Should Rich Countries Cancel Poor Countries’ Debt?

It sounds controversial, but there are persuasive arguments for the wealthy Global North to write off the debts lower-income nations have accrued. Some say the US and Europe actually owe it to them. This is one of those boring ones you shouldn’t skip.

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Episode Transcript

Speaker 1 (00:01):
Welcome to Stuff you should know, a production of iHeartRadio.

Speaker 2 (00:11):
Hey, and welcome to the podcast. I'm Josh and there's Chuck.
It's just the two of us, the dynamic duo doing
our thing. Training wheels are off. This is stuff you
should know.

Speaker 1 (00:23):
Can I have a brief preamble?

Speaker 2 (00:25):
Oh? Please?

Speaker 3 (00:27):
Well, I know people skip around our show. Some adherents
listen to every single one, of course, which we appreciate.
But some people pick and choose, just like I do
with my favorite show sometimes. But I want to urge
people to listen to this if at first they're like
debt cancelation boring, because you know, economics is not my

(00:47):
jam at all. But like I realized that having an
understanding of global debt and debt cancelation, it's really a
pretty fundamental. Like having that fundamental understanding really helps you
understand so much about politics and global economy. And just
when you hear that stuff on the news and you

(01:08):
don't get it, I think it's really easy just to think, like, oh,
America is paying everyone's debts, right, and that's.

Speaker 1 (01:14):
Just not how it works.

Speaker 3 (01:15):
And to have a real understanding of that, I just
think makes you more well armed as a human.

Speaker 2 (01:21):
I think that was an excellent preamble. Man.

Speaker 1 (01:23):
Thanks, this is really good. Livia crushed this article, just
absolutely crushed.

Speaker 2 (01:28):
It was so clearly in her wheelhouse, and I was
actually approached to thinking it was going to be interesting,
and it turned out to be one of the most
fascinating things I've researched in a very long time.

Speaker 1 (01:39):
Ohough, are you going to say it turned out to
be super boring for me?

Speaker 2 (01:41):
No, I'm really into this because you're right, like, when
you peel this back, you're looking at the inner machinations,
the most basic functioning of the global economy that there is.
This is it, this is what it all runs on
what we're about to talk about, and it's hugely important.
And there's an idea that the West has been taking

(02:03):
advantage and I'm going to accidentally say the West a lot.
There's a lot of different ways you can talk about
the different income countries. Apparently, like the World Health Organization
says low and middle income countries. Yeah, the United States
and Europe would be higher income countries. Some people say
developed and undeveloped. There's a lot. It's like a minefield basically.

(02:24):
So I'm going to accidentally say the West a lot,
which is not correct anymore, but it still gets the
point across.

Speaker 3 (02:30):
Yeah, and I think Livia not I think, I know,
she went with the term global South to refer to
what were we think of as generally lower to middle
to lower income countries. She did make that up, but
that's you know, it's a collection of largely sort of
Latin American, some Asian and African countries which we're going
to be talking about, so we'll probably mix and match.

Speaker 1 (02:52):
I'll probably say global South a lot.

Speaker 2 (02:54):
Yeah, that's a I mean, I've seen that virtually everywhere
as well. I think the low and low middle income
countries called licks and mix as like it's super wonky. Yeah,
it is a little cute for what we're talking about, because,
I mean, what we are talking about is the idea
that has become more and more widespread that the global North,

(03:18):
which I just recently referred to as the West, has
long been exploiting the global South, basically taking advantage of
it for its natural resources, cheap labor, and then using
that money to enrich itself, right, not really funneling much back.
And then when it does funnel it back to the

(03:39):
global South, it does so with strings attached or interest
rates in the form of loans, bonds, that kind of thing.
And there's this idea that, like, that's just totally unfair,
that that this playing field has started out from the
get go so imbalanced that the only responsible, human, humane

(03:59):
thing to do is to cancel the debt of some
of the poorest countries in the world.

Speaker 3 (04:07):
Yeah, I mean, it's kind of that simple, you know,
there's this idea, and libby us is a great, just
sort of example to bring it home. When someone steals
your credit card or steals your identity and racks up
a bunch of money in your name, you don't have
to pay for that. That is something that you're not
on the hook for. And there's this called odious debt.

(04:30):
There's a lot of people that think, you know, we
should apply that same logic to sovereign debt. And this
isn't a new idea. This idea has been around for
about one hundred years or so a little more than that,
with the idea of the Spanish American War coming to
an end when the US gets control of Cuba from Spain,

(04:51):
but Spain, as the colonizer, had racked up a ton
of debt on the back of Cuba and the US.
And we'll talk about the power structure of why they
were able to do this. It was basically because they
had the power through the Paris Peace Treaty and said, hey, Cuba,
this is your fault, this is Spain's fault, so you
shouldn't be as a relatively poor nation, you shouldn't be

(05:14):
on the hook for this. So Spain's got a step
up and pay and the US had the power, you know,
at the time, they had the upper hand in that agreement.
So in the Paris Peace Treaty, Spain was kind of
forced into taking on that debt.

Speaker 1 (05:30):
But that's not how it always works, right.

Speaker 2 (05:32):
No, there's another example that kind of demonstrates the other
way it can go, which is with the African National Congress,
which was headed by Nelson Mandela in the post apartheid
South Africa, and they they were the successor to the
apartheid government and they took on all of South Africa's
existing debt. Well, they considered that debt odious because a

(05:55):
lot of that debt had been borrowed to spend on
military and police to keep the population in line and
to enforce apartheid, which had been globally rejected. Even little
Stevie wasn't into apartheid at the time. But so they said,
this is odious debt, like we're not going to pay this,

(06:17):
We shouldn't be expected to pay this. This is money that
we would be paying back that was borrowed to keep
us repressed. How does that make any sense? And the
thing is is there's no international law that recognizes the
odious debt doctrine. It's more like a come on, guys, like, seriously,
let's use our common sense. But common sense doesn't always

(06:37):
like jibe with capitalism. Fortunately for the African National Congress,
the people who were heading South Africa under Nelson Mandela,
they had a huge ally in the Soviet Union at
the time, so they were actually like, yeah, Soviet unions
like these guys aren't going to pay their debt back
and the world is just going to go along with it.
The problem is the Soviet Union crumbled and the African

(06:59):
National Congres ended up having to pay that apartheid debt
back because they no longer had the backing of a
superpower any longer.

