Last week I mentioned how I was excited about the Live 8 concerts to promote debt relief and foreign aid to reduce global poverty and senseless deaths-- ~30,000 children die each day to preventable causes. Since some may not care about moral implications of these deaths, I decided to take a look at Ethiopia and see if we can do anything by cancelling debt and checking if that has any effect on our economy. (Oi, two poorly constructed sentences. Sue me.)

Ethiopia has seen some decent economic growth over the last decade or so. However, as this 2002 IMF report states, debt is a big problem:

Notwithstanding the success noted, the dependence on external financing needs closer attention (see Alemayehu and Befekadu 1999). One implication of this is the debt problem (10). In Ethiopia, this problem is acute because it has been coupled with military based debt accumulated during the Derg period. Due to the growing resource gap both the debt stock and the debt to GNP ratios have increased steadily since the 1980s. This has resulted in accumulation of arrears during the 1980s. Prior to this period, there had been almost no interest arrears and principal arrears were negligible (see Alemayehu and Daniel 1999). The rising level of arrears relates to the resources constraint that hindered timely debt-service payments. This has worsened the situation as it resulted in an even larger arrea s accumulation. (p. 21)

OK, so a poor leader builds up a lot military debt and the country has to perpetually pay for that. WWII reconstruction helped rebuild Europe and Japan into economic powers. What if we forced these people to shoulder the entire burden alone? We now have global partners that push innovation and competition (at least in principle).

Bush likes to champion strong democracies and robust economies as important to freedom and security. I'll give him that because I feel the same way. (Though I'm hesitent to install U.S. definitions of "democracies" vis a vis Central and South America and Afghanistan and Iraq during the 80s.) So how is debt effecting Ethiopia's economy?

The magnitude and burden of external resource leakage in the form of deteriorating TOT, debt servicing and other international payment obligations is reaching beyond the country's capacity. Particularly, in the face of widespread poverty and resource-constrained capital stock, the issue of making globalization work for Ethiopia is a real concern. In 1999/00, total leakage through declined commodity price, debt services and amortization amounted to about Birr 3992 million. Seen relative to public expenditure on social and economic services, the magnitude of this leakage amounts to about 142 and 139 per cent, respectively. Excluding amortization, the external leakage in 1999/00 amounts to about 138 and 445 per cent of public expenditure on education and health. Under these adverse external conditions, the challenge to reducing poverty significantly is believed to be huge. (p. 35, my emphasis)

So Ethiopia is spending more money on debt services, etc. than on economic development or education and health. If investing in economic development and education are key to Ethiopia's progress (as indicated in the report), shouldn't we allow them to invest in development and education to help themselves?

If you convert the 4 billion Birr to U.S. dollars it comes out to roughly $460 millionUSD. Divide that amongst the richest 10 countries and you have $46 million a year per country. Even multiplying this amount by say 100 countries who may need help only amounts to $4.6 billion per year per country. That's less than two tenths of one percent of a $2.5 trillion dollar budget. Our defense budget is $500 billion this year and the Bush tax cuts for the hyper-wealthy are way more than the amount needed to help some of these countries. It's about priorities. Granted, there are some other structural policies that need to be in place, but we can have a huge impact through debt relief and even more with foreign aid.

Let's spread some freedom, Mr. President. And it costs less then your botched wars and tax cuts that aren't helping the average American worker.