Opinion & Commentary
Debt-relief sceptics right
The short-term response to the tsunami emergency has been terrific. If the gods designed this as a test for human morality, the immediate verdict must be that people all around the world have performed much better over the last fortnight than most intellectuals would have predicted.
Military assets have been deployed to save lives and alleviate human suffering. Government officials and regulators have pushed their petty, self-seeking concerns aside and done much for those who are suffering. Most countries have offered help pragmatically and as effectively as one can expect after such an unforeseen cataclysm.
Petty, point-scoring comments by United Nations officials and misanthropic commentators have been drowned out by the hands-on engagement of people of goodwill. The start of 2005 looks to me like a triumph of humane sentiment.
However, the tsunami crisis has also highlighted a great need for clearer thinking in some high places. The knee-jerk criticism of a New York-based bureaucrat two days after the disaster, accusing Western countries of being stingy, revealed a monumental ignorance, if not malevolence, at the UN. The UN spokesman confused humanitarian emergency assistance with development aid.
The latter is all too often a transfer of taxes levied on poor people in rich countries to rich government elites in poor countries. Foreign-aid schemes often not only fail to reach the poor, but also fatten and strengthen the kleptocratic cliques that suppress ordinary people. In the case of the UN's oil-for-humanitarian-aid in Iraq , the transfer enriched corrupt fat cats at the UN.
The ugly side effects of long-term government-to-government fund transfers have now led independent foreign observers and many younger intellectuals in Asia , Africa and South America to call for an end to such schemes. They may give us the satisfaction of feeling compassionate and righteous, but in reality they do more harm than good.
All the goodwill and compassion we are feeling now must not let us forget the basic fact that Indonesia , in particular, rates woefully on official graft. Simply pouring more funds into a system in which government jobs are bought, sold and then remorselessly milked would only aggravate this structural handicap.
This is why the beginnings of joint operations, such as the Australian army's civil-military co-operation cell in Medan and the leading role Australians have taken in organising the medium-term reconstruction effort, are essential.
This is also why one can be in favour of massive emergency aid, but argue for phasing out traditional government payments to poor and ineffectual regimes.
UN officials who simply stare at aid as a percentage of a rich country's gross domestic product and make a moral case out of such summary statistics are ignorant do-gooders, who do not care about the harmful side effects.
Instead of pumping up the traditional aid mechanisms, world leaders should now come up with free-trade offers to the farmers, miners and manufacturers of Sri Lanka , the Maldives , Thailand and Indonesia to reduce their handicaps in trade. The same can be said of politicians in London , Berlin and Paris , who try to climb up in this week's league table of tsunami donors by proposing foreign-debt forgiveness for Indian Ocean countries.
Not one more nail for home reconstruction, or one urgently needed civil-engineering team, will reach Sumatra or Tamil Nadu if a European plan to waive interest payments, or a Paris Club waiver on debt repayments, is put into action.
It will, of course, be welcomed by official borrowers, who will learn that to incur bad debts has its rewards. In the long term, credit to poor countries would only dry up.
It is therefore absolutely essential that direct, in-kind emergency assistance and practical help with reconstruction is not be confused with official debt relief.
Australian, American and Japanese scepticism about the European Union proposal is justified because debt relief is a lazy man's solution to the pressing problems on Indian Ocean shores.
The task now is to translate the tremendous goodwill and practical engagement, which has been evident in the short run, into a medium-term contribution. The task is to think first and foremost about the welfare of the poor survivors and, with luck, support those officials who are honest and effective.
They can do with a Western injection of honesty and hands-on engagement on the ground. Australians have made an excellent start. We can now do much to take a lead during the medium-term work.
Wolfgang Kasper is professor of economics emeritus, University of NSW, and a Senior Fellow at The Centre for Independent Studies.