Speaker 3 (07:06):
Yeah, so that's a good sort of post preamble post amble.

Speaker 2 (07:11):
It was a pamble.

Speaker 3 (07:13):
It's a pamble that brings us to this idea, which
is post colonialism, and what do we do about this?
And it is pretty pretty much agreed upon by any
rational thinker that Europe plundered the world for five hundred

(07:34):
years or so, give or take.

Speaker 2 (07:36):
Yeah, Europe and the United States.

Speaker 3 (07:37):
Yeah, well yeah, Europe, which the United States, which which
came from Europe.

Speaker 1 (07:42):
Okay, I'm kind of lumping us all in at that point.

Speaker 2 (07:43):
I got you.

Speaker 3 (07:44):
Yeah, And that plundering basically led to where we are today.
It put all these different countries on different paths, one
toward prosperity and one path toward being poor.

Speaker 1 (07:59):
And there's a better word for that. What's the word
opposite of prosperity, impoverished? Impoverished. That's a good one, That's
what it was I was thinking. But it's even better.

Speaker 2 (08:08):
Yeah, And I mean the way that that happened was
the the global North came to the global South and
said we're going to take all of your natural resources
by force. And that was just straight up colonialism.

Speaker 3 (08:21):
Right, Well, natural resources is one thing, but then also
and we're going to make you do help us do
it on the backs of enslaved people. I mean, we
talked about slave labor, and then later on it became
you know, cheap labor, which is kind of where we
are now. But at first it was there was just
no money being exchanged. Is Hi, we're going to take

(08:41):
your stuff. You're going to help us take your stuff.
And this is going to lead all of these different
countries around the world down two very different paths. And
the argument is basically like, hey, today, and we'll get
way way more into the weeds on this stuff. But
this is what led us to where we are today.
So the debt forgiveness of these countries isn't just like, oh,

(09:03):
you know, you're poor country and we're a rich country,
so we got to pay your debts. It's no, we
got rich off of your backs for hundreds of years.
And so the R word, if you want to bring
up something like reparations, is not like a fine that
you've paid for being a bad country. It is it's
almost like a better and this is people are probably

(09:25):
going to kill me for this. But a better way
I think to think about it is a long overdue
payment for labor.

Speaker 2 (09:31):
I think that's the fairest way to look at it.
Because the other ways of looking at it makes it
seem like that the global South are needy who are
getting handouts from the global North who are being heroic
by giving them handouts.

Speaker 1 (09:45):
Right, So, yeah, which is not true.

Speaker 2 (09:47):
No, I agree with I agree with you. I think
that that's a really good way to look at at reparations,
especially through post colonialism. And the other thing is a
lot of people argue against things like reparations based on
the idea that, like you kind of touched on it,
that this is something that happened in the past. Man,
I didn't enslave anybody. I didn't like go exploit the

(10:08):
Congolese for their rubber trees and cut their hands off
when I caught them stealingly. I didn't do that. My
grandparents didn't even do that. I had nothing to do
with that. So colonialism, straight up colonialism where you go
in and use force and invaded country and say all
your stuff is ours now and we're using you as
slave labor. That went away largely in the nineteenth century,
definitely by the twentieth century, but it was replaced by

(10:32):
the same end exploitation. It was just dressed up slightly differently.
So like we saw with the United Fruit Company helping
overthrow the Guatemalan government, the elected Guatemalan government that we
talked about in our Edward Burnet's pr episode, Like it
was kind of like that. We would go around, and

(10:53):
by we, I mean the Global North. We would go
around and destabilize other countries, governments and economies to our
benefit if they weren't friendly to the kind of trade
and exploitation we wanted from them, right and then we
would see to it that somebody else would get installed.
Sometimes people just straight up got assassinated, but it wasn't
wholesale slavery and slaughter like it had been in colonial days.

(11:16):
So that was post colonialism. Today again, the same thing
is going on. We're exploiting and extracting the resources from
the global South for the use and enrichment of the
global North at firesale prices, and then we're selling the
things that we use those resources to make back to
the global South at greatly inflated prices, which is called

(11:38):
the trade inequality. And that is how we're keeping the
global South impoverished.

Speaker 1 (11:43):
Right now, All right, that's a great boy, you just
summed up the whole thing.

Speaker 2 (11:48):
We're done.

Speaker 3 (11:48):
Then I'll tell you what this is. Early for a break.
But let's take a break and we'll talk about this
great through line example that Livia included of the Democratic
Republic of Congo. Right after this, we should know.

Speaker 2 (12:05):
Lar childs of h.

Speaker 4 (12:08):
Y s k as w s k as good.

Speaker 3 (12:22):
All right, So Livia used this great example, and I
love it when in an example in an article like
this can serve as a through line through the whole thing.
And this this kind of does here and there, which
is really helpful for a dumb dumb like me who
doesn't really get econ. But I got this, so I
know if I can get this, that anyone can. But
the Democratic Republic of Congo, which used to be Zaire,

(12:44):
let's go back to the old days of the late
nineteenth century. They were and are a very rich country
in resources, copper, cobalt, diamonds, oil, you name it, lots
of rich, rich stuff. In the nineteenth century, King Leopold
of Belgium said, hey, the rest of Europe, why don't
you let me go down there and basically enslave this

(13:06):
country and use it for production of rubber and ivory.
And sure, we may kill ten million people, like half
of the population but just think of the money that's
waiting for us if we do this, and Europe said
it sounds good to me, go have at it. Flash
forward about sixty something years and they won independence in

(13:29):
nineteen sixty and a prime minister was democratically elected named
Patrice Lamumba. Six months later, La Mumba was killed in
a coup that was supported by our old friends in
Belgium and the United States because of a suspicion of
being in bed with the Soviet Union. A general takes
power Mobuto Cesci Seiko and through the support of the

(13:53):
US and other I guess richer Western countries, basically spent
about three decades lining his pockets with money and from
except for about twenty seven years from seventy to ninety seven,
the nation's debt went from five percent of the GDP
to one hundred and fifty percent.

