The newly independent states were generally rated according to high level of political, economic or social risk (not entirely untrue), which meant that the levels of interest were generally extremely high. Even more, the sums paid for interest would generally surpass the actual funds that had been received. This meant that, instead of focusing the countrys resources on development and internal projects, most of it had to be spent paying off debts which were not even viable and extremely costly.
On the other hand, from an international perspective, international debt is something fundamentally essential to the financial markets. Money is made to circulate and move around, which means that entities need to be connected to the financial markets, borrow on the open markets and use that money to create added value and generate more cash flow. The fact that, in many cases in the developing world, this mechanism was in fact not functional should not necessarily be explained through the non-viability of the international financial market and international debt, but rather through the managerial deficiencies and lack of experience of the newly independent countries throughout the 20th century.
Despite the current emulation around the idea according to which there was a Western conspiracy throughout the 20th century to trick the developing countries into large amounts of foreign debt that they could not sustain, one needs to be objective in distributing blame and evaluating that the funds received through those international loans were, in many situations, badly mishandled and mismanaged, as well as used for projects that would not bring any profit. At the same time, even the numerous attempts by various organizations to reduce the level of debt these countries have incurred and the fact that the subject is always on the agenda of meetings like the G8 meetings, shows that there is some moral responsibility involved.
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2. Herz, Noreena. The Debt Threat: How Debt is Destroying the Developing World. Democracy Now! January 2005.
3. Strange, S. (1986) Casino Capitalism, Oxford, OUP
4. Block, F. (1997). The Origins of International Economic Disorder.
5. Galbraith, J.K. (1995) Money: whence it came, where it went
6. Eichengreen, B..