Third World Debt

by Shihang

After a long morning of listening to secondary school kids talk about third world debt, I for once understand what people mean when they argue that opinion is dominated only by perspective.

When you argue about the ideal solution to third world debt, what is the immediate issue? There are many arguments in favour of debt cancellation: the argument that debt causes externality (a better argument in the RMUN context given its cynicism), some debt is immoral (which takes many forms, none of them very interesting), that debt causes a poverty trap etc. You might notice that only a few arguments would be persuasive from any point of view.

For example, if you are an OECD country, you might only be persuaded by the externalities argument, and to an extent the poverty trap argument to the extent that the poverty trap impoverishes your interests. If you are a third world nation with debt, you will be very interested in a moral argument for debt cancellation and the idea of a poverty trap will be rather persuasive.

I seem to see debt restructuring and debt rescheduling as the best option, and am not adverse to some debt write-off. In theory, a write-off of debt will have significant economic advantages; in reality, we have to give due consideration to politics: the countries in question must be politically stable and debt cancellation must lead to a sustainable budget position. Also, in reality, most debt restructuring do not actually help the nations in question. If only life imitated the art of theory!