The following is a (long) quote by Noam Chomsky, longtime political activist, writer and professor of linguistics at MIT. He was interviewed for The Nation in late February by David Barsamian, director of Alternative Radio in Boulder, Colorado (www.alternativeradio.org):
Barsamian: Why do you say the debt crisis is an ideological construction?
There is a debt, but who owes it and who's responsible for it is an ideological question, not an economic question. For example, there's a capitalist principle that nobody wants to pay any attention to, of course, which says that if I borrow money from you, it's my responsibility to pay it back, and if you're the lender, it's your risk if I don't pay it back. But nobody even conceives of that possibility. Suppose we were to follow that.
Take, say, Indonesia, for example. Right now its economy is crushed by the fact that the debt is something like 140 percent of GDP. You trace that debt back, it turns out that the borrowers were something like 100 to 200 people around the military dictatorship that we supported, and their cronies. The lenders were international banks. A lot of that debt has been by now socialized through the IMF, which means Northern taxpayers are responsible.
What happened to the money? They enriched themselves. There was some capital export and some development. But the people who borrowed the money aren't held responsible for it. It's the people of Indonesia who have to pay it off. And that means living under crushing austerity programs, severe poverty and suffering.
In fact, it's a hopeless task to pay off the debt that they didn't borrow. What about the lenders? The lenders are protected from risk. That's one of the main functions of the IMF, to provide free risk insurance to people who lend and invest in risky loans. That's why they get high yields, because there's a lot of risk. They don't have to take the risk, because it's socialized. It's transferred in various ways to Northern taxpayers through the IMF and other devices, like Brady bonds. The whole system is one in which the borrowers are released from the responsibility. That's transferred to the impoverished mass of the population in their own countries. And the lenders are protected from risk. These are ideological choices, not economic ones.