The Uneasy Calm: Third World Debt—The Case of Mexico

Authors

  • John C. Pool
  • Stephen C. Stamos

DOI:

https://doi.org/10.14452/MR-036-10-1985-03_2

Keywords:

History, Imperialism

Abstract

In their article "The Two Faces of Third World Debt: A Fragile Financial Environment and Debt Enslavement" (MR, January 1984), the editors make a convincing case that the third world debt situation has reached crisis proportions which threaten the stability, if not the very foundation, of the international financial system. What makes this article significant and unique among the onslaught of recent articles on the topic is their analysis of the simple mechanics of the lending process in which they demonstrate that any situation which involves a regular annual amount of borrowing and a conventional repayment schedule will soon lead to a situation where the debt servicing, i.e., the interest and amortization, will exceed the annual amount of new loans. This process, they demonstrate, will soon lead to a reverse capital flow, that is, a flow of capital from the capital poor to the capital rich; which, of course, is the opposite of what one would presume was the desired effect.

Published

1985-03-02

Issue

Section

Articles