History of debt

This timeline sets out a series of key dates and events in the history of global debt which have helped shape the way indebtedness is perpetuated to this day.

Under the colonial system, territories in Africa, Asia and Latin America are captured and controlled by colonies. Their economies are run to provide raw materials to European powers.

France takes over the running of Tunisia’s economy after the country defaults on its debt.

5 million people die of famine in British colonised India at the same time as wheat is exported from India to the UK.

Berlin Congress divides Africa up amongst European powers, including confirming Tunisia as a colony of France, and making present day Ghana a colony of the UK.

Further famines in India kill 6 million people, but in late Victorian times, India provided the UK with 25% of its wheat.

The Treaty of Versailles, following World War One, imposes a $32 billion debt on Germany, the equivalent of $442 billion in today’s money. The debt has to be paid in foreign currency.

To try to make debt payments, the German government prints money with which it buys foreign currency. This leads to the value of the deutsche mark dropping rapidly causing hyperinflation and the mark becoming worthless.

With no foreign currency and a worthless mark, Germany has to make debt payments in raw materials. After several defaults, French and Belgian soldiers occupy the Ruhr to ensure access to Germany’s coal to pay the Versailles debts.

The US, UK and other European nations lend Germany money to help it establish a new currency. In return, they take significant control over Germany’s Central Bank.

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, precipitating the Great Depression through the 1930s, where economies fall and unemployment increases across the world.

US, UK and France agree to a one-year moratorium on Germany’s debt payments.

The UK government cuts spending to try to reduce its deficit. Economy continues to fall and unemployment increase.

1931 – 1938
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

France and the UK 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.

UK unemployment goes over 20%, over 2.5 million people.

Adolf Hitler comes to power in Germany and confirms no further war debt payments would be made.

US President Roosevelt begins the New Deal programme to try to revive the US economy, including increased government spending and new regulations on bank lending.

UK unemployment is still over 1.5 million as the Second World War begins. It falls rapidly to less than 100,000 by 1942 as the government spends to fight the war.

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. The conference also creates two new institutions: the International Monetary Fund to lend to countries in temporary crisis, and the World Bank to provide long term investment.

1944 – 1972
Relatively calm global financial system, with just seven government defaults in almost 30 years.

The US Marshall Plan begins to help rebuild Europe. Grants, and a smaller proportion of loans, are given to allies such as UK and France, whilst just loans are initially given to Germany.

India and Pakistan (West and East) gain independence from the UK.

Half of Germany’s outstanding foreign debt is cancelled including by the US, UK and Greece. Repayments on the remainder are made dependent on Germany earning trade surpluses with which to repay the debt.

Ghana becomes the first British colony in Africa to gain independence from the UK.

The US abandons convertibility of dollars into gold, some claim to help finance the fighting of the Vietnam war, and begins to remove regulations on the movement of money between countries.

The OPEC group of oil producing countries declares production cuts and an embargo against the US.

The oil price more than doubles. Profits are recycled into western banks, which seek new opportunities to lend.

1974 – 1979
Loans to Latin American governments increase more than fourfold, from $8 billion in 1973 to $33 billion by 1979. Similarly, loans to governments in sub-Saharan Africa increase from $2 billion in 1973 to $8 billion by 1979.

The UK is the latest country to remove regulations on the movement of money between countries.

Prices for raw materials – agricultural crops, metals and fossil fuels – begin to fall, and continue to do so for next twenty years. The initial fall is caused by global recession, while institutions and governments respond to the crash by producing more – often under advice from the World Bank – causing prices to fall further.

The US government increases interest rates to try to reduce inflation, whilst cutting taxes to stimulate its economy. Increased dollar interest rates push up payments for debtor governments while both moves increase the value of US dollar, increasing the relative size of debts.

Mexico announces it cannot pay its foreign debt.

Following Mexico, 57 countries in the global south have difficulties paying debts to private lenders through the 1980s.[1]

The IMF lends $60 billion through the 1980s to help payments to be made, up from $15 billion in 1970s. The World Bank also starts such bailout loans. In return, the two institutions demand a series of policies are followed, including cutting government spending, privatisation, trade liberalisation and deregulation.

After the 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.

In sub-Saharan Africa, GDP per person is 15% lower than it had been in 1980. In Latin America it is 5% lower.

Under pressure from the US, the new ANC government in South Africa accepts paying all the debts of the apartheid government.

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.

The Asian Financial Crisis begins, in particular affecting South Korea, Thailand and Indonesia. The crisis is caused by large foreign debts owed by private companies rather than governments. Malaysia avoids the worst of the crisis by ignoring IMF advice and introducing controls on the movement of money out of the country.

The number of Indonesians living on less than $3.10 a day increases from 155 million in 1996 to 183 million in 1998, whilst Indonesian GDP per person falls by 15%.

Under the banner of the Jubilee 2000 campaign, 70,000 people surround the G7 summit in Birmingham, UK, demanding that the debts of 52 impoverished countries are cancelled by the year 2000.

Uganda is the first country to qualify for any debt cancellation under the Heavily Indebted Poor Countries initiative, but its’ debt is reduced by just 20%.

The Asian Financial Crisis spreads to Latin America, Argentina’s economy enters recession again.

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

In sub-Saharan Africa, GDP per person is now 20% lower than it had been in 1980. The number of people living on less than $2 a day increased from 295 million in 1981 to 513 million by 2002.

