CAPITALISM'S ACHILLES HEEL Dirty Money and How to

over that line, it becomes very difficult to argue that the debt instrument remains
intact. In my opinion, both the Paris Club of official creditors and the
London Club of private creditors have, by their own actions, weakened, diluted,
and largely lost the legitimacy of their claims against the severely and
moderately indebted. When I hear about “debt forgiveness,” my question is,
who will forgive the creditors?
Looking to the Future
Spreading Prosperity 359
In my story I told how, after clearing off our mutual debt claims, we went
on to do many times the volume of business we had done earlier. Can you
imagine a market of nearly five billion people released from a $1.5 trillion
debt they can never repay anyway? How many cell phones or computers or
textbooks or vaccines will that buy from the West? How much foreign exchange
will that leave in the country to promote investment? How many
jobs in commerce and industry will it create? How much will debt relief
contribute to strengthening fragile democracies? How much better off will
western countries be because non-western countries are more productive?
These are the kinds of questions that a UN panel can address. Look at a
world relieved of this mutual burden and recrimination and tell us if we can
together have a brighter future.
Having said all this, outright cancellation is probably not the most effective
approach. Debt offset is preferable, as other groups have also suggested.
Increase domestic expenditures on education and health, and that
will serve as an offset of an equivalent amount of foreign debt. Here’s how it
should work.
Take the central government’s annual expenditure on education and
health as a base line. Perhaps an average over the most recent three years
can serve. Increase expenditures on education and health (perhaps also
housing and conservation) above this base line, and the added amount
spent internally on these services will cancel an equal amount of debt externally.
The foreign debt gets liquidated through expanded social expenditures
domestically. Annual expenditures would be inflation adjusted. The
local World Bank office can monitor the process. Paris Club official creditors
take the lead in setting up the arrangement, and London Club private
creditors are subject to a “cram down” by the official creditors, that is, no