The Morality of Third World Debt

I have a question for the small army of intelligent people with whom I share Facebook.  Over the years the Western World has made loans to nations of the developing world, the enormity of which are matched only by the level of corruption practiced by the kleptocracies which have run those countries in the past and in many cases continue to do so today.  A vast percentage of that money was drawn off into the private accounts of family, friends and political allies of whatever gang of thugs happened to be running those countries at any particular time, most of which accounts may be found in European and other offshore and out-of-country banks.  The numbers, in many cases, are staggering.

The unfortunate result of this practice is that people who live in places like Guyana, Burkina Faso, and a host of other garden spots retain these debts when the local dictators mercifully die off or, as is more likely, are deposed by characters no more savory than those who preceded them.  Western lenders insist on maintaining the fiction that the dollars or pounds or Euros or whatever form of currency that was ‘lent’ went into development of the borrowing country was legitimate however, and that the money lent should be repaid at interest out of the resources of that country.

Of course, precious little development ever went into those countries and the lenders (smart people, all of them) never really believed that any development would.  Instead, a drain of natural resources flows out of those countries as payment for loans which nobody ever really expected would be repaid while new kleptocrats negotiate new loans which, again, have no chance of repayment.  This is a process well understood by loan sharks and credit card companies.  These debts insure that the indebted nations will never achieve any sort of development, not that most are likely to do so under any circumstances.  The people who live in those countries are therefore forced to live under conditions of exploitation by foreigners of their natural resources, crushing debt that will never be repaid, and national ‘leaders’ who are not at all likely to do anything to alter this picture.

In these circumstances there is little that Westerners can do to ease the suffering of citizens of those countries.  Their lot is indeed hard and devoid of much in the way of hope.  We in the West cannot march into those countries and run them for the native’s own good; a form of that idea was tried in the nineteenth and first half of the twentieth centuries, the negative consequences of which continue to be felt to this day.  The selection of leadership of those countries and the use and allocation of their resources must largely remain issues to be settled by the citizens of those countries by whatever means they chose.  It may not be pretty but it is, for the most part, not our business.

What we can do however, is address the problem of their debt.  I do not believe that there is much argument that loans were made to the governments of those nations in order to obtain access to natural resources at bargain basement prices or for geopolitical advantage, or both.  The welfare of the people was rarely a factor in the advancing of those loans.  I therefore propose that it might be a good thing to investigate a process of forgiving all or part of those loans as a means of lifting at least our part of the crushing burden which lies across the backs of many of the suffering citizens of the third world.

Of course, it is wrong to paint all nations and governments of the developing nations with a broad brush.  Some countries are actually making gains and are responsibly paying back loans as their improving economies permit.  In these cases, it might be proper to forgive loans on a graduated basis.  To simply forgive a loan to a nation which is honorably engaged in developing it’s people’s well being would, in my opinion, disrespect that country.  To greatly reduce it’s debt burden however would better reward it’s efforts while respecting it’s national pride.

Of course, there would be a financial impact here in the United States and the West and, God forbid, in my own 401K.  I, for one, could stand that blow.  Those loans were made to known thugs, in my opinion, and have no more legitimacy than a 40% loan to a Cosa Nostra loan shark.  There is no honor in benefiting from the tragedy that is life in the very difficult places of the earth.

But this may just be sentimental nonsense.  I am no economist.  I am a Christian who believes very much in the commandment to “Love my neighbor as myself”, but I may be taking that out of context.  I look forward to the response of any folk who are more conversant with economics out there to help me understand if I have got it wrong.  I eagerly await your input.

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4 thoughts on “The Morality of Third World Debt

  1. John

    IMO your concerns are legitimate. We know not all US foreign aid is altruistic. We know that much, if not most of that aid is used to line the pockets of corrupt leaders in the donee countries and never gets used for the good of their citizens. We know that similarly corrupt leaders in the US have at times used foreign aid and it’s influence for their own corrupt purposes. We also know that the U.S. has been more generous with real, legitimately intended foreign aid than any country in history, partly because it is the richest country in history, and partly because of the influence of it’s rapidly dissipating Christian heritage. We also know that to forgive government to government debt on a general basis and a massive scale would have some significant negative repercussions both now and in the future, as well as the possibility of positive repercussion. It’s probably not a bad guess that the kleptocracies, as you aptly call them, in countries where the debt would be forgiven, are probably not truly dead, just the names of the kleptocrats have changed. So it’s hard to envision how the forgiveness of debt is going to do anything more than continue to line the pockets of those people who will only continue to neglect the needs of their people.

    It’s a hard nut to crack to realize that even with the best of intentions, a gospel of a risen Savior that brings human dignity, and a boatload of money we cannot fix the entrenched problems of the world. This does not mean that we should not try, or that we should not work to improve things the best we can. Of course we should. But what we really need are leaders of churches, of government, of business, and of society who are both wise and good. Those seem to be in short supply these days. It seems our bloated and compromised education system along with our compromised families no longer breed such people in sufficient numbers. Surprise, surprise, right?

    IMO, the global problems are too nuanced to be solved by individuals like us. We just don’t know all the parameters of a given situation that should affect decision-making. All we are left with is to do individually what we can and also associate ourselves and our giving with the best people, programs and institutions we can find. We need to humbly do what we can to raise our own families in the fear, wisdom and instruction of the Lord, and do what we can to encourage others in doing the same. And we need to humbly ask God to show mercy on us, our children, our country, and our world, and empower us to faithfully pursue this course.

    I’m all ears for any more concrete suggestions.

    Reply
  2. John

    As you probably remember, I read a lot of history. I’m in the middle of reading James McCullough’s long biography of Harry Truman. Boy do we need a man of integrity like Truman now. I’m in the middle of the chapters on his early political career after coming home from the Western Front as an artillery officer in World War I and failing at other pursuits. He immediately as a Democrat confronted the corruptions of the Democratic machine in his county and his state. Apparently he encounter moral conflicts that made him physically ill, to the point where once he spent three days writing an agonizing private discourse with himself. He sometimes had to look the other way on minor matters, let corrupt men pursue some of their corruptions, to get important major matters done. And he hated it. Such is political life even for men committed to doing right.

    History teaches me that moral corruption eventually brings a culture and a nation down, but also that politics and getting important things done often involves distasteful compromises with corrupt men who can get them done. Sad but true.

    I would literally have died from such conflicts if I had ever chosen to pursue political leadership. In fact, I found the same is even true with church leadership. You remember what we went through at CPBC. Still, I have to admit that in some ways a nation needs the strong leadership of people who can get things done. A real conundrum. However, in the church it cannot be so. As Jesus said, ambition and “getting things done” can never rule over doing right in the church, else the church has become the world.

    Anyway, you’ll have seen my private message re: at least some of the reasons why I don’t do a blog. I’m glad you do, though, and I’ll follow it with interest. I ALWAYS enjoyed chewing the fat with you. And we did it a few times, didn’t we?

    Reply
    1. gdgdurden Post author

      Yes we did! And I will make one more pitch and then give it up. Your comments are far and away the most thorough, thoughtful, and voluminous that I have received in my blogging. I experience virtually no give and take, such as I do on various FB chat groups. I don’t post all that regularly, either. You have cranked out two comments today that would be great blog posts, and if somebody doesn’t like them, tough beans! OK. I’ll let go of your arm. I’m going to bed now, as 5AM comes awfully early.

      Reply

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