Dropping the Debt: For, Against and Why Watch

Poll: Should the industrialised nations write off all the debts owed by developing nations?
Yes (11)
68.75%
No (5)
31.25%
Agent Smith
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#1
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Some of you may remember the various attempts made around the turn of the century to get the Western nations, or possibly the World Bank (it was never made very clear) to write off the colossal debts they were owed by many nations. This didn't really work, but the attempts continue.

I have a few questions about this.

Firstly, a bit of historical background. When were the loans given, to which specific nations (it seems everybody just uses the blanket term "Third World nations" because (a) they don't know the precise details and (b) it accentuates the good-guy/bad-guy division and glosses over the fact that in some cases the debt is the result of corrupt dictators frittering it all away on projects that never make anything back) and why?

Secondly, why bother keeping the debts on the books when the debtor countries are now permanently incapable of repaying them? No amount of kicking and screaming enables you to get blood out of a stone. If a man owes you money and you take too much too soon, depriving him of every scrap of property and the means to earn more, you've just shot a hole in your own profits. The approach taken by the international creditors is similarly unintelligent and self-contradictory. If they'd taken a Student Loans approach and taken a smaller amount of money over a longer time (a proportion of GNP, varying according to how great that GNP is, such that richer countries pay off more quickly but poor ones never end up paying more than they can afford), they'd end up with more money at the end of it.

Thirdly (the reverse position), why is it considered a good idea to write off the debts of countries that have in many cases simply wasted aid on useless projects - or worse, golden jacuzzis for the President-for-Life or similar? In doing so, the creditor nations/organisations will surely send a clear message that unsound fiscal policy is acceptable. Incompetence and corruption will go unpenalised. Conventional banks don't take this approach to individual debtors; if you can't pay, you get in trouble. You don't get a sympathy vote which allows you to get away with it.

Fourthly, what's the position on debts between industrialised countries? Doesn't the US owe billions to China, the UK billions to the US and Germany billions to, well, everybody (although those might have been written off)? What happens about these debts (which the Drop the Debt campaigners didn't address as far as I know)?
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AnythingButChardonnay
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We finished paying our war debts to the US a couple of years ago.

If we hadn't wasted our Marshall Aid on the NHS, we would probably have had the same economic surge as the Japs and Germs did.

As for the money the 'First World' has lent to the 'Third World,' of course it's all been pissed up the wall. The dictators will have been laughing all the way to the bank when we wrote it off.
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Agent Smith
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(Original post by AnythingButChardonnay)
We finished paying our war debts to the US a couple of years ago.

If we hadn't wasted our Marshall Aid on the NHS, we would probably have had the same economic surge as the Japs and Germs did.

As for the money the 'First World' has lent to the 'Third World,' of course it's all been pissed up the wall. The dictators will have been laughing all the way to the bank when we wrote it off.
We didn't write it off; at least, not all of it. And that's another question: From what I remember some response did occur; so why did we only go halfway? It's bizarre. Why not go the whole hog, or conversely refrain from doing anything at all?

Was there any media fuss about the end of the war debts; if so, do you have a link? Might be fun to read.
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Catsmeat
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(Original post by Agent Smith)
Firstly, a bit of historical background. When were the loans given, to which specific nations (it seems everybody just uses the blanket term "Third World nations" because (a) they don't know the precise details and (b) it accentuates the good-guy/bad-guy division and glosses over the fact that in some cases the debt is the result of corrupt dictators frittering it all away on projects that never make anything back) and why?
Presently the 'glossed over' loans to developing nations (a useful phrase) seem to indicate that richer, developed nations remind those poorer states of their subordinate position through debt. Whilst I hesitate to suggest that it is a deliberate and malicious policy, I do believe that in sustaining loans certain nations benefit from (paltry) returns and on the indication, to World Aid organisations and pressure groups, that they are acting on poverty.

(Original post by Agent Smith)
Secondly, why bother keeping the debts on the books when the debtor countries are now permanently incapable of repaying them? No amount of kicking and screaming enables you to get blood out of a stone. If a man owes you money and you take too much too soon, depriving him of every scrap of property and the means to earn more, you've just shot a hole in your own profits. The approach taken by the international creditors is similarly unintelligent and self-contradictory. If they'd taken a Student Loans approach and taken a smaller amount of money for less time (a proportion of GNP, varying according to how great that GNP is, such that richer countries pay off more quickly but poor ones never end up paying more than they can afford), they'd end up with more money at the end of it.
It indicates, perhaps, that world markets are strategising only in the short term; drawing as much 'blood' from the stone of developing states. It could be the result of a disspassionate cycle; nations lend money, the nation spends money and falls into irreversible debt. Knowing the pessimistic economic outlook nations begin to 'hover', using those debts as a 'safety blanket'. I'm sure that, considering the long duree of debts to developing nations, that developed states have compensated for the 'loss' incured, and no default would harm their own economy significantly. It seems, then, that it may be a 'safety blanket' in times of stress.
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AnythingButChardonnay
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(Original post by Agent Smith)
We didn't write it off; at least, not all of it. And that's another question: From what I remember some response did occur; so why did we only go halfway? It's bizarre. Why not go the whole hog, or conversely refrain from doing anything at all?

