Debt and the Dictator

Throughout the world today, the cry to engage in extensive debt forgiveness of some of the world’s most underdeveloped nations continues to echo. Every western politician, from presidents to prime ministers, is regularly told by religious leaders, actors, and rock stars that massive debt forgiveness for some of the world’s most impoverished countries is a moral obligation. Failure to embrace such a cause, one sometimes hears, is akin to condemning millions to death.

Whatever one thinks of such claims, they become rather harder to sell in light of some African political leaders’ behavior. Let’s take President Denis Sassou-Nguesso of the Republic of the Congo, who was in Washington this week pressing the case for, among other things, immediate and extensive debt-forgiveness for his nation.

To say that President Sassou-Nguesso has a checkered past is an understatement. In a previous incarnation as a Marxist, President Sassou-Nguesso first came to power in the early 1980s before rising to power again after a civil war that ended in 1997. On several occasions, his supporters have been accused of numerous atrocities — including torture and rape — by Amnesty International and other international observers.

For developing world dictators of any stripe, these are the usual run-of-the-mill facts with which westerners have become wearingly familiar. But what is especially reprehensible about this particular African leader is the manner in which his government continues to fudge the facts of what happens to the considerable revenues derived from the Congo’s oil industry — revenues that could be used to pay off considerable foreign debt. The IMF, for instance, has stated that the Congo’s “oil revenues continue to be diverted for other uses and do not reach the treasury.” This is bureaucrat code-language for the c-word: corruption.

None of this might have come to public attention, save for the flagrant manner in which President Sassou-Nguesso spends money on himself and his entourage when traveling abroad. While the Congo’s citizens continue to be mired in living standards that lead to disease and death rates consigned to history in the West centuries ago, their leader reportedly spent $295,000 on an eight-night stay for himself and 50-strong entourage (including his wife’s hairdresser) earlier this year in New York. This is just one of a number of similar documented instances of extravagant spending by the president of a country in which the average citizen lives on approximately $2 a day.

But stepping back from this particular case’s sordid details, perhaps its greater significance is the manner in which it starkly highlights the known moral and economic hazards of engaging in extensive, imprudent debt-relief. The most likely result of extensive debt-forgiveness is the further undermining of many developing nations’ reputation for meeting their contractual obligations. This in turn limits their future access to the foreign capital that they require for economic growth.

Allowing heavily indebted nations to walk away from their debts sends precisely the wrong economic signal to private and public international lenders of capital. Why should they lend any more funds to such countries in the future if they can never be sure that their funds will be returned? Developing countries need to develop reputations as responsible borrowers who not only deploy the borrowed funds productively but who also repay their debts as contracted. How will debt forgiveness of a country like the Congo, especially given its extensive government corruption, help the Congo to achieve either goal?

On the moral side of the equation, such debt forgiveness is very questionable insofar as it effectively mortgages the economic future of the ordinary citizens of countries like the Congo. It is they — not the President Sassou-Nguessos of this world — who will suffer as a consequence of the Congo’s future limited access to the foreign credit essential for the only sure slayer of poverty — economic growth.

Moreover, does anyone seriously imagine that debt-forgiveness that fails to hold accountable those developing world political elites who have corruptly diverted the billions loaned to their countries, is likely to discourage future leaders of such nations from following similar paths? Surely such actions will only undermine on-going efforts to discourage corruption among these elites by effectively rewarding with debt forgiveness those countries whose leaders have been irresponsible borrowers.

Enough is enough. The time for placating corrupt African politicians is long past. Refusing President Sassou-Nguesso’s demands would send a signal to the developing world’s political elites that the days of toying with their peoples’ futures are over. While such refusal might appear unfashionable in some circles, the future well-being of millions of Africans depends on it.

Dr. Samuel Gregg is Director of Research at the Acton Institute in Grand Rapids, Michigan. He is the author of Economic Thinking for the Theologically Minded (University Press of America, 2001) and On Ordered Liberty: A Treatise on the Free Society (Lexington Books, 2003).

(This article is a product of the Acton Institute —, 161 Ottawa NW, Suite 301, Grand Rapids, MI 49503 — and is reprinted with permission.)

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