For Haitians' Sake, Drop the "Drop the Debt"

January 29, 2010

As I blogged Monday, the Haiti government owes the rest of the world about $1.25 billion. Seems like a lot of money. Inevitably, groups such as the One Campaign, Oxfam International, and the Jubilee Debt Campaign have seized the moment to call on Haiti's creditors to cancel the debt. And they have a point: can you imagine a metaphorical debt collector from the IMF knocking on the door of the Haitian finance ministry (if it still has one) asking for a few million dollars please? That's why I called debt relief, meaning at least a suspension of debt collection, a no-brainer.The question is whether to go further than debt service suspension, to drop Haiti's debt outright, as non-governmental organizations, members of Congress, and others have demanded. Actually, the practical question for citizens, officials, politicians, campaigners, and other players is whether to push for that. On a few days' reflection, I say no. I would go so far as to describe such pressure as harmful.Why? For starters, the benefits of debt relief over the next few years, however done, will be tiny. In my previous post, I wrote that Haiti's debt service amounts to $18 million for the current (2009/10) fiscal year, rising to $34 million in 2011/12. I was wrong. Turns out that $9 million/year of that is debt service to the Inter-American Development Bank (IDB)---which the U.S. government has been paying on Haiti's behalf since before the quake. So IDB debt is already costing Haiti nothing. Roughly half the remaining debt service is payable to Taiwan and Venezuela, which may be less susceptible to campaigning from western officials and non-governmental organizations (NGOs). In play then, is perhaps as little as $25 million over the next three years.How to square this with the enormity of $1.25 billion? Most of Haiti's debt is not due for a long time. So a typical dollar written off today might not help Haiti (by lowering debt service) for a decade. That's why cancellation does little good in the short run. It is not a coherent response to crisis.Meanwhile, there are other ways to help Haiti much more, in responding to the crisis and in rebuilding. Looking at the recent history of humanitarian aid, the people who compile the Humanitarian Response Index judge that many official donors could do a much better job. Isn't this the time for activists to harvest the lessons of history and hold public and private aid agencies accountable? My colleague Michael Clemens has called for a "Golden Door visa" to let more Haitians come to the United States (or other rich countries) to work. Prying the door open a hair more would swamp the economic value of debt relief. Kim Elliott has emphasized reducing import barriers to Haiti-made goods. Why not extend the Africa Growth and Opportunity Act to Haiti so that shirts made in Haitian factories can enter the U.S. with the same ease as those from some African nations?The excitement stirred up about dropping the debt consumes scarce resources: the time of government officials spent devising elaborate debt relief arrangements worth $9 million/year instead of international trust funds worth $900 million; the limited attention span of politicians and the public for development issues at this teachable moment; the staff time and political capital of NGOs who lobby legislatures for reform. More effort on dropping the debt means less effort on things that could make a bigger difference. Who, if not the NGOs, will lobby politicians to vote against the domestic textile industry and for "Made in Haiti"? (...more precisely in the U.S. case, to support and expand the trade provisions in the Dodd-Lugar bill?) Who will monitor how well aid agencies in Haiti delegate and coordinate to minimize waste? Who will name the grave injustice in forcibly transplanting a people from Africa to Haiti, forcibly extracting a century's ransom in plantation labor, then confining them to a denuded semi-island whose capital has crumbled? Who will tell the public the truth about how little difference dropping the debt will make?Taking on trade and immigration policy isn't as easy as beating up on the World Bank and IMF, who have mastered the jujitsu art of absorbing the attacks of debt relief campaigns and turning them to publications relations advantage. While it would be foolish for NGOs take on impossible causes, it is fair to ask whether they are letting themselves off too easily by belaboring debt relief. After some 3 million people have lost their homes and perhaps their livelihoods, is the best we can do to tiptoe around the domestic textile industry?These graphs capture the situation as I see it:Haiti debt service, exports, aid, and remittancesSources: IMF, World Trade Organization, DAC Table 2a, and World Bank.Allocation of NGO political effort for HaitiSource: Me. The sites of Oxfam International, the One Campaign, and other organizations with a history of activism are emphasizing fundraising for Haiti. As for activism, debt cancellation dominates. Oxfam America will soon co-host a panel discussion at the Newseum entitled, "In the Wake of Haiti, How Can We Improve Aid to Developing Countries?" The U.S. House of Representatives passed Congresswoman Barbara Lee's non-binding resolution offering condolences, long-term , and debt relief. Senators Dodd and Lugar introduced a bill touching on aid, debt, and trade.Four days after the temblor in Hispaniola, an experienced aid worker named Alanna Shaikh guest-blogged at Aid Watch under the title, "Nobody wants your old shoes: How not to help in Haiti":

Donating stuff instead of money is a serious problem in emergency relief. Only the people on the ground know what’s actually necessary; those of us in the rest of the world can only guess. Some things, like summer clothes and expired medicines are going to be worthless in Haiti. Other stuff, like warm clothes and bottled water may be helpful to some people in some specific ways. Separating the useful from the useless takes manpower that can be doing more important work. It’s far better to give money so that organizations can buy the things they know they need.
The New York Times put her point this way: "Don’t send shoes, send money. Don’t send baby formula, send money. Don’t send old coats, send money." Former President George W. Bush got the message too: "I know a lot of people want to send blankets or water. Just send your cash.”I think that Shaikh, Saundra Schimmelpfennig, and other bloggers were saying something more profound than that cash is king. So many attempts to help go awry because the giver decides what the receiver needs. The giver's sense of virtuosity quashes self-questioning, indeed, makes criticism seem churlish. Yet especially in emergencies, those who would aid have a moral obligation to ask two tough questions, in this order: 1) what do they need most? and 2) and what is the best role for me in getting it to them?I fear that calls to cancel Haiti's debt are the old shoes of political activism. They make superficial sense. They feel good. But they will hardly help Haiti recover from the quake. And in a crisis, if you're not helping, you're in the way. I hope that the politicians and activists responding with vigor and sincerity to this crisis will act also with the gravity it demands.David Roodman usually blogs at his Open Book Microfinance Blog.


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