Speaker 2 (14:11):
Right. And the reason the debt went up so much
is because, like you said, he's lining his pockets. And
the other countries from the Global North that were lending
this money to drc knew that he was lining his pockets.
They didn't care because he could turn around and use
his country's natural resources to pay off these debts that
he was using to enrich himself while his people were

(14:34):
impoverished and starved. The thing is is like that is
on cesse seiko, sure, right, but also on the lenders,
the financiers, who knew what he was doing and did
not care about what happened to the people of the
Democratic Republic of Congo. They just cared that they had
a steady flow of natural resources, and that right there,

(14:55):
that's that's as far as capitalism goes. That's fine, there's
no moral hazard to that. But the thing that makes
this moment in history different than say, the nineteen sixties,
is we've now come to question that part of capitalism.
Some people question capitalism as a whole, and you can
do that, But I tend to think that capitalism itself

(15:16):
is not an inherently flawed system, but that it has
some really flawed capes that are hung around at shoulders.
I don't know why I went with capes, but you
get the point, right, And one of those is the
idea that corporations should maximize profits at all costs without
any regard to morality or global citizenship. It doesn't matter,

(15:38):
So those corporations can't really be lumped in in any
legal sense, because they're just doing corporations too, being psychopaths
who are out to maximize profits as much as possible.
So that's where we're at. Like a lot of people
just stop at blaming sesse Seiko for being as corrupt
as it comes and plundering his own nation, but they're
not also like panning to the left a little bit

(16:01):
to see the larger picture, And that's what you have
to do when you really are examining global sovereign debt
crises like we're in right now.

Speaker 3 (16:09):
Yeah, for sure. So this is kind of going on
a timeline. So that was the sixties and into the seventies.
Now we go, which will lead up to the eighties
debt crisis. In the seventies, if everyone who knows history
knows that.

Speaker 1 (16:24):
That was a bad time for oil, I guess a
good time.

Speaker 3 (16:26):
If you're an exporter, oil prices went through the roof,
and if you are an importer of oil, this is
going to have a ripple effect, and it did all
across the world to basically ramp up inflation, raise the
cost of fuel, which affects the cost of a lot
of other things. Because of a domino effect. And the
other side of this is these oil rich countries that

(16:50):
were now exporting. Not only were they getting all this
dough and enriching themselves from the oil. Fine, that is
what it is. They then said, hey, we can now
be a lender and lend money to these poorer countries
and some of these Latin American countries that are really
kind of growing fast, and who cares about the risk
involved and everyone sending up warning signs. We're the lender

(17:13):
and we're going to make a ton of interest off
of this dough that we now have because of the
oil that we are selling to them.

Speaker 2 (17:21):
Yeah, that would be a familiar pattern that would emerge.
But that oil thing that you were talking about, for
non exporting countries like the United States, that was a
real problem because we saw just very recently in the
last several months, when oil prices go up, all prices
go up because everything's so dependent on oil. And that
happened in the early eighties too, So inflation started to

(17:42):
get so far out of hand. I think it reached
like fourteen percent. What was it we were like screaming
about recently, like six or eight, which was bad enough.
This is fourteen percent, So the guy who ran the
Federal Reserve, Paul Vulker, committed what's now known as the
Vulgar Shock. He jacked interest rates up so suddenly and
so high, I think, up to twenty percent, that it

(18:05):
immediately triggered a global recession. And it definitely did, within
a couple of years, wedge everybody out of that global recession.
It stabilized that inflation, brought prices down, things got back
to normal. But you had to be a really rich
country to weather that fairly. Well. If you weren't a
rich country, you were screwed. And so these countries that

(18:27):
had already racked up tons of debt now had high
interest rates and low currency values and were expected to
pay these loans back. So if you were on like
a three point two percent or a four percent interest
rate on an eighty billion dollar loan, you owed three
point two billion dollars to service that loan. If it
went up to twenty percent interest rates, you suddenly owed

(18:49):
fifteen billion dollars to service that loan. So Mexico, Brazil,
a bunch of other countries, I think twenty seven of
them said we can't pay these debts any longer. This
is not sustainable and frankly, it's now become odious because
of this Volker shock that we didn't do anything to do,
but now we're suffering because the US decided to plunge
everyone into a global recession to help itself.

Speaker 3 (19:12):
Right, So this is going on. All these countries have
thrown up their hands basically and said we just can't.
Like it's not you know, we're not saying, oh, we
don't want to pay that, like we literally can't afford to,
and that people started beating the drum, like you said
on odious debt again and activists started speaking up. Peru
is a great example that you mentioned. In nineteen eighty five,

(19:33):
the president of Peru, Alan Garcia, said, you know what,
We're not going to pay any payments on our debt
in excess of ten percent of our export revenues and
that's the only way to keep our country solvent basically,
which helped them out in the short term. But then
all of a sudden, you're doing that, and every financial
institution all over the world looks and says, we can't

(19:56):
trust Peru anymore, we can't do business with them, and
we can't invest in Peru if we're a company or
corporation looking to invest in foreign economies, and that triggered
a hyperinflation there by the end of the eighties. And
so all of this mess is happening in the eighties,
and finally, finally two organizations stepped in and said, we

(20:17):
got to do something about this. The International Monetary Fund,
the IMF, and the World Bank stepped in. These are
two organizations founded post World War two. In part, the
World Bank was to help dig Europe out of the
economic devastation they suffered during the war, and the IMF
initially was just to sort of encourage all countries to

(20:39):
get along economically. But then after this, the IMF and
the World Bank basically became a lender, a multilateral public lender.
That's complicated to sort of explain how that all works,
but let's just leave it at It was controlled still
by these northern countries, the UA in other rich countries.

