Close the IMF, Abolish Debt and End Development:A Class Analysis of the International Debt Crisis

Protestors have responded to the international debt crisis in two ways: a reformist response which has, at best, called for debt relief and renewed lending, and a more radical response which has called for flat out cancellation of the debt. Unfortunately, the analyses upon which these positions have been based have contributed little to either a useful understanding of the crisis in terms of social relations or to the construction of appropriate grassroots political strategies to deal with it.

Among the reformists, most of the critical commentaries written by those outside capitalist policy circles, however sincere their concern with the negative consequences of the crisis, have failed to understand the crisis in terms of the changing relations of power between business and labor. In case after case the analysis reflects business' own point of view, most usually by accepting its definitions of the relevant actors: private banks (and other forms of private capital), nation states or national governments, and international agencies (such as the IMF or the World Bank). To the degree that everyday people make an appearance at all, they are seen as the victims of business or state predations and blunders.(1) For others, who have used a Marxist analysis, the problem has been much the same: by fetishistically understanding the "logic" of business without regard to the determining power of social activism, there is no analysis of that power which might provide a point of departure for an evaluation of useful strategy. Grassroots activism appears in such treatments principally as a response to falling standards of living.

This essay, therefore, outlines just such an analysis in terms of those powers of determin-ation which everyday people have exercised in the emergence and evolution of the crisis. This approach recasts our understanding of the crisis as a crisis of business and power brought on and perpetuated by the ability of people in various parts of the world to undermine state planning and corporate accumulation. This approach recasts our view of the relations among nation states in terms of the social relationships within those nation states as moments of a particular international composition of social relations. This approach recasts our understanding of the logic of business as a system of rules which must be imposed and whose functioning is contingent upon the ability of business to manage people's activities. It does this by shifting the perspective of analysis from that of business to that of the people themselves, i.e., the grassroots.

There are four parts to this outline. The first argues the need for a conceptualization of the crisis in global social terms. The debt crisis is seen as one moment of rupture in a more general crisis of the ability of business and the state to manage a particular global composition of the labor force and society more generally. The second part traces the origins of the crisis to an international cycle of social conflict which ruptured global accumulation. The emphasis here is on the complementarity of struggles of people in different countries and regions of the world and on the accumulation of debt as part of business's ability to deal with those struggles. The third part locates the continuation of the crisis in the ability of borrowers to repay that debt in the failure of business and the state to overcome those struggles and to restore conditions for a new cycle of accumulation. Finally, the fourth part of this essay argues that the power to resist state crisis policies should be, at least partially, focused on the illegitimacy of the debt and organized to force its abolition. The current emergence both of a debt crisis in the United States and of calls for IMF-style austerity policies in this country provide a golden opportunity for the coordination of social struggles both North and South.


The international debt crisis is but one contemporary example, among many, of economic and political phenomena whose interpretation demands a global approach to understanding economic and social relations today. Other such phenomena include industrial restructuring, international trade patterns, international monetary regimes, immigration, hunger and famine, ecological destruction, conventional wars and the threat of nuclear war.

Unfortunately, in the place of such a global social analysis the Marxist heritage is limited mostly to theories of imperialism which, since Lenin, have abandoned the applicability of class analysis to international relations and dealt with global capitalism primarily in terms of competition among national blocs of capitalists. In such analyses the relations between labor and capital virtually disappear at the international level.(3) Marxian analysis of exploitation is displaced to a discussion of countries exploiting countries that in the current situation focuses on the "creditor countries" exploiting the "debtor countries" without adequate analysis of either the relations within business or the relations between workers and business in each country, whether debtor or creditor. Even in the more recent approaches which quite appropriately view capitalism as a "world system," the emphasis has been on the power of business to impose itself everywhere and the ways it has done so, without understanding those actions as part of the dynamics of social conflict both locally and globally.(4)

