seven richest nations ('G7') arrive in London to discuss the management of the world economy. High on their agenda will be assessing how much more they can squeeze the world's indebted nations -in Asia, Africa, and above all Latin America. How were the chains of debt bondage forged?
The origin of debt crisis is in the explosion of oil prices following the 1973 Arab-Israeli war. Western banks were flooded with petro-dollars' from the oil-rich states. Desperate to recycle these deposits at maximum profit, the banks scoured the world to Why don't the debtor naFor the ruling elites in the so-called 'third countries, this seemed a golden opportunity to boost their economes orate met own bank balances. As an orgy of borrowing took place, vast amounts were salted away in Swiss bank accounts and wasted on 'prestigé' projects. Very little found its way to the people of the poorer nations.
Borrowing heavily, for states and individuals, is no problem so long as you can keep up the repayments. But economic developments in the West sabotaged the ability of the debtors to pay. First, between 1980 and 1982 the US economy was sharply deflated. Imports of raw materials from the poorer have a head-on battle with imprices fell sharply. The result was a collapse in export earnings to finance debt repayment Nhen the US economy turned around on the basis of massive borrowing and a huge budget deficit after 1983, US interest rates shot up. But the third world debt was tied to US interest rates. The repayment of the interest on the debt grew to staggering proportions.
The next act in the tragedy was rescheduling the debt. In effect, this meant the debtors had to borrow yet more money - but at a massive cost. only banks were involved in rescheduling but the world's 'lenders of last resort' - the international money cops of the IMF and the World Bank. In exHELP THE KURDS!
masses in the debtor nations. What role is there then for an anti-debt campaign in the West? debt they demanded grinding austerity.
The great money trick of the debt has imposed a Catch-22 situation on the borrowers. For the first time in the post-war world the less-developed countries have become net exporters of capital. The transfer of funds in debt repayment from the poor to the rich nations increased from $7 billion in 1981 to $74 billion in 1985. But this conceals the real figure because the rich in the debtor countries have exported huge amounts of capital back to bank accounts in London, New York and Switzerland.
Like home owners stuck with variable mortgage rates in the less-developed PEOPLE ARE FREE TIBETAN HELP THE PANAMANIA Wing interest rates. High interest rates since the early 1980s ensure that the debt will be repaid many times over without any substantial inroads being made into the capital sum owing. The figures are staggering. It has been estimated that Brazil paid. a total of $33 billion in 'excess' interest between 1973 and 1985. The debtor nations havebeen mugged. They are victims of a loan-sharking operation, which does not differ in any way from the operation of loan shark mafias. in New York Manchester. But more than that they are the victims of economic recession and financial instability in the advanced capitalist countries. STILL STARVING HELP THE in Africal PALESTINIL REFUGER