Mexico – Foreign Debt

May 5, 1999

• Debt is an instrument of development and a great instrument at it.
• As any instrument can turn negative in negative circumstances, foreign debt has been the ruin of several nations.
• There is no truth in it. It is possible for us to restore debt to its original positive role.
• Interest is, if any, the only burden on debt.
• Viewed from our theory, interest helps the unfit - economically unfit - to survive socially because of the mutuality of the collective. Interest enables the lender to lend. Interest enables the unfit to become fit by earning the interest also. Those who are crushed by the burden of interest are unfit to receive the benefit of collective help.
• It is obvious that the help offered by credit can be usefully availed of only by those who are willing to work harder than usual and more resourcefully than the average. This is so because everyone earns on their capital an income to survive. The borrower has to earn, in addition, the borrowed capital. Interest is a further dimension. In practice, in periods of great social expansion, the entrepreneur who benefits by vast social changes is able to earn the capital and interest back in addition to the income for survival. During calm commercial periods, interest or even borrowing will wipe out the borrower. At these periods a new negative phenomenon has arisen. Lenders, if tyrannical, can have their eye on the properties of the borrower and in adverse circumstances acquire that property for a song. Money in terms of lending has always had this negative role.
• That negative capacity of money acts in another way also. This comes into play when the borrower had to pay not only the capital and interest but also for the prestige of the lender as we pay a far higher price in the gift shops. The poor man has no business to shop in the gift shop and pay exorbitant prices.
• Foreign exchange rate is fixed by the relative value of two currencies. It extends to several currencies. Money that started as a commercial medium has also to some extent, become the expression of the political military strength of a nation. As these strengths rise, the nation that borrowed the foreign money for commercial purpose finds its own commercial system unable to generate additional revenues to feed the political and military prestige of the lender.
• Money, as I said earlier, plays a negative social role in the relationship of weak-strong men. Money is a social instrument of exchange. When it acquires a non-commercial SOCIAL role, it acts positively with average men, negatively with below average men. Outside the range of simple exchange, money has a social role. There the weak man is a victim.
• The Indian government offering 16% profit for power plants is one way of insulating the local enterprise from the fluctuations of foreign exchange
• Your idea of wages paid by the foreign companies unaffected by the exchange rate is another way of insulating the borrower.
• Economists in the field must have hundreds of such practices and must be in a position to devise any number to protect the borrower.

- Money as a mere medium of exchange is a harmless instrument.

- It becomes a social instrument to protect the weak when credit is born.

- It is interest that enables an economic possibility to become a psychological reality for the lender and thus to the society.

- In the relation of strong-weak combination, the instrument that serves a medium acts in favour of the strong.

- The employer, the boss, the mother-in-law, the authority tyrannised over those under them. Now the scales are tilted. The employee, the daughter-in-law, the backward people tyrannise over others. Please see the instrument of RELATIONSHIP acts both times in favour of the strong. This is our theory.

- Exchange rates are not merely commercial. They are monetary also reflecting the political, military realities. It is inevitable for weak nations to suffer when they borrow from strong nations.

The weak nations end up paying additional amounts apart from capital and interest, for the prestige of the DOLLAR.