The debt boomerang
The Third World debt crisis is doing you harm – whether you live in
the North or the South. Susan George explains how a small elite is
making a killing at the expense of the world’s majority.
If the goals of managers in the official institutions that rule over Third World debt were to squeeze the debtors dry, to transfer enormous resources from South to North and to wage undeclared war on the poor continents and their people, then their policies have been an unqualified success.
If, however, their strategies were intended – as official institutions always claim – to promote development beneficial to all members of society, to preserve the planet’s unique environment and gradually to reduce the debt burden itself, then their failure is colossal.
The most obvious aspect of this failure – or success, depending on your point of view – is financial. Every single month, from the outset of the debt crisis in 1982 until the end of 1990, debtor countries in the South remitted to their creditors in the North an average six-and-a-half billion dollars in interest payments alone. If payments of the principle are included, then debtor countries have paid creditors at a rate of almost twelve-and-a-half billion dollars per month – as much as the entire Third World spends each month on health and education.
Moreover, the debt crisis has given creditor countries the chance to intervene in the management of dozens of debtors’ economies – using the International Monetary Fund (IMF) and the World Bank. Their job is simple: to make sure the debt is serviced. Since the average citizen of a low-income debtor country earns less than one fiftieth of the average citizen of a high-income creditor country, this process is like trying to extract blood from a stone.
To accumulate hard currency and service its debts a country must increase its exports and reduce government spending. Most debtor governments have accepted this and forced their people to co-operate with the draconian policies of the IMF and World Bank to ensure that debts are serviced. Much good has it done them. A decade has passed since the Third World debt crisis first erupted, yet in spite of harsh measures faithfully applied this crisis is today more intractable than ever.
