The Economist : Forgive debt, not theftvendredi 21 mars 2003 / par Dom
Source : The Economist
Lobbying groups are bullying companies in a misguided bid to help poor countries
FOR a company to find itself on the receiving end of a campaign by non-governmental organisations (NGOs) is a scary experience. Even giant multinationals tremble when Greenpeace or Oxfam get them in their sights. For the highly effective letter-writing campaigns that a well run NGO can mount are usually aimed at affluent yuppies, just the kind of customer most firms are loth to lose. Such groups thus have as much duty as any company to use their power responsibly.
In recent years, campaigning groups successfully persuaded the IMF and World Bank to forgive some of the massive debt owed by poor countries. Rightly : much of the money was never used for productive purposes ; indeed plenty still sits in the Swiss bank accounts of third-world kleptocrats. Releasing poor countries from misused official loans is sensible, especially in return for economic and legal reforms that benefit the poor. But now the NGOs have turned their sights to a different sort of debt : corporate compensation claims for assets expropriated years ago. Here, they are doing harm, not good.
This week, Jubilee Debt Campaign, a campaigning group that had previously brought together Bono, a rock star, and the pope to argue for forgiving foreign debts, scored what looked like another triumph. Its threat of a public-relations campaign against Big Food, the parent of Iceland, a British supermarket chain, persuaded the company to drop its claim against the government of Guyana for GBP12m ($19m) in compensation for sugar mills seized in the 1970s (and now worth around $1 billion). Nestle, under pressure from Oxfam, decided in January to give up its long-running claim against Ethiopia for assets seized by the country’s 1970s Marxist dictatorship.
It is easy to see why company bosses would rather drop a rightful claim than stand up to a campaigning group. Too often, the NGOs pay little heed to the facts : Jubilee Debt Campaign’s press release never mentioned that Guyana’s "debt" was the result of nationalisation. Pressing a claim in international arbitration courts may give a company a symbolic victory, but it may never recover a penny. It is cheaper to cave in.
A victory for the poor ? Sadly not. No wise company will readily invest fresh money in a country that fails to protect property rights. That is a pity, since foreign direct investments, which poor countries desperately need, have been in decline of late. Instead of allowing NGOs to fight their cause, governments of poor countries would do better to affirm their commitment to property rights and the rule of law, even by letting foreign companies return to manage and invest in their assets.
The NGOs’ tactics suggest that they are more concerned about creeping capitalism than with the needs of the desperately poor. If they wish to do good, NGOs should begin by trying to encourage more, not fewer, investments in poor countries That would truly be, to quote the mantra of one NGO, "Justice for the world’s poor."