A $40 billion victory for Africa...and unilateralism.
After last week's meeting in Washington between Bush and Blair, the G8 countries, after heavy lobbying from Britain's Chancellor and future PM Gordon Brown, agreed to a deal to write off about $40 billion in Third World debt relief spanning 18 (14 African and 4 South American) countries, with future commitments to relieve another nine African countries of $11 billion in international debts once they meet certain good-government and liberalization criteria demanded by the World Bank and IMF.
Debt relief is a tricky business because, while in principle it is the most logical and broadly idelogically appealling type of aid -- allowing the governments of poor nations to redirect debt service payments to more pressing national needs, to free themselves from the hassle and stigma of renegociation, and eliminating the embarrassment of rich-nation-backed lending organizations having to press poor countries for their annual service payments -- it's also highly interconnected with the health and essentiality of multinational lending organizations like the IMF, the World Bank and the African Development Bank, all of which have come under varying, and varyingly fair, degrees of criticism from both the right and the left over the years.
Unsurprisingly, Bush and Blair come at the issue of international aid and lending quite differently. The British New Labour liberal internationalists, and Tony Blair himself (who has been an especially fierce advocate for greater attention to Africa from the West and is currently on tour advocating a commitment from G8 nations to up their African aid commitments to 0.7% of GDP) favour maintaining a multilateral approach to aid, working through the G8 and maintaining the strength of the international lender operations. The Bushies, by contrast, are somewhat less enthusiastic about ponying up large amounts of cash (though, to be fair, the U.S.'s African aid budget is currently 3 times its level in 2000), especially when that money is directed through multilateral organizations such as Blair's proposed International Finance Facility which aims to pool and frontload future third world aid pledges from donor nations.
Two major issues are at stake in mapping out the path of debt forgiveness. The first concerns who should qualify for debt relief, and for aid in general. The Bush Administration, like the World Bank and IMF, favours maintaining fairly tight restrictions on which governments are eligible for international aid, and requires (sensibly) that potential recipient governments prove themselves transparent and relatively free of corruption, and (more ominously), that they favour market liberalization. So far, for instance, the US Millenium Challenge Account -- a Bushie initiative offering aid packages to eight qualifying African countries -- has yet to dispense any of its $2.5 billion resources because of the delay in finding governments who meet its qualifications (so far, only Madagascar has been approved for an aid package, which has yet to be transacted).
The who-qualifies issue ties into the larger issues of the conflicts between the need to insist on models of good government so that aid funds are not wasted in their historical role propping up despotic regimes, the basic dictates of humanitarian relief and the need to defer to national autonomy in chosing a country's degree of protection and market liberalism. The Globe and Mail article linked above quotes Gary Barr of the Canadian Council for International Cooperation offering a typical critique: "We have a lot of countries that now have really competent governments, that would be able to use debt relief to save millions of lives, that just aren't eligible for it because they don't meet these conditions that are excessively strict, and that could actually damage their economies if they were implemented." The issue is further complicated by the fact that the worst humanitarian crises often occur where governments are the most corrupt, for instance, in Mugabe's Zimbabwe and in Bashir's Sudan. For its part, the recently-announced debt write-off includes only governments that meet the criteria of the World Bank-IMF's 1996 Heavily Indebted Poor Country (HIPC) Initiative, although this does not seem terrible draconian: Nigeria, the country whose exclusion has raised the most complains is slated to meet the HIPC qualifications within the next 18 months.
The second issue concerns who gets stuck with the bill for the off-written debts, and it's this issue on which the conflict between liberal internationalism and Bushie unilateralism (as opposed to the more traditional conflict over eligibility between liberal governments and NGOs and the Washington-World Bank-IMF side) mainly comes into play. Washington prefers that debts simply be written off books at the IMF, World Bank and African Development Bank, and further that aid to countries with sufficiently low GDP-per-capita (about $500 US per year) be provided from here on out with grants rather than with loans from these multilateral entities. Blair and Brown, along with most European liberal internationalists, want to see the G8 countries take over the poorer nations' debts and recompensate the lender organizations for their losses and to maintain the policy of making loans rather than grants. A New Republic editorial on Wolfowitz's assumption of the World Bank presidency argued that these measures "would deprive the Bank's soft loan kitty [which is funded partly by repayments of earlier loans] of a large chunk of its future resources. Unless donors compensated the Bank by stumping up more cash, the Bank's operations in its poorest client countries would contract substantially. What's more, once some countries get debt relief, it will be hard to deny other supplicants. The cost of forgiveness to the Bank could snowball." The latter concern was the sticking point for the Japanese and German finance ministers at the weekend G8 talks, though they eventually caved to Brown.
