Global Economy class questions

Factual Questions
1

I am preparing for finals and I am stumped on a few questions in which the internet has not helped me.

  1. How can one justify a proposal to forgive the foreign debt of African Countries?

  2. Why would one argue against debt forgiveness?

  3. Has how China achieve such a rapid economic growth?
    I just need a few general ideas and examples. (NOTE TO MODS: Some of the questions do not have factual answers, but my question is asking for examples of possible answers/reasons, not the actual right or wrong…so thus I think this post belongs in GQ)

2

Also:

What are some of the impose requirements by the IMF when lending out money and why?

3

  1. Forgive debt because some of these countries are in a debt trap. Overlending without performing due diligence on a country’s ability to repay. Money going to service the debt would be better spent on productive infrastructure. Such debt levels essentially “enslave” many of these countries. Think about being in serious debt to loan sharks.

  2. They borrowed the money so they should repay.

  3. a) allowing capitalism b) massive foreign direct investment c) created a strong export economy d) overseas Chinese bringing both capital and expertise back to China.

4

IMF places pre-conditions on countries like Argentina for conservative fiscal responsibility before lending money as the lender of last resort. Well, usually the IMF only does that when the country is an economic basket case and close to collapse. Again, you can google argentina for a pretty recent example.

5

  1. To understand the whole African debt situation, you have to go back to the 1970’s and understand how it was created. OPEC jacked up oil prices and dumped it into the banks. The banks panicked and dumped it into 3rd world countries at absurdly low interest rates. The 3rd world countries were woefully underprepared for such an injection of cash and most of it ended up being embezzeled/wasted. Then stagflation happened and interest rates shot up. As a result, 3rd world countries are now paying for the mistakes of their forefathers and greedy 1st world banks.

  2. Forgiving debt makes lenders far less likely to lend to those countries again which reduces their abilty to borrow in the future.

  3. By being in the right place at the right time with a massive, cheap labour force at the dawn of the 2nd wave of globalisation.