The Poverty Issue, Debt Cancellation, and Alternative Visions for Globalisation

Reforming Globalisation

The economic dimension of globalisation also comprises analyses and assessment of revenue and wealth distribution throughout the global economy, including the ‘underside of wealth’, i.e. poverty. Recently, two of the most influential economists – apart from Amartya Sen, the Nobel Prize winning Indian professor, who has been dealing with poverty for a long time – have expressed their views on this aspect of globalisation: former World Bank’s head economist Joseph Stiglitz (also a Nobel Prize winner and honorary doctor at Charles University), and an advisor to UN Secretary General Kofi Annan, Professor Jeffrey Sachs (see Stiglitz 2003, and Sachs 2005). Both seek the same purpose: the reformation of globalisation so that it benefits the poor as much as the rich, thereby bringing an end to poverty. The issues of poverty and debt cancellation for the poorest countries are perpetual, but they re-emerged with new urgency on the agenda of the global financial institutions prior to the Millennium Year 2000.

Debt Cancellation and a Confidence Crisis

The issue of debt cancellation for the most indebted developing countries is a good textbook example of how seemingly clear economic problems are in fact ambiguous and controversial, and how even good intentions may be a path toward intensifying a problem. It seems obvious on the one hand that the trap of credit indebtedness and ‘interest slavery’ which some African, Latin American and Asian countries have fallen to is so deep that there is practically nothing left to debate about: they will never be able to repay the debt anyway. The histories behind the fall into the trap vary, but tend to have a lot in common. Creditors’ consortiums and World Bank ‘development projects’ are often found equally guilty in tripping countries up. The current governments in politically unstable regions even tend to refuse to assume responsibility for the debts of previous governments.

On the other hand, the debt cancellation issue does not only concern the past and past errors made by both the debtors and the creditors. It is also a question of future and learning from past errors. Debt cancellation sets the learning from past errors in a risky light as it may evoke the feeling that ‘your debts will eventually be paid for you anyway.’ Until political, and often military conditions for a new path toward the future are set up, debt cancellation itself will not solve much. More effective institutional warrants on credit agreements between credit banks and developing country governments, or better still, private businesses in developing countries, need to be developed. Effective bankrupt procedures for debtor country governments as an ultimate means of enforcing their obligations toward creditors have been lacking.