Was there any media fuss about the end of the war debts; if so, do you have a link? Might be fun to read.
As you've found out, I don't know the ins and outs of the level of debt we cancelled to Africa. But cancelling any of it was too much in my view, because it won't have helped that country one iota.

The Times seemed quite happy about our last Marshall Aid repayment. http://www.timesonline.co.uk/article...520100,00.html

http://www2.warwick.ac.uk/fac/soc/ec...ease070110.pdf has a rather different perspective.
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PhantomBoggler
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I would of thought that would of been big news, and i didn't really hear anything so...
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Agent Smith
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(Original post by Catsmeat)
It indicates, perhaps, that world markets are strategising only in the short term; drawing as much 'blood' from the stone of developing states. It could be the result of a disspassionate cycle; nations lend money, the nation spends money and falls into irreversible debt. Knowing the pessimistic economic outlook nations begin to 'hover', using those debts as a 'safety blanket'. I'm sure that, considering the long duree of debts to developing nations, that developed states have compensated for the 'loss' incured, and no default would harm their own economy significantly. It seems, then, that it may be a 'safety blanket' in times of stress.
I'm confused as to what you mean by that phrase, "safety blanket"...

More generally, though, it could be argued that the demand for impossible amounts of money is partly responsible for the shift in so many poorer nations (particularly in Africa) towards Socialism. After all, if you haven't got any money to fund your various development progammes in the conventional sense of actually paying the people who build the dams and tar the roads and such, the only other way you can possibly afford them is if you are a Socialist state.
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Agent Smith
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(Original post by AnythingButChardonnay)
cancelling any of it was too much in my view, because it won't have helped that country one iota.
Well, you can't be sure of that. And even if it didn't help, I don't see how it could have done anyone concerned - the debtors or the creditors - any real harm.
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Agent Smith
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#9
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{Poll has now been added.}
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AnythingButChardonnay
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(Original post by Agent Smith)
Well, you can't be sure of that. And even if it didn't help, I don't see how it could have done anyone concerned - the debtors or the creditors - any real harm.
It's a matter of principle.

"No, we're not going to cancel your country's debt, Mr Dictator, just so that you can go ahead and take out another loan simply because none of the original loan actually helped the people of your country, because you pocketed it."

Well, that's how I see it anyway.
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yonanz
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Its tacitly and widely agreed that underdeveloped countries would never be able to pay back their debts, so these are just stated for nominal purpose but never actually implemented.Developed countries do not actually actively pursue and press upon the indebted countries to pay up. In fact there are a number of pacts which sought to write off billions of debts so as to free up funds to other areas such as investments and infrastructures in developing countries
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Agent Smith
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(Original post by AnythingButChardonnay)
It's a matter of principle.

"No, we're not going to cancel your country's debt, Mr Dictator, just so that you can go ahead and take out another loan simply because none of the original loan actually helped the people of your country, because you pocketed it."

Well, that's how I see it anyway.
So would you write off the debts of Country X if its dictator is overthrown and a democratic government installed?
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AnythingButChardonnay
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(Original post by Agent Smith)
So would you write off the debts of Country X if its dictator is overthrown and a democratic government installed?
I would consider it. I would want to be absolutely satisfied that they were going to use it well, though.
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Tory Dan
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No I don't think we should, if they had followed the neo-liberal policies of the IMF and World Bank by liberalising their economies rather than falling for decadent socialist and statist economic policies in the 1980's then they wouldn't be in the this situation. Structural Adjustment Programmes were meant to be eradicate national debt and increase economic growth at the same time.

The Third World is currently run by left wing dictators, until they get rid of this problem then there is no hope. This is international society, no emergency number to call when your in trouble, oh Realism is brilliant.
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Zoecb
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#15
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I say they at least freeze them at what they are now and stop adding interest to them...
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Catsmeat
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#16
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(Original post by Agent Smith)
I'm confused as to what you mean by that phrase, "safety blanket"...
Assuming those African nations (for example) develop into major economies, the debt that they owe industrialised nations will suddenly be worth, in real terms, much more (it will be accessible). In this respect, by sustaining the debt it represents a source of potential revenue (assuming those nations develop into major economies).
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Cubasaur
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#17
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No they shouldn't write it off, it is good to be a more powerful country and having "power" over other countries, and it is their fault for being in that situation. We are too lenient with them
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Agent Smith
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(Original post by Catsmeat)
Assuming those African nations (for example) develop into major economies, the debt that they owe industrialised nations will suddenly be worth, in real terms, much more (it will be accessible). In this respect, by sustaining the debt it represents a source of potential revenue (assuming those nations develop into major economies).
True. But that would point more to the idea of a moratorium (similar to the "Student Loans" model I proposed above) to enable them to actually reach that stage. Then we can milk them without causing significant problems.
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Catsmeat
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(Original post by Agent Smith)
True. But that would point more to the idea of a moratorium (similar to the "Student Loans" model I proposed above) to enable them to actually reach that stage. Then we can milk them without causing significant problems.
That would make sounder economic sense, but would require a degree of internal financial and governmental stability; Zimbabwe was one of Africa's most vibrant economies but has subsequently spiralled into debt and inflation. How much of the money loaned by (for example) the UK Government represented money that was balanced in the first place? If that money had been given on debt itself then it may be that this more short-term, 'rational' model is safer.
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L i b
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#20
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Right off their debts? Pah. We should invade their countries, kill their leaders and convert them to Christianity.
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