Why is debt such a pervasive phenomenon among underdeveloped countries today? In what way has debt reinforced the underdevelopment of the developing world?

The all-encompassing effects of globalization on monetary coordination international trade , telecommunications , scientific cooperation cultural exchanges , migration , and international relations have made it a persistent phenomenon that is worthy of being the subject of much argumentation by economists and laymen alike . Globalization has been criticized as being a tool for exploitation of people especially those in the underdeveloped nations , resulting to an ever increasing gap between the rich and the poor , environmental destruction and heavy debts (Helmle 2001

The supranational institutions , IMF and WTO were established in 1945 after the world war

at a conference in Bretton Woods . These institutions , functioning as economic policy-makers had become the major influencers of the economies of underdeveloped nations (Alternative Information and Development Center 2008 . As Stiglitz (2003 ) points out these institutions being the agents and directors of the forces of globalization , account for the current pervasive debt that characterizes almost all underdeveloped countries

In principle , circulation of any surplus of capital must be induced by financial institutions lest capital turnover and transformational growth become hampered (Salvatore 1994 . Underdeveloped nations were encouraged by these institutions to take out loans for the stimulation of development during the period of increased global capital surplus in the 1970s . This was based on the theory that planning and investment were necessities for the correction of market imperfections , creation of enterprises and industries as well as the need to finance development in Third World (Thadani 2006

As a result , the previous nationally-directed path of development in countries was transformed to a path that was directed by global economic policies , paving the way for global economic integration (Thadani 2006 Underdeveloped countries were forced to adapt to this globally-directed policies by transforming economic management to one that fits the neo-liberal agenda (Thadani 2006 . In doing this , economic management must be characterized by reduced economic regulation , privatization , and liberal market systems - principles derived from the individual goals of industrial countries (Dunn and Mutti 2004 . The underdeveloped countries ' roles in policy-making became subjugated to these global principles . This resulted to problems in governance and representation as well as questions on the legitimacy of these supranational institutions in dictating the course of action for Third World development (Stiglitz 2003 Thadani 2006 . One school of thought saw globalization as a phenomenon that eroded state sovereignty and traditional states (Jameson and Miyoshi 1999 , as supranational institutions such as IMF and WTO emerged as global economic controllers that reduced such sovereignty to merely an element of the usual bargaining leverages done by states (Prakash , Vijapur and Shah 2006 Alternative Information and Development Center 2008

For global integration to become effective , strategies and policies must be formulated and discussed by these policy-making institutions to enable the nations to benefit by increasing the job opportunities increasing incomes , improving technologies and skills , restoring the environment , and by being provided and avenue for the exportation of local products (Prakash , Vijapur and Shah , 2006 . In underdeveloped countries , these did not happen

Due to the failure of the development projects , mismanagement corruption of leaders...