Volume 31, Number 11 · June 28, 1984
The Debt Won't Be Paid
By Harold Lever
The first oil price rise at the end of 1973 led the less developed countries of the world to begin borrowing very heavily from the governments, private markets, and banks of the West. Much of the money they borrowed came from the surpluses of the OPEC nations and was recycled to them by Western banks. They now probably owe around $800 billion, something under half of it to private banks. The bankers gave little serious consideration to the inability of the less developed countries (LDCs) to pay the interest on the debt or make payments on the principal. The LDCs were sovereign countries, and for the bankers default was unthinkable; new credit would therefore always be available. But the process of snowballing debt made these confident assumptions harder and harder to believe.
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