A Clear, Straightforward Explanation of Third World Debt

From Tony Campolo and Gordon Aeschliman's Book Everybody Wants to Change the World: Practical Ideas for Social Justice (Regal, 2006):

Here's hos this debt problem emerged. In the 1960s and 1970s when the Cold War was at its height, Western banks loaned billions of dollars to impoverished young nations. The idea was to attract the poor away from the lure of Communism, a system that promised to side with the poor instead of the wealthy West. Western economists and social engineers were sent to these poor nations to show the leaders how the "religion" of the West—a free-market economy—would bring about a harvest of wealth for all.

To jump-start the system, the generous West would provide the loans. Of course, these loans went into building massive energy and agriculture systems that were then outsourced to companies from the West. The loans, in the short run, filled the coffers of Western corporations instead of companies in the poor nations.

The optimistic projections of the West never came to fruition, and by the end of the Cold War, billions of dollars were owed to Western nations. The debt was structured to greatly benefit the wealthy and, as a consequence, some countries have already paid back more than three or four times the amount they originally borrowed. Yet they have only paid interest—the entire principal is still owed.

Campolo and Aeschliman, of course, advocate forgiving debt owed by third-world nations. They suggest joining the Jubilee movement (inspired by Leviticus 25).