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Nov. 18, 2009
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Nov. 17, 2009
Steven Emerson: How Does the 4th Amendment Impact Terror Finance Investigations?
JWisdom.com: If Frank Sinatra married Edith Piaf with Rabbi Y.Y. Rubinstein (2 minutes) Life lessons from what would be regarded as the most inappropriate lyrics ever sung
Nov. 16, 2009
The Jewish Ethicist by Rabbi Dr. Asher Meir : When borrowing is stealing
JWisdom.com: Deconstructing faith with Rabbi Warren Goldstein (9 minutes)
Nov. 13, 2009
JWisdom.com Sarah's subjective reality with Rabbi Sroy Levitansky ( 6 minutes)
Caroline B. Glick: Obama's failure, Netanyahu's opportunity
Nov. 12, 2009
The Kosher Gourmet By Marialisa Calta : A sweet sweet potato treat
JWisdom.com Does God get tired? with Rabbi Harvey Belovski ( 5 minutes)
Nov. 11, 2009
Rabbi Avi Shafran: Jews and money: When anti-Semitism isn't
JWisdom.com Marriages are not made in Heaven with Rabbi Lawrence Hajioff (VERY fast 15 minutes)
Nov. 10, 2009
Michael Doyle: Author of book exposing CAIR ordered to remove supporting documents from Web
JWisdom.com If the creation so loudly shouts the existence of the Creator, why aren't more people believers? with Rabbi Naftali Brawer (9 minutes)
Nov. 9, 2009
Mark Steyn: Shooter exposes hole in U.S. terror strategy
JWisdom.com It's never too late to have a happy childhood with Sarah Chana Radcliffe (5 minutes)
Nov. 6, 2009
Rabbi Berel Wein: Choosing to hear
JWisdom.com Zero to 1/60th: How to Empower An Hour with Gavriel Aryeh Sande (7 minutes)
Caroline B. Glick The mullahs' big week
Suzanne Fields A Fallen Wall for Fallen Man
Nov. 5, 2009
The Kosher Gourmet: Three scrumptious -- but simple -- butternut squash dishes
JWisdom.com Hidden Hints: Unlocking Faith & Prayer with Rabbi Jay Yaacov Schwartz (10 minutes)
Nov. 4, 2009
Tom Hamburger and Kim Geiger: Should prayers be covered?
JWisdom.com When God played peacemaker With Rabbi Sroy Levitansky (5 minutes)
Nov. 3, 2009
Martin Peretz: Beware, Barack. Beware, Rahm. Beware, Axelrod
JWisdom.com Are you are closet idolater? With Sara Yoheved Rigler (10 minutes)
Nov. 2, 2009
Paul Greenberg: The Holocaust is now on Facebook
JWisdom.com Abraham's Strange Change With Rabbi Yitzchok Fingerer (5 minutes)
Oct. 29, 2003
Mortimer B. Zuckerman: Graffiti On History's Walls (MUST-READ!)

Jewish World Review June 16, 2005 / 9 Sivan, 5765

Debt relief in Africa subsidizes ineptitude

By Robert Robb

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http://www.JewishWorldReview.com | What's being proposed for Africa isn't just debt relief. Instead, it's also in large measure an assumption of the loans by developed countries. And that makes it a mistake.

It is certainly debt relief from the standpoint of the mostly African nations owing the money. Finance ministers from the United States, Western Europe, Canada and Japan agreed last week that $40 billion in loans to 18 countries should be immediately lifted. An additional 20 countries are eligible to potentially shake off $16 billion more in obligations.

A small portion of the initial debt to be written off is owed to the International Monetary Fund, which is well capitalized. So, the finance ministers propose that the IMF simply eat the loss.

But the bulk of the money is owed to the World Bank, which is not well capitalized. The finance ministers propose that their countries make the bank whole for the loans. The U.S. share might run as high as $1.75 billion.

This is to enable the World Bank to continue loaning money to developing countries, rather than curtailing its activities as a result of its lending losses.

But the non-performing loans being relieved are themselves proof that the World Bank has been an improvident lender. It has also been an utter failure in facilitating economic growth, particularly in Africa.

Since 1980, the World Bank, in conjunction with the African Development Bank, has lent African governments more than $75 billion. Yet half of these countries have seen a decline in real per capita income. Only a handful made any meaningful economic progress.

There's an explanation as to which countries did make meaningful progress, and it doesn't have anything to do with lending by international organizations.

The Heritage Foundation and the Wall Street Journal publish an Economic Freedom Index, comparing the degree of economic liberty that is available in countries. It looks at such things as taxation, regulation, and sound and fair governance as it relates to business activities.

The countries in Africa that are rated mostly free on the index have an average per capita income four times higher than the countries that are not free.

The Bush administration understands this reality. It has made reforms conducive to democratic capitalism a prerequisite to receiving U.S. development assistance. Presumably it expects new President Paul Wolfowitz to do the same at the World Bank. And indeed, there is a bow in that direction in this debt-relief plan.

But there is a paradox to the Bush requirement: Countries that truly make reforms conducive to democratic capitalism don't need foreign aid or subsidized credit through international organizations. Their economies will experience internal growth, and they will be able to attract private-market loans and investment.

That, of course, is the real fuel for economic growth in these countries. Last year, the World Bank lent about $20 billion to developing countries. That same year, developing countries received more than 10 times that, $255 billion, in direct foreign investment.

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Moreover, good governance and free-market reforms are much more likely to be made and stuck with if these countries have to convince private lenders and investors rather than U.S. or international bureaucrats. Private lending and investment is also likely to be much larger and more responsive than loans and grants flowing through governmental institutions. The track record of what one economist has called the "cartel of good intentions" has not been very good.

There is, of course, a humanitarian aspect to all of this, given the wretched conditions in which many Africans live. But there is a tendency among Western governments to conflate humanitarian aid with economic development assistance. Even if Western governments want to stay in the humanitarian aid business, they should get out of the economic development assistance business because they aren't very good at it.

Moreover, being in that business — and attaching conditions relating to internal governance to the assistance — accentuates the sense that the United States, and developed nations generally to a lesser extent, is trying to impose its will on the world.

If there is to be additional, large-scale African debt relief, it would be far better for the World Bank to be required to write off its loans just like any other improvident lender. Making it whole for its imprudence simply funds and encourages more of the same.

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JWR contributor Robert Robb is a columnist for The Arizona Republic. Comment by clicking here.

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