The Debt Threat

Written on May 28, 2007 by Max Oliva in Development

J.Pozuelo-Monfort, MSc candidate in economic development at LSE.
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Noorena Hertz does it again. In a book written before she wrote The Silent Takeover she exposes how developing countries have become heavily indebted over the past few decades, particularly since many of them earned a deserved independence from their former colonies.
Dr Hertz starts with a superb opening first chapter in which she details how Bono was able to persuade the political class of the G8 countries and particular that of the United States, that the debt burden on the poorest countries of the world was not only unfair and unethical, but had been accumulated thanks to the lax lending of western banks.
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The book continues to give additional facts on how some of the debt has been used by despots and dictators in developing countries to undertake their personal vision.
The book also gives a relatively unprecise explanation of the role of the credit rating agencies, that usually are much more quantitative than qualitative and do not necessarily take capricious decisions seeking to increase the negative impact of a financial crisis in the developing world.
There is in the end more to blame on the current financial architecture of the world, allowed by industralized nations, and the imposed neoliberal economic policies on behalf of the World Bank and the International Monetary Fund, than on the side of the Rating Agencies.
Dr Hertz finalizes her piece providing further thinking as to how the debt burden ought to be forgiven, and how to incentivate developing countries to use the so-liberated funds appropriately, far away from using them for other reasons different than those of reducing poverty through the promotion of free access to education and better healthcare provision.


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