THE GLOBAL DEBT CRISIS: America Growing Involvement

The headlong lending to Less Developed Countries (LDCs) that Anthony Sampson vividly narrated in The Money Lenders (1981), and the ensuing Mexican debt crisis that Darrell Delamaide crisply analyzed in Debt Shock (p. 475), together get ponderous, fizzed-up treatment here. Makin is a U. of Washington economist with extensive experience in international finance--enough to know better than to assert that, until that August 1982 Mexican risk-of-default, ""Only a few insiders at the Federal Reserve Board of New York. . . had any idea that a serious problem existed."" (See Emma Rothschild's 1976 warning of ""The Coming Crisis,"" for starters.) Makin falls into that kind of sloppy misstatement because he wants to make a point--Not Enough Attention Is Paid, especially in the US. And that's the main problem with the book: it harps on certain pet themes, without providing a clear, straightforward explanation of the unmysterious way the debt crisis developed. For Makin, overlending was rooted in American malaise: ""The fear of raw materials scarcity became a metaphor for the general loss of self-confidence in the wake of the cultural revolution of the seventies and the relative decline in the industrial world."" (The idea is that the LDCs had raw materials, ""key to the economic future of the world""--though they mostly put the money into industrial growth, European bankers were only proportionately less greedy, big-debtor Poland didn't appeal for its coal.) Makin also sees the LDC crisis as part of ""a general crisis resulting from rapid expansion of government debt,"" in the US and other developed countries too--arising from ""expansion of social programs"" and refusal to either raise taxes or cut military spending. (Everybody's improvident--not everybody's self-interested.) The body of the book includes a review of past lending booms and debt-repudiations, as a cautionary lesson (in which, along with other trivia, the Lindbergh kidnapping symbolizes ""the shift from the spirit of the twenties""). There is no attempt to write for the layperson, uncomfortable with risk-analysis--and nothing here for the specialist that hasn't been covered more effectively before. The added ingredient is Makin's ideas, which aren't particularly impressive.