Stop lending money to poor countries

The G8 agreed to cancel $40 billion of debt owed by the world’s poorest countries, most of them in Africa. (See NY Times.)

The lesson I get out of this is that it’s a bad idea to lend money to poor countries. The money apparently gets squandered instead of being put to productive uses. Read the following quote from the article:

Mr. Brown [referring to Gordon Brown, the British chancellor of the Exchequer] said Group of 8 countries had agreed to compensate the World Bank and the African Development Bank in particular for forfeiting interest payments on poor countries' debt, so those groups would have the income to make new loans to other countries. "We could not contemplate a situation," he said, where debt cancellation for some poor countries was made at the expense of other poor countries.

The above quote suggests makes it clear the no lessons have been learned. The world will continue to lend money to poor countries, and such countries will continue to squander the money and end up being worse off because of the loans.

Comments

[William]

Hi. Keep in mind the majority of that money was spent buying our products. Also, we still need to help them, thus would it not be more logical to put strings on the loans, like development advisors, rather than stop them altogehter. Another point, most successful developping economies, like Brazil's and China's, were rooted in loans. Finally, if we're going to stop giving loans to poor countries because they can't pay them off, shouldn't other relatively "poor" countries stop giving loans to us? Unless you see a balanced budget in the near future, perhaps you should start telling them that.