Myth 9: Everyone has to pay their debts

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Myth 9: Everyone has to pay their debts

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In 2013, 110,000 people in Ireland protested against the bank debt. (William Murphy under a Creative Commons Licence)

I once met a man from an Indian village who was a slave all the time he was a child and young man because his father had to pay back a landlord for a blanket. When he was rescued, the ‘debt’ still was not repaid.

So debt is about inequality as well as about lending and borrowing.

Here is another extreme example. The richest one per cent of the world now have 50 per cent of the wealth. And 71 per cent of the world’s poorest people – 3,386 million – only have three per cent of the total wealth.

So people and countries are more dependent on debt. And a lot of money goes into very risky financial speculation – for a lot of risk, they get a lot more money. And it creates a tiny group of people at the top who make more and more money from everyone else through debt.

From the 1970s, Western banks had a lot of money from oil, so they encouraged some of the most corrupt governments in the Majority World to borrow a lot of money. They knew that the dictators and their friends would take the money themselves and that the people of those countries would be responsible for a very big debt - the original loan was sometimes repaid many times. This destroyed the economies of these countries.

Many of these debts are ‘odious’ debts – not legitimate. People should punish the lenders. But the only thing that happened to help was that some debt was cancelled in the new millennium because of active campaigning. Today there are signs of a new debt trap for some of the poorest countries of the world.

Rightwing Western governments mostly force the poor countries to pay the debts. And they now will not lend them the money they need.

People often say debt is the reason for cuts. But we need the opposite to get more public confidence and get economies moving; we need debt-management. After World War Two, many European nations had very big debts and invested in public services to start their economies again. Then they were able to lower the debt to levels they could manage.

It can be dangerous if a poor country owes too much money to other countries. But we must make the countries that lend money as responsible as the countries that borrow money. Greece borrowed too much money in corrupt agreements. Today the country’s economy is broken. But all the help is going to pay back the money, not to the Greek people. The biggest need is to restructure the massive debt and cancel the illegitimate debt. But they are doing nothing about this.

US economist Jeffrey Sachs says that paying off debt is a game. You could give Greece tens of billions of euros every couple of years for Greece to repay the debt. But the debt grows; the Greek banks die; and the Greek small and medium businesses collapse. It is death by debt.

NOW READ THE ORIGINAL: http://newint.org/features/2015/12/01/paying-debts/ (This article has been simplified so the words, text structure and quotes may have been changed).