The Debt Crisis of the Eighties and Nineties

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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 “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 ...

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...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

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