![]() ![]() And the problem is not only the absolute amount of debt but the debt burden, that is, the amount of debt relative to the country’s economy. The total global debt is currently greater than in 2007, before the Great Recession. 2 But in the face of the 2008 financial crisis, and the greater availability of capital, developing countries took on even larger amounts of new debt. In the early 2000s, as commodity prices climbed and some debt relief was available, many developing countries were able to reduce their indebtedness. The global distribution of wealth is increasingly inequitable, and debt continues to be a vehicle by which wealth is transferred from South to North, while doing little to fund effective economic development. Today, the situation is no less urgent than it was two decades ago. While the borrowing states may no longer be officially in default, the overall burden of debt is unabated and there is little fiscal relief for the borrower states. However, these restructurings, more often than not, are framed in a way that favors creditors. In response to the inability of debtor states to meet their payment obligations, Paris Club creditors-an informal group of primarily Western governments engaged in lending to states-in collaboration with international financial institutions such as the World Bank and IMF generally respond by restructuring the debt. In some cases, state assets were not only privatized but privatized transnationally, with foreign entities coming to own the debtor country’s major industries and infrastructure. The policies of the Washington Consensus, including austerity programs imposed by the International Monetary Fund (IMF) and other creditors, compelled states to cut spending on health, education, and social needs, and many borrowers were obliged to sell off state assets, including infrastructure. In 1991, the economist Xabier Gorostiaga, S.J., noted that Latin America’s debt service payments alone were 80 percent more than the total amount of foreign investment coming into the region 1-a significant contributor to the growing consolidation of wealth in the Global North, alongside the worsening of extreme impoverishment in the Global South, which he characterized as a “crisis of civilization.” By the late 1980s, it was common to hear references to la deuda impagable-debt that was so high as to be unpayable. In the 1980s, Latin America saw a period of negative economic growth, due in large part to the increasing burden of debt service following the free availability of credit in the prior decade. Indebtedness has long played a role in the struggle of countries in the Global South to achieve economic and social development. ![]()
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