G8 Does The Right Thing.

Following British Prime Minister Tony Blair's lead, the Group of Eight industrialized nations has agreed to cancel some $40 billion in third-world debt and put in mechanisms to write off even more:

"We are presenting the most comprehensive statement that finance ministers have ever made on the issues of debt, development, health and poverty," said Britain's Treasury chief Gordon Brown. The agreement represents a "new deal between the rich and poor of the world," he said.

U.S. Treasury Secretary John Snow, who helped hammer out the deal, called it "an achievement of historic proportions."

Officials said 18 countries, many in sub-Saharan Africa, will benefit immediately from the pact to scrap 100 percent of the $40 billion they owe to the World Bank, the International Monetary Fund and the African Development Bank. As many as 20 other countries could be eligible if they meet strict targets for good governance and tackling corruption, which could eventually boost the total debt relief package to more than $55 billion.

However, Britain, which holds the G8 presidency this year, faces further tough negotiations on another ambitious target of boosting international development aid by $50 billion a year. Britain hopes a second accord will be reached on this aid goal at G8 summit on July 6-8 in Gleneagles, Scotland.

Aid charities welcomed the package, but said at least 62 countries needed full debt cancellation.

I have just a few observations about this.

First, this is a very big deal and about time. Second, this is the kind of thing that former Treasury Secretary Paul O'Neill was roundly--and wrongly-criticized for. But then again, at that time he was running around in a dashiki with Bono, so he must have been wrong, no? While the G8 is working to bringing poor nations into greater economic stability, it should also take this opportunity to reform the IMF and World Bank,whose draconian, regressive rules drive poor nations towards bankruptcy and spiraling poverty. The G8 nations must cease trade protectionism when it suits them and their industry lobbyists and realize that free trade is perhaps the last chance to lift poor nations out of destitution.

The fair-weather capitalists in the US will no doubt scream bloody murder in response to this agreement. However, it's time to put their money where their mouths are.

Bob Geldof is correct when he says that more needs to be done. This is a good and historic first step. It would not have come about without Tony Blair, who dragged George Bush kicking and screaming to the deal. For all Bush's rhetoric about free trade and compassionate conservatism, he has done little to fix the ills that plague third world economies, many of which have been caused and exacerbated by the policies and practices of rich nations.

Good on Tony. And good on the G8.

 

Comments

[thc]

No doubt this will be good for the world economy in the long run and I have a couple of questions. What proportion of this write-off will the U.S. bear and could that be why Bush has been reluctant to do it? His administration has caught so much flak for the cost of the war in Iraq, where a more stable and capitalistic mid-east will also be good for the world economy.