That poor nations get the raw end of the stick isn't new! Whenever politicians in the West speak piously of spending money in, say, Africa, it inevitably ends up as a good photo-op but the monies promised rarely come through.
Read this from Share the World's Resources and you will readily see how poor nations are forever in debt - and unable to spend money on critically important things like healthcare, education, etc.
"Between 1970 and 2002, the continent of Africa received some $540 billion in loans. However, a U.N. study showed that, despite repaying some $550 billion in principal and interest over the same period, there was still some $295 billion outstanding.
In 2005, as a result of its outstanding debt, Kenya was obliged to spend as much on the servicing of its debt as it allocated to health, water, roads, agriculture, transport and finance combined. Indonesia, whose debt was largely run up by previous dictators, used up almost 25 percent of its budget on debt service, some four times its combined spending on health and education.
The origins of the current debt crisis can be traced back to the 1970s. In 1973, the Organization of Petroleum Exporting Countries (OPEC) quadrupled the price of oil. Given the relatively inelastic demand for oil, particularly in the northern hemisphere, OPEC accumulated vast profits, generally stored in U.S. dollars, commonly known as petro-dollars.
Large banks in the northern hemisphere were inundated with these petro-dollars and were faced with the dilemma of where and how to invest them at a profit. Given the slackening growth in the North, states in the South were actively encouraged by these banks to take out loans.
The effects of this policy can be seen in the massive rise in borrowing by poorer states in the southern hemisphere that led to a twelve-fold rise in their debt burden between 1968 and 1980. However, as long as the interest rates on the loans contracted remained low and the debtor countries earned sufficient export-based revenues to cover their repayments, the debt incurred remained sustainable.
Initially, the interest rates were relatively low in the region—4 to 5 percent—but at the turn of the 1980s this all changed as the interest rates began to soar upwards. Within a relatively short period, they went as high as 16 to 18 percent, and debtor states found themselves having to allocate three times as much to cover their debt.
Most importantly, this imposition of higher rates was completely one-sided. It was imposed by the richer northern hemisphere states on the loans poorer nations had taken out. These nations, mainly based in the southern hemisphere, had no input or chance to challenge this massive increase in their debt burden."
Read this from Share the World's Resources and you will readily see how poor nations are forever in debt - and unable to spend money on critically important things like healthcare, education, etc.
"Between 1970 and 2002, the continent of Africa received some $540 billion in loans. However, a U.N. study showed that, despite repaying some $550 billion in principal and interest over the same period, there was still some $295 billion outstanding.
In 2005, as a result of its outstanding debt, Kenya was obliged to spend as much on the servicing of its debt as it allocated to health, water, roads, agriculture, transport and finance combined. Indonesia, whose debt was largely run up by previous dictators, used up almost 25 percent of its budget on debt service, some four times its combined spending on health and education.
The origins of the current debt crisis can be traced back to the 1970s. In 1973, the Organization of Petroleum Exporting Countries (OPEC) quadrupled the price of oil. Given the relatively inelastic demand for oil, particularly in the northern hemisphere, OPEC accumulated vast profits, generally stored in U.S. dollars, commonly known as petro-dollars.
Large banks in the northern hemisphere were inundated with these petro-dollars and were faced with the dilemma of where and how to invest them at a profit. Given the slackening growth in the North, states in the South were actively encouraged by these banks to take out loans.
The effects of this policy can be seen in the massive rise in borrowing by poorer states in the southern hemisphere that led to a twelve-fold rise in their debt burden between 1968 and 1980. However, as long as the interest rates on the loans contracted remained low and the debtor countries earned sufficient export-based revenues to cover their repayments, the debt incurred remained sustainable.
Initially, the interest rates were relatively low in the region—4 to 5 percent—but at the turn of the 1980s this all changed as the interest rates began to soar upwards. Within a relatively short period, they went as high as 16 to 18 percent, and debtor states found themselves having to allocate three times as much to cover their debt.
Most importantly, this imposition of higher rates was completely one-sided. It was imposed by the richer northern hemisphere states on the loans poorer nations had taken out. These nations, mainly based in the southern hemisphere, had no input or chance to challenge this massive increase in their debt burden."
Comments