The extent of the debt crisis was widespread. Over 80 countries worldwide were burdened with debts to international banks and agencies, forcing then to adopt austerity and stabilization programs.
The debt was, in part, tied to aid for costly development projects common in the less developed world in the 1960s and 1970s. It was also a product of excessive lending to strategic countries like Turkey, Egypt, and South Korea.
The total debt of developing countries to the First World was quite large, increasing from $64 billion in 1970 to $686 billion at the end of 1984. Private banks were heavily involved.
According to the International Monetary Fund (IMF), debt to private banks stood at one-third of the total debt of Third World countries in 1973, climbing to more than half by 1982.
As a consequence of what was thought to be a disturbing trend, the US government and international agencies began to place stricter conditions on new loans and aid programs. The IMF, particularly, mandated a set of measures to be imposed on most borrowing countries, including the following:
- devaluation
- reduced public spending
- elimination of public subsidies for food and other essentials
- wage restraint despite inflationary spirals, increased interest rates, increased taxes
- elimination of state-owned or state-supported industries
- greater access for foreign investment
- lesser protection for local industry
- export promotion
- new debt ratios.
While these cuts were applied differentially, some observed that the urban working class was almost always affected by subsidy cuts, wage cuts, layoffs, and cuts in public services. Austerity protests were often the end result.
Typically a nation’s capital city was the primary focus, although demonstrations didn’t always begin or end there. For example:
“in Egypt, Turkey, Poland, Brazil, Tunisia, and Morocco, the protests began in regional cities experiencing stagnant industry, unemployment, and the inequities of regional development.”
Photograph by Lisa Reynolds Wolfe.
