Third World Debt and International Public Policy

Third World Debt and International Public Policy

Third World Debt and International Public Policy

Third World Debt and International Public Policy

Synopsis

This study traces the evolution of the international debt crisis from its beginnings in the early 1970s to the present. The author explores the economic forces within developing countries and the external conditions which led to the build-up of serious debt, focuses attention on the changing roles of multilateral lending agencies such as the JMF and the World Bank, and examines the role played by U.S., European, and Japanese commercial banks. Finally, O'Cleireacain details the changing attitude of the U.S. from the early approaches of the Reagan administration through the Brady Plan initiatives of the Bush administration.

Excerpt

The debt crisis of the 1980s presents a fascinating study in international political economy. It also raises some basic questions of international public policy. These include (1) the appropriate development strategies for Third World countries; (2) the role of multilateral lending agencies; and (3) the role of commercial banks as lenders to sovereign governments.

The crisis emerged over a weekend in mid-August 1982, when Mexico informed the United States and the International Monetary Fund (IMF) that it was unable to meet its debt payments. Soon, the crisis had engulfed other developing countries. It stalled forty years of economic growth in the Third World, producing the worse recession in Latin America since the 1930s. As the development process slowed, education and child welfare were among the budget items slashed in many countries, causing UNICEF to include the debt crisis among the factors contributing to a slowing in the decline in infant mortality. UNICEF estimated that the slowdown in development had cost the lives of an additional half-million children, raising to fourteen million the number of under five-year-olds who die every year. The debt crisis also inflicted costs on developed country taxpayers and shareholders.

This book uses a sample of debtor countries to seek to understand the economic forces within developing countries and the external conditions outside that led to the build-up of debt and the inability to carry it.

In doing so, it raises a number of longer-term questions about international public policy, the role of multilateral lending agencies, and the economic policies of developing countries.

A key issue of international public policy is the sustainable level of Third World debt and the appropriate market and nonmarket organs to be responsible for providing that debt. The rising level of developing country external indebtedness since 1980 is detailed in Table 1.1. The table also shows the main sources of financing. One indicator of the growing debt crisis was the number of countries falling into arrears in their external payments. This doubled between 1975 and . . .

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