The Origins of the International Debt Crisis

Abstract

Following the lacklustre performance of many developing countries over the last fifteen years, the problem of international debt is once again creeping back into the policy limelight. The achievements of structural adjustment and new lending programmes that have been at the heart of previous policy responses have been limited in terms of their ability to deliver new growth to debtor nations. Latin American countries are still heavily indebted to multilateral institutions with heavy debt burdens still threatening access to markets (World Bank 1995; Langfield 1995; and UNCTAD 1995). Similarly, some of the Asian "success stories" are once again becoming exposed to dangerously high levels of sovereign debt, especially to Japan (Ana and van Hees 1995). Such developments are naturally a renewed challenge to policy makers and to the accepted understandings of the causes of the crisis and its sustenance. It is postulated that analytical approaches that examine the issues surrounding new lending in the 1970s or, more commonly, the spate of defaults started by Mexico in 1982, are focusing attention on what is symptomatic, rather than on what is causal. By doing so, there is a danger that such analyses will provide a new inheritance of misinterpreted policy developments and limited future options. Developing these arguments becomes all the more important when considering the current stage of evolution of the policy debate, in particular, the emerging controversy on the possibilities of debt forgiveness, as opposed to the more traditional instruments of new lending and structural adjustment. For example, in September 1995, the World Bank, albeit begrudgingly, publicised a proposal for $11 billion in multilateral debt write offs for forty countries (Holman 1995). Despite opposition from the International Monetary Fund (IMF) and major creditors such as Japan and Germany, this has brought the issues of debt forgiveness back on the agenda. There have been similar developments in the G-7 summit process (van Hees 1995; Anonymous 1997), the Lome 223

Minority governments and budget deficits: The role of the opposition

“…To avoid such unsustainable economic paths, the strength and stability of the government is thought to be a relevant variable. Politically weak governments tend to be considered as less able to undergo economic stabilisation and successful adjustment policies (Locke and Ahmadi-Esfahani, 1998;Franzese, 2002). Many authors have indeed shown how unstable and weak governments are more prone to deficits and debt, particularly in problematic economic contexts (de Haan and Sturm, 1994;Borrelli and Royed, 1995;de Haan et al, 1999;Lavigne, 2010).…”

Political Institutions and Foreign Debt in the Developing World

“…Most published writing on developing country foreign debt emphasizes “bad luck.” This bad luck hypothesis suggests that governments accumulated foreign debt in response to adverse global economic developments. Iyoha (2000:175), for example, states that “a significant proportion of the increase in [sub‐Saharan Africa’s] external debt since 1982 can be attributed to exogenous factors.” Governments borrowed to finance “unexpected and unmanageable current account deficits and to finance burdensome debt‐service payments” (see also Locke and Ahmadi‐Esfahani 1998; Oxfam International 2001; Roodman 2001; Catão and Sutton 2002; Easterly 2002; Pettifor 2002, 2003; Manasse, Roubini, and Schimmelpfennig 2003). Even the IMFs official discussion of the debt buildup emphasizes exogenous shocks: “worldwide events in the 1970s and 1980s—particularly the oil price shocks, high interest rates, and recessions in industrial countries, and then weak commodity prices—were major contributors to the debt build‐up” (International Monetary Fund 2000).…”

Debt

“…Yet if we accept that the practice of lending, borrowing, and repaying commodity-money differs in significant ways from other kinds of social interdependency, and so bears consideration in its own right, then anthropology's inquiries into debts of money arguably begin much more recently. They may begin with ground-breaking studies of state debt emerging in the 1990s (Locke andAhmadi-Esfahani 1998, Roitman 2003), in response to the 1980s crisis, and new work on microcredit (Elyachar 2005) and household debt (Dudley 2000, Maurer 2006, Williams 2004 multiple scales (Hann and Kalb 2020, 4). Forerunners of this approach include the work of Janet Roitman (2005), Julie Elyachar (2005), and Kathryn Dudley (2000).…”