Third World Debt Relief
As we have scene, foreign aid is not the answer to fixing some of the world’s
problems. Of course it is a help and is naturally appreciated by those countries who
accept the aid. There is however a solution which could have dramatically positive
impacts in a reasonably short time. This concept is DEBT RELIEF!
In order to understand why one would even consider dropping the debt of another
country, one has to understand the history as to why these countries got into such debt in
the first place.
History - How did these countries get into debt?
1) The continuing impacts from colonialism - the developing countries’ debt is
largely the result of the unfair transfer to them of the debts of the colonizing
States! A sum of US$ 59 billion in debt was imposed on the newly independent States in
1960. With the additional strain of an interest rate set at 14%, this debt increased
rapidly. Before they had even had time to organize their economies and get them up and
running, the new debtors were already saddled with a heavy burden of debt.
2) Odious Debt - is debt that resulted from loans to an illegitimate or
dictatorial government that used the money to oppress the people or for
personal purposes, with the knowledge of the lenders. The lenders may be said to
have committed a hostile act against the people. They cannot legitimately expect
repayment of such debts.
3) Mismanaged Lending - Further debt resulted from mismanaged spending
and lending by the West in the 1960s and 70s.
- the 1960s saw the US spend more than it had, resulting in the printing of more dollars.
- In 1973, the oil-producing countries hiked their prices as a result, earning a lot of
money, which they put into western banks.
- Interest rates started to plummet resulting in more lending by banks to try and prevent a
crisis.
- A lot of the borrowed money went to western-backed dictators, resulting in little benefit
for most people.
4) The corruption and stealing of money by the elite in developing countries
(who were often placed in power by the powerful countries themselves). These moneys
are often placed in foreign banks (and used to loan back to the developing countries).
Many loans also come with conditions (tied) that include preferential exports etc.
5) Globalization controlled by the rich - International agreements are
designed to benefit the rich at the expense of the poor. The economic decisions
and influence in various international agreements, treaties and institutions by the wealthy
and powerful nations also help form the backbone of today’s globalization. That such
immense wealth and prosperity for some have come at a time when most nations in the
world have steeped into further poverty and debt is no coincidence. The policies of
those who have the power and influence have been successful to help raise
standards for some in their own nations, but at a terrible cost others,
especially in poorer countries.
The Scale
Consider the following:
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In 1970, the world’s poorest countries (roughly 60 countries
classified as low-income by the World Bank), owed $25 billion in
debt.
By 2002, this was $523 billion
For Africa,
o In 1970, it was just under $11 billion
o By 2002, that was over half, to $295 billion
Debts owed to the multilateral institutions such as the IMF and World
Bank is currently around $153 billion
For the poorest countries debts to multilateral institutions is around
$70 billion.
$550 billion has been paid in both principal and interest over the last
three decades, on $540 billion of loans, and yet there is still a $523
billion dollar debt burden.
Jubilee 2000
Jubilee 2000 was an international movement in over 40 countries advocating
a debt-free start to the Millennium for a billion people. They were fighting
for a one-off cancellation of the unpayable debts of the world’s poorest
countries by the year 2000, under a fair and transparent process. While the
ultimate goal of the debt cancellation was not achieved, and perhaps initially
their campaign could have fallen under the above criticism of stopping just
at the debt issue, their work was crucial in getting the issue of debt in to the
mainstream media of many industrialized countries. In addition, they
continue on as Jubilee Plus looking into deeper and related causes as well.
Live Aid raised over 200 Millions Dollars!