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Post-tsunami challenge: Debt write-off for the weak and vulnerable

By Gordon Brown - posted Thursday, 27 January 2005


This audience has been brought together by shared concern for world poverty and is also expressing a universal sorrow at the tragic consequences of one the most devastating disasters the modern world has witnessed, and our resolve to do everything to help the victims, and assist the reconstruction. An earthquake in one continent has left families devastated in every continent.

Humbled by nature, we have since been humbled by humanity in recent days. We have witnessed an unprecedented demonstration of sympathy and generosity: The true test of an international community.

We must ensure that all heavily indebted countries gain relief, re-finance their health and education systems, and are not prevented from essential reconstruction because they have to service massive debt. So, we and other governments, propose an immediate moratorium on repayments, such as a 100 per cent debt write-off, for Sri Lanka - with Britain, paying 10 per cent of this. The G7 and Paris Club options for further assistance must be on the agenda of a G7 Finance Ministers meeting, soon.

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Unprecedented disasters can befall any country at anytime. The capacity to withstand and respond to disasters reflects the state of emergency services, health care systems, and the basic infrastructure. These all reflect underlying levels of prosperity and poverty. Starkly, without warning systems, developed health care, and with weak institutional capacity, countries are more vulnerable, and less able to cope in the aftermath. One moment of devastation can wipe out years of hard-won development.

The UN Secretary General has already asked for £1 billion. We also welcome the decision by the World Bank to make hundreds of millions of US dollars and additional resources available for reconstruction, and for the offer of US$1 billion of emergency assistance loans by the IMF.

Just how irrevocably bound together we all are in adversity. The richest persons are connected to the fate of the poorest of the world, even while they are strangers and have never met. People now see that they share the same concerns, the same interests, the same common needs and the same linked destinies. The worldwide response - in Britain £90 million has already been raised by the public - demonstrates that we seek, individually, to address the underlying causes of poverty.

The UK has special responsibilities, as President of the G7 and European Union, we can tackle not just the tragic consequences - but forge a long term plan for the reconstruction of Asia - by creating a new “Marshall Plan” for the developing world. We need a world that does not have to choose between emergency relief and the causes of poverty which equal injustice.

World leaders are due to attend at UN Summit to examine what we have to do to seriously address the scale of global poverty.

Five years ago, in New York, these leaders shared a commitment to right the greatest wrongs of our time including: the promise that by 2015 every child would be at school, avoidable infant deaths would be prevented, and poverty would be halved. Rich countries would work with the poor.

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These Millennium Development Goals were not a casual commitment. Every leader, every international body and almost every single country signed up.

So close to the start of our journey to 2015, it is clear that our destination risks becoming out of reach, receding into the distance ... And we know one stark fact that underlines this: not only are 70 million girls and 40 million boys not going to school today and every single day but until we act as many as 30,000 children will suffer and die from avoidable disease even while the world has the medicines to help them.

In 1948, while Europe still lay in ruins, the American Secretary of State, General Marshall, proposed an ambitious plan for social, and economic, reconstruction. Marshall understood most of these problems were not, in themselves, a strategic military threat. He realised his plan should include all poor countries in the area.

Marshall concluded that an historic offer of unprecedented sums of money was required. And that America could contribute an unparalleled 1 per cent of its national income to fight war torn hunger, poverty, desperation and chaos. His treasury also argued that prosperity, like peace, was indivisible, not to be achieved at the expense of others, but had to be spread throughout. Prosperity, to be sustained, had to be shared.

And Marshall’s plan - the unparalleled transfer of American resources - made possible the reconstruction of Europe, the renewal of world trade, and prosperity for both.

We now, tragically, but challengingly, have a unique opportunity to deliver a modern Marshall Plan for the developing world - one in which developing countries are partners. Not supplicants.

Our Government calls on all to recognise the three essential elements of developing a plan for a new deal:

  • First, full debt-relief for burdened countries;
  • second, world trade begins to “better benefit” poor countries, and ensure their capacity to benefit from this new trade; and
  • third, declaring the level of aid to be approx 0.7 per cent of national income, we must also create an International Finance Facility (IFF) to offer immediate, long term aid for investment and development - such as commitments from individual governments, leveraging in funds from capital markets, and raising an extra US$50 billion for the next ten years. This would double aid and halve poverty.

Today, 27 countries benefit from US$70 billion worth of unpayable, and exponential debt being written off, while 37 others are considered eligible. US$100 billion of debt relief is now seriously possible.

It is partly because of debt relief that in developing countries, primary school enrolments have increased at twice the rate of the 1980s; those aged over 15 who can read has risen by 7 per cent; life expectancy has increased; and the numbers living in extreme poverty has fallen by 10 per cent. People weighed by the burden of debts imposed by the last generation cannot even begin to build for the next generation.

