The Jubilee Debt Campaign - Essay Example

Download file to see previous pages This paper suggests that while reckless or self-interested lending by the rich world is indeed a factor, one significant aspect that must be neglected is the weakness of the developing countries with regard to its democratic institutions and regulatory mechanisms. In many, if not most, instances, it is the leaders of the developing countries themselves that subvert the development trajectory of the respective nations and compromise the well-being of their citizens. Domestic policy has played a big, if not key role, in the debt crisis of the third world. Leftwich suggests that official Western aid policy and development thinking is dominated by a new orthodoxy that good governance and democracy is not only desirable but also necessary. In many aid and loan agreements, however, precisely what is being taken advantage of is the dismal lack of democratic structures and glaring issues of governance. The point is that it is impossible to work out an economic recovery program while following the debt-repayment schedule of the creditors. Despite two decades of death relief efforts, the problem still remains. Hardships are evident, and many mass protests have taken place as a result of these hardships. A very good example of this is when precious government resources are channeled to debt restructuring instead of capital expenditures. The researcher takes a look at the example of Asian countries during the period of 1985 to 1995. Contrary to doctrinaire free-market economics, institutional economists argue that government financial resources devoted to building physical or social infrastructure or shoring up domestic demand “crowd in” rather than “crowd out” private investment, including foreign investment. For instance, one key study of a panel of developing economies from1980 to 1997 found that public investment, complemented private investment, and that, on average, a 10-percent increase in public investment was associated with a 2-percent increase in private investment. ...Download file to see next pages Read More