Stuff You Should Know - Should Rich Countries Cancel Poor Countries’ Debt?

Episode Date: April 18, 2023

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.See omnystudio.com/listener for privacy information.

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Welcome to Stuff You Should Know, a production of iHeart Radio. 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. Can I have a brief reamble? Oh, please.

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. At first, they're like, debt cancellation, boring, because, you know, economics is not my jam at all. But like, I realize that having an understanding of global debt and debt cancellation, 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 don't get it, I think it's really easy just to think like, oh, America's paying everyone's debts, right? And that's just not how it works. And to have a real understanding of that, I just think it makes you more well-armed as a human. I think that was an excellent preamble, man. Thanks.

This is really good. Livia crushed this article. Just absolutely crushed. It was so clearly in her wheelhouse. And I actually approached it 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. Oh, there you're going to say it turned out to be super boring for me. No.

I'm really into this because you're right. 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 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, the World Health Organization says low and middle income countries. The United States and Europe would be higher income countries. Some people say developed and undeveloped. It's like a minefield, basically. So I'm going to accidentally say the West a lot, which is not correct anymore, but it still gets the point across. Yeah.

And I think Livia, not I think, I know, she went with the term global south to refer to what we think of as generally lower to middle to lower income countries. She didn't 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. I'll probably say global south a lot. Yeah.

That's it. I mean, I've seen that virtually everywhere as well. I think the low and low middle income countries called licks and mix is 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, 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 global south, it does so with strings attached or interest rates in the form of like loans, bonds, that kind of thing. And there's this idea that like, that's just totally unfair, that this playing field has started out from the get go so imbalanced that the only responsible human humane thing to do is to cancel the debt of some of the poorest countries in the world.

Yeah. I mean, it's kind of that simple. You know, there's this idea and Libby uses a great 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. 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 a hundred years or so, a little more than that, with the idea of the Spanish-American war coming to an end when the U.S. gets control of Cuba from Spain. But Spain as the colonizer had racked up a ton of debt on the back of Cuba. And the U.S., 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, said, hey,

Cuba, this isn't your fault. This is Spain's fault. So you shouldn't be as a, you know, relatively poor nation, you shouldn't be on the hook for this. So Spain's got to step up and pay. And the U.S. had the power, you know, at the time they had the upper hand in that agreement. So in the Paris peace treaty, Spain was going to forced into taking on that debt. But that's not how it always works, right?

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 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 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, 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 jive with capitalism.

Fortunately for the African National Congress, the people who are 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 we're all just kind of going to go along with it. The problem is the Soviet Union crumbled and the African National Congress ended up having to pay that apartheid debt back because they no longer had the backing of a superpower any longer. Yeah.

So that's a good sort of post preamble, postamble. It was a pambel. It was a pambel. That brings us to this idea, which is post colonialism and what do we do about this? And it is pretty much agreed upon by any rational thinker that Europe plundered the world for 500 years or so, give or take. Yeah. Europe and the United States.

Yeah. Well, yeah. Europe, which United States, which came from Europe. Okay. So that brings us all in at that point. I got you. 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. There's a better word for that. What's the word? Opposite prosperity. Impoverished. Impoverished. That's a good one.

That's what I was thinking, but that's even better. Yeah. I mean, the way that that happened was that 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, right? Well, natural resources is one thing, but then also, and we're going to make you help us do it on the backs of enslaved people. I mean, we talked about slave labor and then later on it became cheap labor, which is kind

of where we are now. At first, there was just no money being exchanged as, hi, we're going to take 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, you know, you're poor country and we're a rich country, so we got to pay your debts. 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 people are probably going to kill me for this, but a better way I think to think about it is a long overdue payment for labor. 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, right? So yeah. Which is not true. No. I agree with you. I think that that's a really good way to look 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 Congolese for their rubber trees and cut their hands off when I caught them stealing. 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 invade a country and say all your stuff is ours now and we're using you as slave labor. That went away largely in the 19th century, definitely by the 20th century. But it was replaced by the same end. Yeah. 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 Bernays PR episode. Like it was kind of like that. We would go around, and by we, I mean the global north, we would go around and destabilize other countries' governments and economies to our own benefit if they weren't friendly to the kind of trade and exploitation we wanted from them. 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.

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 fire sale 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 the trade inequality. And that is how we're keeping the global south impoverished right now. All right. That's a great boy.

You just summed up the whole thing. We're done, man. I tell you what, this is early for a break, but let's take a break and we'll talk about this great throughline example that Libby included of the Democratic Republic of Congo right after this. America loves its founding fathers, but that's a tough act to follow as a founding son. If you do not rise to the head not only of your profession, but of your country, you will be owing to your own laziness, slovenliness, and obstinacy.

