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Lesson 6, Topic 3
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Building a timeline of debt crises in the Global North & Global South

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Activity title

Activity 2: Building a timeline of debt crises in the Global North & Global South

Overview

 In this activity, students use prior knowledge, teamwork and logic to build a timeline of the history of global debt crises on their classroom walls. In pairs, they choose 3 key events and estimate where on the timeline to place the cards. They then hold a discussion about the timeline.

Objectives

 This activity aims to build students’ understanding of the historical roots of debt, by drawing attention to hidden factors such as colonialism, commodity markets and geopolitics. It aims to increase students’ awareness of the complexity of sovereign debt, and the instances when debt may be illegitimate.

Materials

Timeline date cards. Paper/card to create a timeline. Blu-tac. One set of historical event cards (see below). 

Time

 1 hour

Instructions For Trainers:

(A) Pre-class: Using the walls of your classroom, create a large ‘timeline’ stretching from 1850 to 2021 (or the current year!). To do this, place the below dates across each wall, in a line, in large writing so they stand out well. Leave plenty of space between each date, and if possible link them with a narrow strip of paper and a ‘line.’ 

1880—–1900 ——— 1910 ———- 1920 ——– 1930 ——— 1940 —— 1950 —– 1960 —– 1970 —- 1980 —— 1990 ——2000—–2010——2020      

(B) 10 minutes: Place each of the event cards (cut from below) randomly on a table. Do not distribute the dates – this is just for your reference! Tell students to work in pairs, and to select 2 to 3 cards per pair (or more, depending on the size of your group). Ask them to guess the correct date of the events they have been assigned, and use blu-tac to attach the card to the approximate location on the timeline of that date (i.e. for 2011, it should be placed just after the large ‘2010’ sign on the wall). Explain to the students that some of the cards represent events which are ‘common knowledge,’ some may require them to just guess, while others feature in the case studies they have already learned about. Ask them to think about the history they know and think when the event might logically have taken place.  

(C) 15 minutes: When the timeline is complete, correct any errors (it might be useful to take a break in the session at this point). Ask the students to take ten minutes to read through the entire timeline, including noting any changes that have been made to their cards.  

(D) 15 minutes: Facilitate a discussion with the entire group about the sequence and logic of the events on the timeline. For example: 

  • Highlight the period from 1944 – 1971; from when the Bretton Woods Institutions were established to the end of the Gold Standard. Highlight the fact that very few currency fluctuations or debt crises took place in this period. Ask what students know about what happened in Europe in this period (expansion of the welfare state, increase in workers rights, European reconstruction). 
  • Draw attention to the lending boom which took place after the 1971-73 oil crisis; lending is often fuelled by a surplus of cash looking for a profitable home in the economy, rather than by the needs of borrower countries.  
  • Ask students what more they know about colonialism. What sorts of economies were in place in the Global South when colonialism ended? How were they able to raise money for development? Draw attention to the fall in commodity prices that happens at various points in the timeline, and how that links to debt crises / ability to repay debts.  
  • Draw attention to who the borrowers and lenders were – for example, rich countries lending money to Ferdinand Marcos in the Philippines. Ask students what they know about the politics of Latin America in this period. Who were the rulers? Who were the rich countries lending those rulers money? Was this fair? Who benefitted from these loans? Is it just for those debts to be passed on to the people?  
  • How should we view issues such as the privatisation of Tanzania’s water system? Who had power in that situation? Did the decision strengthen democracy in Tanzania? 

(E) 10 minutes: It might be useful, after this discussion, to use a powerpoint to run through the entire timeline from start to finish, to reinforce students’ knowledge.

Group size

 4 – 30 

Event / Fact

Date

The Berlin Congress divides Africa up amongst European powers.

1878

The Treaty of Versailles imposes a $32 billion debt on Germany, the equivalent of $442 billion in today’s money.  

1919

Large lending by banks fuels speculation in stock markets in the US and around the world.

The London and New York stock exchanges crash in value, starting the Great Depression.

1925 – 1929

The US, UK and France agree to a one-year moratorium on Germany’s debt payments. France and the UK then agree to fully cancel Germany’s Versailles debts, if the US cancels the French and British debts from the First World War. The US Congress refuses.

1931 – 1932

Latin America’s export revenues collapse leading to widespread government debt defaults, including by Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Mexico, Nicaragua, Panama, Paraguay, Peru and Uruguay

1931 – 1938

World War II breaks out, ending in 1945

1939

The Bretton Woods Conference in the US creates a system to regulate loans between countries, whilst the dollar is pegged to the price of gold, which is designed to stabilise currency exchange. The conference creates the International Monetary Fund and the World Bank.

