Third world contries take on debt for supposedly good reasons.
But how common is wise investment of borrowed money in order
to develop a country's economy more quickly? If it were common
at all, then the countries which borrowed the most would be the
ones doing well. Without getting into the statistics, we'll just
point out that debt is more often what is hurting these economies
rather than what is helping them. The debt is there, though,
so what can be done about it?
Renounce the Debt
Renounce it! This may sound too radical at first, but not
once you understand the nature of international debt. Under the
guise of helping to develop a country's resources, the world
bank or various governments loan money to a third world government.
The lenders usually don't just want to make interest on the loan,
but to develop something that will benefit them, like oil or
lumber resources. Alternately, it is expected that companies
from the lending countries will get large contracts for various
Meanwhile the corrupt government that receives the loan has
it's own ideas about what to do with the money. Altogether, many
corrupt officials, lending institutions, governments and companies
make money, while little real benefit trickles down to the people
of the borrowing country. The scoundrels are long gone when the
next government has to deal with the growing debt.
At this point the lending countries, international monetary
fund or world bank step in to renegotiate the debt. They will
even loan more money to alleviate a "crisis." This
new deal comes with rules, of course. A country may have to tax
the people more heavily, or encourage "cash" crops
that can be sold to pay the debt. Meanwhile, the people once
Think about this for a moment. If a corrupt, often non-democratically
elected government borrows money for their own purposes, do the
people have an obligation to repay the money? If I borrow money
in your name, would you feel obligated to pay? Of course not!
This is my solution: The moment a new government comes to
power in any of these debt-ridden third world countries, they
should renounce all foreign debt, and stop making payments at
once. Neither they nor the people who actually are taxed to pay
it have any obligation to do so.
Some will argue that a country which does this will probably
not be able to borrow again for a long time. I say that since
debt has been one of their problems, and not the solution to
their economic woes, this is a benefit. Make sure no one will
lend to these governments!
Meanwhile, the new government can stabilize expenditures and
create a market system in which money will be comfortably lent
to many individual companies within the country. The resulting
economic growth will provide the tax base for public works. Letting
the world lend to value-producing companies instead of to inevitably
corrupt governments will go a long way towards solving the problems
of debt in the third world.