The Debt Crisis of the Eighties and Nineties Essay -- Economy Economic

The Debt Crisis of the Eighties and Nineties 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 â€Å"chronic syndrome†[1]. The primary crisis, which occurred in Mexico in 1982, was centred on middle-income nations[2], while the second strain occurred in poorer African nations, with the effects from it still being well and truly felt today[3]. 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 nations[4]. 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 people[5]. While others struggled with failed projects and damaging economic decisions[6]. 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 too to make the same money[7]. Combined with the rising and falling of the dollar, and the rises of interest rates in the 80s, the third world debt was now even larger than ... ...continue in the long run many of HIPC goals will be achieved. Success of HIPC and the debt cancellation plans of the 90’s are indeed difficult to judge. If success were to be measured by how much has been paid out from the forecasted amount then HIPC could be viewed as a failure. However if success were judged on the increase of social service spending then yes HIPC would be seen as a successful initiative. The one clear success of the debt cancellation plans has been public awareness. Though the cancellation process is moving slowly and only achieving a fraction of its goals[18] the general public of the world has now awoken to the horrors that debt can lead to. With public support behind the debt cancellation process the debt crisis will eventually be overcome. --------------------------------------------------------------------- [1] La Trobe, Assignment Manual, p.130 [2] Ibid [3] Ibid, pp.130, 131 [4] Ibid, p.133 [5] Ibid, p.131 [6] Ibid [7] Ibid, p.137 [8] Ibid [9] lecture [10] Ibid, p.144, 145 [11] Ibid [12] Ibid [13] Ibid, p.149 [14] Ibid, p.152 [15] Ibid, p.156 [16] Ibid [17] Ibid [18] Ibid, pp. 150-153