You’re a British school teacher and you wonder how you are going to pay off your debts. Then you read that the government is still paying off the debt stacked up during the financial crash in 1720. You’re erudite. You know that the debt problem causes thousands of children to die every year in poor “underdeveloped” countries. And you know also that the debt—supposedly to “help” those countries develop—is increasing by leaps and bounds as the dollars come streaming back from straggling economies to fill the coffers of banks and financial institutions (which have had a hand in the ongoing financial crisis that makes it so difficult for you to get to the end of the month.)
Economics is not your favorite dish, yet you know that the world lives on indebtedness, some thriving on it, some struggling with it, some dying with it, some making enormous profits with it, some making sermons about it while trying to cast off its chokehold grasp. You know that every time a debt is refinanced—something that happens time and again and is part of the business—the amount due mysteriously increases as interest piles upon interest.
You open your computer, curious. Hm. The impoverished countries of the Sub-Saharan Africa spend roughly four times more on paying off their debts than on health care and education for their citizens. There’s that alarming statement by the former president of Nigeria, Obasanjo: ”All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors' interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest.” (jubilee 200 news update)
So the whole thing about “giving” money to poor countries is a boomerang? To get more money in return? To get poor countries to offer tax reductions and other tit bits to get foreign investment to produce things that will be exported, while demanding the draconian payment of interest on their foreign debts?
What about this jewel by J.W. Smith (The World’s wasted wealth 2, Institute for Economic democracy, 1994): “The size of the debt trap can be controlled to claim all surplus production of a society, but if allowed to continue to grow the magic of compound interest dictates it is unsustainable. One trillion dollars compounded at 10 percent per year become $117 trillion in fifty years and $13.78 quadrillion in one hundred years, about $3.5 million for every man, woman and child in the Third World. Their debt is 50 percent greater than this and has been compounding at twice that rate — over 20 percent per year between 1973 and 1993, from $100 billion to $1.5 trillion [only $400 billion of the $1.5 trillion was actually borrowed money. The rest was runaway compound interest]. If Third World debt continues to compound at 20 percent per year, the $117 trillion debt will be reached in eighteen years and the $13.78 quadrillion debt in thirty-four years.”
You have a friend in the U.S.A. who tells you that each U.S. citizen’s share of the U.S. debt of $18,032,267,753,648.54 is $56,433.82. Woh! And the newspapers and Wall Street and the government say things are improving.
You have another friend who travels around Latin America and says that the debt is the headache of every government in the area, a headache that is also a political and social and cultural migraine attack. How are you supposed to “develop” if you have to dedicate most of your efforts towards paying off your debts? And what happens, as in the case of Argentina, when financial speculators buy up debt to resell it at exorbitant prices and pressure the government to open its doors to “market economics?”