Speaker 2 (21:01):
And it still is. And bear this in mindful when
we talk about today. The IMF is partly funded by
rich countries called the Paris Club, which includes the United
States and most European democracies. Right, it's nice, it does.
It sounds like the kind of place i'd want to
hang out. Yeah, I want to go have a sip
of something with my pinky in the air, you know exactly,

(21:21):
So just put that, put that in your bonnet and
smoke it later. Right. The IMF is funded in part
by democracies and governments around the world. Okay, so the
IMF and the World Bank changed their mandate. They decided
now that they were going to basically aid in development
around the world, but especially focusing on lower income, middle

(21:42):
income countries to help them. And this is the view
of the economists that the IMF and their supporters to
help these impoverished nations learn to be better capitalist economies
and as a result become a self sustate and self supporting,
basically creating neoliberal economies where there was say socialist economies

(22:07):
or other types of economies opening them up for business.
And so they would start sending these loans to these
countries that really attractive interest rate, sometimes as low as
like no interest whatsoever, in which case it was basically aid,
but there were strings attached, and they were things like
increase your tax revenue, stop social spending. All those state

(22:31):
owned enterprises you have, you need to privatize them to
open it for competition, and most importantly, you need to
open up your whole country, get rid of trade restrictions,
all that stuff, open them up to international business so
we can come in as unfettered as we want to.
And by the way, to help you understand all this
and do all this, we're going to send our own
Western economists and advisors to teach you how to do this.

(22:55):
And some of those advisors and their successors you showed
up in the eighties are still there. They never laughed.
They're just part of like that nation's government. Basically.

Speaker 3 (23:06):
Yeah, these were called structural adjustment programs or SAPs, ironically,
and you know, the proponents would argue what you just
talked about, and then people that didn't think it was
such a great idea would say, well, this is just
sort of a new version of the same thing, right,
And which is why they call it neo colonialism. It's

(23:28):
you coming in and saying, hey, we want to use
your resources and tap your country or sap your country,
but you got to spend the money that we're lending
you at cheap rates of the way we say. A
lot of countries got on board during the nineteen eighties.
It also led to a lot of unrest and a
lot of protests. In nineteen eighty five, to go back

(23:51):
to our example of the DRC, they had these economic
policies implemented by the IMF. By nineteen eighty five, the
Washington Post did a report that basically said, their hospitals
and their schools are decimated. Malnutrition is going through the roof.
Activists once again started rearing their heads. There was one
guy who I think this bears maybe a deeper dive

(24:14):
at some point, but his name was Thomas Sankara, and
he was the president of a West African nation called
Burkina Fasso in the early eighties and a leftist guy
who basically was beating the neo colonialism drum. And in
July of eighty seven, he gave a big speech at
the Organization of African Unity where he said, everyone joined

(24:37):
with us, and let's not pay this debt to our colonizers.
Let's remember that idea. Let's get that going again. A
few months later, he was assassinated in a bloody coup
from his former friend who became his rival, a guy
who still doesn't own up to being a part of
this like to this day.

Speaker 1 (24:57):
His name was.

Speaker 3 (24:57):
And I heard a few ways of pronouncing, but I'm
going to blaze compare compare.

Speaker 2 (25:05):
I like that.

Speaker 3 (25:06):
It was kind of tough, but you know, so what
happens is a leftist organizer, president advocate against this speaks
up and is promptly killed, and then that country promptly
rejoins the IMF and World Bank.

Speaker 2 (25:24):
Yeah, and sank Kara he was very dangerous because he
was starting to make real waves. If all those African
nations join together and just said we're not paying you back,
tens hundreds of billions of dollars would have just evaporated
for the Global North right. So that's why he was assassinated.
But he left this legacy of looking at sovereign debt

(25:46):
among low income nations in a certain way that some
people still kind of see it through today, and which
is kind of the lens we're looking at it through
in this episode, which is that it's like the colonizers
coming into a country, exploiting it, leaving and then sending

(26:07):
a bill to the country right to repair the damage
done by colonialism. That that's essentially what's going on with
the Global North lending money interest to the global.

Speaker 3 (26:22):
South right, and in the case of Sinkara at the time,
and it's good that he's you know, been sort of canonized,
I guess now.

Speaker 1 (26:29):
But is that the right word. Yeah, okay.

Speaker 3 (26:35):
At the time, basically it's send the message to all
other countries, like you see what happened to him when
you when you rise up and try and take a
stand against this kind of thing, and it basically quashed
things until the nineties when Bono got to be in
his bonnet.

Speaker 2 (26:53):
Yeah, so that's a that's a really interesting thing that happened,
and it happened almost exclusive because of Bono. There was
a guy named Martin Dent who was a professor at
Keele University in the UK, and in the early nineties
he came up with this idea that, hey, the millennium's coming,
let's use it as a chance to like wipe the
debt free. Because in Jewish tradition there used to be

(27:14):
something called the Jubilee. We've talked about it before. I
don't remember what it was. I think we did one
on the Rolling Jubilee. Maybe maybe, But it's this idea
that every fifty years in Jewish culture, all debts would
be wiped free, right, And they were saying okay, yes, yeah, okay,
And so they were saying Dent was saying, hey, let's
just do this. We could totally do this and start

(27:35):
the millennium fresh and everybody on more of an equal footing.
And Bono is like, I like that a lot. And
he took this up and very nice. Sorry, he championed it. No,
no need for apologies.

Speaker 1 (27:48):
I had that one.

