Hello the_brickster-ga,
I have read through several articles and have selected some to take
out excerpts from. I recommend that you read through all of the ones I
have cited and you will certainly be able to gain a good understanding
of all three parts of your question.
I found an interesting article by Kenneth Rogoff at
http://www.econlib.org and will be summarizing some of the mail points
here. I recommend that you read through the entire article as it
contains a wealth of information:
-The article was written in 1991 and says that by the end of 1990, the
worlds developing countries owed more than $1.3 trillion to
industrialized countries, Argentina owing $61 billion by itself.
During the 70s, bankers became eager to lend money to developing
countries, even though many third world countries defaulted their
loans in the 30s.
-Some causes of world debt are 1) The “sharp rise in world interest
rates in the early eighties greatly increased the interest burden
because most of their borrowing were indexed to short-term interest
rates”, 2) the export receipts of developing countries started to
fall, and 3) “sluggish growth in the industrialized countries made
debt servicing much more difficult.”
-The article says that many governments in the 70s made the situation
worse by mismanagement of their economies.
-“Not enough money was invested in productive projects that could be
used to service the debt.”
As for one possible solutions, the article says to:
-“force private creditors to forgive part of their debts or use large
doses of taxpayer resources to sponsor a settlement”
SOURCE: Third World Debt (by Kenneth Rogoff)
http://www.econlib.org/library/Enc/ThirdWorldDebt.html
As of February 4, 2002 debt to third world countries had risen to $1.8
trillion. A very obvious problem wish such a staggering amount of debt
owed by poor countries, usually to rich countries, is that the
interest rates are making it all but impossible for poor countries to
get ahead. A court in Brazil has found that the crippling debt that
third world countries have is “illegitimate, unjust and unsustainable,
ethically, legally or politically.”
Argentina, which has defaulted on $141 billion in public debt after it
suffered four years of recession and a cut off from further loans is
often viewed as an example “of the failure of free-market economies.”
The article also quotes an individual saying that: “The more we pay,
the more we owe and the less we have.”
SOURCE: Third World Debt Deemed Illegal (by Harold Olmos)
http://www.commondreams.org/headlines02/0204-05.htm
One solution to the third world debt problem is to cancel the debt
itself allowing the countries to breathe again. “The foreign debt
imposed on the Third World is not a relation among equals. It is based
on the relationship between a handful of oppressor powers—whose
headquarters is in Washington—and the majority of nations oppressed by
imperialism. The most industrialized countries, which enjoy a greater
productivity of labor, extract huge profits by imposing unequal terms
of trade on the semicolonial nations, whose economies are subjected to
and distorted by the domination of these imperialist powers. The debt
squeeze on Argentina and other semicolonial countries is simply a
vehicle to suck enormous amounts of wealth into the coffers of the
imperialist banks.”
The article continues in saying that Argentina, although it was paying
massive interest rates, their debt continued to grow. In July 30, 2001
it had $130 billion in debt, but its annual gross domestic product was
only $374.
“The only solution proposed by the wealthy bondholders […] make
working people pay – to slash wags and social benefits, and similar
measures.”
Source: Cancel Third World Debt
http://www.themilitant.com/2001/6529/652901.html
Another article talks about the awful instability Argentina has gone
through, partially because of the staggering debt that country has. It
notes that Argentina, with $140 billion in debt has 20 percent of its
population unemployed. The banks had only 15 percent of the cash
needed to return savings of Argentina, so people were unable to
withdraw their money from banks.
Source: Leadership Vacuum in an Economic Black Hole (by Alfred
Hopkins)
http://www.worldpress.org/Americas/370.cfm
In theory at least, loans to poorer countries could work, and it could
bring a boost to the economy. In some places such as South Korea,
loans have worked to boost the economy, but in many places such as
Argentina, the interest on these loans and their mismanagement has
been a disaster. The economy, government and social stability quickly
collapsed as soon as they were unable to pay off the interest on their
loans, and thus they were unable to secure more loans to keep their
country running.
You can read some more about the instability caused by the massive
debt in Argentina here: http://www.worldpress.org/Americas/370.cfm
With mismanagement and a bad economy, the World Bank refused to loan
Argentina more money, because it could not pay its interest, and
required payment of interest before new funds would be issued (which
of course will lead to even more interest):
http://news.bbc.co.uk/1/hi/business/2471617.stm
Here is another quote from an excellent article worth reading: “For
most of the 20th century, Argentina was considered one of the most
developed countries in South America, however poor economic decisions,
political instability, and endemic corruption have contributed to
Argentina's decline from the 10th richest country in the world in 1913
to the 36th in 1998. Argentina now finds itself bankrupt with an
external debt of US153 billion. This constitutes one seventh of all
the debt of developing countries.” The fourth paragraph discusses how
there was a 13% cut in public service salaries, pensions etc., to pay
interest on the loands.
Source: http://www.cafod.org.uk/latinamerica/argentina_background.shtml
Also adding to the problem is that aid from other governments, and
sometimes loans too come with conditions, such as that they must be
used to purchase products or services from the loaning country. This
can lead to significant disadvantages for the country receiving the
money, because they are not in full control of the funds. On the other
hand, if foreign government were required to be more accountable,
there would be less mismanaging of the funds and perhaps change is
possible.
The easiest solution to the debt crisis would be to simply eliminate
the need of all third world countries to repay their debt.
Unfortunately, private and public organizations who have loaned the
money to third world countries do not want to see their money simply
disappear, especially when, in many cases it has been so mismanaged
and in some cases stolen by corrupt politicians.
There is no easy answer to solving the debt problem, should we cut the
debt in half and require countries to be accountable? Should we demand
that poor citizens be forced to take pay cuts so that they can fully
repay the loans? Should we eliminate the debt completely giving
everybody a fresh start? What then?
In conclusion, here is a link to an article entitled “The Third World
Debt Crisis: Facts and Myths” (by David Roodman) Here is one excerpt:
“Many poor countries are using new loans to pay off the old. Among the
poorest countries (GNP per capita less than $885 a year) in 1999, of
every dollar received in new loans, 83 cents went right back to pay
old ones.”
http://www.worldwatch.org/pubs/paper/155facts_myths.html
Please let me know if you need any clarifications to this answer and I
will respond as soon as possible.
tisme-ga
Search Strategy:
"third world debt" argentina
://www.google.com/search?q=%22third+world+debt%22+argentina
debt argentina protests
://www.google.com/search?q=debt+argentina+protests
debt argentina corruption
://www.google.com/search?q=debt+argentina+corruption |
