David Casley

POVERTY, in both relative and absolute terms, was greater before the least developed countries borrowed heavily.

World Bank loans to the poorer countries were made under the aegis of the International Development Association (“IDA”) which essentially were interest-free loans with long delayed repayment periods. With what was virtually free money came also substantial professional advice from World Bank staff. These programmes were extremely successful in helping many countries out of least-developed conditions into rapidly expanding economies with increasing prosperity for their peoples. Much of Asia, particularly South-East Asia, was in this category. (Today’s financial crisis in these countries is a problem of economic overheating and excessive ambition not poverty alleviation loans).

The main areas of failure were Africa and parts of Latin America. In some countries, such as Mexico, governments borrowed excessively from commercial banks to achieve rapid industrialisation. This excessive borrowing caused a debt crisis in the mid-80s which was well handled by the international community with debts sold at a fraction of their value, which means a high proportion of the debt was discounted – written off if you will – in exchange for certain reforms of the internal financial systems, such as those being discussed for Japan today.

In Africa the problem was, and is, a more intractable one, caused by leaders whose greed, coupled with incompetence, has not been paralleled in modem times. Prosperous countries like Ghana and Zambia were ruined by ill thought through socialist programs, which crippled the economy. And potentially even richer countries such as Nigeria and Zaire were crippled by despots and military dictators.

Writing off debt for such countries merely guarantees the survival of lunatic internal economic policies and enables the ruling cliques or their heirs to continue to create more poverty by creaming off ever-greater portions of the land and wealth.

The example of Tanzania, highlighted in the Jubilee folder, is a gross misrepresentation of the truth. Tanzania borrowed from IDA, i.e. virtually free money for Rural Development in every part of the country. Just as the small farmer projects and infrastructure support were getting under way the Government, in the person of Julius Nyerere (the darling of the international liberal establishment), fractured rural society by his policy of Ujamaa, which was a forced relocation of rural peoples off their own land into communes – a sort of soft, Chinese-style ‘Great Leap Forward’ which, as in China, resulted in disaster. (China, incidentally, borrowed not at all until it joined the World Bank in the 1980s, but any World Bank staffer who went there will confirm that in the remoter parts of China they saw poverty worse than anything they had seen before – whole areas where people lived in caves and scrabbled for roots to survive.) China, now that she is an international borrower, is starting to develop at the rates achieved by countries such as Korea and Malaysia.

What is needed in so many of these countries is reform of the governance, and the introduction of an economic system that is aimed at helping the poor instead of further enriching the despots. Only then can the debt-burden be addressed, as has happened in Ghana (under the stable government of Rawlings), and Uganda (under Musaveni). To wipe off the debts of an Idi Amin, a Mobutu or a Bokassa does not solve a problem; it exacerbates it. That is why the international community wants reform in Indonesia (and the stepping aside of the ruling family) as a necessary ingredient in the crisis solution.

Poverty is related to governance or the lack of it. Is debt the cause of destitution in Rwanda, Burundi, Liberia, Sierra Leone, Somalia? Or is it civil war and tribal hatreds.


David Casley finds that governance and not indebtedness
is the chief cause of poverty

The United States has one of the highest per capita national debts in the world, higher now than ever in history. If debt was a cause of poverty, US citizens should be destitute, rather than the most prosperous society the world has ever seen.

Simplistic, nice-sounding but spurious solutions are not only ineffective, but by directing attention from the real problems can contribute to further disaster at the start of the next Millennium.

Dennis Casley is a member of Congregation at Church of St Corentin, Cury Parish and former (1980 – 90) Chief of Project Evaluation of the World Bank