At the heart of the business-labor relationship, is the ability of business to impose endless work on human beings, to reduce them to the status of "mere worker."(5) This is true whether we are talking about the rise of capitalism in the 16-18th Centuries or about capitalism today. At the same time, business's ability to impose such endless work has depended on its ability to create and maintain complex, hierarchical divisions among people: some have been put to work doing this, some to that, some have been paid, some have not, some have been paid more, some less, some have been assigned more responsibility, some less. This is true whether we are talking about the shop floor, a firm, an industry or the economy as a whole. Viewed politically, that is to say in social terms, we know that the purpose of these divisions are not essentially technical but are aimed at the control --control both in the crude sense of being able to put people to work, and in the more subtle sense of being able to harness their creativity and imagination. At every level business seeks a particular composition of hierarchical power among those in its labor force which gives it power over them all.(6)

We also know that against this imposition of work and against these hierarchical divisions of power, those made workers have always struggled. They have fought against having their lives reduced to the one dimensionality of work, have defended their own self-organization, and where business has been able to subordinate them to its despotic divisions, they have battled to recompose these relationships to their benefit.(7)

Applying this analysis at the global level we can understand that since the beginning of the rise of capitalism, the spread of business across the face of the earth has been, most essentially, a constant process of reorganizing the composition of the labor force in ways designed to create or restore control in the face of resistance. We can see the process of colonialism less as a titanic conflict among competing imperialisms than as a desperate search for new pools of controllable workers who could be pitted against currently insurgent ones. The subordination of colonial peoples was a process both of integrating them into an evolving division of labor and of recreating that division internationally. Africans were not simply put to work in America producing cotton, they were also being inserted as a poorly paid strata at the bottom of the international hierarchy of textile industry labor. The process reorganized the textile industry on a global scale. The readiness of European textile capitalists to accept this insertion stemmed from their needs to deal with their existing workers at home. Their ability to do it depended upon these new workers being organized separately from the existing workers and in forms which made their collusion in struggle difficult or impossible --conditions which were fulfilled partly by the institution of slavery, partly by the organization of international commerce and partly by the institutions of distinct nation states.

So has it been since. As contemporary electronics firms have opened factories in Third World countries, they have not only been imposing new kinds of work in those countries, they have also been widening their organization of labor so as to escape the strength of American workers and pit poorly organized and low paid foreign workers, e.g., women chip assemblers in Malaysia, against better organized and more highly paid workers in the United States. Where once such Malaysian workers would have been kept under control through British colonial power, today their insertion into the "global factory" is achieved through similar means exercised by nominally independent neocolonial states. To speak of capitalism as an evolving global system, means that capitalism is an evolving world system with a changing international composition of power relations with and within the labor force. In any historical period we can identify the international composition of those power relations and the ways in which they are being changed, either through the struggles of workers, or through the actions of capital.(8)

In this process of identification we must do something quite different from the usual assessment of the imperial hierarchy of nation states, or of the international division of labor. We must begin by studying the pattern of social struggles around the globe; their content, their levels of intensity and the ways they are connected and circulating, or separated and isolated. To rewrite history, and to rethink current politics, "from the bottom up" means more than just telling the story of everyday people which is generally left out of mainstream discourse. It means reinterpreting the past, and analyzing the present, in ways which identify the power of people to shape their lives and how this has repeatedly threatened the continuation of business's dominant role, and thus shaped the evolution of business's own history and current projects. Thus, by understanding these dynamics of social struggle, we can understand the forces at work: the growth of and limits to peoples' ability to rupture the system and the transformations in managerial plans and strategies of business and the state.