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On this podcast, you get to hear the raw real life stories behind their journeys and the tools they used. The books they read, and the people that made a difference in their lives so that they can make a difference in hours. Listen to On Purpose with Jay Shetty on the iHeartRadio app, Apple Podcast, or wherever you get your podcasts. Join the journey soon. Alright, so Libya used this great example, and I love it when an example and an article

like this can serve as a through line through the whole thing. And 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, let's go back to the old days. So the late 19th century, they were, and are, a very rich country and resources. Copper, cobalt, diamonds, oil, you name it, lots of rich, rich stuff.

Alright. So in the 19th century, King Leopold of Belgium said, hey, the rest of Europe, why don't you let me go down there and basically enslave this country and use it for production of rubber and ivory. And sure, we may kill 10 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. Dash forward about 60-something years.

And they won independence in 1960. And a prime minister was democratically elected named Patrice Lumumba. Six months later, Lumumba was killed in a coup that was supported by our old friends in Belgium and the United States because of suspicion of being in bed with the Soviet Union. Global takes power, Mobuto Sesececo, and through the support of the U.S. and other, I guess, richer Western countries, basically spent about three decades lining his pockets with money.

And for about 27 years, from 70 to 97, the nation's debt went from 5% of the GDP to 150%. Right. And the reason the debt went up so much is because, like you said, he's lining his pockets in 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 impoverished

and starved. The thing is, is like that is on Sesececo, 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, 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 1960s 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 is not an inherently flawed system, but that it has some really flawed capes that are hung around its 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. So these corporations can't really be lumped in in any legal sense, because they're just

doing what corporations do, being psychopaths who are out to maximize profits as much as possible. So that's where we're at. A lot of people just stop at blaming Cece Seiko for being as corrupt as it comes and plundering his own nation. But they're not also panning to the left a little bit 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.

Yeah, for sure. So this is kind of going on a timeline. So that was the 60s and into the 70s now we go, which will lead up to the 80s debt crisis. In the 70s, if everyone who knows history knows that that was a bad time for oil, I guess a good time if you're an exporter. Oil prices went through the roof. And if you were 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 we're 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 in everyone sending up warning signs? We're the lender 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.

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 80s, too. So inflation started to get so far out of hand, I think it reached like 14%. What was it we were screaming about recently, like six or eight, which was bad enough? Yeah.

This is 14%. So the guy who ran the Federal Reserve, Paul Volker, committed what's now known as the Volker shock. He jacked interest rates up so suddenly and so high, I think up to 20%, that it 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 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 3.2% or a 4% interest rate on an $80 billion loan, you owed $3.2 billion to service that loan. If it went up to 20% interest rates, you suddenly owed $15 billion to service that loan. So Mexico, Brazil, a bunch of other countries, I think 27 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. Right. So this is going on, all these countries have thrown up their hands basically and said, we just can't.

Like, we're not saying, oh, we don't want to pay that, 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 1985. The president of Peru, Alan Garcia, said, you know what? We're not going to pay any payments on our debt in excess of 10% 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 trust Peru anymore. We can't do business with them. Right. And we can't invest in Peru if we're a company or corporation looking to invest in foreign economies. And that triggered hyperinflation there by the end of the 80s.

And so all of this mess is happening in the 80s, and finally, finally, two organizations stepped in and said, we 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 II. 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 get along economically with me.

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 US, and other rich countries. And it still is. And bear this in mind for 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. It sounds nice.

The Paris Club? It does. It sounds like the kind of place I'd want to hang out and have a sip of something with my pinky in the air. So just put that in your bonnet and smoke it later. The IMF is funded in part by democracies and governments around the world. 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 income countries to help them. And this is the view of the economists at the IMF and their supporters to help these impoverished nations learn to be better capitalist economies and as a result become self-sustaining and self-supporting. Simply creating neoliberal economies where there was say socialist economies 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 rates, 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, stops social spending, all those state-owned enterprises you have. You need to privatize them to open up 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. And some of those advisors and their successors who showed up in the 80s are still there. They never left. They're just part of like that nation's government basically. Yeah. These were called structural adjustment programs or SAPs, ironically. And 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. And which is why they call it neocolonialism. It's you coming in and saying, hey, we want to use your resources and tap your country or SAP your country. And but you got to spend the money that we're lending you at cheap rates the way we say. A lot of countries got on board during the 1980s. It also led to a lot of unrest and a lot of protests in 1985 to go back to our example of the DRC.

