[saymaListserv] Fwd: Re: Sweet victory ahead on debt relief? (regarding Quaker social concerns for the world's poor)

Janet Minshall jhminshall at comcast.net
Wed Jun 29 11:45:40 JEST 2005


Dear SAYMA Friends, This issue of he Quaker Economist and the 
correspondence below it are relevant to several conversations I had 
with SAYMA Friends at yearly meeting.  As always, any response is 
welcome.  Janet Minshall


Date: Wed, 29 Jun 2005 11:32:49 -0400
To: afmdiscussion at yahoogroups.com
From: Janet  Minshall <jhminshall at comcast.net>
Subject:  Re: Sweet victory ahead on debt relief? (regarding Quaker 
concerns for the world's poor)
Cc:
Bcc:
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Dear Friends, The Quaker Economist #125 has just come out and I 
reprint it here in response to a question from Joe Parko.  (His 
message and my response to him are below the text of TQE 125.)  In 
Peace, Janet Minshall

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Date: Tue, 28 Jun 2005 21:07:16 -0400
From: Jack Powelson <jack.powelson at colorado.edu>
To: The Quaker Economist <tqe at quaker.org>
Subject: The Quaker Economist, Letter No. 125
Reply-To: tqe-comment at quaker.org

Leadings

Inter-Mountain Yearly Meeting's keynote topic (2005) was "Leadings."
Unfortunately, I missed the keynote speaker because I was taking Robin
(my wife) to the hospital for a heart problem (she's OK now). But
Friends were talking afterward about leadings, and I had many
conversations.

Every day, one young girl was wearing a traditional Quaker dress and
bonnet. Why, I asked her? "Because," she replied with a smile, "God
told me to." One Quaker said he favored forgiving debts of Third World
countries, because "Jesus forgave." I wondered whether accepting the
leadings of God or Jesus means that Quakers no longer think for
ourselves.

Let me illustrate.

Minimum wage. Many Friends are led to demand a higher minimum wage,
because workers do not earn enough on which to live. But the history
of minimum wage shows that it causes unemployment, is racially
prejudiced, brings inflation, and finally leaves the purchasing power
of workers about where it was before. It does the first because, with
higher wages to pay, employers shift to machines (like the computer)
and fire (or fail to hire) workers. It does the second because the
ones they fire (or do not hire) are usually the minorities against
whom they are prejudiced. It does the third because workers culturally
know their places in a hierarchy, and to keep them they demand higher
wages up the line. It does the fourth because higher wages cause
higher prices, and workers ultimately have no more purchasing power
than earlier. (Yes, I'm an economist, and I know some economic
history.) Though the sequence is not exact, all this is generally what
has happened in economic history.  In one case of higher minimum wages
in the United States annually for two decades, the unemployment of
Blacks went up from less than 10% to more than 40%. (Other factors may
have been at work, but surely wages were one cause.)

Forgiving debts. On June 11, the "Big Eight" agreed to cancel $40
billion of debts of many countries in Latin America and Africa to the
World Bank and other international institutions, provided their
governments agree to an anti-corruption campaign and other "good
practices." "Everyone" agrees that these debts would never be paid
anyway, but the countries were nevertheless paying interest annually
(out of new loans from the Word Bank, of course). To prevent losses to
international institutions (mainly the World Bank), the Big Eight
governments promised them grants in compensation.

A debt is a contract, and whoever breaks a contract, for whatever
reason, becomes "branded" in the international debt market. That does
not mean they may never borrow again, but it does mean that incoming
investment will be curtailed, as it now is in Argentina and
Bolivia. But investors do not believe that "good government practices"
can be imposed by an outsider anyway (and neither do I). There is,
however, a precedent in international law that a succeeding government
may renege if a dictator borrows, pockets the money, and vanishes.

BUT the Argentines defaulted on their government debt because of their
own profligacy, and the Bolivian government canceled an unpopular
water contract with a U.S. company. It was not a good contract, and
the people were right to protest. But these exceptions matter little
in the international economy. Debts must be paid and contracts
honored, or much-needed foreign investment will not be
forthcoming. One Quaker at IMYM told me he was "led" to forgive debts
because "Jesus forgave." I wonder if Friends are led (by God or Jesus)
to ask for policies that will damage the very countries they wish to
protect.

My proposal, instead, is to form an international bankruptcy court to
determine, country by country, how much can be repaid and who will
suffer the losses (just like a domestic bankruptcy court). Countries
going bankrupt will be "branded" in international finance just as
bankrupt people are branded in domestic finance, but that cannot be
helped.

Outsourcing. For decades the United States has been assisting
Third-World countries financially. Now, suddenly, we are "outsourcing"
jobs to, say, India.  Outsourcing is the only way in which Indian
wages can rise (the aid was minimal and helped little). Yet some are
led to oppose outsourcing; we prefer to keep American jobs for
American workers (and pay higher prices as a result). BTW: The very
firms that outsource also "insource" by hiring more skilled foreign
workers than the unskilled jobs they outsource.  But outsourcing is
not the only reason for unemployment. Our employment is held down by
machinery (see two paragraphs above). The bank's teller machines make
it unnecessary to hire so many live tellers, and online buying cuts
down the number of store clerks needed. We do not seem to complain
about these, however.

