Abstract
By 1982 national governments had borrowed more than a trillion dollars from the private international banking system, and a number of them could no longer meet the obligations they had accumulated. What had once appeared to be a very successful resort to the market mechanism to deal with the problem of structural balance of payments deficits along Keynesian lines, had instead produced a debt structure which had come to threaten the stability of the capitalist system itself.1 This has locked a number of important banks into a symbiotic relationship with about a dozen of the most advanced LDCs which could threaten many banks’ long-term survival if the countries concerned are unable to improve their external performance dramatically. It has produced a situation in which many countries are having to reduce their imports, thus cutting consumption and domestic investment and also destroying jobs in the industrial exporting countries. It has also forced the leading international agencies and the governments of the main industrial countries to evolve large-scale rescue packages that involve a direct interference with the market mechanism, and which puts very large amounts of public money at risk.
Though foreign loans are indispensable for the emancipation of the rising capitalist states, they are yet the surest ties by which the old capitalist states maintain their influence, exercise financial control and exert pressure on the customs, foreign and commercial policy of the young capitalist states.
(Rosa Luxemburg, The accumulation ofcapital, 1913, p. 421)
There are 10 countries in the developing world that are crucial to the future success or failure of world capitalism. Between them, they contain 13% of the world’s population, they produce 8% of its gross national product, and they account for $355 billion, or 47%, of developing countries debt. Watch them closely, for they are all market economies, and some of them are in great danger.
(Euromoney, October 1983, p. 64)
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Notes and References
We should not overlook the contribution of the growth of bank credit in the 1920s and its collapse in the 1930s to the financial crisis and subsequent disintegration of the international economy. See H. W. Arndt, The economic lessons of the nineteen-thirties (London: Cass, 1972);
C. Kindleberger, Manias, panics and crashes (London: Macmillan, 1978);
M. Friedman and A. Schwartz, The great contraction 1929–1933 (Princeton: Princeton University Press, 1965).
Detailed figures can be found in E. Brett, ‘International banking and the crisis’, Socialist Economic Review, 1984; the major sources of data on debt are the Bank for International Settlements, Annual Reports, World financial markets, issued by Morgan Guaranty Trust; the World Bank’s World debt tables; IMF, International financial statistics; and AMEX Bank Review, Special Papers, ‘International debt, banks and the LDCs’, 10, 1984.
US Senate Committees on Foreign Relations, Sub-Committee on Foreign Economic Policy, International debt, the banks and US foreign policy (Washington: Government Printing Office, 1976) p. 11.
IMF, Annual Report, 1983, p. 18.
See, for example, R. I. McKinnon, The eurocurrency market (Princeton, Princeton University Press, 1977);
C. H. Stem et al., Eurocurrencies and the international monetary system (Washington: American Enterprise Institute, 1976).
Bank for International Settlements, Annual Report, 1982/83, p. 130.
See J. Spero, The failure of Franklin National Bank (New York:Columbia University Press, 1980).
G. Johnson with R. Adams, Aspects of the international banking safety net, (Washington: IMF, 1983) p. 2.
See in particular ‘The maverick who yelled foul at Citibank’, Fortune, 10 January 1983; and for a more general discussion see E. Brett, International money and capitalist crisis (London: Heinemann, 1983) p. 222 ff.
For a good analysis of the conditions under which excessive borrowing can lead to national bankruptcy, see J. Williamson, ‘The international financial system’, in E. Fried and C. Schultze, Higher oil prices and the world economy (Washington: Brookings, 1975).
For an early analysis of the way in which loans eventually had to be paid by an appropriation to the output of direct producers in third world countries, see R. Luxemburg, The accumulation of capital (London: Routledge & Kegan Paul, 1951).
World Bank, World Debt Tables, 1982–3, pp. ix–x.
See in particular K. Marx, Capital, Vol. III (London: Lawrence & Wishart, 1972) Part V.
BIS, Annual Report, 1983/4, p. 101.
BIS, Annual Report, 1982/3, p. 182.
Ibid., p. 183.
Ibid., p. 188; see also World Financial Markets, June 1983, p. 13; Euromoney, June 1983, p. 7; and even some cautious support for this view at the Williamsburg Summit in 1983 (see IMF Survey, 13 June 1983).
B. Quinn (Assistant Director, Bank of England) ‘International debt: a central banker’s view’, Bank of England Quarterly Bulletin, 23(4), 1983, p. 544.
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© 1985 E. A. Brett
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Brett, E.A. (1985). Private Banks, LDC Debt, Global Disequilibrium. In: The World Economy since the War. Palgrave, London. https://doi.org/10.1007/978-1-349-17896-4_11
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