And how did the current deal shake down? The details not totally clear, but the gist is that, while the deal is a victory for the Blair-Brown liberal internationlists on relief eligibility and extent (%100 write-offs to qualifying governments; almost everyone slated to qualify), the US basically got its way on the big issue of how the debt is to be written off. According to the New York Times, "Britain agreed to the American proposal to write down debt rather than have the rich countries pay it down themselves over the next decade" while at the same time, the United States "agreed that the United States and other rich countries make up what the World Bank and other lenders would lose in loan repayments, which with cost the United States $1.75 billion." The Financial Times quoes Brown saying that "We could not have tolerated a situation where the World Bank was prevented from giving money to other poor countries because it was not compensated for the loss of debt interest payments from the heavily indebted poor countries" but that the G8 countries made it clear initial payments would come out of existing aid budgets. Also, in contrast to the World Bank, the IMF is required to cover its own losses under the deal; Britain also abandonned its suggestion to have the IMF sell off some of its gold reserves to fund the debt relief.
Given recent suggestions that Paul Wolfowitz was shunted off to the World Bank mainly as punishment for misjudgement on Iraq (and possibly also because his lightning rod presence there could revive left-liberal anti-Bank agitation), the question all this raises is whether debt relief, and the abolition of loans, serves mainly to further a neoconservative goal of weakening multilateral institutions and devolving aid decisions back to individual Western governments. There are a lot of reasons why indepedent international / multilateral aid institutions are theoretically better than single-country agreements, the main one being that rich countries have incentives to "tie" their aid (as has sadly been the case with roughly half of Canada's African aid) by requiring that poor countries use the aid money to buy the donor's products.
Of course, the IMF's historical ties to the US Treasury and continued deference to Washington Consensus austerity, not to mention some of the rules currently required for WTO membership, give the lie to the idea that mulitlateral organizations are necessarily purely benevolent entities, independent from the interests of rich country governments and corporations, or even that they at present represent a more "liberal" form of international management. Nevertheless, they offer some hope for an intellectual and governing framework that is free from the various whims and pathologies of changable national governments. It's highly questionable that the Bush Admininstration, great believers in American exceptionalism, sees this as a good thing.
Debt relief is a tricky business because, while in principle it is the most logical and broadly idelogically appealling type of aid -- allowing the governments of poor nations to redirect debt service payments to more pressing national needs, to free themselves from the hassle and stigma of renegociation, and eliminating the embarrassment of rich-nation-backed lending organizations having to press poor countries for their annual service payments -- it's also highly interconnected with the health and essentiality of multinational lending organizations like the IMF, the World Bank and the African Development Bank, all of which have come under varying, and varyingly fair, degrees of criticism from both the right and the left over the years.
Unsurprisingly, Bush and Blair come at the issue of international aid and lending quite differently. The British New Labour liberal internationalists, and Tony Blair himself (who has been an especially fierce advocate for greater attention to Africa from the West and is currently on tour advocating a commitment from G8 nations to up their African aid commitments to 0.7% of GDP) favour maintaining a multilateral approach to aid, working through the G8 and maintaining the strength of the international lender operations. The Bushies, by contrast, are somewhat less enthusiastic about ponying up large amounts of cash (though, to be fair, the U.S.'s African aid budget is currently 3 times its level in 2000), especially when that money is directed through multilateral organizations such as Blair's proposed International Finance Facility which aims to pool and frontload future third world aid pledges from donor nations.
Two major issues are at stake in mapping out the path of debt forgiveness. The first concerns who should qualify for debt relief, and for aid in general. The Bush Administration, like the World Bank and IMF, favours maintaining fairly tight restrictions on which governments are eligible for international aid, and requires (sensibly) that potential recipient governments prove themselves transparent and relatively free of corruption, and (more ominously), that they favour market liberalization. So far, for instance, the US Millenium Challenge Account -- a Bushie initiative offering aid packages to eight qualifying African countries -- has yet to dispense any of its $2.5 billion resources because of the delay in finding governments who meet its qualifications (so far, only Madagascar has been approved for an aid package, which has yet to be transacted).
