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THIS HOUSE BELIEVES that countries which suffer from natural disasters should receive debt relief
THIS HOUSE BELIEVES that countries which suffer from natural disasters should receive debt relief
Debt relief is often discussed as a possible solution to world poverty. Given the over 34% of the world’s population still live in poverty on less than $2 per day, the international community, and more specifically the G8 group consisting of the most powerful nations in the world, made poverty relief one of the main goals during the UN’s millennium meeting in 2000. In looking for solutions for world poverty, debt relief is often seen as an important element and has thus sparked the creation of initiatives such as the Heavily Indebted Poor Countries Initiative (HIPC). This addresses some of the world’s poorest nations that face an unsustainable debt burden and seeks to provide debt relief or complete debt cancellation in exchange for economic and political reforms. 36 of the world’s poorest countries already benefit from this initiative.
In 2005, at the urging of British Prime Minister Tony Blair, the G8 summit revisited the issue of debt relief as a way to rid the world from poverty. An agreement was reached to provide more aid as well as debt relief to poverty-stricken countries. The agreement erased the debt of 18 of the world’s poorest nations (mainly in Sub-Saharan Africa). 70% of this debt was owed to the World Bank and the remaining debt was owed to the IMF and the African Development Bank. Debt relief for countries affected by natural disasters - such as the Asian tsunami, the Kashmir Earthquake and the Mozambique floods – is also being discussed as part of this larger debt relief initiative. The United Nations has been very supportive of debt relief.
 Salmon, Felix, ‘How poverty has tracked global population’, Reuters, 31 October 2011, http://blogs.reuters.com/felix-salmon/2011/10/31/how-poverty-has-tracked...
|Points For||Points Against|
|Developing Nations are trapped in a spiral of debt||Rich countries with debt suffer disasters as well|
|Debt relief for nations suffering natural disasters does not cause a moral hazard||Debt Relief creates a Moral Hazard|
|Disasters wreck attempts at responsible long-term debt management||Debt Relief treats a symptom, not the root problem|
|People who have no power over their government do not deserve to suffer for that government’s corruption|
Remember to choose a winning argument!
Developing Nations are trapped in a spiral of debt
Debt relief is much needed for the world’s poorest nations and the only way to ensure that they get back on the road to economic development. Without debt relief, the cycle of poverty, disease and corruption would continue and possibly spread to other parts of the world. Debt relief is particularly needed in countries affected by natural disasters, where much of the aid is focused on solving immediate concerns as opposed to getting the economy back on track. Not only do they desperately need more money to cope with the disaster, but the economic impact of the tragedy reduces their ability to service their loans anyway. What is the point of the developed world promising hundreds of millions of dollars in post-disaster aid, if they then take away much more money each year in debt charges?
A cancelling of debt is a mechanism that dates back to antiquity as a means of ‘resetting’ power and wealth inequalities that have expanded to critical levels.
 http://en.wikipedia.org/wiki/Solon, See also: Gill, N.S. ‘Democracy Then and Now, Rise of Democracy: Solon’s Constitution’ http://ancienthistory.about.com/od/democracy/a/050510SolonsConstitution.htm
There is no doubt that poverty is a serious issue in the world today and that a solution is needed. Debt relief, however, has so far proven to be fairly inefficient in terms of getting countries back on the road to development. In fact most countries whose debt has been forgiven have not managed to escape the cycle of poverty.
Debt relief alone will not be a solution in desperate situations where corruption, totalitarian governments and criminal gangs rule. It is better when natural disasters occur to provide short-term humanitarian assistance in the form of emergency supplies, specialist teams and money for rebuilding. Unlike debt relief, such aid can be focused on areas in real need and monitored to ensure it reaches those suffering in the disaster zone.Improve this
Debt relief for nations suffering natural disasters does not cause a moral hazard
Normally debt-relief schemes are accused of creating a moral hazard - encouraging governments of poor countries to spend their revenues unwisely in the expectation that creditor nations will wipe out their debts if they get into trouble. Debt relief for countries affected by natural disasters is different, as by their very nature such events are unpredictable and cannot be planned for. Instead the possibility of such assistance in the event of an earthquake, tidal wave, or other disaster makes it more possible for developing states to plan ahead and invest wisely for the future.Improve this
We need to keep in mind the fact that the need for debt relief is looked upon as a threat of bankruptcy. This means countries that are desperate enough to seek debt relief after a disaster may in future be seen as bad credit risks, and become unable to receive the loans they need in order to rebuild for the long-term after a natural disaster. It is also unclear what qualifies as a “natural disaster”. Earthquakes, hurricanes and tidal waves may be sudden and unpredictable, but as much or even more damage can be done by disease outbreaks such as AIDS, SARS or Avian ‘Flu, or by famine caused by crop failure. Outbreaks of Hepatitis A for example cost up to $36million. And why do disasters have to be “natural” to justify debt relief? What about countries affected by man-made disasters such as war? Tanzania and Chad have both suffered hugely from coping with massive refugee inflows following violence in neighbouring states (Rwanda and Sudan respectively).
