Enough

I’m a little disturbed this morning that I couldn’t find a single article which lists the African nations that will have their debt relieved by the G8 nations. I’m a little perturbed this morning that I couldn’t find a single article that names a single institution that will be writing off the debt to the unnamed African nations. I’m a little disheartened this morning that so few reporters, and so few advocates, and so few politicians, give a you know what about the details of the G8 debt relief package to Africa.

I’m finding out this morning that good intentions, no matter who gets hurt, is what makes the world go around; not moral governments, not inquisitive reporters, not knowledgeable skeptics, just big hearts and gutless leaders deciding what to do with money they didn’t have to earn in order to control. Money someone else had to break a sweat in order to earn; money someone else was counting on; money a lot of deserving and poor people will now never see.

Every transaction between one person or one institution who lends money to another person or institution or government has consequences. The lender postpones investing or spending their money for the period until the loan is repaid. The lender usually gets a fixed rate of return in order to offset the effects of inflation and provide a small return as an incentive. This incentive is what keeps funds available to be lent. The borrower gets the benefit of using money that has not been earned by agreeing to pay back the original loan along with an interest charge. In effect, the lender is postponing the gratification of using their money and the borrower is receiving unearned gratification.

Not every borrower is poor and not every lender is wealthy. There are many wealthy borrowers throughout the world and there are also many poor lenders throughout the world. Financial markets evaluate the risk associated with a loan in order to allow lenders to decide how much risk they are willing to exchange for a certain amount of return. Those who are poor have the opportunity to enjoy more of the fruits of their labor if they are willing to postpone enjoyment and accept a small amount of risk.

The market in Africa and South America is not working now, just as it has not worked in my lifetime, because lending decisions have not been based on market forces. My guess is that very little of the debt has been going to entrepreneurs who could actually make life better in these developing countries. My guess is that the debt is going to governments who don’t allow free markets and free people to make free spending, working, lending, and investing decisions. My prediction is that this won’t be the last time we will be seeing Brad Pitt and Bono claiming American’s aren’t doing enough for the rest of the world. If only Pitt and Bono knew what they were talking about.