1944

Half of Germany’s outstanding foreign debt is cancelled including by the US, UK and Greece. 

1953

Dictator Ferdinad Marcos comes to power. For two decades in power, he takes on enormous foreign currency loans. The most notorious is a $20billion loan to build a power plant called Bataan, which, because it is located on an earthquake fault line, never produces a single watt of energy.

1965

The US abandons convertibility of dollars into gold and begins to remove regulations on the movement of money between countries.

1971

Due to the US role in the Arab-Israeli war, oil producing countries cut production and announce an embargo against the US, doubling the oil price. Profits (petro-dollars) are recycled into western banks, who then lend them on. 

1973 – 74

Loans to Latin American governments increase more than fourfold in four years, from $8 billion to $33 billion. Similarly, loans to governments in sub-Saharan Africa increase from $2 billion to $8 billion in the same four years.

1974 – 1979

Prices for raw materials begin to fall, and continue to do so for the next twenty years. Advice from the World Bank to produce more just causes prices to fall further.  

1980s

Following an increase in interest rates by the United States, the Mexican government announces it can’t pay its debts. Following Mexico, 57 countries in the global south have difficulties paying debts to private lenders.

1982-1989

The IMF lends $60 billion in this decade to help payments to be made, up from $15 billion in the previous decade. The World Bank also starts such bailout loans. In return, the two institutions demand that a series of policies are followed (called structural adjustments), including cutting government spending, privatisation, trade liberalisation and deregulation.

1982 – 1989

Dictator Ferdinand Marcos is deposed. The Freedom from Debt Coalition is founded in the Philippines to argue for an audit into the Philippines debt, and adjustment of debt payments to ensure economic growth and poverty reduction.

1986-1987

The G7 group of rich countries create the Heavily Indebted Poor Countries initiative to cancel some of the debts of some of the most impoverished countries, if those countries implement more IMF and World Bank free market economic policies.

1996

The Jubilee 2000 petition calling for debts to be cancelled for the millennium receives more than 20 million signatures globally.

1999

Tanzania qualifies for debt relief under the Highly Indebted Poor Countries (HIPC) Initiative, after meeting the condition to privatise the water system in Dar es Salaam. The privatisation collapses in 2005.

2001

Malawi enters a food crisis just a year after it is made to sell off its grain reserve as a condition to qualify for debt relief.

2002-2006

Argentina announces it risks defaulting on its debt. A few years later, it reaches an agreement with over 90% of its creditors to pay 33 cents on every dollar owed. However, some vulture funds buy up other debt cheaply and refuse to take part in the debt restructuring.

2005-2008

Having had $6.7 billion of debt cancelled by public institutions, Zambia is sued in UK courts by vulture fund Donegal International for $42 million on a debt it paid $4 million for. The British judge rules a debt is owed, but only $20 million.

2007

Fears over securitised debt linked to sub-prime mortgages leads banks to stop lending to each other. Lehman Brothers goes bust in September. In the UK, US and Ireland, governments begin to bailout banks.

2008

Countries like Ireland begin to seek new loans from the IMF and the EU, in order to cover the costs of the decision to bail out banks. In Ireland, this eventually costs €64 billion, as so much bad bank debt has been nationalised.

2011

After campaigning by the Jubilee Debt Campaign, the UK parliament passes an Act to prevent vulture funds suing Heavily Indebted Poor Countries for more than they would have got if they had taken part in the debt relief scheme.

2011

London-based banks Credit Suisse and VTB secretly lend $2 billion to state-owned companies in Mozambique, under UK law.

2013

In countries across the Eurozone, IMF & EU loans come with conditions to impose austerity and cut government budgets. The IMF later recognises these conditions prevented economic recovery.

2008-2012

The UN votes for new principles for debt restructuring by 136 votes in favour to six against, but those against include the key countries which decide how global debt is regulated, including the US, UK, Germany and Japan. The vote comes as campaigners warn of a new global debt crisis, due to a boom in lending, falling commodity prices, and rising costs of debt repayments in poor countries in particular.

2015

A new Argentinian government agrees to pay off the vulture funds, in what could represent a profit of over 1,000% for some of them.

2016

Over $11 trillion of cash is released into the global economy because of Quantitative Easing policies of rich country governments, who buy up large amounts of corporate debt. This increases the amount of cash being lent by companies in rich countries to the governments of countries in the Global South.

2010-2018

Global debt reaches a historic high of $255 trillion, or 320% of GDP.

2019

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