Debt Crisis

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The impact of the Third World Debt Crisis and Globalization on Developing and Developed Nations

There are extreme cases of the debt crisis in the modern world, and it needs to be understood well. Often the debt crisis refers to public and private external debt that is experienced by developing countries. The latter has been taking place since the 1970’s and exists up to date. The global economy is being affected tremendously by the debt crisis. Furthermore, the government of the United States is suffering immensely as it seeks to correct the problem of budget deficits. Also, its loans and savings institutions, as well as its balance trade deficits are being affected by the debt crisis.

On the other hand, Globalization is changing the relations that exist between the developing and developed nations. The world is on a daily basis having an integrated economy that is global. It means that decisions regarding social relations and production consumption have transnational dimensions. It cannot be denied that the influence of globalization is felt everywhere, and it is quite strong. Globalization has ensured that forces such as consumption patterns, information, and technologies, real and financial capital are present.

This paper seeks to give a critical analysis concerning the relationship between developing and developed nations. Moreover, it seeks to find out how their relationship has been affected by Globalization and the Third World Debt Crisis.

Critical analysis of the Global Debt Crisis and its impact on Developing and Developed nations

It is claimed that the developing world will never repay its debts fully, and this is due to the fact that they cannot afford it. Loans were initially given to the developing world as a form of stimulus to get rid of their poverty. Some economists claimed that in order to ensure that the citizen’s plight is addressed; they have to give them loans. People living in the developed world often cannot relate to poverty. Those living in developing nations do not have access to proper housing, nutrition, health care and even education.

The first world seeks to find ways of making sure that the debt crisis is resolved before it escalates any further. In turn, it has come up with three methods, and they include; reduction, adjustments of repayments and repudiation. Debt repudiation has been quite common in South American countries such as Peru and Brazil. Unfortunately, this measure has only been temporary. Jeffery Sachs an economist claims that repudiation will never be a solution to the debt crisis. In fact, it is known to affect the relations that exist between the developing nations. Some of polices established by the International Monetary Fund are discriminative. For example, the IMF believes that by controlling the currency values of African countries it can maintain the debt crisis. In Tanzania, the IMF has sort to solve the problems that are related to balance of payments. The latter attempt by the IMF failed, and this made the world know that the debt crisis cannot be handled by the organization.

Countries such as Brazil and Mexico have massive debts, and this is due to the international financial system, which they focus upon. Another region known to be affected by the debt world crisis is the region of Sub-Saharan Africa. Development in the third world is being hindered as a result of the debt crisis. It has made the debtors have a life quality that is not superior. For example, in most African countries such as Somalia and Sudan there is constant fighting. The decline in life quality is due to the political violence that is taking place in those regions. The Somali government has many debts that it cannot be able to pay and in turn the country is in chaos. The Al-Shabaab that is against the Somali government has resorted to find ways of taking over the country. They have resorted to engage in terrorist activities and some analysts’ claim this is due to the debt crisis that has affected Somalia.

Most of Africa is taking the time to develop as the debt crisis has made them become heavily indebted. The international economic system is the key reason why poverty levels are extremely high. There are some African nations, which are extremely rich, while others are the complete opposite. Egypt is a rich African country that cannot be compared to others such as Senegal and Mali. The first world seems to favor Egypt and often finds ways of removing their debt burden. In turn, Egypt has an opportunity to progress while other regions are ignored by the first world. African nations have resorted to protecting their own territories and not become involved with each other. In turn, the debt crisis is blamed for affecting the relations between members of the third world.

It is argued that the relationship that exists between Developing and Developed nations has been affected by Globalization. Recently, there has been an increase in interconnection, which is economic in nature. In turn, it has led to changes that are political, and it seems to affect many countries and especially the poor ones. Developing countries are extremely dependent on the economies of developed countries. For example, the United States is viewed as a power that can fully support most developing countries. America is known for its high levels of technology levels as well as capital expertise. Multinationals are a perfect example of how globalization has affected the relationship between the two diverse nations. Brands such as Sony, Nike and Coca Cola are examples of products that affect globalization. Also, as a result of globalization, capitalism has emerged and it has three features that are unique. The most distinct features are the ones concerning delocalization and its relation to globalization.

People are becoming familiar with one another through mediums such as the internet, telephones, media, advertising as well as economic exchanges. This means that, at the same time, material consumption is enhanced by the developing and developed nations. For example, the American brand known as McDonalds is widely found. In fact, the chain has outlets in all almost all the continents. Local communities are also affected by the activities that are conducted by multinationals. The latter often search for developing countries whereby, they can obtain cheap resources and labor, in order to carry out their operations. In turn, the local communities benefit as there is a flow of wealth and this enhances the globalization process. Also, the scenario can bring about cases of unemployment that is large scale. The result is that there will be wide gaps of inequality between the local communities and the multinationals For example, employees working in a multinational in a country such as China, for the company known as Nike, often complain about poor pay. In a 1998 in China, it was found out that manufacturers such as Nike and Ralph Lauren underpaid Chinese workers. They were being paid as little as 13cents every hour, while their counterparts in other companies in the same region were being paid 87 cents every hour. Moreover, workers doing the same job in the United States were being paid at least 10 dollars every hour. In turn, the relation between the United States and China was strained as a result of such cases.

Conclusion

In conclusion, the first world does not seem to try and solve the problem of the debt crisis in the third world. It is almost a daily occurrence to hear of loans being given to third world countries. This is despite the fact that they are heavily indebted and cannot find a way to pay back. It is vital that suitable ways of helping the developing third world are found, other than give them loans that cannot be repaid easily. Globalization has totally widened the gap between developing and developed nations. At the same time, globalization has been enhanced by beliefs and ideas that have been spread through western imperialism. This is an error that is costly as well as serious that multinationals in developing nations should be aware of. Since they have the power of improving a developing countries economy, they should control the macroeconomic forces that exist. In turn, the local community in the developing country will be satisfied by the changes that are taking place.