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The rational solution of the third world debt problem

Abstract: Many underdeveloped country have contracted eternal debts in foreign currency and are today in the incapability to pay back their debts. This situation is one of the most complex issue of the globalization. The negotiation with the IMF are based on subjective criteria and are subjected to create tensions between rich and bankrupted countries. To advance in this issue, the capitalist party reminds how debt issue are solved according to capitalism principles.

Debt is a old problem. During the middle age, the economy was blocked by various law against usury which includes the forbidding applied to Christian and Muslim. The purpose was to prevent that debtd ends up in the slavery of the debtor. Unfortunately , this state of affair makes it impossible for entrepreneur to find out the fund to risk in new concepts.

In the beginning of the modern area, the limited liability appears. It is a revolution in the sense that in case of failure, the debtor can only claim the asset of the company and not the house of the entrepreneur. So, it became possible to create a business without risking the family house. It is one of the key principle which explains the impressive entrepreneurial spirit which raise up at this time in Europe.

Concerning the emerging market debts, sovereign nations don't have the protection of the bankruptcy laws and the limited liability due the fact of their monopoly on a territory. It might not be a problem if states create their own money. In this case, state can devaluate and use inflation to reduce the level of their debt. In this case of major developed countries which has a huge in its own money, the government should also control the dynamic of the debt increase according to the GNP.

In the case of underdevelopped country, the debtor is done in a foreign currency. And so, they can't control the level of reimbursement of their debt. And furthermore, if the project which justify the debt failed, they have to make profit in some other projects to pay back the debts.

So, a government  inherit of the debt level of the previous government. Furthermore, despite individuals, state are eternal, a debtor country can become an eternal debtor country.

The C.G.A.. defends the ideas that state should never contract debts but community can. As most of collective action of the state can be done at the community level, there is no need for the state to contract debts for example to improve the welfare infrastructure. On this point, coexistencialism inherits from capitalism, as communities can benefit from the bankruptcy law protection as they are not the highest authority of the territory. In doing so, government of communities can involve themselves in policy in order to develop the community without risking the future of the whole nation by an eternal debt.

Then, Coexistencialism can create an efficient protection against an incontrollable level of debts and should avoid the difficult and highly criticized negotiation of the IMF.

 

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Copyright 2003

Author: Hector Archytas

 

Keyword: debt and dependency are the imf legacy commentary,