September 30, 1999
Forgive And Forget
How Does IMF Spell Relief?
On The Launchpad
Forgive And Forget
President Clinton said Wednesday that the United States would forgive all debts owed to it by impoverished countries, Reuters reports. Clinton, speaking at the annual meetings of the International Monetary Fund and World Bank said it was "an economic and moral imperative that we use this moment of global consensus to do better" for the debtor nations. "Today I am directing my administration to make it possible to forgive 100 percent of the debt these countries owe to the United States," Clinton said. Last week, new Nigerian President Olusegun Obasanjo said "[d]ebt relief for developing countries is not a plea for charity, but an urgent matter of social and economic justice" in calling for a cancellation of Africa's $300 billion debt.
In the Cato Policy Analysis "A New Aid Policy for a New World", Doug Bandow wrote, "Since World War II the United States has provided more than $1 trillion (in current dollars) in bilateral economic assistance to other nations, supplemented by generous contributions to such multilateral organizations as the World Bank, regional 'development banks,' the Inter-national Monetary Fund (IMF), and the United Nations. Washington has also provided developing nations with large-scale military support, trade subsidies, and the like. And aid money continues to flow. Washington has been spending about $18 billion a year… As Mexico's problems expanded, the administration proposed an additional $40 billion in loan guarantees, only to face mounting public opposition. President Clinton then bypassed Congress and announced his plan to provide $20 billion in loans and loan guarantees through a special Treasury Department fund. (The overall $50 billion assistance package includes $17.8 billion from the IMF, to which America is the largest contributor.)
Not that this should come as any surprise. The Bush administration forgave nearly $7 billion in Egyptian debt to reward Cairo's participation in the Persian Gulf war; Washington formally wrote off roughly $2.7 billion in Polish debt to assist that nation's move to democracy. The Clinton administration is a leading supporter of increased assistance to Moscow; according to then-Treasury Secretary Lloyd Bentsen, 'President Clinton promised that, as long as Russia keeps reforming, we'll work with the G-7, the IMF, and the World Bank to get this support delivered as rapidly as possible.'"
How Does IMF Spell Relief?
The International Monetary Fund has launched a new debt relief initiative and will endeavor to speed internal reforms. The IMF has been under fire recently due to the Russian money laundering scandal and criticisms that the IMF clumsily handled the global financial crisis. The new effort will provide debt relief to 36 of the world's poorest nations, with the intention of eliminating up to $100 billion in debt that the nations could reinvest into poverty, health and education programs.
A new Cato Foreign Policy Briefing, "Repairing the Lender-Borrower Relationship in International Finance" by Ian Vásquez, criticized IMF lending policies: "Through official lending and mediation, usually led by the International Monetary Fund, authorities have reduced the possibility of sovereign default in an effort to avoid the spread of financial turmoil. That strategy has shielded investors and debtors from economic reality, has prompted calls for changes in the international financial architecture, and is leading to some reforms at the IMF. IMF initiatives to provide preventive bailouts to countries before difficulties arise and to 'bail in' the private sector are fraught with problems. Preventive lines of credit are likely to be misused and to increase moral hazard, while efforts to force losses on the private sector may precipitate the very crises they are intended to prevent. The historical experience suggests that direct two-party bargaining between creditors and debtors is a better way of handling financial crises than is reliance on official third-party interventions. Private investors in the 19th and 20th centuries regularly solved collective action problems and supplied so-called public goods that official agencies intend to provide. Default, or the real possibility of default, led to renegotiations of debt conditioned on reforms in the debtor country."
On The Launchpad
NASA Administrator Dan Goldin told the Space Frontier Foundation's eighth annual conference that the space agency wants private industry to take over activities in the Earth's orbit, such as the International Space Station, so NASA can get back to deep space exploration, Wired News reported. "The way we'll get there is with a revolution both in [our] technology and business approach. We can't afford to do solar system exploration until we turn these earth orbit activities over to a cutting edge private sector… Beyond the next 5-10 years [when the International Space Station is completed], our hope is to turn the keys of the station over to an entrepreneur in the private sector who sees an opportunity," said Goldin.
Edward Hudgins examined NASA's past failures to privatize in a commentary
entitled "Time to Privatize NASA": "The
government has had many opportunities to turn over civilian space
activities to the private sector. In the 1970s, American Rocket Co. was one
of the private enterprises that wanted to sell launch services to NASA and
private businesses. But NASA was moving from science to freight hauling,
and planned to monopolize government payloads on the shuttle and subsidize
launches of private cargo as well. The agency thus turned down American
Rocket. In the late 1980s, Space Industries of Houston offered, for no more
than $750 million, to launch a ministation that could carry government and
other payloads at least a decade before NASA's station went into operation.
(NASA's station currently comes with a price tag of nearly $100 billion for
development, construction and operations.) NASA, not wishing to create its
own competition, declined Space Industries' offer. In 1987 and 1988, a
Commerce Department-led interagency working group considered the
feasibility of offering a one-time prize and a promise of rent to any firm
or consortium that could deliver a permanent manned moon base. When asked
whether such a base were realistic, private-sector representatives answered
yes -- but only if NASA wasn't involved. That plan was quickly scuttled."
Hudgins testified before Congress on
NASA recommendations in 1995.