Leading Article: We have a debt too

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The Independent Online
POOR Clare Short just can't get it right. She is the sentimental left's mascot in the Blair cabinet, a woman of warm if often incoherent emotion, an anguished "friend of all the world". But the cares of office have been cruel to the International Development Secretary. Her none- too-long fuse was ignited by the volcano-stricken, but importunate people of Monserrat, who will "be asking for golden elephants next" - not quite the language her doting admirers expect from her.

Now she has put her foot in it again. Interviewed on the Today programme about the catastrophe in Central America, and about what the British government is doing to help, she said (with characteristic lucidity) that "debt relief takes too long to be relevant to helping the people who need immediate relief to make sure we don't get the present crisis becoming an absolute catastrophe because hunger and disease spread". For her pains, she was called "arrogant" by the Tory shadow minister, Gary Streeter. But, of course, she was right. She had been right, in a brutal way, about Monserrat; she was right when she landed herself in yet another row when she said that some of the activities of aid agencies in Sudan during the famine were "unnecessary", and she is right about debt relief.

There is another kind of arrogance, which tries to deny the sheer awful majesty of nature and what used to be called acts of God. Such acts will always be with us, and it is hubristic to speak as if human will, or mastery of the universe, could prevent earthquakes and hurricanes. Moreover, in the short term debt relief is irrelevant to the people of Honduras and Nicaragua in their agony. What they need is aid (which is "necessary" in this case, please note, Ms Short), in the form of medicine, food, and above all the helicopters and vehicles which will bring these supplies. The very concepts of outstanding debt or interest rates are utterly meaningless to a family whose home has been swept away by typhoon and torrent and who have had nothing to eat for days. Equally, to compare a supposedly inadequate western response to Hurricane Mitch with the speed with which ailing hedge funds are rescued is too glib, and savours not merely of bien-pensant attitudinising but of a category error.

In an age when several hundred billion pounds are transferred electronically on the money markets every day, saving any financial institution (as opposed to helping the victims of a distant natural disaster) can be done literally at the touch of a button. And on the principle of "the greatest good of the greatest number", it is more important that the economy of the developed world should be protected: if it collapsed, the future of all mankind would be unimaginably terrible.

But it is precisely, and only, in the short term, that Miss Short is right; for Mr Streeter is right, too. We can pass over the sheer gall of a Tory spokesman who says this. What did his party do about Third World debt as it accumulated during its 18 years in office? There is a better argument than the guilty hand-wringing of western politicians and publicists. When hard-hearted free-marketeers insist that contracts should be honoured and debts repaid, they forget "neither a borrower nor a lender be" - or, more to the point, that for every borrower there must be a lender. Saying that debtor nations "must pay" implies a moral judgement: the tropical countries which borrowed so many billions in the 1970s and 1980s should be chastised for being so feckless, at whatever cost to their unfortunate inhabitants.

But what about the fecklessness of the western bankers who lent the money? Some years ago, the chairman of one of our great banks said publicly that these loans were mistaken in hindsight but had seemed a good idea at the time. To which the only answer was that it hadn't seemed so at all to anyone who could stop and think. A country like Zaire, lent several billions, was quite obviously a bad risk from the beginning. But then these were the self same bankers who had thought Robert Maxwell a good risk for several hundred millions in loans.

However it may be in terms of immediate relevance, the burden of Third World debt is a very real problem in the longer term. It may not be a bad advertisement for the western political economy that a hedge fund is propped up; it is a horrible display of our values if we are prepared to see poor people starve in the name of financial rectitude. And it will do us no good if underdeveloped countries are obliged to repay interest which annually exceeds their economic product. There are plenty of precedents for the orderly rescheduling or cancellation of national debt; indeed, the failure to arrange such cancellations after both world wars had a disastrous consequence. The interests of prudence as well as humanity demand no less - and if it shook up some complacent folk in the City and Wall Street, that would be no bad thing in itself.