Assess some of the ways in which Third World Debt might be reduced.

Assess some of the ways in which Third World Debt might be reduced.

Despite the overwhelming number of statistics and indicators, global

poverty is as hard to measure as it is to conceptualize. One fact is

undeniable: someone is going to have to pay for past debts. It could

be the people in debtor countries, or the banks, or the people in

advanced industrial countries. Most likely it will be some combination

of these three groups. In the last ten years, there have been a

variety of proposals which, unfortunately, usually reflect only the

special interests of the groups proposing them. Generally speaking,

these solutions fall into three categories: repudiation, minor

adjustments in repayments, or reduction.

A report “Relief Works: African proposals for debt cancellation - and

why debt relief works” examines public spending in 10 African

countries which have benefited from debt cancellation. It reveals that

total spending on education in these countries has increased, and is

now twice the amount that is being paid to foreign creditors. The

story is similar with spending on health, which has risen by 70 per

cent since before debt relief, and is now one third higher than

spending on debt repayments. And contrary to the views of sceptics,

debt relief is not being used to fuel military expenditure. The report

presents these clear indications of the positive difference that debt

cancellation can make as the strongest argument there is in favour of

further debt relief for the world's poorest countries.

However, various G8 Summits have seen promises of billions in

debt-write off, but almost hardly are carried out, or contain a lot of

spin. For example, a lot of debt relief promised may include moneys

previously annouced for such purposes, thus creating an impression of

enormous write-offs. Bilateral debt relief also does not typically

release actual money to be used for other purposes. Multilateral debt

relief, however, could.

Debt repudiation, in the sense of a unilateral cessation of repayment,

occurred in a number of countries: Bolivia, Brazil, Costa Rica,

Dominican Republic, Ecuador, Honduras, Nicaragua, Panama, and Peru.

With the exception of the Peruvian cessation, however, most of these

actions have been taken with assurances that the stoppages were only

temporary. Peru announced that it was unilaterally limiting its ...

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... and abysmal poverty as a normal

condition. This need not, and should not, be the case. The developed

countries have a responsibility to create conditions whereby the

poorer countries can interact more productively in international

economic activities: their single most important contribution to this

end might be in the area of reducing trade restrictions on the

products of poorer countries. Similarly, the developing countries have

a responsibility to see that money is more effectively utilized within

their own borders. The obscene personal profits accumulated by such

leaders as Marcos of the Philippines and Mobutu of Zaire should not be

fostered by the strategic interests of other countries. The banks

should also face up to the fact that their single-minded pursuit of

profits almost led them to the brink of bankruptcy. The lesson to be

learned from this experience is that for economic growth to be

sustained, close attention must be paid to the mutual interests of all

parties involved. Only after sustained economic growth returns to the

heavily indebted countries can the international community even begin

to determine manageable rates and methods of debt repayment.