilee claims that more than 20,000 Americans participated in its 40-day fast campaign calling for the cancellation of debt owed by the poorest nations.

Currently, indebted nations spend an average of $100 million each day simply to service their debts, an amount that, according to groups like Jubilee, is more than enough to provide food, medicines, and education for the millions of poor in Africa, Asia, and Latin America.

“All the impoverished countries deserve to have their debts canceled once and for all,” said Waters in recent statement. Like her, Bachus argues that debt cancellation is “the right thing to do.”

“For [the United States] it’s a good thing because it makes the world better,” says Bachus. “It makes the world more stable. It’s the right thing to do for growing democracies because the great threat, I think, to democracy and freedom is poverty.”

© 2008 One World

 

[a_majoor]

I will have to disagree.

1. Since there is no provision to enforce fiscal dicipline, what is to say these governments will not persue destructive economic policies inthe future, unrestrained by the necessity to pay back their debts?

2. US and Western taxpayers will be on the hook for additional billions of dollars; or

3. Financial institutions which made these loans in the first place will be under extreme economic hardship, and will lose billions of dollars in capital value to their shareholders, or even go bankrupt (see 2 above).

Considering much of the debt was run up under government "assistence" programs (often pressuring financial institutions to particpate), this is an example of regulatory failure of a very high magnitude. Unless the debtors are placed under strict constraints (essentially debt counciling), simply cancelling the debts will do little or nothing for these nations, and by failing to hold governments to account, encourage continuing destructive behaviors by third world governments.

 

[Long in the tooth]

Is the US government actually going to bail out these debtor countries with taxpayer money when hundreds of thousands Americans have just foreclosed on their homes?  This is a significant intrusion into the market as most of the debt has been repackaged and resold as various derivatives, often at only dimes to the dollar.  I'll bet that that paper just rose in value.  Given that most of the debt is not owed to governments but banks and financial institutions this will only benefit them.

Has anyone else noticed that the biggest proponent of debt forgiveness, Bono, keeps his assets offshore in order to minimize his tax bill?

 

[geo]

Is the US government actually going to bail out these debtor countries with taxpayer money when hundreds of thousands Americans have just foreclosed on their homes? 

Let's understand something here.  The money has already been paid to these countries - a long, long time ago - but the loans aren't being paid back - nor are they in any position to pay them back.  The simple fact that they are writing off a bad debt just means that the US (& other western countries) will stop looking at the old debts - cause they KNOW that it'll never be paid back.

Does not mean that these 3rd world countries will receive any more money.

 

[Long in the tooth]

Yes, let's understand something here.  I'm quite aware that no new money will be avail to these countries.  But the fact is that the debts are on someones' books as a credit owed to them.  Who is going to pay these debts, whether owed to corporations or government?  It's not as simple as 'writing it off'.  If politicians want to reduce or eliminate third world debt then they will have to pay for it - with taxpayer dollars.

It's quite possible that the repackaged third world debt is leveraging (underwriting) further legitimate lending.  The very fact that politicians have said they will pay for this debt raises its value and allows further borrowing or lending.

And again, if I've just lost my house (and I know of this, as I just completed a house hunting trip to Nebraska and Iowa) I'd be damned if I'm going to forgive someone else for their debts.

 

[CougarKing]

And again, if I've just lost my house (and I know of this, as I just completed a house hunting trip to Nebraska and Iowa)

Sorry to hear that. 

Quote by Thucydides:

Since there is no provision to enforce fiscal dicipline,

Well is the restraint by these debts on these nations the only incentive to achieve this "fiscal discipline"? No alternatives?

 

[geo]

Hmmm... IIRC, Britain managed to pay off it's WW2 war debt within the last couple of years - an industrialized country with a reasonnable GNP that can give it out as well as it can take it...
Meanwhile, most of the countries that benefited from the Marshall plan were not required to pony up refunds in subsequent years... should those countries have been made to reimburse ???  mixed feelings.

 

[a_majoor]

Quote by Thucydides:
Well is the restraint by these debts on these nations the only incentive to achieve this "fiscal discipline"? No alternatives?

There are lots of alternatives, including meditating and thinking really, really positive thoughts to the governments of debtor nations, but just like dealing with unruly renters or other scofflaws, there needs to be some sort of enforcement mechanism, and an effective one, to ensure real changes take place. Leaving the debt in place and collecting the payments is a pretty effective way of ensuring the changes you want are done (you can always offer new terms and conditions), IMF "Shock Therapy" might work, or to go all out, invade and impose your own system of government and institutions.

Between Kumbya and an invasion, there are a number of effective remedies. I would also argue that encompassing these nations into Free Trade Agreements with the West so they have large markets for their goods and services is probably the number one means of improving thier prospects. Given the protectionist rhetoric coming from the Democratic Party contenders and their congressional counterparts (on both sides of the aisle, I might add), the reality is they will remain shut out for some time to come.

 

[tomahawk6]

Naturally the waste and corruption of these nations isnt the cause of their economic plight. :

 

[a_majoor]

I'm sure we can point to lots of waste and corruption here at home; IMO the reason that the West is economically and politically stable and strong is we have internalized Freedom of Speech, Property Rights and the Rule of Law.

Of course, the extent that we do internalize and uphold these principles is also the extent of our strengths. The EU is much weaker in upholding these principles (and their populations haven't embraced than strongly), so the potential of a continental market with greater resources and population than the United States have not been realized. Most other nations have not adopted any or all of these ideas, hence they are weaker and more brittle than comparable Western nations.