• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

third world debt

Extracts from this document...

Introduction

THIRD WORLD DEBT Cancelling all 3rd world debt seems morally right, but there are good economic reasons to be cautious. Debt cancellation should help create sustained economic growth and human development. However, this may not be the case if the money goes into the hands of the rich elite or corrupt dictators. Therefore it makes sense to use debt cancellation as a lever to get changes that are essential for economic growth and the emergence of good governance. For example, every child must get an education until 12 Debt cancellation should be given when it reduces poverty or brings sustained human development but not if it reinforces dualism and puts money in the hands of a corrupt or self serving elite. This is a result of the corrupt individuals wasting money on arms races or dictators using it to suppress people. This is the case in Zimbabwe where there is widespread violence and instability so debt shouldn't be cancelled. However, bordering Zimbabwe is Mozambique. ...read more.

Middle

Our debt cancellation judgment must look at each country individually and ask whether debt cancellation can reduce poverty. This should be far more important than the self interest of a country and banks. Similarly governments declare aid and debt cancellation but fail to carry out promises made. The conditions set must be sensitive to the obstacles and potential of each country. Therefore fixed conditions or free market ideology should not be imposed. In contrast negotiations should take place with local officials and economists as they know what's best for a country. In order to make the best use out of debt cancellation it may be best to gradually relieve debt in a number of instalments. However, there is an extreme position when immediate relief is essential. This occurs when debt servicing is unsustainable and repayments of capital with interest are greater than a country's annual exports. At this it seems morally incorrect for mdcs to demand there money back. Another major issue surrounding 3rd world debt is the demand for foreign currency. ...read more.

Conclusion

In comparison Incompetent government borrowed and wasted money as institutions didn't exist to utilise the spending. Similarly why should banks suffer because of these misjudgements in LDCs. There is a high opportunity cost of cancelling 3rd world debt including education spending and pension funds. If we cancel the debt of Pakistan because they have improved their institutions and have worked towards improving human development it can create a dilemma. India will argue that they have worked hard in paying off debt and deserve debt cancellation. Debt cancellation is too often a tax on poor people in rich countries that ends up as benefit to the rich in poor countries Encourages people to muck about and waste money then go back and ask for more. Should this misallocation of money be payed for by the west instead of spending on healthcare and education? Overall it can be concluded that third world debt is extremely damaging to an ldc and should be cancelled. However, debt cancellation should be a process where demands associated with economic growth and human development are met. The process should include debt cancellation in instalments and not in one go. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. Why has GDP growth been so slow in Somalia?

    The examples of this untoward market come in abundance. In 2008, the United Nations claimed that up to 80% of all arms, ammunition and supplies that were supplied to the transnational government of Somalia were diverted to the black market. The firearms ended up in the hands of private individuals, opposition groups and arms traffickers.

  2. Will trading fairly reduce world poverty?

    This process of developing the countries in an empire is known as colonialism. The huge profits made from trade based on cheap imports from the colonies and slavery in America helped Europe and the USA become richer, whilst the countries that became colonies were left behind.

  1. A Comparison Of The Path Of Development In

    Usually they would run off to start their own plantations and the ones that stayed did not have any incentive to perform to their best ability. Eventually the Virginia Company changed its policies and employed the use of indentured servants to fulfill the demand for labor.

  2. Assess some of the ways in which Third World Debt might be reduced

    Multilateral debt relief, however, could. Debt repudiation, in the sense of a unilateral cessation of repayment, occurred in a number of countries: Bolivia, Brazil, Costa Rica, Dominican Republic, Ecuador, Honduras, Nicaragua, Panama, and Peru. With the exception of the Peruvian cessation, however, most of these actions have been taken with assurances that the stoppages were only temporary.

  1. Where does the World Trade Organisation fit in the overall scheme of international public ...

    international economic order, from Hume and Smith to Hayek and Tumlir, is its stress on the need for general rules of conduct in a more complex world. As the world becomes more complex in globalisation's wake, it does not follow that governance should become more complex too.

  2. This investigation will try to test the level of external debt and measure its ...

    The general content of this essay is summarized in the following aspects: Chapter I will contain the necessary theoretical framework, which will sustain the explanation of Ecuador's economy in a practical order that will later be presented. In chapter II, the empirical framework will be undertaken, specifically a critical study

  1. Case Study: Mozambique Floods of 2000.

    More than 900 state enterprises have been privatised. Pending are tax and much needed commercial code reform, as well as greater private sector involvement in the transportation, telecommunications, and energy sectors. Since 1996, inflation has been low and foreign exchange rates stable.

  2. Unsustainable Debt.

    The origins of the debt crisis lie in the beginning of the Cold War era. An era in which the two superpowers of the world sought to gain alliances with as many nations as possible. One such method of attracting allegiance was to provide military aid and economic aid (termed

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work