315
In South Africa, high debts were
incurred by the apartheid regime.
Many argue that the debts from the
apartheid era should be canceled since
the government was not legitimate.See also: International trade and Bretton Woods 186–87 ■ Development economics 188–93 ■ Dependency theory 242–43 ■
Asian Tiger economies 282–87 ■ Speculation and currency devaluation 288–93
CONTEMPORARY ECONOMICS
rich countries had made these
loans either to buy support in the
Cold War or to secure contracts
for their own companies, they had
an obligation to lift the debt. US
economist Michael Kremer took a
legal line. He said that since many
debts were incurred by corrupt
regimes to feather their own nests,
they could be considered “odious.”
This would mean that countries
have no legal obligation to repay
them. The World Bank, for instance,
continued to lend to former dictator
Mobutu Sese Seko in Zaire (now
the Democratic Republic of Congo),
even after an IMF representative
pointed out that he was stealing
the money. Many of South Africa’s
debts were borrowed by the
apartheid regime, considered
by many not to have been a
legitimate government.
Others, such as Jeffrey Sachs,
gave an economic argument.
Sachs argued that canceling debt
and increasing aid could kick-start
growth in poor countries. Such was
the appeal of these arguments that
the G8 countries (the eight largest
economies in the world) agreed to
write off over $40 billion in 2005.
Another American, William
Easterly, argues that debt relief
rewards poor policies and
corruption by recipient countries.
Many criticize the free marketreform programs that are made
a condition for relief, which may
damage the economic prospects of
the countries receiving the relief.
Interestingly, the debt crisis has
now shifted from the less developed
world to the once-flourishing
countries of Europe. Here, similar
free market austerity measures
are being pushed through—but,
crucially, without the debts
being canceled. ■Jeffrey Sachs One of the world’s most
controversial economists, Jeffrey
Sachs was born in Detroit,
Michigan, in 1954. He first came
into the public eye in 1985 with a
plan to help Bolivia deal with
hyperinflation. The plan came to
be called “shock therapy” and
centered on making the country
easily accessible to foreign
business. This meant opening
up the Bolivian market, ending
government subsidies, eliminating
import quotas, and linking the
Bolivian currency to the US dollar.
Inflation was indeed brought
under control, and Sachs becameknown as a global economic
troubleshooter. He was on hand
in 1990 to shift Poland out of
communism with breakneck
privatization and did the same
in Russia in the early 1990s. In
the 2000s Sachs turned his
attention to global development
issues, arguing that, with the
right interventions—including
aid and microloans—extreme
poverty could be eradicated
in 20 years.Key work2005 The End of PovertyShall we let the children
of Africa and Asia die
of curable disease, prevent
them from going to school,
and limit their opportunities
for meaningful work—all
to pay off unjust and
illegitimate loans made
to their forefathers?
Desmond Tutu
South African archbishop (1931– )