International finance and the State in advanced and less developed capitalist countries

The international financial boom of the past 20 years presents features that, especially in comparison with past experience, have given rise to a number of analytical confusions. The first is that contemporary international finance is above or beyond the nation state; yet the form of today’s Euromarkets is due largely to the impact of state policy, and the markets hold together largely because of the implicit or explicit presence of the major states - especially the principal guarantor of the system, the United States. The second major error is to see Third World debt either as evidence of the success of developing countries’ inexorable march toward full economic autonomy or as evidence of their total loss of economic independence. In fact, foreign borrowing has strengthened the hand of the domestic states and of the elites that support it and are supported by it, providing funds essential for the constitution of an integrated national economy. At the same time, however, this borrowing can place major constraints on the debtor country, especially in periods of economic trouble. Contemporary international finance thus rests on strong support from the advanced capitalist countries’ nation-states - a support which is now clearly aroding - and upon an implicit partnership between lending banks and borrowing countries - a partnership now being strained to the breaking point by increasingly onerous demands their creditors are making on the heavily indebted developing countries.

KEYWORDS:
External debt; debt crisis; international capital flows