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Third World Debt - New Ideas

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 development projects.

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 again suffer.

Debt Relief

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.

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Third World Debt