Tanzania qualifies for debt relief, after meeting the condition to privatise the water system in Dar es Salaam. The privatisation collapses in 2005.

After three years of recession, Argentina goes into default on its external debt. The economy begins to recover later in the year.

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. Malawi finally gets debt relief in 2006.

Ghana becomes the 14th country to qualify for debt relief through the Heavily Indebted Poor Countries initiative, getting 50% of its debt cancelled. In total the 14 countries have had $29 billion of debt cancelled.

Prices for raw material exports start to significantly increase for the first time since the 1970s.

Under the banner of Make Poverty History, 250,000 people march in Edinburgh, UK, during the G8 summit, calling for debt cancellation, trade justice and more and better aid. The G8 instruct the IMF and World Bank to cancel all the debt owed to them of countries which have completed the Heavily Indebted Poor countries process, on loans before 2003. Total debt cancelled under the scheme by the end of 2005 reaches $77 billion for 18 countries.

Argentina reaches an agreement with over 90% of its creditors to pay 33 cents on every dollar owed. Some vulture funds buy up other debt cheaply and refuse to take part in the debt restructuring.

Demand for securitised loans linked to US sub-prime housing lending begins to fall. There is a run on British bank Northern Rock.

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.

Fears over securitised debt linked to sub-prime mortgages leads banks to stop lending to each other. Lehman Brothers goes bust in September. The UK undertakes a mass bailout of banks, nationalising RBS and Lloyds. The US, Ireland and other countries follow.

In Iceland, the foreign debt of its banks is too large for the government to take-on. Instead, it guarantees debts owed by the banks within Iceland, but not to creditors in other countries.

Ecuador holds a public audit into its debt, which finds that much of the external debt is illegitimate or illegal. The government threatens not to pay, causing the price of its debt to crash on financial markets. The government then secretly buys back this debt, making a large saving.

Having already cut interest rates to record lows, the US Federal Reserve and UK’s Bank of England start printing money to buy their government’s debt (a process known as quantitative easing). This further reduces interest rates, and increases the amount of money being lent from the western world to the global south.

A UK Court orders Liberia to pay $20 million to two vulture funds, Hamsah Investments and Wall Capital.

Financial markets realise the Greek government cannot pay its debt. Rather than defaulting, the EU and IMF lend more money to enable debts to creditors, including German, French and British banks, to be paid. Similar bailouts take place of Ireland and Portugal’s creditors.

The Democratic Republic of Congo becomes the 30th country to qualify for Heavily Indebted Poor Countries debt relief, taking the total amount of debt cancelled to $117 billion. Haiti is given additional debt relief after the devastating earthquake.

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.

A limited debt relief scheme is agreed for Greece, but it does not include any of the bailout loans from the Eurozone or the IMF, debts bought by the European Central Bank, or debts bought by vulture funds, which are owed under UK law. The Greek economy continues to crash and poverty increase.

Following campaigning by the Jubilee Debt Campaign, the UK government releases information on where current debts owed by global south governments to the UK come from. Much of the debt is from loans to past dictators for weapons, but the UK government refuses to cancel any of the debt.

London-based banks Credit Suisse and VTB secretly lend $2 billion to state-owned companies in Mozambique, under UK law. The loans only come to light in 2016.

International loans to the governments of the most impoverished countries increase from $56 billion in 2008 to $151 billion by 2014.

Global prices for raw materials fall rapidly from the middle of the year, causing big falls in income and exchange rates for raw material exporters such as Ghana and Mozambique. The fall in exchange rates rapidly increases the size of debts owed in dollars and other foreign currencies.

The vulture funds which bought up Argentinian debt cheaply following its default get a US judge to rule that unless Argentina pays them in full it is not allowed to pay anyone. Argentina refuses to pay, so is forced to default on its debt again.

Left-wing party Syriza wins the elections in Greece on a platform of holding a European conference on debt restructuring, replicating the conference which cancelled half of Germany’s debt in 1953. Greece’s calls are rebuffed by other EU countries, and the country is forced to sign-up to a programme of further austerity, in order to not be kicked-out of the eurozone.

Bailout loans to Mozambique, Ghana, and other raw material exporters, begin. The World Bank guarantees payments on a $1 billion loan to Ghana by private lenders, with an interest rate of 10.75%, guaranteeing high profits.

In response to global campaigning, the IMF agrees $100 million of additional debt relief for the countries affected by the Ebola crisis – Guinea, Liberia and Sierra Leone.

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 secret loans to Mozambique by Credit Suisse and VTB are revealed. The IMF and other lenders and donors suspend their bailout loans. Mozambique starts to default on its external debt owed to private lenders.

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.

More secret debts come to light in the Republic of Congo and the Gambia.


[1] Angola, Argentina, Bolivia, Brazil, Burkina Faso, Cameroon, Cape Verde, Central African Republic, Chile, Colombia, Congo, Costa Rica, Cote d’Ivoire, Cuba, Dominican Republic, Ecuador, Egypt, El Salvador, Ethiopia, Gabon, Gambia, Ghana, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Iraq, Jamaica, Jordan, Liberia, Madagascar, Malawi, Mexico, Morocco, Mozambique, Nicaragua, Niger, Nigeria, Panama, Paraguay, Peru, Philippines, Sao Tome and Principe, Senegal, Sierra Leone, South Africa, Tanzania, Togo, Trinidad and Tobago, Turkey, Uganda, Uruguay, Vietnam, Yemen, Zambia

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