The Debt Crisis in the 21st Century

1
The Debt Crisis in the 21st Century

• The Contemporary Situation

2
The Debt Crisis in the 21st Century

• Levels of debt have increased 1984 to 1991 it
  doubled despite 209b being paid in interest
• Debt now exceeds 2.7t

3
Consequences of the Debt Crisis

• Mexico
• 1 January 1994 Mexico signs North
• American Free
  Trade
• Agreement (NAFTA)
• Zapatistas in
  Chiapas

4
Consequences of the Debt Crisis

• Question Why?
• Local problems but negative effects of NAFTA
  cheap grain
• Effect of globalisation/interdependence as
  economies become more open to world market
  condition of IMF/World Bank
• Gap between rich poor increasing

5
Consequences of the Debt Crisis

• Venezuela
• Oil producer original member of OPEC
• Oil price fell in late 1970s borrowed money
  debt problem

6
Consequences of the Debt Crisis

• Venezuela
• 1980s many problems
• 1988/1989 economy contracted 8.6
• inflation 40.3
• extreme poverty 13.9 to
• 29.6

7
Consequences of the Debt Crisis

• Venezuela
• 27 February 1989 Caracazo the day the shanty
  towns came down from the hills
• Problems continue February 1998 Hugo Chavez
  becomes President
• Populist push buy Venezuela

8
Consequences of the Debt Crisis

• Brazil
• In top 10 economies in world but 1983 moratorium
  on debt
• 1990s debt more than doubled to 400b
• Massive social problems
• 14m over 5 never been to school
• 3.4 college degree (80 white/2 black)

9
Consequences of the Debt Crisis

• Brazil
• October 2002 Luis Inacio de Silva (Lula) becomes
  President ex-metal worker
• Won on promise For a decent Brazil
• zero hunger
• expand
  domestic market

10
Consequences of the Debt Crisis

• Both countries have advantages oil or large
  economies
• Present Presidents elected since populations
  unhappy with social/economic situation as result
  of debt crisis and role of IMF SAPs

11
Consequences of the Debt Crisis

• Argentina
• Again one of big 3 economies
• Debt problems but by early 1990s IMF model pupil

12
Consequences of the Debt Crisis

• Argentina
• 4 economic shocks in late 1990s
• December 2000 rioting 5 Presidents in 2 weeks
• Corralito
• 2002 defaulted on 100b to commercial banks
• August 2004

13
Drop the Debt Campaign

• Does the Developed World have a moral duty to
  help?
• Jubilee Debt campaign
• 25 countries including UK/Italy/Sweden
• Set up for year 2000
• Trying to get governments to change policies
  bring influence to bear on IMF/World Bank
• UK treasury received 30,000 Drop it cards
• Some debt has been cancelled but is it enough?

14
Conclusions

• Debt risen and not fallen
• Social consequences of SAPs
• Population lost out gap between rich poor
  increasing

15
Conclusions

• Case studies big 3 plus oil rich Venezuela
• Same things elsewhere
• Effects globalisation/interdependence

16
Conclusions

• the debt crisis is too serious to be left to
  financers economists
• the debt crisis is not simply a matter of
  economics health, education, employment,
  poverty, standard of living, diet, politics and
  the nature of society are also integral elements