Debt & global financial crises

Debt is such a powerful tool, it is such a useful tool, it’s much better than colonialism ever was because you can keep control without having an army, without having a whole administration.

Susan George

By 1990 the governments of the world’s developing countries owed more than US$1.3 trillion to industrialised countries, and many were paying more on servicing their debts than on health care and education. For some, borrowing had initially been a way around the hardship of simultaneous rises in the price of importing food and oil in the 1970s, but became a debt trap as a further ‘oil shock’ led to inflation and interest rate rises while export earnings dropped. Other debts had been incurred illegitimately by corrupt and oppressive regimes, lent to by industrialised countries unscrupulously seeking political allies in the Cold War. The result was a debt crisis, beginning with Mexico’s default in 1982 and following throughout much of the developing world.