They had these economic policies implemented by the IMF. By 1985, 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 at some point. But his name was Thomas Sankara, and he was the president of a West African nation called Burkina Faso in the early 80s and a leftist guy who basically was beating the neocolonialism drum.

And in July of 87, he gave a big speech at the Organization of African Unity where he said, everyone join 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. His name was, and I've heard a few ways of pronouncing it, but I'm going with Blaise Campare.

Campare. I like that. It was kind of tough. 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. Yeah. And Sankara, he was very dangerous because he was starting to make real waves. If all those African nations joined together and just said, we're not paying you back,

tens, hundreds of billions of dollars were just evaporated for the global north, right? So, that's why he was assassinated. But he left this legacy of looking at sovereign debt among low-income nations in a certain way that some people still kind of see it through today, 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 a bill to the country to repair the damage done by colonialism, that that's essentially what's going on with the global north lending money at interest to the global south.

Right. And in the case of Sankara at the time, and it's good that he's been sort of canonized I guess now, but is that the right word? Yeah. Okay. At the time, basically, it's in the message to all other countries, like, you see what happened to him when you rise up and try and take a stand against this kind of thing. And it basically quashed things until the 90s when Bono got to be in his bonnet.

Yeah. So that's a really interesting thing that happened, and it happened almost exclusively because of Bono. There was a guy named Martin Dent, who was a professor at Kiel University in the UK. And in the early 90s, he came up with this idea that, hey, the millennium's coming, let's use it as a chance to wipe the debt free, because in Jewish tradition, there used to be 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. It's this idea that every 50 years in Jewish culture, all debts would be wiped free, right? I think debts are the poor. Okay, yes. Yeah. Okay.

And so they were saying, Dent was saying, hey, let's just do this. We can totally do this and start the millennium fresh and everybody on more of an equal footing. And Bono was like, I like that a lot. And he took this up and championed it. He said, I will follow. Very nice. Sorry. He championed it.

No need for apologies. I like that one. He championed this whole idea and I don't want to say single-handedly, but largely was responsible for the eradication of about $130 billion worth of debt. He did, man. Almost single-handedly just by going and talking to the right people and getting them on board. Yeah.

I mean, there are a lot of stories of Bono's charm in these rooms with these people that range from brutal dictators to far, far right religious zealots like Bono gets in the room with those guys. Bono's a Christian, very, very Christian man. Super Catholic. Very Catholic. I'm reading his books still now. It's great.

Oh yeah? What's it called? Catholic me, Catholic you by Bono? 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, 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 because he thought he was doing some good, and he was, and got a lot of people on board, tens of millions of supporters. It launched formally in 1996, and this was called Jubilee 2000, I don't think we mentioned the official name. I think it's called, what's it called now? Debt Justice.

It's called, yes, it's much better. Yeah, it's a great name. I like Jubilee 2000. It has a fun ring to it. Sure, and I think it served its purpose for a while. But because of things like the Christian group involvement, you had Republicans on board in some cases. There was a guy named Spencer Baucus from Alabama, a rep there that basically said,

hey, this will cost each American $1.20 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, they're probably not going to pay it anyway, so maybe we should get on board with another plan. Right. Not everybody did. I read this American Heritage Contemporaneous article that was like, 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 hasn't aged very well for humanity. That's what, actually. And so Spencer Baucus, he's a real hero here. He made this his mission, and he actually reached across the island, worked with Maxine Waters and Arch Liberal, and got what was called the Jubilee Act, passed finally in 2008. 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 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 owed the Global North was just wiped out. Yeah. Bono said, every country deserves to live free of poverty. Every street should have a name. Do it in the name of love.

Oh, wow. We could really go down a rabbit hole here. Yeah. On your knees, boy. I'm not sure that fits. That's pretty good. So, 70%, I believe, was the number, initially, the debt was going to be reduced by 70% for 33 different countries in Africa, Latin America, and Asia.

And the U.S. agreed to more debt cancellation. I think there was a Jubilee debt campaign in the U.K. that stepped up. In 2015, there was about $130 billion worth of debt canceled, and we should point out Libya very, and I'm glad she did this, reminded us that it's not a dollar-to-dollar thing. You can spend $100 million to maybe cancel a billion dollars in debt sometimes. Right, because you're taking into account all the interest and restructuring and all that stuff involved. They really just owe you $100 million in principle, but it ballooned up to $1 billion.

