May 10

Stiglitz's arguments about debt is thought provoking. Maybe a bit at variance, he makes an argument supporting the free flow of money to developing countries, then makes an argument against overlending. Overborrowing is very common amongst developing countries, mostly in dictatorships and undemocratic governments with no future vision. How the money is spent is not in the hands of the people in such an environment and the examples in the past must have created a picture in the heads of the lenders, causing them to better control how the money is spent. But then again, too many controls on spending give an advantage to the lenders as they can plan the development of the borrowers according to their own goals. The situation seems to put a "burden" on one of the players no matter what. Stiglitz is right saying that the risk of borrowing should be reduced, but the risk of lending should also be reduced. The odious debt situations create a risk to lenders, as it is very abusable. Recurrence of such, and overlending in order to control others are examples of abuses, the "moral hazards". Debt clearing should only be discussed in cases where the country is unable to pay the interest of the debt, let alone the debt itself.