Third World Debt Undermines Development

Causes of the Debt Crisis

The causes of debt are a result of many factors, including:

• The legacy of colonialism — for example, the developing countries’ debt is partly the result of the unjust transfer to them of the debts of the colonizing states, in billions of dollars, at very high interest rates.
• Odious debt, whereby unjust debt is incurred as rich countries loaned dictators or other corrupt leaders when it was known that the money would be wasted. South Africa, for example shortly after freedom from Apartheid had to pay debts incurred by the apartheid regime. In effect, South Africans are paying for their own oppression.
• Mismanaged spending and lending by the West in the 1960s and 70s

In effect, due to enormous debt repayments, the poor are subsidizing the rich.

Read “Causes of the Debt Crisis” to learn more.

The Scale of the Debt Crisis

Total debt continues to rise, despite ever-increasing payments, while aid is falling. For example:

• The developing world now spends $13 on debt repayment for every $1 it receives in grants.
• For the poorest countries (approximately 60), $550 billion has been paid in both principal and interest over the last three decades, on $540bn of loans, and yet there is still a $523 billion dollar debt burden.

Debt kills. Some 11 million children die each year around the world, due to conditions of poverty and debt.

Read “The Scale of the Debt Crisis” to learn more.

The Heavily In-debt Poor Countries Initiative is Not Working

The Heavily In-debt Poor Countries (HIPC) initiative set up in 1996 by the rich nations through the IMF and World Bank calls for the reduction of external debt for the poorest countries through write-offs by official donors.

The IMF and World Bank have actually admitted that the HIPC initiative is backfiring in some cases and are confirming warnings that debt-relief advocates were making even before the scheme was launched. Difficult, and sometimes unfair conditions, are often associated with the initiative.

Read “The Heavily In-debt Poor Countries Initiative is Not Working” to learn more.

Debt Cancellation and Public Pressure

As well as the admissions by some heads of international financial institutions such as the IMF that their various schemes are not working (as mentioned above), there have been some additional positive actions and decisions. The Jubilee 2000 initiative, for example, has been very beneficial here to raise awareness.

Various G8 Summits have seen promises of billions in debt-write off, but almost hardly are carried out, or contain a lot of spin. For example, a lot of debt relief promised may include moneys previously announced for such purposes, thus creating an impression of enormous write-offs. Bilateral debt relief also does not typically release actual money to be used for other purposes. Multilateral debt relief, however, could.

Read “Debt Cancellation and Public Pressure” to learn more.

Debt and the Global Economic Crisis of 1997/98/99

The structural adjustment measures, global, unregulated free markets and lack of protection for emerging economies all contributed to the global economic and financial crisis in the late 1990s.

The Progress of Nations, 1999 report by UNICEF, suggests that debt is killing children. It is pointed out that as countries are diverting resources away from social provisions to repay debt, those most affected are the poor, especially women and children. UNICEF’s 2000 report says 30,000 children die each day due to poverty. That is just under 11 million children each year.

Read “Debt and the Global Economic Crisis of 1997/98/99” to learn more.

Debt and the Effect on Children

Read “Debt and the Effect on Children” to learn more.

Debt and the Environment

At first glance, it may seem like separate issues, but environment issues and poverty/debt are very much related. Basically, the more the developing countries stay in debt, the more they will feel that they need to milk the earth’s resources for the hard cash they can bring in, and also cut back on social, health, environmental conservation, employment and other important programs.

Responding to environmental disasters is also made more difficult when the affected countries are in severe debt. Examples include Honduras and Nicaragua, where Hurricane Mitch devastated large parts of those countries, as well as Mozambique and Madagascar where floods have made hundreds of thousands of people homeless.

Tackling debt-related issues would also therefore indirectly help address environmental and other issues as well.

Read “Debt and the Environment” to learn more.

G8 Summits: Empty promises each year

The G8, is made up of the seven most powerful economies of the world, (United States, Japan, Germany, France, UK, Canada, Italy) and Russia. Together they form a very powerful and influential (though informal) group of nations. For example, they accounting for almost 50% of the votes at the IMF and World Bank. At their annual summits they attract a lot of criticism, increasingly now in the mainstream, for failing the world’s poor. This section introduces the G8 with an overview of recent summits and their outcomes.

Read “G8 Summits: Empty promises each year” to learn more.

Third World Debt and Disaster Recovery

When poor countries face natural disasters, such as hurricanes, floods, earthquakes, and fires, the cost of rebuilding becomes even more of an issue when they are already burdened with debt. Often, poor countries suffer with many lost lives and/or livelihoods. Aid and disaster relief often does come in from international relief organizations, rich countries and international institutions, but sometimes poor countries are still paying millions of dollars a week back in the form of debt repayment.

Read “Third World Debt and Disaster Recovery” to learn more.

Poverty Links for More Information

Links to other sites discussion issues on trade, the global economy, poverty and other related issues.

Read “Poverty Links for More Information” to learn more.

Trade, Economic Links For More Information

Read “Trade, Economic Links For More Information” to learn more.

G8: Too Much Power?

Read “G8: Too Much Power?” to learn more.

Causes of Poverty

Poverty is the state for the majority of the world’s people and nations. Why is this? Is it enough to blame poor people for their own predicament? Have they been lazy, made poor decisions, and been solely responsible for their plight? What about their governments? Have they pursued policies that actually harm successful development? Such causes of poverty and inequality are no doubt real. But deeper and more global causes of poverty are often less discussed.

Read “Causes of Poverty” to learn more.