Speaker 2 (27:50):
He championed this whole idea and I don't want to
say single handedly, but largely was responsible for the eradication
of about one hundred and thirty billion dollars worth of debt.
He did almost single handedly just by going and talking
to the right people getting them on board.

Speaker 1 (28:08):
Yeah.

Speaker 3 (28:08):
I mean, there are a lot of stories of Bono's
charm in these rooms with these people that range from
you know, brutal dictators to far far right religious zelots
like Bono gets in the room with those guys. Bonna
is a Christian, very very Christian man, super Catholic, very Catholic.

(28:31):
I'm reading his book still now.

Speaker 1 (28:32):
It's great.

Speaker 2 (28:33):
Oh yeah, what's it called Catholic? Me Catholic?

Speaker 1 (28:36):
You by Bona it is. I was trying to think
of another riff on that, but that nailed it. It's
called Surrender, I think, but really good book. Anyway.

Speaker 3 (28:45):
Bono is a guy that can have a lot of
sway when he gets in a room with someone. And
he got together with Christian groups, with NGOs, with Republicans
and Democrats and all kinds of people from all over
the world, people he had to apologize for being in
the same room with, you know, because he thought he was,
you know, doing some good and he was and got
a lot of people on board, tens of millions of supporters.

(29:10):
It launched formerly in nineteen ninety six, and this was
called Jubilee two thousand. I don't think we mentioned the
official name. I think it's called what's it called now?

Speaker 2 (29:20):
Just yes, that's much better.

Speaker 1 (29:22):
Yeah, it's a great name. I like Jubilee two thousand.
That has a fun ring to it.

Speaker 2 (29:26):
Sure, and I think it served its purpose for a while.

Speaker 3 (29:28):
But because of things like the Christian group involvement, you
had Republicans on board.

Speaker 1 (29:33):
In some cases.

Speaker 3 (29:35):
There was a guy named Spencer Bacchus from Alabama, a
rep there that basically said, hey, this will cost each
American a dollar twenty a year to get children out
of hunger all over the world. And it's not that
much money. Some people were slower to come around, but
even people that were slower to come around eventually said, well, listen,

(29:56):
they're probably not going to pay it anyway, so maybe
we should get on board with another plan.

Speaker 2 (30:02):
Right, not everybody?

Speaker 4 (30:04):
Did.

Speaker 2 (30:05):
I read this American Heritage contemporaneous article that was like this,
this is reckless, especially for the GOP. It's going to
cost America billions of dollars and for what And now
in retrospect, it's like that article has an age very
well for humanity, that's what actually And so Spencer Bacchus,
he's a real hero here, like he made this his

(30:27):
mission and he actually reached across the island, worked with
Maxine Waters, an arch liberal, and got what was called
the Jubilee Act passed finally in two thousand and eight.
And it was a hugely bipartisan act that wiped out
a lot of debt that America held. And by America
being a part of this and other European nations being

(30:49):
a part of this, other nations started to follow. Like
Bono would say, the IMF got on board, the World
Bank got on board, and so suddenly a lot of
money that the global South. Oh, the global North was
just wiped out.

Speaker 3 (31:04):
Yeah, Bona said, every country deserves to live free of poverty.
Every street should have a name.

Speaker 2 (31:11):
Do it in the name of love.

Speaker 1 (31:14):
Oh wow, we could really go down a rabbit all here.

Speaker 2 (31:17):
Yeah, on your knees, boy, I'm not sure that fits.

Speaker 3 (31:23):
Yeah, that's pretty good. So seventy percent, I believe was
the number. Initially, the debt was going to be reduced
by seventy percent for thirty three different countries in Africa,
Latin America, and Asia, and the US agreed to more
debt cancelation. I think there was a Jubilee debt campaign

(31:47):
in the UK that stepped up between twoenty twenty fifteen
that was about one hundred and thirty billion dollars worth
of debt canceled. And we do should we should point out,
Liviya very and I'm glad you did this. Reminded that
it's not a dollars dollar thing, like you can spend
one hundred million bucks to maybe cancel a billion dollars

(32:07):
in debt sometimes, right, because.

Speaker 2 (32:09):
You're taking into kind of all the interests and researchructing
and all that stuff involved, you're just they really just
owe you one hundred million in principle, but it ballooned
up to a billion dollars. But as far as that
lower income country is concerned, that's a billion dollars. They
don't have to pay where to you, it was just
one hundred million, just one hundred million.

Speaker 3 (32:25):
Yeah, exactly. So that's basically what happened in the sort
of two thousands is all these countries got on board.
The framework was sort of led by the US for
the Heavily Indebted Poor Countries initiative from the World Bank
and the IMF, and you know, it worked pretty good
through the two thousands and twenty ten's for the most part.

Speaker 1 (32:49):
It helped.

Speaker 2 (32:50):
It did, and as a matter of fact, it was
helped not just by that initiative. So that was a
big deal, right, Like we shouldn't really breeze past it.
It was a big deal. There was a lot of
heart behind it, a lot of genuine like humanity from
countries that held a lot of debt that just said, okay,
we're going to forgive this for the greater good. But
there was another thing that happened too, which was the

(33:12):
global financial crisis of two thousand and seven and eight. Right,
the big meltdown from the US housing market bubble. That actually,
because the US FED was so interested in combating the
effects of that and the recession that followed, they dropped
interest rates like crazy to like basically zero, and so

(33:33):
that meant that international lending rates were also really low too,
which led to easy money. A lot of people could
borrow money. There were a lot of rich countries that
had lots of money to lend, and countries that wanted
it could borrow it for really cheap. And it was
so cheap you could borrow money to pay back the
other money you just borrowed. It was kind of like
that set up.

Speaker 1 (33:53):
I was just leverntry at the time. Yeah, I did
exactly that.

