Drop The Debt

Worldwatch Institute 6jul01

The global debate over the third world debt crisis will crescendo on July 20-22 as the heads of the world's eight leading industrial nations (G-8) gather in Genoa, Italy. The host of the summit, the government of Italy, has vowed to put the debt crisis at the top of the agenda. And Drop the Debt, a London-based successor to Jubilee 2000 (the campaign that forced rich-country politicians to respond to the debt crisis in the late 1990s), has set its sites on a "New Deal on Debt" from the Genoa summit ^__ see http://www.dropthedebt.org/action/genoa.shtml.

Since World War II, the richest countries have lent the poorest ones hundreds of billions of dollars, much of it in the name of democracy, freedom, and development. Yet scores of the borrowing countries are now mired in debt and poverty--some 47, according to World Bank benchmarks, all but 10 of them African. Together, they owe $422 billion, or $380 per person, a substantial sum for them, but just 11 months of military spending for western governments. Responding to pressure from nongovernmental organizations, creditor governments have recently offered to cancel up to 55 percent of the debt they are owed by 41 poor debtors. In return, they are demanding that debtors implement market- oriented "structural adjustment" economic policies and design poverty- fighting plans in consultation with civil society groups.

Many rich-world politicians now want to put debt cancellation behind them. But many non-governmental groups are calling for more. Both sides, Roodman argues, may have unrealistic expectations about how much good such programs are doing and can do. On the one hand, almost all of the debt set for cancellation would never have been repaid anyway, so canceling it will not make much financial difference. On the other hand, debtor governments uncommitted to the policies that creditors are demanding in return for debt cancellation will generally implement the policies only in the breech. To expect much more is to ignore the lessons of history.