Is it possible to identify who is to blame for the debt crisis?
Third world debt was not anticipated till little more than a generation ago, developing countries in Africa, Asia and Latin America were heading towards economic success with their abundance of natural resources and the revolutionary technology from the west to back it up. So what went wrong? In the beginning the loans that developing countries had taken from the oil rich west were to invest in large development projects however due to an unexpected rise in interest rates, a global recession and low commodity prices in the early 1980s excessive debts began to mount. The question lies in why this debt so comtinues: Was it economic incompetence, corruption, and excessive military spending or was it a failure to respond to the suffering within debtor nations and a serious of bad decisions from the west
In1996 the ‘Heavily Indebted Poor Country’ (HIPC) initiative was formed by the IMF and World Bank, its purpose was to prevent unsustainable debt burdens from obstructing economic growth in developing countries. The indebted countries in question were required to meet certain criteria criteria; this includes implementing liberal economic policies as well as completing a range of performance targets known as Structural Adjustment Programs (SAPs). At first glance the initiative seemed like it would be a success: debts will be greatly reduced or cancelled as long as the developing countries practice sustainable development by learning to open their markets and capitalise their produce. The central paradox however is that even after two decades of relief they still remained heavily indebted. In this essay I will examine the HIPC initiative and evaluate whether its policy furthered third world debt or whether other factors are to blame. The latter includes how developing countries responded to the policy and if its failure was their fault.
Firstly the methods of the HIPC have been deeply criticised, for...