The Debt Boomerang

The Debt Boomerang
How Third World Debt Harms Us All
Pluto Press/TNI, London, 1992 (202pp)
ISBN: 0-7453-0594-6

• New Internationalist, May 1993

A decade after the onset of the debt crisis, the Third World is in its worst shape - and deeper in debt - than ever before. In the South, debt and the 'structural adjustment' measures of the International Monetary Fund and the World Bank use to treat it have devastated countless livelihoods and lives. But this is no longer simply a problem for the debtor countries. 'The Debt Boomerang', based on research by a Transnational Institute team, shows how we in the North are also unwitting victims of this crisis. The South is closer than we think. Its debt accelerates deforestation and global warning, fuels the expanding drug market, destroys jobs and farms, encourages mass immigration and heightens global insanity and conflict. Our taxes ensure that the banks need never take the consequences of their foolish loans. 'The Debt Boomerang' explains why solidarity with the South is not just ethically desirable but in our interest as well.

Debt-induced poverty causes Third World people to exploit natural resources in the most profitable and least sustainable way, which causes an increase in global warming and a depletion of genetic bio-diversity. This ultimately harms the North too.

Exports from rich countries to the Third World would be much higher if those countries were not
strapped by debt, and this would stimulate manufacturing and employment in the North. The loss of jobs due to 'lost exports' is estimated to account for one fifth of total US unemployment.

The illegal drugs trade is the major earner for heavily indebted countries like Peru, Bolivia and Colombia. The social and economic costs of the drug-consuming boom in the North is phenomenal – $60 billion a year in the US alone.

The International Labour Organization estimates that there are about 100 million legal or illegal immigrants and refugees in the world today. Many go to the richer countries of the North to flee poverty and the effects of IMF-imposed economic policies.

Governments in the North have used their tax-payers’ money to give banks tax concessions so that they can write off so-called 'bad debts' from Third World countries. But in most cases this has not reduced the actual debts of poor countries. By 1991 UK banks had gained from tax credits for more than half their exposure. The eventual total relief will amount to $8.5 billion.

Debt creates social unrest and war. Iraq invaded Kuwait in 1990 largely in retaliation for the latter's insistence that Saddam's regime repay a $12 billion loan.