 Luyten J, Beutels O, ‘Costing infectious disease outbreaks for exonomic evaluation: a review of hepatitis A.’, Pharmacoeconomice, 2009, Vol 27, No. 5, pp.379-89, http://www.ncbi.nlm.nih.gov/pubmed/19586076
Disasters wreck attempts at responsible long-term debt management
Debt burdens are common in the developing world, but natural disasters such as earthquakes, tsunamis or hurricanes are rare and unpredictable. Existing debt-reduction programmes take a long-term approach, but years of good policy and improving governance can be totally wrecked by one event. For example Cyclone Nargis in 2008 caused immense damage to Myanmar’s [Burma] economy with disaster costs amounting to nearly 30% of GDP, something that would immensely strain even the best managed country.
 CRED, the Centre for Research on the Epidemiology of Disasters, ‘Natural disaster management’, Global Education, 20 August 2010, http://www.globaleducation.edna.edu.au/globaled/go/pid/308
While it is true that debt payments place a serious burden on governments, one also needs to consider what kind of governments are talking about. Because current debt-relief programmes such as the HIPC scheme are already rewarding countries for good governance, some of the poorest states will in future have little debt to forgive in the event of a natural disaster.
People who have no power over their government do not deserve to suffer for that government’s corruption
People who have the misfortune to live in badly-run or totalitarian states still deserve our help when disaster strikes. Debt-relief is one way for the international community to make sure they are not oppressed from without (by debt charges) as well as from within. Totalitarian governments may also be more willing to accept aid if it comes with debt relief.
Only those which refuse to meet international norms for governance and human rights are keeping their debts and so will be in line for debt-forgiveness after a future mass tragedy. Sadly, in many cases these have governments that are involved in civil wars, killing their own populations as well as others; they are governments that waste most of the aid that comes into their countries; governments that use development funds to feed their own foreign bank accounts; and governments that engage in serious human rights violations. Forgiving the debts of such states will do nothing for those struck by disaster and will make a mockery of the existing debt relief schemes.Improve this
Rich countries with debt suffer disasters as well
Where would you draw the line? The proposition seems to assume that only developing countries suffer from natural disasters, and so require debt relief. In fact, natural disasters can strike a wide range of countries and it is not clear if your scheme would not also apply to middle-income or even rich states. In recent years the United States has been struck by several devastating hurricanes, hurricane Katrina which hit New Orleans in 2005 may have cost up to $250billion, and many people believe an enormous Californian earthquake is overdue. Given the huge foreign debts of the US government, why shouldn’t it apply for debt relief too in such situations? And what about Japan, for example after the Kobe or Tōhoku earthquakes? After all, given the much greater physical infrastructure of such countries compared to developing ones, the cost of damage done by a similar natural disaster will be very much higher.
 ‘UNT experts can discuss Tropical Storm Gustav and Hurricane Katrina’s 3rd anniversary’, University of North Texas, 28 August 2008, http://web3.unt.edu/news/story.cfm?story=11129
These schemes are designed to help developing countries recover after terrible tragedies, not to channel money to rich nations even if disaster strikes them too. The key difference is the ability of the country to cope with the situation. The US (or Japan) may have huge debts and potentially huge reconstruction costs after a disaster, but compared to the size of its overall economy or government budget these are much more affordable. Hurricane Katrina may have been one of the most costly disasters in history but it was still between 1 and 2% of U.S. GDP, much smaller than the 30% for Cyclone Nargis. Developed nations also have access to insurance to spread the burden of loss after a disaster - something which is either absent or totally unaffordable in developing countries. There are therefore tangible indicators that can be used to distinguish between countries that would qualify for debt relief and those which would not.