Speaker 3 (33:57):
I got a stated in come loan for our first
house by just walking in there and saying, we make
this munch of money, and they went, sounds great. And
we had a bunch of credit card debt and we
rolled that into that loan because we had overborrowed for
a lot of different reasons, not because we were just
living the high life emily early because early business investment

(34:18):
and stuff like that. But we rolled all that into
one big thing, and so I can, like you can
use the example of an individual, and it's kind of
the same as these countries.

Speaker 2 (34:30):
It's the exact same thing. It's all the same principles,
it's even largely the same mechanisms with the same people
involved as far as lenders go. It's just on a
global scale or like a like an individual scale. But
it's that's a great point. It's virtually the same thing.
So with all of this easy money, people started racking
up more and more and more debt because it seemed

(34:53):
like the spigot was never going to turn off, which
is always like, when you start thinking the spigot's never
going to turn off, you should stop immediately.

Speaker 1 (34:59):
Yeah, because that means that the spigot.

Speaker 2 (35:01):
Turning off is right around the corner, and everybody's gonna
get caught with the hot potato. And that's essentially what
happened when COVID hit.

Speaker 1 (35:07):
You're mixing metaphors in a great.

Speaker 2 (35:08):
Way around the corner with the hot potato.

Speaker 1 (35:11):
You know, spiggots and hot potatoes. And I don't know
what's coming next.

Speaker 2 (35:15):
There's probably some baseball metaphor or something. Okay, you know,
you get caught with three loans and you're out. I'm
I'm really I'm off my game, Chuck. I used to
be so much better at this, and then you kids.

Speaker 1 (35:28):
You're killing it.

Speaker 2 (35:29):
I feel like it's evaporated a little bit, just temporarily,
but a little bit.

Speaker 1 (35:33):
No, No, you're crushing it.

Speaker 2 (35:34):
Okay, Well, I say that we take a little break.
I'm going to recollect myself. And we've reached the COVID
pandemic having a huge impact on that debt, definitely large
hous of each.

Speaker 4 (35:50):
Sksh sks tough.

Speaker 2 (36:00):
You should know. So COVID nineteen strikes, and all of
a sudden, that money dries up because everybody needs money,
and like all countries, lower income, middle income, high income
countries are all borrowing money because business as usual has
just stopped, right.

Speaker 3 (36:19):
Yeah, I mean health care costs are going through the roof,
business is going into the toilet, and trade has gone
into the toilet, not completely, but for a large part.
And so the world all of a sudden was thrust
into a global financial crisis. And I love that Olivia
even used your word. She used upshot.

Speaker 1 (36:40):
I saw that it's wear enough.

Speaker 3 (36:43):
The upshot, though, is now because of all this, they're
all of these countries, not all of them but many
of these countries that we've been talking about are in
more debt than ever before. The debt burden of nations
classified as developing nations went from two point one trillion
in two thousand to four point one trillion in two
thousand and nine to eleven point one in twenty twenty one.

Speaker 2 (37:06):
That's crazy. And then like the external debt to gross
national income ratio among those countries external debt is all
the foreign held debt to their gross national income went
from seventeen percent in twenty ten to forty eight point
five percent twenty twenty one. Daggering number it is, and
it's a really scary number too, especially if your country,

(37:28):
like I need to feed my people and I need
some money, and now it's the money's dried up because
some of these wealthier countries are borrowing two and that
that also means that they need the money that I
already owe them, So they're not going to be very
interested in forgiving debts right now, especially post COVID. So
it put everybody in a really precarious situation that we're

(37:48):
still in now. And it followed the same thing that
happened in nineteen eighty two inflation happened, which meant that
the value of the dollar went down and value of
international currency went down, so it made it more expensive
to pay your debts. And then also or you needed
more money to pay the same amount. And then also
as interest rates went up, that meant that it was

(38:09):
unsustainable to service a debt, just like it was in
nineteen eighty two. It just got too expensive. In countries
now are doing the same thing. They're saying, I don't
know what we can do to pay this, we need help.

Speaker 1 (38:21):
Yeah, and a lot of it.

Speaker 3 (38:22):
You know, when you break it down, it's really important
to look at where this money's coming from, because it
used to be a lot more like IMF multilateral sort
of lending now. I think there was one estimate LIVA
included that African countries about thirty five percent of their
external debt to private creditors which have interest rates more

(38:45):
along the lines of five percent twelve percent to Chinese creditors.
They've China has really stepped in to fill a void,
So just kind of keep your eye on that. At
about two point seven percent, thirteen percent to other governments,
in thirty nine percent to those multilateral institutions that we've
been talking about at a rate of about one point
five percent, so more money in private debt, less money

(39:09):
and multilateral institutions. And if you're talking about two or
three percentage points on hundreds of billions of dollars, that's
a huge difference.

Speaker 2 (39:18):
Yeah. And the reason you're like, well, why don't they
just get it all from the IMF, Well, those private
lenders they have high interest rates, but they don't come
with strings attacked exactly raising taxes on your people and
not spending on social programs anymore. If they're just using
market conditions, right and saying, well, your country's this risky,
so we're going to charge this interest rate on'll do it.

(39:39):
Chic with it, right, But the IMF will say, we'll
charge you a low interest rate, but you also have
to completely restructure your economy to a way we say. So,
there's pluses and minuses of both. But that those private
lenders becoming bigger and bigger in the last couple decades
is really distressing because the collectively private lending now rivals

(40:01):
like the Paris Club as far as geo political global
influence goes. And that's that's distressing to me. You might say, well,
it's not like the Paris Club and other wealthy nations
did a very good job when they were in control.
They were still in some way, shape or form like
subject to the to the people back home in their votes. Right,

(40:22):
there's at least still nominally that with with you know, corporations,
there's nothing but their shareholders. It's just it's different to me,
and I'm not entirely comfortable with it. But the upshot
is there's now private lenders that own entire chunks of
whole nation's economies. Like there's a commodities group called Glencore.
I think they're out of Switzerland. They own a third

(40:45):
of Chad's national debt a third, and they they are
very happy to give Chad that money because Chad has
secured that debt with its natural resources. So if Chad
can't pay its debt via money, glink Core says, just
give us some crude oil, and they do very frequently.