The first of these understandings, the pattern of growth of the power of the grassroots, must always be the primary concern, if our object is the maximization of that power and the overthrow or transformation of the system into modes of existence more appropriate to our own goals in life. This is also why the second of these understandings, of changes in business planning, must be interpreted in terms of the former. We must evaluate changes in business strategies in terms of our own power to see where and how our struggles have been effective, as well as to see their limits and where and how we can go beyond them.(9)

In other words, we need to fully understand both the various terrains of struggle and the disposition of forces thereon. When our struggles are successful on one terrain, business often seeks to shift to another and by so doing turn our strength against us. This we can only understand, and even better anticipate, if we understand how such shifts of terrain are actually countermoves in an ongoing conflict.(10) Similarly, blocked on one terrain, we may be more successful on another of our own choosing. The political problem is not only that of figuring out how best to fight in a given situation, but also of seeing when to shift, how to shift and how to fight on new ground. When we don't bother to attempt such an understanding and allow ourselves to be drawn into the discourse of business and the state --which is often ideological precisely in the sense that it hides the social character of conflict and crisis-- we lose the ability to view the situation, past or present, from our own point of view and thus to find strategies most appropriate to our goals.(11)

At the global level, such "terrains" on which we fight are sometimes literal geographies. During the period of early capitalism mentioned above, business reorganized itself internationally partly by annexing African labor and putting it to work in America. This was a fundamental restructuring of the social geography of what was then primarily an Atlantic capitalist system. But at the same time, such geographical shifts of terrain were complemented by other, quite different shifts in terrain on the part of capital: the reorganization of production and the judicial persecution of militant workers (which included hanging and transportation to the colonies) were also means through which the existing political composition of textile worker power in Britain was decomposed.(12)

During that same period, workers were themselves shifting their terrains of struggle. Defeated in England and defeated in Africa both transported British workers and enslaved Africans circulated their struggles to America right along with the Atlantic reorganization of business.(13) "As the number of co-operating workers increases, so too does their resistance to the domination of capital."(14) A corollary of this must be: "Along with the reorganization of capital which occurs in response to workers' struggles, inevitably comes the self-reorganization of those same struggles." To understand the reorganization of business, we must understand the workers' struggles which provoke it. To understand the self-reorganization of the workers,we must understand the reorganization of business to which it is, at least partially, a response. True inside a factory, true at the level of the world as a whole. In the contemporary world, it will be argued below in some detail, the global changes associated with the debt crisis have involved just such interacting processes of self-reorganization and struggle --struggles between workers who have ruptured the Post WWII pattern of capital accumulation and business and the state that have fought, partly with debt to reestablish the conditions of future investment and growth.

From these methodological considerations and specific examples of the social dynamics of accumulation to the global level in old history, let us turn to recent history --to the origins of the international debt crisis.


Analyzing the emergence of the debt crisis requires discovering how these financial problems constitute parts of the evolving structure of social relations --a process which involves situating the fetishized world of money and finance as moments of social conflict. On the surface, the debt crisis is a purely monetary and financial problem: how to manage international flows of capital so that the debtors of the Third and Second Worlds (and tomorrow, perhaps, the United States in the First World) can repay their debts. Thus, the current literature on the debt crisis deals primarily with issues of liquidity vs. solvency, the relations between private bank loans and official, especially IMF, sanctions, conditions of debt rescheduling and internal policy changes in the debtor countries. But, understanding these problems of liquidity, debt financing and adjustment in social terms requires analyzing two prior phenomena, both rooted in the changing structure of global social relations. The first of these is the build-up of the debt whose repayment has become an issue of conflict and crisis. Why did the businessmen and governments in the debtor countries take on hundreds of billions of dollars of international debt in the 1970s? Why were such large sums available to them at rates they thought they could handle? The second is the combination of the rapid rise in interest rates in the early 1980s that raised the cost of the debt to levels difficult to repay and the global recession in growth and in trade that made earning the foreign exchange necessary to repay the debt equally difficult.

To understand these interrelated phenomena in social terms requires a grasp of the state of the global social composition during the period in question, about 1970 to the explosion of the debt crisis in 1982. Elsewhere, I and others have argued that this twelve year period was part of a somewhat longer period of crisis of the global capitalist order which has lasted from the mid-1960s to the present.(15) To make a long story short, let me just say here that we understand the onset of crisis to be found in an international cycle of social conflict which swept round the world in the second half of the 1960s, rupturing business's global order West and East, North and South.