 Chapman, Paul, ‘Christchurch earthquake: government wants to demolish 5,000 homes’, The Telegraph, 23 June 2011, http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/newzealand/8593434/Christchurch-earthquake-government-wants-to-demolish-5000-homes.html
Debt Relief creates a Moral Hazard
Debt Relief creates a significant moral hazard; it sends the message that it is possible to be financially reckless and still end up with a ‘free lunch’.
Natural Disasters are beyond the control or prediction of individual states but then so are all manner of events that might affect an economy; from stock market crashes to wars. A prudent government ensures that it has a reserve to meet the unknown, for exactly this reason many Asian governments have been building up foreign exchange reserves to act as a hedge against a “rainy day” since the 1997 Asian financial crisis, whether this is natural disaster or some economic crisis.
 Lee, Bernard, Wang, Fefei, ‘Reevaluating the Roles of Large Public Surpluses and Sovereign Wealth Funds in Asia’, ABDInstitute, Working Paper No. 287, 6 June 2011, http://www.adbi.org/working-paper/2011/06/06/4580.roles.public.surpluses.wealth.funds.asia/roles.of.asian.official.institutions.in.the.new.global.financial.landscape/
Moral Hazard only arises when there is agency for the circumstances which give rise to the harm which needs to be relieved. Natural disasters constitute a force majeure for which there cannot be any reasonable moral fault for not preventing.
It is also naïve to conflate the ability of developed and wealthy countries to set aside strategic reserves of currency to hedge against a future calamity with the position of developing countries which need to take on debt in order to fuel their industrialisation.Improve this
Debt Relief treats a symptom, not the root problem
There is a difference between the problem of debt and the problem of deficit and imprudent borrowing; the former is a consequence of the latter.
Even if Debt Relief is implemented for countries which have been thrown into economic turmoil, it is useless unless matched with substantial changes to the way those countries are run or else they will simply get back into debt.Improve this
This analogy ignores the fact that the primary way of curing an illness is to treat the symptoms. Solving the problems of unsustainable deficit spending is not possible if a country is burdened with the interest payments on a debt that was made when the economy could sustain them but has subsequently become unserviceable.Improve this
Chapman, Paul, ‘Christchurch earthquake: government wants to demolish 5,000 homes’, The Telegraph, 23 June 2011, http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/newzealand/8593434/Christchurch-earthquake-government-wants-to-demolish-5000-homes.html
CRED, the Centre for Research on the Epidemiology of Disasters, ‘Natural disaster management’, Global Education, 20 August 2010, http://www.globaleducation.edna.edu.au/globaled/go/pid/308
Gill, N.S. ‘Democracy Then and Now, Rise of Democracy: Solon’s Constitution’ http://ancienthistory.about.com/od/democracy/a/050510SolonsConstitution.htm
‘Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative’, International Monetary Fund, 6 September 2011, http://www.imf.org/external/np/exr/facts/hipc.htm
Lee, Bernard, Wang, Fefei, ‘Reevaluating the Roles of Large Public Surpluses and Sovereign Wealth Funds in Asia’, ABDInstitute, Working Paper No. 287, 6 June 2011, http://www.adbi.org/working-paper/2011/06/06/4580.roles.public.surpluses.wealth.funds.asia/roles.of.asian.official.institutions.in.the.new.global.financial.landscape/
Luyten J, Beutels O, ‘Costing infectious disease outbreaks for exonomic evaluation: a review of hepatitis A.’, Pharmacoeconomice, 2009, Vol 27, No. 5, pp.379-89, http://www.ncbi.nlm.nih.gov/pubmed/19586076
Salmon, Felix, ‘How poverty has tracked global population’, Reuters, 31 October 2011, http://blogs.reuters.com/felix-salmon/2011/10/31/how-poverty-has-tracked...
‘UNT experts can discuss Tropical Storm Gustav and Hurricane Katrina’s 3rd anniversary’, University of North Texas, 28 August 2008, http://web3.unt.edu/news/story.cfm?story=11129
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