Debt - ECONOMIC INTERACTION Flashcards
For every £__ of ___ given from ______ to ______, £__ is given back in ____ __________.
a) £1
b) aid
c) MEDCs
d) LEDCs
e) £9
f) debt repayments
Why is Tanzania a notable example of how debt can be detrimental?
(3)
Borrowed lots in 60s & 70s when interest rates were low.
Interest rates went up in 80s so borrowed more to meet debt requirements.
Debt is now £5 billion.
One of the consequences faced by Tanzania due to debt is having to cut back on basic services like education.
Give evidence of this.
What does this show?
Families pay £12 more a year for a child to receive schooling.
Spends 3x more a year on debt repayments than education.
Burden of debt affects everyone.
What is the debt crisis?
Rich countries started giving loans to poor countries due to modernisation theory.
What did the debt crisis serve?
Capitalist interests in short-term; poor countries invested in infrastructure.
What happens to money as a result of debt crisis?
Money gets wasted - dictators took some & spent lots on wrong things as they didn’t know how to modernise/were corrupt.
(Debt Crisis) What did the economic crash in the 1970s/80s result in?
Rich countries couldn’t afford goods or as much oil.
Poor countries lost income & couldn’t pay debts (HIPC).
What does HIPC mean?
Highly-Indebted Poor Countries
6 BOOMERANGS
What do the 6 boomerangs represent, George (1991)?
Consequences of countries in debt
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What are the 6 boomerangs, George (1991)?
Environment Unemployment Drugs Taxes Migration War
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Environment boomerang:
People are ________ by ____ to exploit __________ in the most ______ & least _________ way.
Leads to __________, exhaustion of ________ & depletion of _________.
a) forced, debt, natural resources, profitable, sustainable
b) climate change, resources, biodiversity
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Unemployment boomerang:
If ________ countries were _____ off, they’d be ____ & _______ to buy from ________ countries, so ____ have been ____ from lack of _______.
a) indebted
b) better
c) able
d) willing
e) developed
f) jobs
g) lost
h) markets
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Explain the drugs boomerang.
For some indebted countries, the huge demand in developed countries for drugs (eg cocaine) is a tempting market but has social & economic costs.
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Explain the tax boomerang.
People in developed countries pay taxes to give banks concessions to write off bad debt.
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Explain the migration boomerang (3).
Many flee poverty by moving North or to rich countries nearby.
Economic migrants not recognised as refugees.
Countries lose talent.
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Explain the war boomerang.
Debt creates social unrest which can lead to war.
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What is an example of an environment boomerang?
Brazil, cutting down forests
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What is an example of an unemployment boomerang?
Greece after financial crash - workers lose income after lots of debt from EU.
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What is an example of a drug boomerang?
Columbia - govt’s very corrupt & their national income comes from cocaine.
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What is an example of a migration boomerang?
North Indian countries
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What is an example of a tax boomerang?
Riots may form due to increased taxes, such as Renault in France.
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What is an example of a war boomerang?
Iraq’s invasion of Kuwait happened partly because Iraq was under pressure to pay back a $12 billion loan.
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Who came up with the 6 boomerangs?
George, 1991
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What kind of idea are the 6 boomerangs?
Postmodern
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What does George (1991) say that the 6 boomerangs suggest?
Cancelling or writing off debt benefits rich countries by avoiding consequences of bankrupting poor countries.
Private investment is encouraged by Neoliberalists - it led to _____ countries being _____ for __________.
This led to increased ____ from ____ countries - the ______ of ____ countries ____ off _________ on behalf of those they were meant to have _______.
_______ companies got ____ at the ______ of all ________ - suggested this is due to their ___________ (Seager & Lewis, 2007).
a) poor, sued, non-payment
b) aid, rich, citizens, rich, paid, private loans, helped
c) private, rich, expense, involved, government ties.
Moral hazard (neo-colonialism) states the only reasons _____ are _________ is if they ______ to the following rules:
____: __________.
_________: pay ____ towards the ____.
This would _______ them to become more ________.
a) debts, written off, conform
b) IMF: free market
c) World Bank: pay, tax, UN
d) enable, capitalist
