Bank lending to third world countries in the 1980's

The world financial system today faces challenges more serious than any since World War II. International trade in goods declined sharply in 1981 and 1982. Last year was the first year in 40 years that income in many developing countries declined. Unemployment levels around the world are both staggering and frightening. All of these problems are focused neatly into the international debt issue in which countries in the process of development are currently unable to repay principal on their international indebtedness without very great political and financial strain. The LDC debt question is a public policy issue that has exhibited at least nine lives. One should emphasize two self-evident facts: One, we are dealing in this issue with intangibles; the political climate in the developing countries, the mood of the United States Congress and the regulatory authorities in the creditor countries. Secondly, we should frankly admit that there are huge gaps in our knowledge of the facts that make all prediction hazardous. The problem of the LDC debt is severe but not beyond repair. A resolution of the problems of worldwide protectionism, and of unstable interest rates and foreign exchange rates will do much to eliminate the problem. This requires cooperation between national governments, central banks, international organizations and commercial banks. The uncertainty which plagues us can be laid to rest only when some evidence is at hand that the major nations of the western world recognize that this is a global problem and requires global solutions.