To continue to insist on payment offends human dignity.

What is morally wrong, cannot be economically right.

So, we propose, first, that this year the richest countries match bilateral debt relief of 100 per cent, with the bold act of offering 100 per cent multilateral debt relief - relief from the US$80 billion owed to the IMF, the World Bank and the African Development Bank.

This cancellation of debts owed to the International Monetary Fund should be accompanied by a detailed timetable, and countries should make a unique declaration, that they will repatriate their share of the World Bank, and the African Development Bank's debts, to their own country.

Our task remains to help developing countries build the capacity, the monetary and fiscal policies, the infrastructure and the support for private investment that are essential for their development. Fair trade is not simply about finance, it is also about empowerment and dignity - enabling people to stand on their own impoverished feet, and use trade as springboard.

So we need to end the hypocrisy of developed-country protectionism. We must open our markets, and do more to tackle the scandal of the Common Agricultural waste. We know that macro-economic stability, poor infrastructure, lack of transparency, legal problems, poor labour skills and low productivity are all key risks and deterrents to foreign and domestic investment.

Making better use of existing aid - reordering priorities, untying aid and pooling funds internationally, to release additional funds for the poorest countries is essential if we are to achieve value for money and the improved outcomes we seek. But we face uncomfortable facts: In Africa 25 million people have HIV/AIDS, in 24 other countries 10 per cent of children die early. Africa devotes US$12 per person, per year, to public health. This is a fifth of 1 per cent spent in the richer countries. A commonplace tragedy is mothers struggling to save an infant and losing their own lives.

And while the truth is that the scale of the resources needed, immediately, to tackle disease, illiteracy and global poverty is beyond what traditional funding can offer, let me tell you the significance and scale of what I am proposing.

With one bold stroke we can double development aid to halve poverty, giving US$50 billion more in aid a year for the poorest countries. It could achieve half the deaths from malaria, if people had access to diagnosis and cheap drugs; a quarter of all child deaths could be prevented by mosquito-nets costing only US$4; US$3 more for each new mother could save up to 5 million lives over the next ten years; for an investment of $9 billion more a year we could build schools so that every child can get a primary education; US$10, or preferably US$20 billion more a year could tackle TB and malaria, build health systems and address the tragedy of HIV/AIDS.

The IFF is not only complementary to the existing commitment to the 0.7 per cent target - allowing participating countries to take faster steps towards this goal by increasing the resources available now - but can be implemented alongside continuing consideration of other proposals to provide financing in the longer term - including international taxes, special drawing rights and other forms of revenue raising on a world wide basis.

The Global Alliance for Vaccines and Immunisation (GAVI) - has immunised a total of 50 million children over the last five years and is interested in applying the principles of the IFF to the immunisation sector - with donors making long term commitments that can be leveraged up via the international capital markets, in order to frontload the funding available to tackle disease.

If, by these means, GAVI could increase the funding for its immunisation program by an additional US$4 billion over the next ten years, then it would be possible that their work could save the lives of an additional 5 million people between now and 2015 and a further 5 million lives after 2015. So in one fund, with one initiative, we can glimpse the possibilities open to us if we act together. And there are other possibilities that the International Finance Facility we propose could do to change the world.

If what we achieve for health we could also achieve for schools, for debt relief, for the capacity to trade, for anti poverty program and for economic development, think of the better world we can achieve. The aim of the International Finance Facility is to bridge the gap between promises and reality. Between hopes raised and hopes dashed. Between an opportunity seized and an opportunity squandered.

It was thought that the Marshall Plan was unattainable: even in 1997 people thought debt relief was an impossible aspiration and yet we are wiping out $100 billion of debt. People thought no more countries would sign up to a timetable for 0.7 per cent in overseas development aid, and yet this year alone five countries have already done so.

A few months ago I quoted a century old phrase saying “The arc of the moral universe is long but it does bend towards justice”.

This was not an appeal to some iron law of history, but to remind people in the words of at least one US President who said, “The history of free peoples is never written by chance but by choice” - that it is by the actions of people of compassion and goodwill, which can and do change the world for good.

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Article edited by Norman Ingram.
If you'd like to be a volunteer editor too, click here.

This is an edited and abridged version of the speech International Development in 2005: the challenge and the opportunity by the Rt Hon Gordon Brown MP, Chancellor of the Exchequer at the National Gallery of Scotland on January 6, 2005. It is Crown copyright.



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About the Author

Gordon Brown was appointed as Chancellor of the Exchequer on 2 May 1997. He has been MP for Dunfermline East since 1983 and was Opposition spokesperson on Treasury and Economic Affairs (Shadow Chancellor) from 1992.

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