Live 8 Concerts Bring Hope....

Live 8 performed and broadcast around the globe this past weekend illuminates the plight of desperate poverty in Africa.

An open letter from Live 8 sponsor Bob Geldof said....

The letter, widely published in British newspapers, listed the measures the anti-poverty campaign wanted the G-8 summit to adopt. It called for an extra $25 billions in aid, 100 per cent debt cancellation for "all'' African countries, and an end to "unjust trade rules'' to help poorer nations build their economies through free trade.

But were the crowds there just to see all the rock stars and participate in a big summer party or do something constructive to eradicate African poverty? As I wrote yesterday, I think its just a big party for our young people.

Unfortunately, I am cynic on alleviating poverty in Africa. Debt forgiveness is a noble goal, but this will only lead these nations to borrow more funds which will probably again be misspent or stolen. I was involved in a program on debt forgiveness several years ago. It was called High Indebted Poor Countries or HIPC for short. Essentially, countries could have their foreign debts forgiven if they took some internal measures to strengthen shortcomings.

The countries' debts would be cancelled once they have reached the "completion point" of the HIPC Initiative, a comprehensive framework that was created in 1996 and revised in 1999 for addressing unsustainable debt. To reach the "completion point," countries must have implemented key macroeconomic policy reforms, maintained economic stability and adopted and implemented a poverty reduction strategy for at least one year.

Currently, 38 countries potentially qualify for assistance under the HIPC initiative; 27 of them already receive some debt relief under the program, but what they have thus far received has not resolved the crisis or contributed in a substantial way to the achievement of the millennium development goal of halving poverty by the year 2015. Of these countries, 18 of them would receive immediate benefits from the new proposal: cancellation of more than $40 billion debt for a combined savings of about $1.5 billion a year. These include Benin, Burkina Faso, Ethiopia, Ghana, Madagascar, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia, Bolivia, Guyana, Honduras and Nicaragua.

Some of the macro-economic policy reforms included the privatization of state owned enterprises and this has caused some level of economic dislocation and job losses. But in order for these nations to compete long-term, this medicine has to be taken one day anyway. So really, the most recent debt forgiveness plan is really not for those countries that have reformed themselves while preparing for HIPC but for those that were unable to unwilling to adopt these kinds of reforms. For example this new program would support the odious regime of Zimbabwe's Robert Mugabe and his murdering henchmen. We are creating a moral hazard where loans to those nations that are unable to pay them back will ultimately be paid for and forgiven by the taxpayers in the richest countries. So why bother to make sound lending decisions to these people?

An interesting viewpoint from Ghana here...

Now come the G-8 countries that decide to cancel $40 million debt of 18 African countries. Let's do the math here. When you divide 40 by 18 you get about 2.2. This figure is significant because it might look very small on the average, yet the gesture of the G-8 is encouraging. Many African political leaders have more than this amount stashed somewhere. They more than likely stole it from their nation's coffers and won't give it back, no matter what. These same leaders will blame the West for unjust world economic order, etc. To me, it seems that the G-8 cares more about the plight of Africans than most of our leaders. Every period has its time. The 1950s and 60s saw the civil rights and self-governance movements spreading across the world. The 70s saw the black power and back to Africa mentality. The 80s saw the devastation of Africa by her own leaders, and the 90s saw more irresponsible governance by some African leaders, butchering, maiming, and killing ourselves. The 90s also witnessed the realization that Africa better wake up and stop being a jerk.

And on the topic of additional aid? Has all the aid that has gone there over the past 40 years or so had any impact? There has been decades of aid to Africa and this has created some incredibly wealthy people but it has not trickled down to the common people. Why is that?

When talking with a few of the young people when I lived in West Africa, a few years ago, I got the distinct impression that we have created a continent of people that are dependent on aid. They expect to be given these handouts and they sometimes were angry if there were strings attached! Have we created an environment where these people are going to work hard for their own better future? I don't think so.

There is one area in which I think that the West can be very helpful and that is to end the unjust trade rules. Agriculture is an area in which Africa can excel and some of the export markets are closed to these poor people in name of protecting farmers in rich countries. Tariffs and subsidies hurt these poor nations in area in which they can build a future.