Mister, Can You "Lend Me" a Dime?
Why do the rich get richer and the poor get poorer? The truism seems often to hold whether we're looking at individuals or corporations or nations. One way to begin to grasp the phenomenon is to start by understanding how it works with individuals.
Everyone needs to spend some money on the daily necessities-- goods, clothing, shelter, etc. Those who are rich have some money left over after providing for those necessities. Perhaps they invest it in financial instruments-- stocks, bonds, CDs, etc. Perhaps they "grow" their businesses by investing in them. Or perhaps they invest their excess in increasing their own "human capital" through education, thereby increasing their earning power. (It is, of course, also possible that they "fritter it away," but that's another story). The point is that those who have more money than they need for daily necessities have the opportunity to increase what is left over by investment of some kind.
But those who are poor and need all the money they can gather simply to exist do not have that opportunity. And, if a problem occurs, they do not even have resources such as savings to fall back on, whether that problem is a health problem, loss of job, their transportation breaking down, inflation reducing their buying power, etc. It is often at that moment that people with limited resources end up going into debt.
And debt brings a downward spiral unless the "problem" goes away or other resources are found, for debt means that not only does one have to find money beyond the daily necessities to repay the loan, but also the interest. And if at least the interest is not paid, the debt grows.
For almost two decades, we have been observing many poor countries struggling with the stranglehold of debt. Although the scenario just constructed for individuals is simplistic, it does also shed some light on what the debtor nations have been struggling with. Once in debt, unless the loan bears immediate fruit in increased income, the desperation of keeping the necessities paid for and paying at least interest on the loan begins.
Jubilee 2000/USA notes that developing countries now owe rich nations and international financial institutions over two trillion dollars ($2,000,000,000,000). "Most of this is owed by 'middle-income' developing countries. But some of the lowest income countries in the world also are heavily indebted, owing around $250 billion." Certainly debt is not the sole cause of poverty in many countries but, at the very least, its burden further degrades desperate situations.
Jubilee 2000/USA can be reached at P.O. Box 29550, Washington, D.C., 20017.
Terry McCoy is Director of the Hunger Network in Ohio.