Last Updated: Friday - 09/24/2010
Week of April 5, 1999
WCR Letters to the Editor
More about the morality of debt forgivenessIn a March 29 WCR letter R. Mollot assumes that forcing Third World debtors to pay the last penny of their loans plus compound interest will somehow force their ruling elites to discuss "how they exploited the loan and why the poor are left to pay."
Mollot also seems to assume that debt relief advocates are responding emotionally rather than from the "rational" perspective of market theory - a doctrine which asserts that economic rewards and punishments discipline people to work properly.
As a debt relief advocate, I assure Mollot that we are well-versed in market theory, but we recognize that the economic conditions Adam Smith based his thinking on do not exist in today's globalized corporate economies.
Smith published The Wealth of Nations in 1776 at a time when subsistence agriculture was the economic norm and farm families supplemented their incomes with cottage industry performed in their homes.
Today's Third World poor people lived much like 18th century Britons until the 1970s when Western bankers dumped billions of Arab petrodollars into transforming Third World economies into resource exporters in a global market.
With the loans, small agricultural holdings were expropriated and/or bought up to make way for large-scale monocropping by agribusinesses.
Just like in 19th century Britain after the "enclosure laws," displaced peasants were forced by economic necessity into wage labour in the expanding mines, processing plants and plantations.
But unlike Britain whose early industrialization gave it a competitive advantage over the rest of the world and whose industrialists could get good prices for their outputs and pay good wages, the World Bank and Western bankers developed the same export industries in each country in which they invested.
When these industries came on line they predictably produced a glut of commodities which devastated their prices so those industries couldn't afford to pay good wages or keep all their employees.
There currently exists a vast oversupply of global capacity in commodities production so all those now-landless peasants are un- or under-employed and barely scraping by.
This is not "emotionalism." This is economic history.
First World investment created the present plight of Third World people by altering the structure of their economies in ways that proved shortsighted and unsustainable.
IMF austerity measures cannot "discipline" displaced peasants into correcting their ways because there are no alternative "ways" available to them now.
Mollot's rational market solution to this situation is akin to throwing a family into the ocean then telling them it's for their own good that they suffer the market discipline of having to swim 200 miles to shore.
The discipline "works" because next time they won't be so quick to get in the water.
Except they didn't "choose" to get in the water. They were pushed, by First World investors and Third World elites.
Forgiving their debts will render moot the IMF austerity programs that force governments to reduce social spending and imports to increase debt-interest payments.
Third World governments could then at least afford to loosen the reins on their citizens and businesses. Their doing so is to be a condition of their debt forgiveness in the plans I've looked at.
As it stands they must either squeeze their people or default and have their currencies rendered worthless so they can't import anything at all.
Debt forgiveness would end this unconscionable Catch 22 situation.
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