The New Dependency: External Debt and Monetarism

Introduction

In "The New Dependency: External Debt and Monetarism," Susan George provides a scathing critique of the international monetary system and its devastating impact on developing countries. George argues that the system, which is dominated by the United States and other wealthy countries, is designed to keep poor countries in a state of perpetual debt and dependency.

The Debt Trap

George begins by describing the debt trap that ensnares developing countries. These countries are often forced to borrow money from international lenders, such as the World Bank and the International Monetary Fund (IMF), in order to finance their development projects. However, the terms of these loans are often onerous, and the countries quickly find themselves unable to repay their debts.

As a result, they are forced to take on even more debt, which only worsens their situation. The debt burden becomes so heavy that it stifles economic growth and makes it impossible for the countries to improve the living standards of their people.

Monetarism and the IMF

George argues that the IMF is a key player in the debt trap. The IMF is an international organization that is supposed to help countries manage their economies and avoid financial crises. However, George argues that the IMF's policies actually make the situation worse.

The IMF's policies are based on monetarism, which is a theory that emphasizes the importance of controlling the money supply in order to control inflation. However, George argues that monetarism is not appropriate for developing countries, which are often struggling with high levels of poverty and unemployment.

The IMF's policies often require developing countries to cut back on government spending and raise interest rates. These policies can lead to a recession, which further worsens the country's economic problems.

The Impact of Debt on Developing Countries

The debt trap has a devastating impact on developing countries. It leads to economic stagnation, poverty, and inequality. It also makes it difficult for these countries to achieve political independence and self-determination.

George argues that the international monetary system is a form of neocolonialism. It allows wealthy countries to control the economies of developing countries and to extract their resources. The system is also used to promote the interests of multinational corporations, which often benefit from the debt crisis.

Alternatives to the Current System

George concludes by calling for a new international monetary system that is more just and equitable. She argues that the system should be based on the principles of solidarity and cooperation, rather than on the principles of competition and greed.

She also calls for the cancellation of developing country debt and for the creation of a new international financial institution that is democratically controlled and accountable to the people of the world.

Conclusion

"The New Dependency" is a powerful and provocative book that exposes the devastating impact of the international monetary system on developing countries. George's analysis is clear and concise, and her arguments are supported by a wealth of evidence. This book is a must-read for anyone who is interested in understanding the global economy and the challenges facing developing countries.