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New Left Review I/145, May-June 1984

Alain Lipietz

How Monetarism has Choked Third World Industrialization

The thirteenth of August 1982. The default of a major Third World debtor, long expected to be the overture to a world financial collapse, burst like a thunderbolt in a sky heavy with clouds. Mexico announced that it was suspending payments, and all the other major borrowers, and dozens of smaller ones, rushed forward to demand a renegotiation of their debt. Yet the disaster did not take place. A summer on the brink gave way to a calmer autumn. Nothing, of course, was actually resolved. In the period leading up to the Caracas conference and the Annual Meeting of the imf, the arrears continued to mount every month, against the tense background of the Brazilian debt renegotiation. An ongoing debate centred both on the possible solutions and, above all, on the allocation of blame. For everyone knew that the Third World debt and interest charges would never be fully repaid. The whole point was to determine how much would be cancelled at the debtors’ expense. Had the banks been too free and easy in granting the original loans? Or had the Third World countries taken on unreasonable debt burdens and frittered the money away? [1] Significantly The Economist of 30 April 1983 used the section-heading ‘An Orgy of Credit’ to describe banking trends in the seventies, and another section on Latin America (‘Where the Money Went’) lays great stress on the squandering of credits.

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Alain Lipietz, ‘How Monetarism Has Choked Third World Industrialization’, NLR I/145: £3

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