The debt crisis Flashcards
What are the ‘six boomerangs’?
The consequences of making countries in debt. The idea that you send out money (aid) but problems come back - like a boomerang.
Environment -
People in developing countries are forced by debt to exploit their natural resources in the most profitable and least sustainable way; for example, cutting down rainforest for timber to export. This leads to climate change, exhaustion of resources and depletion of biodiversity.
I.e. South american countries (Brazil, Chile) and places like indonesia.
Unemployment -
If the indebted countries were better off, they would be able and willing to buy from developed countries, so jobs have been lost for lack of markets.
I.e Greece after the financial crash as EU bailed them out, they were then indebted to them.
Drugs -
For some countries in debt, the huge demand in developed countries for illegal drugs such as cocaine and heroin provides a tempting market, but with huge social and economic costs in the developed countries.
I.e. Columbia after US helped them end civil war with loan but the government is corrupt and most of national income comes from cocaine farming.
Migration -
Many flee poverty by moving to the north or to other rich countries nearby. Economic migrants are not recognised as refugees. Your workforce leaving.
I.e. Middle east and India, no jobs left for the skilled workers from those countries so they move to where the work is ie, US or UK.
Taxes -
People in developed countries pay taxes to give banks concessions so they can write off bad debts.
I.e. People could leave or unhappy people could form riots.
War -
Debt creates social unrest and can lead to war. Iraq’s invasion on Kuwait, which led to the first gulf war, happened partly because iraq was under pressure to repay a $12 billion loan.
So, found a rich neighbouring country with weak army and invaded it.
