The Debt Crisis

The debt crisis of the 1980s and 1990s has been one of the largest economic disasters of the 20th Century. It has caused widespread poverty, famine and starvation across many of the third world countries it has touched. The Crisis did not go by unnoticed however. Since the mid 1990s world governments have awoken to the horrible reality that such debt causes with attempts to lighten the devastating affects with such programs as the Brady plan, HIPC and eventually HIPC 2. While these plans have had only limited success the question of weather the debt crisis can be solved in the long run is still to be answered.

The debt crisis as it is now called did not occur in one single event; instead it developed as a slow moving "chronic syndrome"1. The primary crisis, which occurred in Mexico in 1982, was centred on middle-income nations2, while the second strain occurred in poorer African nations, with the effects from it still being well and truly felt today3. For these countries the need for industrialisation meant the need for large-scale borrowing. Since many of the African nations were excluded from being aloud to borrow until the early 1960s, the need to borrow a lot, quickly, was a common trend throughout the developing nations4. The reasons for the colossal amounts of debt cannot be simply explained for they vary from country to country. Some nations had corrupt militaristic governments who cared more for themselves than for their people5. While others struggled with failed projects and damaging economic decisions6.
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By the early 70's the debt had begun to accumulate. The impoverished and debt stricken countries began to shift commodities meant for the sustenance of the people to the export sector to try and make enough money to pay off their debts. Suddenly all the indebted countries were simultaneously selling their primary commodities on the world market. The flow of coffee, coca, copper, steel, ect, had the devastating effect of lowering the commodity prices causing the developing nations to make much less than they had previously. Countries now had to sell two or three times what the used ...

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