But as far as that lower income country's concerned, that's a billion dollars they don't have to pay, where to you, it was just $100 million, just $100 million. Yeah, exactly. So that's basically what happened in the sort of 2000s is all these countries got on board. The framework was sort of led by the U.S. for the heavily indebted poor countries initiative from the World Bank and the IMF, and it worked pretty good through the 2000s and 2010s, for the most part. It helped.

It did. And as a matter of fact, it was helped not just by that initiative. So that was a big deal, right? We shouldn't really breeze past it. It was a big deal. There was a lot of heart behind it, a lot of genuine 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 global financial crisis

of 2007 and 2008, right, the big meltdown from the U.S. housing market bubble. That actually, because the U.S. Fed was so interested in combating the effects of that and the recession that followed, they dropped interest rates like crazy to basically zero. And so that meant that international lending rates were also really low, too, which led to easy money. Right. A lot of people could borrow money. 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. I was a poor country at the time. Yeah. I did exactly that. I got a stated income loan for our first house by just walking in there and saying, we make this a bunch of money and they went, sounds great.

Right. We made 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's early business investment 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. It's the exact same thing.

It's all the same principles. It's even largely the same mechanisms with the same people involved. Oh yeah. As far as lenders go, it's just on a global scale or like a individual scale, but 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 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. Because that means that the spigot turning off is right around the corner and everybody's going to get caught with the hot potato. And that's essentially what happened when COVID hit. You're mixing metaphors in a great way. Around the corner with the hot potato. Yeah, spigots and hot potatoes and I don't know what's coming next. I'll probably some baseball metaphor or something because you get caught with three loans and

you're out. I'm off my game, Chuck. I used to be so much better at this and then you're killing it. I feel like it's evaporated a little bit, just temporarily, but a little bit. No, no, you're crushing it. 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. America loves its founding fathers, but that's a tough act to follow as a founding son.

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the tools they used. The books they read and the people that made a difference in their lives so that they can make a difference in hours. Listen to On Purpose with Jay Shetty on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts. Join the journey soon. So COVID-19 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? 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 it that Livia even used your word, she used upshot. It's wearing off. The upshot though is now because of all this, there are 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 2.1 trillion in 2000 to 4.1 trillion in 2009 to 11.1 in 2021. 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 17% in 2010 to 48.5% in 2021.

That's a staggering number. It is. And it's a really scary number too, especially if your country is like, I need to feed my people and I need some money and now the money's dried up because some of these wealthier countries are borrowing too. And then 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 still in now. And it followed the same thing that happened in 1982. 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 down 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 unsustainable to service a debt just like it was in 1982.

It just got too expensive and countries now are doing the same thing. They're saying, I don't know what we can do to pay this. We need help. Yeah. And a lot of it, 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, Libya included, that African countries owe about 35% of their external debt to private creditors, which have interest rates more along the lines

of 5%, 12% to Chinese creditors, China has really stepped in to fill a void. So just kind of keep your eye on that. At about 2.7%, 13% to other governments and 39% to those multilateral institutions that we've been talking about at a rate of about 1.5%. So more money in private debt, less money in multilateral institutions, and if you're talking about two or three percentage points on hundreds of billions of dollars, that's a huge difference. 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 attached like raising taxes on your people and not spending on social programs anymore. They're just using market conditions and saying, well, your country's this risky, so we're going to charge this interest rate on it. Do what you want 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 those private lenders becoming bigger and bigger in the last couple of decades is really distressing because collectively, private lending now rivals like the Paris Club as far as geopolitical global influence goes. And 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 people back home and their

votes. Right. There was at least still nominally that with 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 of Chad's national debt, a third, and 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, Glencore says, just give us some crude oil and they do very frequently. How much of the national debt do they owe of Caron's? I know. Sorry. No, I like it. And I'm like, I'm surely saying Chad, right? Right?

It's not Chad or? I think it's Chad. I think that's what I've always heard too. That's what I've always heard. Because of the COVID pandemic, the group of 20, the G20 organization basically said, 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 all. So it's just kind of like a temporary band-aid, of course.

