The debt problem and developmentAfter studying this chapter, you should understand:
|• the origins of the external debt crisis for many less-developed nations;|
|• petro-dollar recycling, OPEC's absorption problem and the nature of the resource transfer from oil importers to oil exporters leading up to the 1980s debt crisis;|
|• when it is prudent for a country to borrow funds externally to finance a current account deficit or an investment project;|
|• how to measure the burden of the external debt and external debt-servicing costs;|
|• the continuing adverse impact of the excessive external debt build-up, or "debt overhang," of the 1970s on current and future growth possibilities for many LDCs; and|
|• some possible solutions to the debt problem.|
Throughout this text, we have examined fundamental action areas for countries wishing to accelerate their pace of economic growth and human development. We considered the critical need for greater attention to education and human capital accumulation. Universal primary education and progress toward universal secondary education are important benchmarks for future advances in growth and development. Tertiary education, we saw, must be geared to turning out a larger number of research scientists and technicians so that the needed focus on technology is implanted.
The creation of an efficient and honest civil service must also be one specific goal of a country's education and training policies. These efforts require that the central government take an active role in setting priorities, in mapping future projects carefully, in monitoring results, and in devoting sufficient public resources to all levels of education and professional training so that the goals which have been set have a reasonable chance of being achieved.
The importance of maintaining moderate or low rates of inflation, of carefully limiting central government budget deficits within sustainable boundaries, of avoiding severely over-valued exchange rates, of not running a persistently large current