Kate Mackenzie and Tim Sahay explain:
" In 2023, the private sector collected $68 billion more in interest and principal repayments than it lent to the developing world. International financial institutions and assistance agencies extracted another $40 billion, while net concessional assistance from international financial institutions was only $2 billion—even as famine spread."
"That process - of money flowing from the poor to the rich - is a bizarre economic phenomenon questioned by Robert Lucas in 1990, and since named the ‘Lucas Paradox’.
Lucas queried why capital defies the laws of physics and economics and, instead of flowing (downwards) from rich to poor countries, flows (upwards) from poor to rich countries. "
"These numbers have been researched more comprehensively by the influential think-tank Development Finance International. In a widely read report written by its founder Matthew Martin, we learn that despite all our efforts back then, flow reversals between rich creditors and poor debtors are intensifying. ..."
And the work of economist #SteveKeen has pointed out that debt overhang in a downturn is serviced by sacrificing wages to creditors.
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