The past week has seen much controversy over the weight of the youth of our nation, but an astounding fact is, that while 1 in 6 of our youngsters is obese; there are 160 million children in the developing world that are dangerously underweight. This is a result of lack of availability of proper nutrition and water in the third world due to little money being spent by their governments on these amenities that we, the Western World, take for granted. While we sit devouring our Mars bars, one quarter of the planet will eat no food today, and who is to blame?

We are. These developing countries owe very large debts to western countries, and the amount of money that they owe is increasing at a relentless rate. Take the region of Sub-Saharan Africa, for example. This region pays out nearly £7 billion every year in a futile attempt to quash its debts – this is nearly four times the amount of money that they spend each year on food, health care and education. Brazil is in a similar situation. Between 2004 and 2009, it is estimated that Brazil will pay some £50 billion to its public and private creditors, only to find itself £15 billion deeper in debt than it is today.

The Debt Crisis started in the late 1970’s, when many oil-exporting countries had large amounts of extra money. This money was put into western banks. These banks loaned much of this money to Third World countries for large development projects. However, a global recession and a rise in world interest rates caused these debts to grow dramatically; and most countries fell behind in their payments. The amount of money owed by these poor countries has grown considerably since the 1980’s from £1 trillion to £2.5 trillion, despite having paid £1.5 trillion over this period.

But why does this debt keep growing? The reasons are threefold. Firstly, governments of the First World demand that these debts are repaid in ‘hard’ currency (pounds, dollars, marks). These currencies do not fluctuate much in value – however, developing countries have ‘soft’ currency, so if the value of their money falls (as it often does), the cost of the debt rises, and so, must pay more of their own currency to repay the same amount of hard currency. The only way for these countries to earn hard currency is to export – but world markets can only consume so much copper, cotton and bananas, therefore, countries must export more every year just to keep their cash flow stable.

The problem with this, is the value of developing countries’ exports often go down. This makes it much more difficult for a country to repay its loans in hard currency. In Latin America, for example, debt is growing faster than earnings from exports. Tanzania was caught out by this fall in export prices. In 1986 there were good rains, and so, the cotton crop doubled. But the same year, cotton prices plummeted by 50% on the world market. As former President Julius Nyerere explained: “The result for our economy – and the income of our peasants – is similar to that of a natural disaster: half our crop, and therefore of our income, is lost. Our peasants and our nation have made the effort, but the country is not gaining a single extra penny. That is theft!”

Finally, a country refinancing its loans, sometimes, gets it into more trouble. This is when it borrows more money in order to pay off earlier loans. In theory, this is a measure to help countries with their debt problems, but in practice, they fall deeper and deeper into debt. This accounts for most of the increase in debts during the 1990’s. Between 1990 and 1997, developing countries paid out more in debt service than they received in new loans – a total transfer of £65 billion from the Third to the First World.

In addition, many of the loans to developing countries are made by government, or governmental organisations, and often carry strict conditions – like cuts in health spending, education and food subsidies. And so, life is made yet worse for the people of indebted countries, as a direct result of the Western World. The lenders only insisted on this ‘structural adjustment’ to increase their chances of being repaid.

What can be done to resolve this hopeless situation? There are two possibilities. Firstly, the debt could be rescheduled or swapped. Rescheduling is simply, allowing more time to repay loans at a lower interest rate. Debt swaps is a clever solution thought up by organisations, like UNICEF, in order to help developing countries lessen their debt burden. UNICEF’s Debt for Child Relief is an example of how an organisation helped some countries with debts. In this program, UNICEF and international banks made a deal. Some of the money that poor countries owed the banks was not paid to the banks but to UNICEF. Instead of the money, banks received tax deductions, and so, UNICEF collected the money in local currency and spent it on programmes to help children inside the country.

The other solution is to simply cancel the debt of the Third World, and possibly is the simplest solution imaginable. The cost of eradicating, not only world debt, but also poverty in general, is estimated to be less that 1% of the world’s total income for one year. Or, just the debt relief of the twenty poorest countries in the world would have cost less than building ‘EuroDisney’.

However, cancelling Third World debt will not solve the problem in the future. To do that, we must change the present financial system, which is based on debt and interest payments; a system that keeps control in the hands of the rich and powerful – the West.

This debt crisis, is clearly not a debt crisis for everyone. Who exactly is reaping the benefits? Obviously not the ordinary Third World citizens whose countries’ economies are in shreds, they themselves are suffering as never before. Neither do the western industries profit: they have lost some £20 billion in exports since the debt crisis began in the early 1980’s, and so, western workers also draw the proverbial short straw. It is estimated that some 5 million jobs have been lost since Third World countries can no longer import western goods. Western taxpayers also lose out. To pay interest on their private bank debt, indebted governments now routinely use public loans. It is the banks that are benefiting handsomely, whilst economies crash. Often, banks are repaid twice: once in interest, and again with loans smuggled out of poor countries, then recycled back to the west by the corrupt Third World leaders, anxious to amass a personal fortune.

Blame for the shocking life of the poor, made poorer by the hour, can clearly be apportioned to the hands of the west. After all, what do the developing countries really owe the developed world? They have repaid their loans many times over in interest payments. In addition, in many cases, developing countries have paid the First World more, in debts, than the west has given in aid, loans and investments. During the 1980’s a surplus of £150 billion went from the countries receiving aid, to the countries ‘giving’ it. In 1994 alone, less developed countries paid out £112 billion more than they received. The most surprising hypocrisy of the west is: that in the US alone, ‘national’ debt now exceeds $6 trillion (£3.6 trillion) – more than three times the debts of all of the developing countries put together.

WORD COUNT: 1,261

Bibliography

· Various articles

· Food Standard Agency

· US government’s website

· Various other websites

· National Geographic