Forgive, But Don't Forget

By Adam Zagorin

It may seem odd that the Secretary of the Treasury of the richest nation on earth is obsessed with poverty. But Larry Summers has used his stint in government not only to boost the U.S. economy but also to push policies designed to eradicate global poverty. Top on his list these days: debt relief for highly indebted poor countries. He explained the plan to TIME's Adam Zagorin:

Why is debt relief important?

Debt relief is a moral imperative. The U.S. should not stand for the proposition that poor countries where as much as half the adult population will contract AIDS must pay back every last dollar of principal and interest. That would be wrong. Last year I visited health clinics in Bolivia where children were getting vaccinations for the first time because money had been freed up by debt relief. The only thing holding back further relief for places like Bolivia is the U.S. Congress. And remember, debt relief is not charity. It is what the toughest financial institutions do when they make bad loans. It is also in the political and security interests of the U.S. to support the poorest countries in their struggle to join the world economy.

What is the difference, in economic terms, between a country facing an insuperable debt burden and, say, the U.S.?

Take Mozambique, from which I just returned. It has a huge debt overhang that deters private investment as well as an even greater social-resource gap that prevents spending even as much as $10 per person on health care or providing schools for the next generation.

But what happens to all the people who made the loans?

Even the toughest private lenders write off their bad debts. That's what governments--and private lenders--need to do with bad loans they have made. Debt reduction clears the way for new private investment so these countries can begin to grow. No U.S. taxpayer money will go to any private bank.