Forget debt, let’s talk rice

Forget debt, let’s talk rice

David Roodman of the Center for Global Development has a thoughtful response to my blog post (responding in turn to his initial post) on the growing calls to cancel Haiti’s debt.

To summarize, David and I are discussing whether debt relief for Haiti is A) a good thing and B) should be a priority — we agree on A (yes) and disagree somewhat on B. David argues that debt payments aren’t going to be an issue in the foreseeable future, and that countries like Venezuela shouldn’t get points for relieving relatively small sums of debt — particularly if they aren’t also providing significant aid, which is more important in the near and medium term. I say there’s a short window in which to ask for countries to throw in the kitchen sink, so why not, particularly given debt’s historical choke-hold on Haiti and given that three or ten years from now, Haiti will still be poor and in debt. Lots of others have good commentary on the subject, including Daniel Altman and Alex Tabarrok.

Ultimately, I still believe there’s room and reason to ask for debt forgiveness — if not now, then when? But it made me wonder about aid effectiveness — if you’re giving x dollars of aid, what provides the maximum benefit: debt forgiveness, direct governmental grants, funding specific programs, ending agricultural subsidies?

Development economists, of course, research this question, well, exhaustively. And the answer? It’s now always clear — or, there’s no general rule. Academically, a dollar of debt relief is worth more than a dollar of granted aid. In reality, the level of indebtedness, degree of governmental corruption, relevant economic fundamentals, and the entities doing the lending all matter considerably.

But there’s consensus on what other countries can be doing, should be doing, and are doing now. Haiti needs material support (water, batteries, medical supplies, etc.) and cash aid. But the United States, especially, should also think about remittances and immigration. Here, Michael Clemens and Amanda Taub argue for giving Haitians temporary protected status in the States. In the longer term, the United States might consider taking a close look not just at debt, but also at rice.