Speaker 1 (41:03):
How much of the national debt that they owe of karens.

Speaker 2 (41:09):
I know, sorry, no, I like it. And I'm like,
I'm surely saying Chad right right, it's not.

Speaker 1 (41:15):
Shod or I think it's Chad.

Speaker 2 (41:18):
I think that's what I've always heard too.

Speaker 1 (41:19):
That's what I've always heard.

Speaker 3 (41:21):
Because of the COVID pandemic, the Group of twenty, the
G twenty organization basically said, you know, we can suspend
some interest payments because of COVID, but that's a suspension
of interest. It's not absolving any kind of debt at Also,
it's just kind of like a temporary band aid, of course.
And you know, basically where the point now where there

(41:42):
is not any sort of straightforward, non case by case
way to make restructuring a country's debt happen. It makes
it really tough to sort of figure out an easy
solution for sure.

Speaker 2 (41:58):
And before, I mean it was convoluted enough when you
just had like the IMF and the World Bank and
the nation's funding them arguing over who did what or
needs to do what. Now you have China who may
or may not talk to you or come to the
table if you ask them to. And then you have
the private lenders who are like, hey, we're just in
it for the money here, we don't want to do
any kind of debt forgiveness. And because you've got all

(42:21):
these different players all and all of them need to
come together for debt cancelation to happen. It does make
it much more difficult because if the private lenders just
step back and say, yeah, United States, Paris Club, IMF,
World Bank, you guys forgive a bunch of those debts
down there in Africa, and then they'll have money to

(42:42):
pay the debts for the stuff we lent them at
the same rates that we lent it to before. So
what you're essentially having on this global international finance scale
are rich governments bailing out private lenders when their loans
come under jeopardy to protect those corporate profits. And those

(43:04):
governments that fund the IMF fund it with taxpayer money.

Speaker 3 (43:09):
That's right, And the private lenders there's not much of
a downside for them, is there.

Speaker 2 (43:15):
No, not at all. They can just lend, lend, lend,
and they know that eventually the IMF and the World
Bank's going to bail these people out because there's softies
and suckers who can't see some people starve at the
in exchange for better access to some or diamonds.

Speaker 1 (43:31):
Right exactly.

Speaker 3 (43:33):
There's another way that debt has can be canceled out,
and that's becoming more and more popular these days, although
on a pretty small level. If you look at the
big picture is debt relief for nature incentives, for natural
incentives and conservation incentives. Basically groups coming in. Sometimes it's

(43:57):
it's usually a private group, like and Belize the Nature
Conservancy came in in twenty twenty one and said, and
of course this is this is small beans in the
big picture, but it's happening. And they said, hey, why
don't you will reduce your external debt by about ten
percent of your GDP in exchange, you got to put

(44:17):
about four million bucks a year into marine conservation or
another country might step up and say, hey, will help
preserve this coral reef and put money toward that if
you cancel some of our debt. Climate change, that's another
you know, it's not necessarily colonialism how you might traditionally
think of it, but there is an argument going around

(44:39):
more and more that hey, these richer northern countries are
the ones that are destroying the environment for the most part,
and these poorer countries are the ones that are suffering
and don't have the kind of money to help themselves
like we do. So like that shit factor in as well.

Speaker 2 (44:56):
Yeah, like if you see things like you do, colonialism
can easily apply that to climate change too, Like, why
should these countries who contributed almost nothing to climate change
but are going to suffer for it have to pay
for it themselves. That doesn't make any sense because of
where they are. And then there's even worse than that,
there's this terrible circular logic where those countries that are

(45:17):
going to get hit the worst by climate change and
need the most money to spend on bracing themselves for
climate change are then the riskiest countries to lend to
because they're most susceptible to climate change, so it costs
them the most to borrow money to protect themselves against
climate change. Yeah, that's the situation that we're in right now,
and so a lot of people have kind of moved

(45:38):
on from colonialism to Okay, this climate change thing is
actually a real thing, and it's not the fault of
the global South. It's the global norse responsibility to pay
for the mess it created, and the global North is
not necessarily on board with that at this time.

Speaker 3 (45:52):
Yeah, and to kind of put a button on what
I mentioned earlier about the R word, there's a historian
at the University of West Indies, Hillary Beckles, who did
some back of the envelope calculations. I'm sure it was
more rigorous than that. I don't want to achieve in it.
But basically said, in the Caribbean alone, Europeans got about

(46:13):
two hundred years of free labor to the tune of
about eight trillion dollars. So don't think of it again
as a reparation. But it's like it's just, hey, we'll
pay you for all that work that happened for two centuries. Basically,
it's a long overdue bill and we're going to pay

(46:33):
it now.

Speaker 2 (46:34):
So if you think that eight trillion is eye popping,
get this. There's a twenty twenty two study by some
academics I think out of Austria and Spain, and they
found that in the year twenty fifteen alone, the global
North appropriated from the global South. You ready, twelve billion
tons of raw materials, eight hundred and twenty two million

(46:56):
hectares of land I think two hundred or twenty one
exit jewels of electricity. Surely that's an enormous amount, right
in three hundred and ninety two billion hours of labor.
This is twenty fifteen only that was worth to the
global North ten point eight trillion dollars between nineteen nineteen

(47:17):
twenty fifteen, that total two hundred and forty two trillion
dollars of wealth that was essentially extracted from the South
by the North. And you say, well, hey, wait a minute,
we're not using slave labor anymore. We're not just going
in there at gunpoint and extracting those gems and those
oil anymore. And no, it's true, but it's what I

(47:37):
was talking about earlier. There's now trade inequality where we
pay very cheap prices for the raw materials and then
sell it much much higher prices back to the people
we got those raw materials from. We don't give them
a fair price for what this stuff we're taking from
them is actually worth. And that's the problem, that's the
current problem right now. And that's why a lot of
people say, Okay, this stuff is so imbalanced. This debt

(48:00):
to have to pay for being impoverished by the North
doesn't make any sense, and we should cancel it. And
I mean, I think it's pretty clear where I land
on that, but there's plenty of other people who are like, look, man,
I don't even feel good about paying on social spending
in my own country right let alone another country, and
those people are going to be very difficult to get
on board, but it can happen. Bono did it before,

(48:22):
he can do it again.

