Final Exam on the Politics of the Developing Worlds - Essay Example

For example, South Africa is a country that has spent years paying the debts that had been borrowed to maintain the apartheid regime (Beaudet, Paul, and Jessica, 84). Another factor that has caused the Third World Debt Crisis is the mismanaged lending of the 1970s, where the oil-exporting countries had a lot of money during this period and they decided to bank such money in the western banks (Bairoch, 127). The Western countries in turn lend the money to the Third World countries for use in implementing major projects, but the loans were prone to increases in interest rates followed by the global recession that was experienced in the 1980s causing low commodity prices for the Third World countries.

This in turn affected their ability to service the debts, thus the increased Third World Debt Crisis (Shah, n.p.). . s, which forms the major exports for the Third World countries, where the export prices of the primary commodities increased by between 20-40% (Bairoch, 123). This meant a good trade period for the Third World countries, since they could manage to balance the imports with the exports, and in turn be left with some more funds which they could apply towards the repayment of the debts owed to the developed countries.

However, in the period after the second world war, the terms of trade for the primary goods deteriorated, which meant that the export prices for the primary goods produced by the Third World countries dropped substantially, thus causing the costs of imports for those countries to be higher than the cost of their exports (Bairoch, 126). The consequence is that the balance of trade deficit increased for the countries, since they could not manage to cover the costs of the imports through the exports they made, and thus they had to seek for alternative ways of servicing the deficit, which eventually forced them to turn into borrowing.

This has served to aggravate the debt crisis for the Third World countries even further (Shah, n.p.). The oil price rises of 1973 to 1979 had a devastating effect on the economies of the Third World countries. The oil-exporting countries hiked the prices of the oil they exported to other countries in 1973 (Bairoch, 133). The increased prices of the oil had two major effects on the development of the Third World countries, and the consequent increased debt crisis for the countries. First, when the oil prices for the oil were increased, it meant that the Third World countries had to pay more for importing the oil.

This meant that the Third World countries would incur more debts, since they could not manage to cover the costs of the