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August 29, 2003

Prisoners of Debt 

I have been reading Samir Rihani's book 'Complex Systems Theory & Development Practice" - not an easy read so forgive me if I over-simplify its main headlines - indeed my purpose is to suggest we should all find the most authentic bookmarks linking these headlines until we've made the whole story of investment in the Developing World transparent.

1) After the second world war, most of the mega-aid associations and corresponding economic agencies UN, World Bank and IMF were set up under some impression that appealed particularly to commanding mid 20th century Americans and Brits- that there should be one ideal pathway for nations to develop from under-developed to developing to advanced, and that all nations requiring aid should be ordered to follow their step on that path. The 60 years of development that we can now look back on have been in most cases an extravagant failure, and usually the poorest have had to pick up the tab. One reason that uniformity of development never could have worked is that nations need to play to unique differences not all be me-toos of at some stage of development.

A far more scary reason (which I'd really like to get more feedback on) is those with the greatest wealth have profited from putting countries in debt almost irrespective of whether the debt incurred had any likelihood of supporting development. This has many vicious subcircles- for those providing the money a banana republic with a corrupt dictator who syphons off the loans can be an ideal target to make loans to with the country still having to pick up the debt long after the dictator has gone. Here are a few lines quoted from pp126-129 of the book.

In Angola, 6.3% of GDP is spent on health and education, 33 per cent on servicing debt. According to UNICEF 1999, the whole of sub-saharan Africa spends more on servicing its 200 billion dollar debt than on the health and eductaion of its 306 million children.A baby starts life with a debt of $997, 1213, 1872 in Mauritania, Nicaragua, Congo respectively. The burden is shaped by factors that are mainly outside the control of the debtors. They may run fast, but the arithmetic means that they stand a good chnqace of going backwards. (eg Sub-sahara's debt has gone up to 200 billion from 80 billion twenty years ago)

The impact of debt on domestic policies is devastating. Subsistence agriculture, for example, would not do; cash crops that have a market abroad have to be cultivated at any cost, up to and including malnutrition.The tragic consequence is instead of unihibited productive interactions between local members of the population adapting to their needs, indebtedness delivers compliant client states and above all else the opportunities for corruption presented by easy foreign money are liable to compound all the way up the system.

Once you're read this book on how the rich profited from the world's poorest (with all the vicious chains of debt that spin viciously over time) you also start to ask different questions in parallel contexts. Previously, I have always been naive enough to feel primarily that every war is an enormous human tragedy. In future, my first question will be who lurks behind this war and intends to profit from it? May the net make this terrifying first question transparent from now on...
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