The Keynesian Era

The global order that was ruptured by this cycle of conflicts we can call Keynesian in reference to the man whose ideas inspired the most fundamental managerial principles used throughout much of the world during this the period.(16) During the period that reaches from the end of the Great Depression through World War II and the 1950s to the mid 1960s, business accumulation both nationally and to a large extent globally was organized around the principles of nation state responsibility for managing the growth and quality of wage income (demand) in such a way as to stimulate, not undermine, investment, productivity and the trade and capital flows derived from them. At the national level this meant government management of development, of monetary and fiscal policy on the one hand and more or less detailed direction of investment on the other. At the international level, it meant Pax Americana and American sponsored "nation building," the Bretton Woods international monetary system of fixed exchange rates, GATT agreements on trade and a combination of official and multinational corporate responsibility for investment --all of which presumed the ability of the Keynesian nation state to manage what is called today "adjustment" in such a way as to open the world more and more to the unfettered flows of capital required to maintain control over society as a whole.

In social terms, all of this meant that business accepted the American and European peoples' mandate drafted during the Great Depression and enforced through sit-downs, union contracts, World War II and the Post -war wave of strikes: the abolition of substantial cyclical unemployment and rising working class income as the sin qua non of social development.(17) It also meant, for the most part, acceptance of the Third World workers' agenda for terminating colonialism and increasing local consumption of locally produced wealth.(18) But if the Keynesian order was a business accommodation to a new level of popular demands, it was nonetheless a system of global accumulation. The crafting of this order required not only the settling of accounts with the major alternative models, fascism (which was accomplished in 1945) and Stalinism (which began in 1953), but also the reorganization of the global social composition in such a manner as to retain control. Thus, in the United States and Western Europe workers' power to limit unemployment and achieve rising social wages was channeled into productivity deals, trade unionism and consumerism. At the same time, while in the United States the waged-unwaged hierarchy was restructured on the basis of black and brown labor recently moved from the South to the North, capital in Western Europe was able to harness a similar labor migration from the Mediterranean basin to underpin discipline in the factories of Northern Europe. Thus, in the Third World, accommodation was made to the demands for decolonialization but in such a manner as to constitute a neo-colonial order that basically maintained the same international position of Third World workers --which is to say in the bottom part of the global hierarchy. Where the colonial powers had policed the old order, American marines played a greatly expanded role in the new. In Eastern Europe and the Soviet Union the change came more slowly as de-Stalinization moved carefully after the Hungarian Revolution from the Khrushchev reforms to those of Kadar, Dubcek and Gierek [and finally Gorbachev].(19)

To say that this period can be characterized in terms of a particular set of ideas and strategies is not to say that these were applied uniformly either in concept or in success. While, on the whole, the years from the end of World War II to the mid 1960s were ones of successful accumulation, they were by no means years devoid of social conflicts or victories for those who contested the new order. Indeed, at the core of what we are calling the Keynesian strategies of capital was the attempt to harness social conflict, and to repress it only when it became unmanageable. At the beginning of this period there was considerable revolt and thus repression of militant workers in the occupied countries of Western Europe and East Asia and against insurgencies in the Third World but the object was always to move as quickly as possible from repression to development. Eventually, this strategy failed and the period was brought to a close by an international cycle of interconnected struggles.

The Crisis of the Keynesian Era

That international cycle of social conflict that escaped the ability of business and the state to manage, and plunged the Keynesian era into a crisis to which policy makers have yet to discover an adequate response included rebellion both in production and in reproduction: in the United States: the civil rights and black power movements, the Chicano and Native American movements, the urban insurgencies that burned Watts, Newark, Detroit and other central cities, the student and anti-war movements, a wage offensive that ruptured the post-WWII productivity deals in the factories and, increasingly, the women's movement; in the Third World: new insurgencies in South East Asia, South Asia, Latin America, and the last anti-colonial struggles in Africa; in Western Europe: May 1968 in France, the revolt of Italian factory workers that led to Italy's hot Autumn of 1969, and an upsurge in the struggles of immigrant workers throughout Northern Europe; in Eastern Europe: a spreading insurgency that erupted from Prague's Spring to the Polish explosion in 1970; in the heart of the socialist block, Russia and China: growing resistance to state organized exploitation that can be traced from the Moscow food riots in 1962 through the Cultural Revolution to the sympathy strikes in Russia at the time of the Polish upheaval. Not only did all these conflicts occur in the same period but they were often directly linked, as in the case of the circulation of rebellion from rice paddies and jungles of South East Asia to American campuses, as in the circulation of insubordination from the ghettos of America's central cities to her factories.(20)

