Banks: The Politics of Debt

International Finance Financial Policies, Annual Report to the President and to the Congress

The National Advisory Council on International Monetary and
US Government Printing Office, 304 pp., $4.30

Report on Developing Countries' External Debt and Debt Relief Provided by the United States

US Treasury

Security Supporting Assistance for Zaire

Committee on Foreign Relations Hearing, US Senate
US Government Printing Office

Covert Action in Chile, 1963-73 Governmental Operations with Respect to Intelligence Activities

United States Senate, Staff Report of the Select Committee to Study
US Government Printing Office, 62 pp., $ .80


We are living in one of the great epochs of expansion in international finance. For thousands of banks, the years from the mid 1960s to the mid 1970s have been a dizzy time. Their business has increased in value and in geographical extent. The most euphoric increase is in the developing countries, as banks set up new offices in nations from Nigeria to Peru. Some corporations, now, have almost more operations than they can count, with Citicorp of New York, for example, acknowledging “approximately 2,026 offices in 103 countries around the world.”1

Throughout the years of expansion, the political consequences of the boom have been hidden and ignored. People were busy making money. The French bankers of the Second Empire did not stop to consider the politics of finance as they lent more and more money to build ever more railroads in ever more distant countries. The bankers of the 1970s—their modern heirs—are similarly sedulous as they consider only today’s loan, to this year’s country borrowing money, not to build railroads but to explore, perhaps, for oil.

In the United States, there is a persistent illusion that the business of US banks, including their international business, is not an issue of public or political concern. But bank lending has already changed US relations with developing countries. US policy toward Chile and India, toward Argentina in the summer of 1976, is influenced by the odd, conflicting involvements of bankers and governments. The US government already pursues a politics of debt in the secrecy of the groups known as creditor “Clubs,” where countries seek to reorganize their foreign debts.

The illusion that business is private is not limited to banking. It corresponds to general changes in US policy. During the late 1960s and 1970s, the US government relinquished many of the functions of international economic hegemony that it had exercised after the Second World War, when the dollar was the main support of the international monetary system, and when most foreign aid to developing countries flowed from the United States. Since the late 1960s, the government has also permitted increasing license to US corporations as their foreign business flourished. As US arms corporations increase their commercial exports, US military assistance accounts for less and less foreign military business. Food exporters increase their commercial sales, while their exports under government aid programs dwindle.

The consequences of these changes are only now becoming evident. As the banks have grown, US financial relations with developing countries have changed from aid to private lending. Throughout the 1960s, official development assistance accounted for well over half of all US capital flows to developing countries. Now less than 35 percent are in the form of official assistance. US official aid was worth less in 1974 than in 1964, with almost all the decade’s increase in capital flows coming from private transactions, including bank lending.2 The distribution of US capital is determined, increasingly, by the preferences of private lenders. Six countries account for two-thirds of…

This article is available to online subscribers only.
Please choose from one of the options below to access this article:

Print Premium Subscription — $99.95

Purchase a print premium subscription (20 issues per year) and also receive online access to all content on

Online Subscription — $69.00

Purchase an Online Edition subscription and receive full access to all articles published by the Review since 1963.

One-Week Access — $4.99

Purchase a trial Online Edition subscription and receive unlimited access for one week to all the content on

If you already have one of these subscriptions, please be sure you are logged in to your account. If you subscribe to the print edition, you may also need to link your web site account to your print subscription. Click here to link your account services.