Anti-globalization. Many Friends have leadings against globalization,
thinking that if we globalize, multinational corporations (MNCs) will
"rule" the world. In fact, those nations that have globalized (freeing
trade and easing the entry for MNCs) are the very ones that have
increased the income of their poor, while for those that have not done
so, the poor remain in poverty. Consider the cases of South Korea
versus North, or Taiwan and Hong Kong versus mainland China, or
Singapore versus Indonesia.

Multinational corporations. Many Friends are led to believe that MNCs
abuse the poor abroad. In fact, MNCs provide jobs, raise wages
(sometimes 100% higher), and supply social services (housing,
education) much more than do local corporations. They follow this
policy because it brings them the best workers. To most residents in
less developed countries -- have you asked them? -- a job with an MNC
is a plum.

Keeping resources at home. So many Bolivians are protesting that
newly-discovered gas should be kept in the ground and not sold to
MNCs.  As a result, that is where it remains, and the country is in an
uproar.  They say the price will rise in the future. But many
economists think otherwise. First, it would have to increase about 7%
a year to equal alternative investment possibilities. Second, some
economists believe the price of gas will fall because alternative
means of energy will be discovered. What are you led to believe?

Work conditions in trade agreements. Many Friends are led to demand
that trade agreements be conditioned on good working conditions and
provision of social services. All well and good, except that history
does not work that way. Historically, trade with others increases the
incomes of both parties as well as trust for each other. Only when
their incomes are increased do they provide the social services and
higher wages.

How to raise the incomes of the poor. Besides economic growth, the
only way to increase the incomes of the poor in less developed
countries is to improve their education and skills. In some ways this
is happening, as in micro-lending. But it will not happen by Quakers
(or others) being led to interfere with international policy in ways
that seem "good" but ultimately are adverse to the poor.

Sincerely your friend,

Jack Powelson


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-  Loren Cobb, Boulder (CO) Friends Meeting, Editor.
-  Chuck Fager, Director, Quaker House, Fayetteville, NC.
-  Virginia Flagg, San Diego (CA) Friends Meeting.
-  Valerie Ireland, Boulder (CO) Friends Meeting.
-  Jack Powelson, Boulder (CO) Meeting of Friends.
-  Norval Reece, Newtown (PA) Friends Meeting.
-  J.D. von Pischke, a Friend from Reston, VA.
-  John Spears, Princeton (NJ) Friends Meeting.
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Copyright (c) 2005 by John P. Powelson. All rights reserved.
Permission is hereby granted for non-commercial reproduction.



Date: Thu, 2 Jun 2005 21:19:35 -0400
To: "Joe Parko" <parkoj at bellsouth.net>
From: Janet  Minshall <jhminshall at comcast.net>
Subject: Re: Fw: Sweet victory ahead on debt relief?
Cc:
Bcc:
X-Attachments:

Hi Joe, I actually wrote about this a few years ago in the Winter 
2001 issue of Friendly Woman in an article called "Economics, A Pop 
Quiz".

In the article I used a series of statements gathered from Friends 
around the country, and then I responded to them.  Statement 6 was:

"We, as Friends, must support the iniative called Jubilee 2000 whose 
focus is to forgive the debts of countries around the world."

My response was (and is) "It is clear that loans to many less 
developed countries (LDCs) were made inappropriately as the result of 
intense political pressure and/or inaccurate information obtained 
about the countries' ability to repay.  Those loans should most 
certainly be written off by the lenders as "bad debts" and lending 
policies should be thoroughly reviewed to preclude repeating the same 
mistakes in the future.  This reality has already been recognized in 
the highest echelons of global capitalism as the only practical 
alternative to resolve the ongoing problem of trying to collect debts 
which are actually uncollectable.

If a country does not meet the requirements to become a borrower of 
funds for development, they should have ready access to development 
grants which do not have to be repaid.  Friends need to be strongly 
supportive of such grants to the poorest countries.

However, if a country legitimately qualifies and applies for a loan, 
for whatever purpose, that loan should be honored and repaid.  Think 
about the process followed to teach people financial responsibility 
in this country.  Credit is granted in small amounts and then a 
person's credit limit is increased on the basis of timely and 
reliable repayment.  Is that unfair?  Do we encourage young adults 
just starting out to take on as much debt as possible because the 
debts they undertake will be "forgiven" anyway?.  No, that isn't the 
message we want to send, that isn't the example we want to set.

What happens when well-intentioned people apply for and take on too 
much debt?  We have a process called debt consolidation which allows 
people to receive free counseling and help (from Consumer Credit 
Counseling Service) on how best to pay off the debts they have 
contracted.  Does it work?  People who have been through the process 
tell me it works very well.  If these are the standards we hold for 
honoring loans contracted among ourselves, are they not the processes 
we wish to share with other countries in process of development? 
Anything less would be patronizing.

In addition, holding countries to their contracts to repay the debts 
they owe will work far better than wars to unseat exploitative 
leaders who divert resources aimed at bettering the lives of their 
people into their own pockets.  Already several LDCs have arrested 
former leaders and officials to regain control of their economies."

I don't think I can say it any better than that.  Best Regards,  Janet

(Feel free to share this if you wish)





Janet,
What are your thoughts on this? I rely on you for Quakerly advice in 
the realm of economics.
                        Joe
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