Debt - ECONOMIC INTERACTION

Question 1

For every £__ of ___ given from ______ to ______, £__ is given back in ____ __________.

Answer 1

a) £1
b) aid
c) MEDCs
d) LEDCs
e) £9
f) debt repayments

Question 2

Why is Tanzania a notable example of how debt can be detrimental?

(3)

Answer 2

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.

Question 3

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?

Answer 3

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.

Question 4

What is the debt crisis?

Answer 4

Rich countries started giving loans to poor countries due to modernisation theory.

Question 5

What did the debt crisis serve?

Answer 5

Capitalist interests in short-term; poor countries invested in infrastructure.

Question 6

What happens to money as a result of debt crisis?

Answer 6

Money gets wasted - dictators took some & spent lots on wrong things as they didn’t know how to modernise/were corrupt.

Question 7

(Debt Crisis) What did the economic crash in the 1970s/80s result in?

Answer 7

Rich countries couldn’t afford goods or as much oil.

Poor countries lost income & couldn’t pay debts (HIPC).

Question 8

What does HIPC mean?

Answer 8

Highly-Indebted Poor Countries

Question 9

6 BOOMERANGS

What do the 6 boomerangs represent, George (1991)?

Answer 9

Consequences of countries in debt

Question 10

6 BOOMERANGS

What are the 6 boomerangs, George (1991)?

Answer 10

Environment
Unemployment
Drugs
Taxes
Migration
War

Question 11

6 BOOMERANGS
Environment boomerang:

People are ________ by ____ to exploit __________ in the most ______ & least _________ way.
Leads to __________, exhaustion of ________ & depletion of _________.

Answer 11

a) forced, debt, natural resources, profitable, sustainable

b) climate change, resources, biodiversity

Question 12

6 BOOMERANGS
Unemployment boomerang:
If ________ countries were _____ off, they’d be ____ & _______ to buy from ________ countries, so ____ have been ____ from lack of _______.

Answer 12

a) indebted
b) better
c) able
d) willing
e) developed
f) jobs
g) lost
h) markets

Question 13

6 BOOMERANGS

Explain the drugs boomerang.

Answer 13

For some indebted countries, the huge demand in developed countries for drugs (eg cocaine) is a tempting market but has social & economic costs.

Question 14

6 BOOMERANGS

Explain the tax boomerang.

Answer 14

People in developed countries pay taxes to give banks concessions to write off bad debt.

Question 15

6 BOOMERANGS

Explain the migration boomerang (3).

Answer 15

Many flee poverty by moving North or to rich countries nearby.
Economic migrants not recognised as refugees.
Countries lose talent.

Question 16

6 BOOMERANGS

Explain the war boomerang.

Answer 16

Debt creates social unrest which can lead to war.

Question 17

6 BOOMERANGS

What is an example of an environment boomerang?

Answer 17

Brazil, cutting down forests

Question 18

6 BOOMERANGS

What is an example of an unemployment boomerang?

Answer 18

Greece after financial crash - workers lose income after lots of debt from EU.

Question 19

6 BOOMERANGS

What is an example of a drug boomerang?

Answer 19

Columbia - govt’s very corrupt & their national income comes from cocaine.

Question 20

6 BOOMERANGS

What is an example of a migration boomerang?

Answer 20

North Indian countries

Question 21

6 BOOMERANGS

What is an example of a tax boomerang?

Answer 21

Riots may form due to increased taxes, such as Renault in France.

Question 22

6 BOOMERANGS

What is an example of a war boomerang?

Answer 22

Iraq’s invasion of Kuwait happened partly because Iraq was under pressure to pay back a $12 billion loan.

Question 23

6 BOOMERANGS

Who came up with the 6 boomerangs?

Answer 23

George, 1991

Question 24

6 BOOMERANGS

What kind of idea are the 6 boomerangs?

Answer 24

Postmodern

Question 25

6 BOOMERANGS

What does George (1991) say that the 6 boomerangs suggest?

Answer 25

Cancelling or writing off debt benefits rich countries by avoiding consequences of bankrupting poor countries.

Question 26

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).

Answer 26

a) poor, sued, non-payment
b) aid, rich, citizens, rich, paid, private loans, helped
c) private, rich, expense, involved, government ties.

Question 27

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 ________.

Answer 27

a) debts, written off, conform
b) IMF: free market
c) World Bank: pay, tax, UN
d) enable, capitalist