And basically, we're the point now where there 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 figure out an easy solution. For sure. And before, I mean, it was convoluted enough when you just had the IMF and the World Bank and the nations 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 these different players and all of them need to come together for debt cancellation 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 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 governments that fund the IMF fund it with taxpayer money. That's right. And the private lenders, there's not much of a downside for them, is there? No, not at all. They can just lend, lend, lend and they know that eventually the IMF and the World Bank

is going to bail these people out because there's softies and suckers who can't see some people starve in exchange for better access to some ore or diamonds. Right, exactly. There's another way that debt 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 usually a private group like in Belize, the Nature Conservancy came in in 2021 and said, and of course, 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 10% of your GDP in exchange, you got to put about $4 million a year into marine conservation, or another country might step up and say, hey, we'll help preserve this coral reef and put money toward that if you cancel some of our debt. Climate change, that's another, it's not necessarily colonialism, how you might traditionally think of it, but there is an argument going around 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 that should factor in as well. Yeah, if you see things like you do colonialism, you 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. Yes, and then there's even worse than that, there's this terrible circular logic where those countries that are 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. That's the situation that we're in right now, and so a lot of people have kind of moved 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 north's responsibility to pay for the mess it created, and the global north is not necessarily on board with that at this time. 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 named Hillary Beckles who did some back of the envelope calculations, I'm not 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 200 years of free labor to the tune of about $8 trillion. 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 it now. So if you think that $8 trillion is eye-popping, get this, there's a 2022 study by some academics

I think out of Austria and Spain, and they found that in the year 2015 alone, the global north appropriated from the global south, you ready? 12 billion tons of raw materials, 822 million hectares of land, I think 200, I'm sorry, 21 exajoules of electricity. Really that's an enormous amount, right? 392 billion hours of labor. This is 2015 only. That was worth to the global north $10.8 trillion.

Between 1990 and 2015, that totaled $242 trillion 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 was talking about earlier. There's now trade inequality where we pay very cheap prices for the raw materials and then sell at much, much higher prices back to the people we got those raw materials from. We don't give them a fair price for what the 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 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, 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, he can do it again. 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, like what you shouldn't do though is just think, oh, well, it's as easy as like everyone's on America's teat. 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 Chad's and I think that is all so dumb, but real Karen's and Chad's have had a hard time with that stuff and I didn't want to add to that and I wasn't saying someone's being a Karen, I was just sort of a tangential joke, but I hope that didn't cause any harm or stress. Very nice, Chuck. I think that that buttons this episode up quite nicely.

I stand by the joke. That was pretty good. Since Chuck stands by his joke, that means, of course, listener mail has been triggered. Great. Great email about. From Gwen. Cremains. I wish it was.

That would explain a lot. Cremains 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 Wolfpackers that Wolfpack is a driver's ed term. It seemed like in a lot of different places in the United States, so. I can't believe it. We've not heard from more people about a single thing in recent memory. Yeah.

A lot of Wolfpackers and also we got the, I said something about the inventor of the Segway riding off a cliff that was not the inventor. That was the, at the time, owner of the Segway company, a man named Jimmy Hesselden, apparently, who was a really, really good guy. Yeah. So a bunch of people recommended this podcast episode February 16, 2023 episode called The Hero who rode his Segway off a cliff from the podcast, Cautionary Tales with Tim Harford. Haven't listened yet, but it sounds great.

Very nice. Yeah. I heard from our friend Van Nostrand about that almost immediately after the episode came out that it wasn't him. We got it wrong. 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 the production company, production company said it was not camera equipment. It was a duck or a goose or whatever. So I don't know at the end of the day if that ever really bore out. Does it really matter what's true if the internet thinks it's a duck? 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 was that he wanted to be cremated and his ashes mixed in a gallon 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 2010. We planned a military honor service, had him cremated and had a memorial service at the local veterans' park. I purchased five pewter tins, divided the cremains 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 cremains 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. Of course, I did give her a real urn with real cremains. The paint was unaltered, but until the day of her passing in 2017, my dad's urn proudly rested atop this paint can. On my mother's mantle is a tribute to the longest-running joke in the family, fully

executed. That is very sweet. That's great. That's from Zach Mitchell in St. Louis. That's off to you, Zach. That was a good one. So thank you for writing in to tell us about it and putting my hat back on so I can take it off to you one more time.

Absolutely. Don't worry about your parents, but that was a great way to honor your dad and have fun with your mom. Well, if you want to be like Zach and take us on a roller coaster ride of emotion where there may or may not be a duck that flies into our face, you can do so via email at stuffpodcast.ihartradio.com. Stuff you should know is a production of iHeartRadio. For more podcasts on my heart radio, visit the iHeartRadio app, Apple podcasts, or wherever

you listen to your favorite shows. I'm Jay Shetty, and on my podcast On Purpose, I've had the honor to sit down with some of the most incredible hearts and minds on the planet, Oprah, Kobe Bryant, Kevin Hart, Lewis Hamilton, and many, many more. On this podcast, you get to hear the raw real life stories behind their journeys and the tools they used, the books they read, and the people that made a difference in their lives so that they can make a difference in hours. Listen to On Purpose with Jay Shetty on the iHeartRadio app, Apple podcasts, or wherever

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