Third World Debt Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

Since the fall of the Berlin wall in 1989, some consider the expression third world out-of-date. It was used in the past to describe countries that did not belong to the Soviet bloc or to the Western European and U.S. capitalist bloc. These countries are now called emerging markets, developing countries, or emerging democracies, the latter a term also used for former communist countries. The poorest nations are often called countries in transition.

Most of these countries have external debt, which according to the United Nations Conference on Trade and Development and the United Nations Development Program, grew fourfold from 1980 to 2000. Interest on the debt increased from $75.4 billion to $317.2 billion, an average increase of 13 to 15 percent. Data from the International Monetary Fund (IMF) show that the total external debt of emerging market and developing countries reached $2.93 trillion in 2004. The IMF estimates that, for 2007 and 2008, the total external debt for these countries will reach $3.5 and $3.8 trillion, respectively. These two figures correspond to an average of 25 percent of their gross domestic product (GDP).

The more optimistic analyst could see the IMF numbers for the emerging countries as promising, because the external debt as a percentage of GDP decreased from 33 percent in 2004 to 24 percent in 2008. However, the IMF includes countries that face very different situations in the same group. For example, countries such as China, India, Mexico, Brazil, and Russia—which are rapidly engaging in the international markets as important game players—are grouped with Sudan, Togo, Chad, and Uganda—countries that face serious political, economic, and social problems.

Recently, developing countries’ private debt has increased more than their public debt. Globalization allows capital to flow easily from one country to the other, thus facilitating indebtedness from trade more quickly than loans from other governments or international organizations. As a consequence, in addition to external debt, most developing countries have very high domestic debt; they owe high interest and commissions to creditors. As a result, the gap between rich and poor widens.

The public resources retained to pay debt vary according to how a developing country’s government manages its foreign debt. Debt prevents governments from investing in basic and strategic infrastructure such as education, health, sanitation, roads, and ports that spur private enterprise and speed development. The United Nations Children’s Fund estimates that in 2007, thirteen children died every day as a result of third world public debt. Private debt may also be an impediment, because governments frequently embrace or endorse it, or give companies discounts or privileges.

Some developing countries, such Argentina, which paid its debt, and Brazil have been struggling hard to relieve themselves of their external debt. The work groups formed by the Bank for International Settlements, the IMF, the Organization for Economic Cooperation and Development, and the World Bank consider the external vulnerability of a country to judge the importance of a country’s indebtedness. If a country regularly pays the price of its debt (i.e., interests and other additional costs) without incurring new debt, it has sustainable indebtedness. The work group also monitors the performance of the twenty-two poorest countries in the world by developing devices and policies that may lead them to sustainable indebtedness, if not to long-term sustainability.

Bibliography:

Dijkstra, A. Geske. The Impact of International Debt Relief, vol. 64, Routledge Studies in Development Economics. London: Routledge, 2008.
Ferraro,Vincent, and Melissa Rosser.“Global Debt and Third World Development.” In World Security: Challenges for a New Century, edited by Michael T. Klare and Daniel C.Thomas. New York: St. Martin’s Press, 1994.
Jochnick, Chris, and Fraser A. Preston. Sovereign Debt at the Crossroads: Challenges and Proposals for Resolving the Third World Debt Crisis. New York: Oxford University Press, 2006.

This example Third World Debt Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.