Sunday, 12 July 2009

Why are poor nations poor?

This from NPR's Plant Money,
The planet's rich nations met this week to discuss, among other issues, ways to help the planet's poor nations.

But those poor (and developing) nations have their own group. It's called the anti-G20, in a nod to the G20 collection of industrialized states. The anti-G20 met at the U.N. last month, where Nobel Laureate Joseph Stiglitz and Martin Khor explained what keeps impoverished countries down. Answer: Their debt to the IMF and wealthier nations.
What is interesting is that the picture that goes with the story has the title,
As of December 2008, Zimbabwe owed $4.69 billion to international creditors.
Are they really trying to argue that Zimbabwe is poor because of its debt to the rest of the world? What about the policies of a guy called Robert Mugabe?

Anyway at Cafe Hayek Russ Roberts writes
There are plenty of things rich countries do to make poor countries poor. Refuse to trade with them. Give the thugs who run the country money. But this IMF argument has always struck me as strange. The poor countries are poor because they IMF expects them to pay back the money that the poor countries borrowed? How do the loans get made in the first place? Don't the thugs who borrow the money bear some of the responsibility? How would forgiving those loans solve the problem?
Good questions.


Jim Otteson said...

And if it is the assumption of too much debt that makes a country poor, then what is the justification for America's current path of generating massive and unprecedented debt?

frank cobain said...

Debt is not e\/il. Or bad.
Using debt to buy black Mercedes Benz's is bad.
Using debt to buy manufacturing equipment is good.
Fire is bad.
Cooking fire is good.