Wed, Jan 26, 2005 - Page 9 News List

Tsunami brought valuable lessons

While complaints about the US' aid and tactics are justified, more attention should be paid to the response of some Asian countries and the pleas by stricken countries\n for fewer tariffs instead of more money

By Joseph Stiglitz

There are many lessons that emerge from the tsunami that brought such devastation and loss of life to Asia. It demonstrated the power of globalization, as television brought vivid pictures of the destruction to homes around the world. Indeed, it is at times like this that the world truly does seem like a global village.

Of course, it seemed to take somewhat longer for news of the extent of the disaster to reach the Crawford, Texas, ranch of US President George W. Bush. But, in the end, he decided to interrupt his vacation and offer amounts of aid that were successively revised upwards, in a global competition which promised to benefit those who were desperate for help.?

The US' aid still appeared niggardly when compared with the amounts offered by countries with a fraction of its economic wealth. Lightly populated Australia offered more than twice the US' assistance, Japan promised almost 50 percent more and Europe pledged more than five times as much. This led many observers to reflect on the fact that the world's richest country was in general the most miserly in foreign assistance -- all the more so in comparison to the amount it spends on war and defense.

The disaster was international, so it was appropriate that the UN take the lead in coordinating the relief effort. Unfortunately, in an effort that was widely seen as another attempt to undermine multilateralism, the US tried to lead a "core group" driving the assistance program, ignoring ongoing efforts within the region and at the UN. Whatever the US' motive, it later wisely decided to join the UN effort. The Bush administration's face-saving rhetoric that it had rushed to push together the core group in the absence of other efforts was quietly let to pass.

The response of some countries within the region was truly impressive, showing how far they had come in establishing efficient and effective governments. Myriad details were addressed: Thailand flew ambassadors to the affected part of the country to help attend to the needs of their citizens; helped those who lost their money and passports return home, provided health care for the injured, set up systems to identify bodies, and dealt with the difficulties posed by shortages of body bags and the lack of cold storage facilities.?

Countries, such as Thailand, that felt that they could handle the finances on their own asked that assistance be directed to others. They did ask one thing: a reduction of tariff barriers and greater access to markets abroad. They didn't want a handout, only a chance to earn income. The response, at least at the time of this column's writing, has mostly been deafening silence.

On the other hand, the G7 made a truly important contribution in offering debt relief. This is especially important for Indonesia, which must service a debt of US$132 billion (of which US$70 billion is owed to public creditors or guaranteed by government agencies). Even without the tsunami, this debt burden would have been an enormous hindrance to the country's development as it finally recovers from the aftermath of the 1997 financial crisis.

Indeed, there is a compelling case to be made for Indonesian debt relief in any case, given that much of the debt was incurred in loans to the corrupt Suharto government. Lenders knew, or should have known, that not all of the money was going to help Indonesian development. Moreover, some of the debt was incurred as part of the 1997 to 1998 crisis, which was aggravated and deepened by IMF-imposed policies.

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