A question for the forums....

I really enjoy the threads on people's views of the world on a large scale. I think they are much more productive than the bitching about whatever is going in the news. So, I was wondering what everyone thought of the IMF and World Bank, do you guys think that debt relief for the HIPC countries should be a goal for these orgs...

I know we have some pretty distinct viewpoints on stuff like this. It'd be interesting to see where people stand.

I'm a huge believer in debt relief. It helps stabilize the countries. For many countries, they are stuck in a single currency debt denomination system, which their currency continues to depreciate against the currency the debt is denominated in.

The reason I brought this up, is that I'm in the middle of writing a policy paper for a political candidate and this is where my head is.

Debt relief is a good idea but it seems like "relieved" countries are never held to any obligations on how to use the money (hey, if they kept their promises they wouldn't have so much debt). Corruption is endemic in the governments of just about every African country, so whenever any money goes into the system (including via debt relief), a huge chunk of it goes to lining pockets and what's left is spent on whatever the leader happens to think is important; sometimes good things like building infrastructure, sometimes bad things like increasing the logging industry or distributing homeopathic AIDS remedies.

What concerns me more is how America's allies avoid debt entirely; we pay for their military acquisitions. Not just a few rifles here and there, but the US pays for multi-million dollar contracts for state of the art fighters and weapons systems for countries like Egypt and Turkey. Personally, I don't like the idea of my tax dollars going toward arming an oppressive regime (Egypt).

Call me a fiscal fundamentalist if you like, but I think debt relief (much like US government intervention on the behalf of multinational corporations) encourages an environment of moral hazard. Bail out irresponsible governments or multinational companies that fail to properly arbitrage and you'll be bailing them out for centuries. I say let Zimbabwe AND Exxon twist in the wind.

Oh, debt relief for corporations? Screw that. Unless highest paid people in the corporation are within, oh... 50% of the lowest paid, let them work it out themselves. I have no sympathy for huge monopolies that take advantage of people and overcharge them on necessities like medicine, then ask for a government handout when their bosses buy one too many yachts.

I think Liberia presents an interesting case for debt relief. The president said that the 2 things that would help their country is the return of skilled workers that fled because of the violence and debt relief that they know they can never repay.

Was that Sirleaf? Because the guy in power before her, Charles Taylor, was a pretty horrible person. Warlord and all that. And the transitionary leader between those two, Bryant, has been arrested for embezzling $1 million from the Liberian government.

Taylor's VP was Moses Blah, the first vampire to be appointed to public office (joke), after Taylor's original VP was assassinated. Taylor and Blah got together previously to overthrow Samuel Doe, who tried his hand at ethnic cleansing.

From what I've seen, Sirleaf has had her head on straight and her hands where they belong, so far.

Lovely place, Liberia. Lightyears better than Sierra Leone or Cote d'Ivoire.

Yes, I am talking about Sirleaf. My wife's coworker from Liberia is talking about moving back. She fled a few years ago because of the violence and corruption. Apparently, the coworker had jaundice at the time she fled, to give you an idea of the conditions in the country at that time.

To be honest, I'm pretty much completely ignorant about the World Bank and IMF. Interesting topic.

I'm solidly with Paleo on this one. Not much else to say.

It frustrates me that the Moral Hazard arguments are never used in relation to multinational corporations. They have no more business petitioning the government to invade a country that nationalizes their assets than some tinpot dictator has demanding debt forgiveness. Screw them both.

fangblackbone wrote:

Yes, I am talking about Sirleaf. My wife's coworker from Liberia is talking about moving back. She fled a few years ago because of the violence and corruption. Apparently, the coworker had jaundice at the time she fled, to give you an idea of the conditions in the country at that time.

I find that people that leave their countries tend to be jaundiced. Jaded, too. *rimshot*

Jolly Bill wrote:

I'm solidly with Paleo on this one. Not much else to say.

I might suggest a one-time deal although I don't know the logistics. Not decades of debt relief, but helping out once so the government can learn from their mistakes, but if they just go and blow it again too bad. I don't know how this would work in countries where my socks last longer than the government (see: Africa).

As far as Paleo's mention of corporate debt relief, I agree, should never happen (see: railroads).

The biggest problem with the World Bank is corruption, and not one easily remedied as the illustrious Dr.W. is harshly learning.

After reading Confessions of an Economic Hitman, my opinion of these organizations dropped quite a lot. In that book, the author asserts:

A) He was recruited by the CIA to work for financial companies;
B) His job was to oversell these countries on infrastructure development by overprojecting expected returns on investment;
C) The country in question would end up in economic servitude to the US, because it could never pay back the loans it was taking out.
D) This allowed the US to get artificially good resource deals, in exchange for forgiveness of some or all of the debt. He also claimed that there may have been vote-buying in the UN by this method, though he didn't have any solid proof to cite.

The way these things were generally constructed was that a few people in power would become obscenely wealthy, would use that wealth to hold power, and the rest of the country would descend into poverty. They became, in essence, permanent vassals of the American empire.

This was a great deal for US companies too, because part of the loan packages would always require that US companies build the infrastructure. So our corporations benefit up front, and then again later with access to cheap resources, and the government gains power as well. Everyone we care about wins.

I wasn't quite sure how to take the book, although it certainly has the ring of authenticity. But externally, it would seem somewhat supported. Anytime the IMF gets involved in any country's affairs, that country mysteriously fails to thrive. It's only when countries tell the IMF to take a hike that they actually tend to improve. I think Peru might be the most recent example of that; I believe they told the IMF to get lost eight or ten years ago, and their economy has done fairly well since. (I'm not sure it was Peru, but I think it was.)

From what I can see, following IMF recommendations is generally economic suicide, and I don't think they'd get it THAT wrong, THAT often, if there weren't some other motivation involved.

I'm not, btw, any kind of expert in this area, not even the armchair version. I'm just running on memories of failure after failure whenever the IMF gets involved.

My problem with debt relief is that historically all that the countries do is take out more, new debt. So you get this cycle of debt relief, debt creation, and so on. All it seems to do is encourage the nation to behave irresponsibly. In addition, you could make an argument that the debt forgiveness lowers the cost of capital for the country, and thus all that debt forgiveness in Africa does is subsidize China's mercantilist efforts there. If I'm a US politician, I'd find it hard to support that.