When individual or businesses reach the point where they absolutely cannot pay their debts, our laws in the United Kingdom give them the ability to declare themselves bankrupt. This not a decision any business wants to be put in, but it means that some or even all of their debts can be written off (reduced or cancelled), or they can organise a to pay back a fraction of what they owe at a level they can manage e.g. monthly payments, and their trustees have to accept that they will not get all of their money back. On the contrary there are no such options like these for the governments of struggling, impoverished countries and there are no international laws exist to protect them. If they need money to develop they borrow from: other governments, the World Bank, the International Momentary Fund (IMF) and in some cases even High street banks. When LEDCS (Less economically developed countries) are in excessive amounts of debt they have no choice but are forced into spending more on repayments than on helping their own people, which means the country doesn’t have enough for infrastructure and falls into a void of economic degradation. Governments of LEDCS owe huge sums to wealthy countries and the international banks they borrowed from. Many LEDCS borrowed money to try to develop their country (e.g. by building motorways, hospitals and schools). Although they were given aid by the MEDCS this often comes with ‘strings attached’ and the amount of aid wasn’t enough to raise the living standards in the LEDC quickly enough. The people of these countries are in debtor’s prison because they are unable to access the freedom that better health, education and social development could bring.
Third World Debt – Brief History
Millions of people in the world’s poorest countries are confined by debt. Debts run up by governments on their behalf. Debts that were started up as easy credit pushed by rich lender. Debts that enrich these lenders further but leave children malnourished, and families living in desperate poverty. The flow diagram below shows how debt crises rose in the 70s and 80s.
Why should debt be cancelled?
When money is loaned to poorer countries for development it should be done on fair terms and in a responsible way that leads to improved quality of life and opportunities for the millions who are trapped in the poverty cycle. Some debts are even run up by the previous colonial regimes and then passed on to newly liberated countries, essentially meaning they were born into debt. Therefore a large proportion of poor country debt is unjust. One example of this would be Haiti. Haiti is an LEDC and suffered from a severe earthquake only a few years ago. It was also a colony owned by the French during the slave trade. After liberating the country the French declared that Haiti was in debt and should pay a certain amount of money back to the country…