Debt, Adjustment and Development

Abstract

Depending on when we open the financial pages of our newspaper and which economic pundit we pay attention to, the LDC debt problem is variously viewed as insoluble or well in hand. The subject represents one of those rare cases when, among academics and practitioners alike, there is general agreement about the facts, but very little about their interpretation. This leaves the field open to the prophets of doom and gloom predicting the imminent collapse of the international financial and trading system, on one extreme, and Pollyanna-like protestations of faith in our efforts to ‘muddle through’ successfully, on the other. Purple language seems to have become a substitute for analysis and consequently we appear to be continuously lurching between crisis and euphoria — both undoubtedly equally unwarranted. This paper will take a quick look at the agreed-on facts, at varying interpretations, and suggest one possible ‘way out’.