The two faces of third world debt: a fragile financial environment and debt enslavement

Yet lend they must, for otherwise the debtors would not be able to keep up their contractual payments. The banks count on the IMF as the pillar of the whole system. But the IMF has no solutions either. All it can accomplish is to discipline the debtors and supply short-term funds in dire emergencies. Part of the IMF program is to get the third worlds countries to import less and export more. Leaving aside the fact that many of them have to import in order to have the supplies to manufacture exports, how can this be a way out if everyone is at the same time reducing imports while trying to increase exports? The upshot of all the frantic rescue measures is hence more of the same: the third world is driven into further debt enslavement and the financial system remains as vulnerable as ever.

The wiser heads in the business community are fully aware that as things stand the problem is insoluble. The schemes they dabble with revolve around either how to get the U.S. public to pay for putting the banks on a sounder basis or how to convert the debt into increased ownership by U.S. capital of third world assets. What none of them are willing to contemplate is the idea that there is nothing sacred about either the profits or the capital of the banks. Why must the banks continue to charge more than nominal interest on the outstanding loans? Why can't the banks' capital be used to write off a portion of the loans? Why not nationalize the banks and do away with them as profit-making institutions?

Sooner or later questions like these will have to be faced and acted on. The alternative possibility is a collapse of the international financial system and with it the opening of a new chapter in the history of the world capitalist system.