Compare the importance of two different transfers of capital [loans | debt repayment] between the gl

As globalization advances, starting from the last two decades, the movement of money and investment does not only flow from core to periphery countries, but also the other way around. Periphery is a category of countries which provide cheap labor and raw materials, and are usually outright/neo-colonies and relatively undeveloped; core is the category that assemblies countries which are strong in economy; they are prominent over other countries in world trade, and produce high-profit and technically advanced goods by exploiting and deriving resources from the periphery. Core and periphery are dependent on one another. This essay will discuss loans and debt repayment between the two categories of countries, where the former stands for money borrowed that is repaid with interest; the latter represents the repaid, rated money. The examples shall be the United States' Treasure bills and the long-standing debt Haiti has.

According to UN, the capital flow from periphery to core nations has increased from $229 to $784 million from the year of 2002 to 2006. This has allowed core countries to earn higher-rated capital in return; workers in the resourceful periphery are guaranteed with higher wages, for which in return higher productivity can be presented. Loans help periphery to expand economy, boost its developments in various aspects, and distinguish its financial relationship with the core if used wisely. Loans are also used to cover other foreign debt and assist cases of emergency. In recent decades, not just poorer countries borrow from those richer, but activities of the other way around are becoming more frequent. For instance, China holds the most of the United States’ debt having bought the most US Treasury Bills (T-bills). Countries buy T-Bills for the fact that the U.S. is democratic and distinguishably credible in debt repayment. The interest earned on T-bills is low but accumulates large deficit for the U.S. in long-run. However, critiques argue that the money should be invested elsewhere for higher interest or used directly in endowing education and health care systems in poorer countries.

However, countries of corrupt government who do not utilize loans properly are likely to be put under poverty by heavy debt instead. Critiques have argued that banks lend money carelessly to countries known to have low credibility in debt repayment, which instead settle them in long-term debt. In 2006, the total external debt of the low-income countries on earth was $375 billion; debt repayment averaged $94 million per day. Large amount in debt repayment takes away assets that were to be spent on construction of better education, health care, housing and transport. After Haiti’s earthquake that caused tens of thousands of injuries, and the emergency aids in response from all over the world, Haiti is still left in its long-standing debt of over $800m. Non-governmental organizations argue that the international finance system is what keeps the poor poor.

In recent years, international law has issued debt of the heavily indebted poor countries (HIPC). The HIPC initiative was funded in 1996 and aims to provide debt reduction for HIPCs. The International Monetary Fund (IMF) and World Bank have been supporting HIPCs with financial assistance and reform programs. Christian Aid (a NGO) had been requesting the British chancellor in UN Alistair Darling to lead the cancellation of Haiti’s debt.

Apparently, loans and debt repayment have considerable positive and negative impact on both core and periphery. Part of wealth of the core is stacked by loans from the periphery; debt has the power to have periphery countries sunken into poverty. The UN and IMF and many NGOs are working cooperatively in reducing the negative impact and the rich-poor gap loans and debt can have on a country.