Speaker 3 (48:24):
Yeah, And the only thing I'll say is, like, if
you end up coming down on the other side of this,
that's fine, if you've done the research and you understand
the complications of world economies.

Speaker 1 (48:41):
Like what you shouldn't do.

Speaker 3 (48:43):
Though, is just think, oh, well, it's as easy as
like everyone's on America's teat.

Speaker 2 (48:50):
Right.

Speaker 3 (48:50):
You know, it's more complicated than that. If you don't
agree in the end, fine, but at least like do
the heavy lifting of learning about it and then make
up your mind and don't just take sort of the
lazy way out. So you got anything else, I got
nothing else, just a quick I made a Karen joke
and a Chad joke. I love Karen's and Chads, and

(49:11):
I think that is all so dumb, but real Karens
and Chads have had a hard time with that stuff.
And I didn't want to add to that. And I
wasn't saying someone as being a Karen. I was just
sort of a tangential joke. But I hope that didn't
cause any harm or stress very nice.

Speaker 2 (49:26):
Chuck. I think that that buttons this episode up quite nicely.

Speaker 1 (49:30):
Stand by the joke. That was pretty good.

Speaker 2 (49:32):
Since Chuck stands by his joke, that means, of course,
the listener mail has been triggered.

Speaker 3 (49:40):
Great great email about from Gwenn Creamines. I wish it
was I would explain a lot about creamins and amusement parks.
But just quickly, a couple of corrections we have heard,
not corrections, but we have heard a loud and clear
from the wolf packers that wolf pack is a Iver's
ed term. It seemed like in a lot of different

(50:03):
places in the United States, So.

Speaker 2 (50:05):
I can't believe it. We've not heard from more people
about a single thing in recent memory.

Speaker 1 (50:10):
Yeah, a lot of wolf packers.

Speaker 3 (50:12):
And also we got the I said something about the
inventor of the segue writing off a cliff That was
not the inventor. That was the at the time owner
of the Segway company, man named Jimmy Hesseltin apparently, who.

Speaker 1 (50:25):
Was a really really good guy.

Speaker 2 (50:27):
Yeah.

Speaker 3 (50:28):
So a bunch of people recommended this podcast episode February sixteen,
twenty twenty three, episode called The Hero Who Rode his
segue off a cliff, from the podcast Cautionary Tales with
Tim Harford.

Speaker 1 (50:43):
Haven't listened yet, but it sounds great.

Speaker 2 (50:45):
Very nice. Yeah, I heard from our friend Van Nostrin
about that, like almost immediately after the episode came out,
that it wasn't him. We got it wrong.

Speaker 3 (50:52):
Oh and also quickly, since we're talking about corrections, there's
this great video on YouTube that explains the whole Fabio
goose situation, and it was way more involved than I thought.
Fabio claimed at the time it was not a goose
and it was a piece of camera equipment because he
had a camera on the front of that ride on
opening day to film it, and that he tried to
sue production company. Production company said it was not camera equipment,

(51:15):
it was a duck or a goose or whatever.

Speaker 1 (51:18):
So I don't know at the end of the day,
if that ever really bore out.

Speaker 2 (51:22):
Does it really matter what's true? If the internet thinks
it's a duck.

Speaker 3 (51:26):
Nobody wrote in about that, by the way, I found
that just through investigation. Nice all right, finally, listener mail,
Hey guys, my dad was a humorous guy, always telling
jokes and pulling pranks. My mom and dad divorced when
I was a teen, but they remained friends best friends.
In fact, they just both agreed to go their separate
ways romantically. Dad never remarried. For as long as I
can remember, even when they were still married, his joke

(51:48):
was that he wanted to be cremated and his ashes
mixed in account of paint, and my mother's bedroom ceiling
be repainted with that paint. This is a joke that
lasted decades. He repeated it every time he had a
chance to, with my mom rolling her eyes. My dad
passed away in twenty ten. We planned a military honor service,
had him cremated, and had a memorial service at the

(52:09):
local veterans park. I purchased five Pewter tens, divided the
cremaines for each of his children, and we had the
service and presented the urns to my siblings. My mom
approached afterward and asked if it would be possible for
her to get some cremaines to put in an urn.
At this point I reached in my pocket and pulled
out a sample paint jar from home depot and handed
it to her. Told her Dad wanted her to have this.

(52:32):
Of course, I did give her a real urn with
real cremaines. The paint was unaltered, but until the day
of her passing in twenty seventeen, my dad's earned proudly
rested atop this paint. Can on My mother's mantle is
a tribute to the longest running joke in the family,
fully executed.

Speaker 1 (52:48):
Sweet that's great. That's from Zach Mitchell in Saint Louis.

Speaker 2 (52:53):
Hats off to you, Zach. That was That was a
good one, So thank you for writing in to tell
us about it. And I'm putting my I HAVE back
on so I can take it off to you one
more time.

Speaker 3 (53:02):
Absolutely sorry to hear about your parents, but that was
a great way to honor your dad and for sure
kind of have fun with your mom.

Speaker 2 (53:10):
Well, if you want to be like Zach, can take
us on a roller coaster ride of a motion where
there may or may not be a duck that flies
into our face. You can do so via email A's
Stuff podcast at iHeartRadio dot com.

Speaker 1 (53:25):
Stuff you Should Know is a production of iHeartRadio. For
more podcasts my heart Radio, visit the iHeartRadio app, Apple Podcasts,
or wherever you listen to your favorite shows.