Assessment 1 of 0

GMAT – Section 3: Test 3

Justice June 5, 2015
Verbal  (Questions 83 – 86)
Use the following to answer questions 83 through 86.

The consequences of debt incurred by developing nations in their search for economic and developmental equality within the global economy as driven by the developed world are curiously detrimental to the stated goals upon which the debt was initiated. After many centuries of colonialism and neo-colonialism, many colonies emerged as independent nations beginning in the latter part of the 19th century and continuing into the mid-to-latter parts of the 20th century. Throughout South America and Africa, as states emerged from, in some cases, centuries of colonial obligations, they were often forced to incur substantial debt made available to these new nation-states by their former oppressors. In some cases this debt was malicious; Haiti, the first Black nation to gain independence in 1825, was forced to agree to a payment of 150 million francs incurred while Haiti was a French colony (the terms of this agreement were hammered out while the French Armada was visible on the horizon from Port-au-Prince).

Despite the punitive nature of much of the debt that has been incurred to the developing world, many of the most detrimental economic effects of debt have been consequences of debt incurred more recently and more insidiously in foreign aid packages made available to developing nations by members of the G8 industrialized nations and the International Monetary Fund. Due to the tremendous amount of foreign aid made available to these developing nations over the past 50 to 100 years, many developing nations actually pay more annually in debt service than they receive in aid; for example, for every dollar that African nations receive in aid they pay $1.30 in debt service. Under these conditions anyone with the most rudimentary understanding of math must realize the untenable position that these states, along with many others across the globe, face regarding sustainable economic independence. Interestingly enough, despite the math, which by definition indicates that these states will never be able to pay down their debt, the developing world continues to offer aid in the form of loans to near dissolute countries across the globe. One argument for the continuing credit availability for these debtor nations is rooted in human decency; those who are blessed with wealth (albeit wealth created within the framework of globalization) must provide aid to those less fortunate. Another argument is, unfortunately, purely economic. A guaranteed 30% return on your investment for the foreseeable future can be difficult to turn down.