I.O.U: the debt threat and why we must defuse it by Noreena Hertz

Noreena Hertz's follow-up to her anti-corporate tract, The Silent Takeover, is another pamphlet disguised as a book. It pretends to weigh up the details and evidence, but its tone implies that anyone who disagrees is stupid or bad. So I'd better stand up and be counted among the moral pygmies.

Noreena Hertz's follow-up to her anti-corporate tract, The Silent Takeover, is another pamphlet disguised as a book. It pretends to weigh up the details and evidence, but its tone implies that anyone who disagrees is stupid or bad. So I'd better stand up and be counted among the moral pygmies.

Actually, I support cancelling more of the debts owed by developing countries to institutions such as the International Monetary Fund. The current system for writing off the loans crippling some governments, especially in Africa, is too mean and cumbersome. But cancelling all debts owed by poor countries - the aim of this campaign bandwagon - is neither easy nor right. Nor are HIV/Aids, the loss of Amazon rainforests and terrorism caused by these debts, which is the facile claim Hertz makes.

It's alarming anybody might think debt cancellation would solve these problems, or even a simpler one such as the failure of some poor countries to achieve development. History in this field is littered with the wrecks of old panaceas. The idea that all "we" have to do is cancel unfair debts is as inadequate as any other idée fixe, whether aid or multinational investment.

The debt burden became an acute problem after the end of the Cold War for two reasons, as Hertz rightly spells out. First, developing countries became less interesting to the great powers as pawns in international conflict. So the supply of loans shrank, and lenders started to grow squeamish about filling the private accounts of appalling characters such as President Mobutu of Zaire.

The second trigger was higher global interest rates adjusted for inflation. Before the late 1980s, high inflation meant the amount of debt to be repaid in future was worth steadily less in terms of the real resources it would take to pay. The switch to low inflation and high real rates meant the future of these economies was well and truly mortgaged.

In 1996, the rich countries came up with a package of debt relief: the Highly Indebted Poor Countries initiative. It was augmented in 1999, and should probably go further. However, there are trade-offs. The money to repay loanshas to come from taxpayers of rich countries. Britain's share might be roughly a penny on the basic rate of income tax for a decade. That's not impossible, but most taxpayers wouldn't rank it a high priority.

Paying off all debt would compete with increasing the amount of overseas aid. And it would funnel assistance to countries which did over-borrow when others were never so irresponsible. It's not that the "debt threat" is not a moral issue, but rather that moral issues are seldom simple ones. Ranting about the injustice of the world doesn't make the solutions easier.