Jubilee 2000 Edinburgh Human Chain
John Blair-Fish
JUBILEE 2000 CAMPAIGN
HUMAN CHAIN
CENTRAL EDINBURGH June 12th 1pm
On Saturday 12th June the Jubilee 2000 campaign is organising a human chain
around the centre of Edinburgh to call for the cancellation of selected
unpayable debts that are owed by the world's poorest countries to the
richest. Tens of thousands of people are expected to be a part of the
chain, which will link up at 1pm. The chain is one of many around the world
in the coming week, showing the leaders of the G8 countries the strength and
depth of support for Jubilee 2000 and a debt-free start in the new Millenium
for a billion people. There will be other events during the day too: a
family festival on the Meadows, seminars on debt in the afternoon, a youth
multi-media event, a choral evensong and a ceilidh to round everything off.
More details from the coordinating centre on 0131-225 4321.
Please feel free to turn up at the Meadows or Princes Street Gardens and be
a part of history.
M Holmes
: JUBILEE 2000 CAMPAIGN
: HUMAN CHAIN
: CENTRAL EDINBURGH June 12th 1pm
: On Saturday 12th June the Jubilee 2000 campaign is organising a human chain
: around the centre of Edinburgh to call for the cancellation of selected
: unpayable debts that are owed by the world's poorest countries to the
: richest.
It is of course quite laudable to lobby for debt forgiveness for the
poor. When it's on behalf of a country however, it's surely more
complicated.
Those debts are presumably owed to people, albeit through corporations
and bureaucracies. Who will settle those debts on behalf of the poor
countries?
If the answer is that these debts will not be settled then surely
there's a risk that either future loans to those countries will simply
not be forthcoming, or that they will incur higher interest rates to
compensate for the perceived risk of lobbying campaigns causing those
debts to be cancelled.
I'm not assuming that lobbyists haven't considered such matters. I'm
sure if the occur to someone as unversed in international finance as
myself, they've been anticipated by those with specialist knowledge. I
am however, curious about their solutions to these problems.
FoFP
M Holmes
: The entity calling itself M Holmes wrote:
:>
:> Those debts are presumably owed to people, albeit through corporations
:> and bureaucracies.
: Most of the outstanding loans are inter-governmental - the UK clearing
: banks, for example, having written off a large part (most?) of their 3rd
: world bad debt back in the 80s (written off against tax, of course).
Wouldn't this have a similar, albeit diluted, effect? One government
writes of loans to another. The creditor government usually has loans
itself by way of issuing bonds. It has to issue more bonds to cover the
writeoff. Bondholders, seeing their holdings diluted, demand higher
interest payments (effectively by dropping the bond price) and then any
new loans the ex-debtor government wants must be financed at higher
interest rates.
The logic of this would seem to imply that a poor government would be
better borrowing, and defaulting on, a "rich" government which itself
has large debts.
Maybe that's why American loans are so popular?
: Iain A F Fleming
FoFP
M Holmes
: The entity calling itself M Holmes wrote:
:>
:> Those debts are presumably owed to people, albeit through corporations
:> and bureaucracies.
: Most of the outstanding loans are inter-governmental - the UK clearing
: banks, for example, having written off a large part (most?) of their 3rd
: world bad debt back in the 80s
I've been thinking (always a Bad Sign) about this.
So there were (obSagan) billyuns and billyuns of credits advanced to
sundry governments of countries containing lots of people who were poor.
The Cunning Plan was presumably to help those people become rich, or at
least less poor, and someone made the mistake of handing the loot to
politicians.
So far, so bad. I'm just guessing here, but the idea would have been to
think of something involved in economic infrastucture which could be
built or created and which would ultimately benefit the poor people in
such a way as to make them richer. In fact The Plan was probably costed
such that the anticipated benefit was in fact larger than the payments
due on the credit used to build the infrastructure, and thus with a
sensible pricing strategy (possibly through taxation, charging, or both)
would pay the interest on the capital with a little left over in the
communal kitty or consumer surplus.
Now we're told that the commercial loans were written off by the banks
(i.e their shareholders lost money through someone's idiotic investment
plans) and now governments are being asked to do the same thing (i.e
bondholders and taxpayers will lose money over someone's idiotic
investment plans).
Of course investments do sometimes go down the swannee, which is why
brokers get paid to package 'em up together in a way in which hopefully
they won't all go south at the same time. In the case of these countries
though, it seems that this is exactly what happened.
Now with brokers, there's a mechanism of ensuring that this isn't
repeated ad infinitum, not to mention an inbuilt incentive: they go
bankrupt if they get it wrong.
With countries however, just writing off the loan, while keeping the
politicians cum investment analysts in power, would seem to be sending
rather the opposite signal: that there aren't any consequences for
screwing up. Our politicians tell their politicians, though admittedly
at the behest of human chains around city centres, "What's a few hundred
billions between friends? After all, it wasn't our money either."
David Friedman says that economics isn't about money, it's about
incentives and consequences, and that interference in the markets, even
markets already well and truly messed up by prior interference, doesn't
always have the intended consequences, even when the intentions are the
nicest possible.
Poor people, getting a bit fed up at people with ummm, radical views on
the economy managing to make everyone even poorer despite billions and
bilions of Dollars being rained upon them, might be persuaded to force
their investment analysts to sling their hook and pursue more honest
employment.
Let them off the hook, by effectively wiping the slate clean and
cancelling their mistakes, might just leave them at their desks ready to
throw the next wodge of help for the poor down another convenient
rathole.
When poor people can't be made richer by throwing planeloads of money at
them, I'm sure it's got to be a sign that someone, somewhere is making
bad decisions. Those people are a bigger problem to the poor than
the debt because even with debt forgiveness, they might simply repeat
the trick.
It's just possible that a human chain, suitably armed, around a palace
in the target country might be more productive in the long run than a
human chain protesting at the door of the creditors. If the creditors
repeat their mistake than that at least has a chance of benefitting the
poor, if the politicians repeat their mistake then the same tragedy will
ensue.
> (written off against tax, of course).
If the investors have to pay tax on interest gained, it seems only
sporting to let them declare losses against this.
: Iain A F Fleming
: If you want to build a shed, go ahead, build a shed
"Giving money to the government is like giving whiskey and car keys to
teenage boys." -- P.J. O'Rourke
Richard Caley
mh> With countries however, just writing off the loan, while keeping the
mh> politicians cum investment analysts in power, would seem to be sending
mh> rather the opposite signal: that there aren't any consequences for
mh> screwing up. Our politicians tell their politicians, though admittedly
mh> at the behest of human chains around city centres, "What's a few hundred
mh> billions between friends? After all, it wasn't our money either."
Unfortunatly, at both lending and borrowing ends, the people who
arranged the loans are mostly long gone. There is little point in
punishing the current office holders, they will be hurt but not learn
(after all, they won't be punished for their own mistakes, the
politicians a generation down the line will get that punishment).
While giving out money doesn't seem to have worked, taking more and
more money (in interest) certainly isn't getting anyone anywhere.
Writing off the debt (certainly to the very poorest countries) and
then setting up systems to stop a repeat would seem to be the only way
to get back to a sustainable position.
--
Mail me as rjc not s...@cstr.ed.ac.uk _O_
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