by the Catholic Fund for Overseas Development

About the author: The Catholic Fund for Overseas Development (CAFOD) is a major British charity that has been fighting poverty in developing nations since 1962.

The 1970s started out with a great deal of promise for the Third World, for Africa in particular. Commodity prices were buoyant and growth prospects good. But oil price hikes in 1973 and 1979 led to hyperinflation in industrialised countries, whose response included steep rises in interest rates. The net effect in the North was economic recession and a slump in demand for commodity exports from the South. So southern governments borrowed [from northern governments, the World Bank, and the International Monetary Fund (IMF)] to make up for their revenue shortfalls on the assumption that the economic downturn would be short-lived...