The who-qualifies issue ties into the larger issues of the conflicts between the need to insist on models of good government so that aid funds are not wasted in their historical role propping up despotic regimes, the basic dictates of humanitarian relief and the need to defer to national autonomy in chosing a country's degree of protection and market liberalism. The Globe and Mail article linked above quotes Gary Barr of the Canadian Council for International Cooperation offering a typical critique: "We have a lot of countries that now have really competent governments, that would be able to use debt relief to save millions of lives, that just aren't eligible for it because they don't meet these conditions that are excessively strict, and that could actually damage their economies if they were implemented." The issue is further complicated by the fact that the worst humanitarian crises often occur where governments are the most corrupt, for instance, in Mugabe's Zimbabwe and in Bashir's Sudan. For its part, the recently-announced debt write-off includes only governments that meet the criteria of the World Bank-IMF's 1996 Heavily Indebted Poor Country (HIPC) Initiative, although this does not seem terrible draconian: Nigeria, the country whose exclusion has raised the most complains is slated to meet the HIPC qualifications within the next 18 months.
The second issue concerns who gets stuck with the bill for the off-written debts, and it's this issue on which the conflict between liberal internationalism and Bushie unilateralism (as opposed to the more traditional conflict over eligibility between liberal governments and NGOs and the Washington-World Bank-IMF side) mainly comes into play. Washington prefers that debts simply be written off books at the IMF, World Bank and African Development Bank, and further that aid to countries with sufficiently low GDP-per-capita (about $500 US per year) be provided from here on out with grants rather than with loans from these multilateral entities. Blair and Brown, along with most European liberal internationalists, want to see the G8 countries take over the poorer nations' debts and recompensate the lender organizations for their losses and to maintain the policy of making loans rather than grants. A New Republic editorial on Wolfowitz's assumption of the World Bank presidency argued that these measures "would deprive the Bank's soft loan kitty [which is funded partly by repayments of earlier loans] of a large chunk of its future resources. Unless donors compensated the Bank by stumping up more cash, the Bank's operations in its poorest client countries would contract substantially. What's more, once some countries get debt relief, it will be hard to deny other supplicants. The cost of forgiveness to the Bank could snowball." The latter concern was the sticking point for the Japanese and German finance ministers at the weekend G8 talks, though they eventually caved to Brown.
And how did the current deal shake down? The details not totally clear, but the gist is that, while the deal is a victory for the Blair-Brown liberal internationlists on relief eligibility and extent (%100 write-offs to qualifying governments; almost everyone slated to qualify), the US basically got its way on the big issue of how the debt is to be written off. According to the New York Times, "Britain agreed to the American proposal to write down debt rather than have the rich countries pay it down themselves over the next decade" while at the same time, the United States "agreed that the United States and other rich countries make up what the World Bank and other lenders would lose in loan repayments, which with cost the United States $1.75 billion." The Financial Times quoes Brown saying that "We could not have tolerated a situation where the World Bank was prevented from giving money to other poor countries because it was not compensated for the loss of debt interest payments from the heavily indebted poor countries" but that the G8 countries made it clear initial payments would come out of existing aid budgets. Also, in contrast to the World Bank, the IMF is required to cover its own losses under the deal; Britain also abandonned its suggestion to have the IMF sell off some of its gold reserves to fund the debt relief.
Given recent suggestions that Paul Wolfowitz was shunted off to the World Bank mainly as punishment for misjudgement on Iraq (and possibly also because his lightning rod presence there could revive left-liberal anti-Bank agitation), the question all this raises is whether debt relief, and the abolition of loans, serves mainly to further a neoconservative goal of weakening multilateral institutions and devolving aid decisions back to individual Western governments. There are a lot of reasons why indepedent international / multilateral aid institutions are theoretically better than single-country agreements, the main one being that rich countries have incentives to "tie" their aid (as has sadly been the case with roughly half of Canada's African aid) by requiring that poor countries use the aid money to buy the donor's products.
Of course, the IMF's historical ties to the US Treasury and continued deference to Washington Consensus austerity, not to mention some of the rules currently required for WTO membership, give the lie to the idea that mulitlateral organizations are necessarily purely benevolent entities, independent from the interests of rich country governments and corporations, or even that they at present represent a more "liberal" form of international management. Nevertheless, they offer some hope for an intellectual and governing framework that is free from the various whims and pathologies of changable national governments. It's highly questionable that the Bush Admininstration, great believers in American exceptionalism, sees this as a good thing.
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