Debt relief of Africa and Impoverished Nations

After studying more about the issues of debt in many impoverished nations, the question that kept coming to mind was,

Where is all the wealth?

A healthy world would undoubtedly have sufficient resources to feed every person, to provide health care and to give each individual a decent living. But success continues to elude the global community.

The situation of poverty in many countries is deplorable. Expecting impoverished countries to get themselves out of poverty is unreasonable because the impoverished are trapped in a causal loop. Poverty removes the possiblity of adequate education, health care and proper nutrition for billions. Each of these factors reduces the probability that children of the next generation will have incomes sufficient to allow them to pay taxes. WIthout taxes, the governments are unable to pay back billions in loans that have accumulated over the years. While they strive to provide security and a minimal form of governance, they are saddled with crippling  interest payments on loans of prior generations.

How should wealth be re-distributed?

Many, throughout decades have called upon the World Bank to cancel the loans and while some relief has been granted, the World Bank has refused to forgive loans arguing that it could not based on its own  laws. If the World Bank is unable to cancel the loans, and donor nations seriously want to help, they must give sufficient amounts to help the countries pay off their loans. But donor nations themselves are also struggling with debt, leading back to the original question, where is all the wealth?

It occurred to me that the one place where wealth accumulates is with families in the upper echelon of society. When we think about the reality that being born into this life is a random process, there is no one individual who deserves to be born into wealth any more than another. As such, the passing of wealth to new generations gives an unfair advantage to those who were lucky enough to be born into wealthy families. While ensuring the future of our children is a reasonable goal, it is in no one’s best interest to have vast accumulations for some while other starve.

Some families recognize this injustice and choose to create trusts through which the money is redistributed to charitable causes. This is laudable and a reasonable form of monetary redistribution. However, for those that choose to keep the money in their families, the following generations continue to be advantaged in every way. The money and wealth continues to accumulate in the form of stocks, bonds, businesses and properties. But children of the wealthy aren’t any more deserving than the poorest child.

Should extreme amounts of wealth be allowed to pass from one generation to the next? Is this fair?

While it may not be politically popular with the few that have unearned wealth passed to them, or those who have vast amounts that they wish to pass to their children through inheritances, it seems fitting that some share of inherited wealth should be used to create a more equitable life for all children. Redistribution through higher estate taxes would be one of the fairest forms of taxation to raise money. Once a person has lived their life and has had a fair and reasonable opportunity to use the wealth they’ve earned, it seems only fair that more of the money should be re-distributed after their passing.  Funds raised in this way could then be used to meet current donor commitments to impoverished nations.

This would benefit the greater good both within a country and and globally.

While I’m not necessarily suggesting that every family be subject to the same percentage tax, it would be reasonable in the case of estates in the billions to be heavily taxed after each generation has passed. Exemptions could be made in the event that a Charitable Trust has been formed, provided that such trust are confirmed to be genuine. By passing more of the assets of wealthy individuals back to the state, a redistribution of wealth would be possible and donor countries could then begin to look at increasing their commitments to impoverished states to the degree necesssary to meet the Millenium Development Goals. Similarly, it would also be reasonable to formalize legal liabilities for nations to ensure the redistribution from one nation to another to ensure that no country suffers excessive poverty while others benefit.

At very least, it would be interesting to model this approach of wealth redistribution to see how it might impact society as a whole. Far from making countries or people worse off, it is has been proven that equitable wealth distribution benefits rich and poor alike. (Click to see a TED video on inequity)

One might look at donor money as priming the pump of an economy. As long as there is insufficient money in the economy, it is unable to effectively create its own wealth. Insisting on payments of past debt cuts off the priming impact of donor money.

Other possibilities exist.

If the World Bank is unable to cancel the loans, then perhaps they might at least consider cancelling all interest and payments for several generations, long enough for these societies to recover. Once an economy is producing sufficient income through taxation it may be able to pay its debt.

Assessments have also identified tax evation by multinationals as being a major drain on poor nations. Global regulation of multinatoinals needs to ensure proper distribution of taxes to the various countries as well as maintaining standards for environmental sustainability and the rights of workers. (Click here for more information)

The issue of Governance and Corruption

While it may be true that impoverished nations have governance challenges, one might question the source of such challenges. If a police officer, responsible for enforcing laws, is unable to earn a living wage, how can they be expected to do their job? If they are hungry, how will they be able to make sound decisions and keep their emotions in check? While corruption is far from desirable, its likelihood increases when survival is threatened. The sooner the underlying causes of poverty are addressed, the more likely that corruption will be minimized.

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