The first economic signs of the extent and seriousness of the damage inflicted on the Keynesian order by these conflicts included: at the national level: accelerating inflation, a growing productivity crisis, a decline in average corporate profit rates, and unmanageable government budget deficits; at the international level growing difficulties with trade patterns, exchange rates and speculative capital flows culminated in the American abandonment of the Bretton Woods system of fixed exchange rates in 1971. The change from fixed to floating rates which took place between 1971 and 1973 constituted a de facto admission on the part of national governments that they no longer had the power to manage accumulation internally in ways compatible with global accumulation. This change also constituted a deft shift of terrain on the part of business and the state: from the concrete worlds of production and reproduction to the abstract and fetishized world of money, from the city streets, factories, college campuses and rice paddies in which the struggles of the 1960s were being fought to the obscure back rooms of central banks and distant markets for foreign exchange. This was a shift that has taken years for people to grasp and respond to. During those years, policy makers have lurched along from one crisis strategy to another ever seeking a formula which will restore control over the world's social antagonisms. The path of this search has been largely determined by the pattern of conflict world-wide.

In terms of understanding the debt crisis, we have to look both at the individual struggles in various countries and at how business and the state have tried, and failed to pit them against each other as the key to regaining control. This we must do to understand each aspect of the origins of the crisis mentioned above: the reasons for the heavy borrowing, how large amounts of capital became available, the source of the global recession that undermined the debtor countries ability to earn foreign exchange and the rise in interest rates which dramatically raised the cost of debt. Let's look at these one by one.

The Desire and Need to Borrow

First, what were the reasons for the heavy borrowing? A complete answer to this question obviously requires a detailed analysis on a case by case basis, of the social conflicts in each of the "debtor countries" and of why the actual debtors (businesses, elected officials and generals) were willing to borrow enormous sums from their foreign counterparts. Although such analysis is obviously beyond the scope of this paper, nevertheless I think we can give something of a general characterization of this borrowing. In most cases, the local administrators of accumulation wanted to use the borrowed funds to finance both their short run response to local conflict, especially military/police control of the workers, students and peasants and their longer run response: local industrialization with all of its attendant costs including substantial investment infrastructure.(21)

In the three largest debtor countries Mexico, Brazil and Argentina such development investment was clearly predicated on the political repression of local struggles, in two cases by military juntas. We should remember that the imposition of military rule in Brazil in 1964 came as a response to an upsurge in workers demands, that the Mexican borrowing was preceded by the massacre of students in 1968 and widespread repression of peasant land seizures in the late 1960s, that the military in Argentina sought to build factories on the unmarked graves of the some 30,000 murdered insurgents. The borrowed money was a weapon in the reestablishment of accumulation after the local moments of the cycle of conflict mentioned above. The money was being drawn into these countries with the aim turning it into capital by exploiting what were, at least temporarily, stabilized populations of workers.(22)

In other parts of the Third World, such as the Sahel, where the working class was weaker and nature provided an alternative weapon, the response to resistance was not development but underdevelopment as drought was turned into famine and starvation was wielded against nomadic populations. In those countries borrowing for productive investment was a secondary response to popular resistance to business plans.(23)

In Eastern Europe, in Poland and Hungary in particular, the heavy borrowing came after the failure to generate local surpluses and investment adequate to the meet the growing demands of the people in those countries. The violent rejection by the Polish people in December 1970 to government attempts to shift resources from consumption to investment by cutting food subsidies caused reverberations throughout Eastern Europe and the Soviet Union. With direct attacks on consumption ruled out by the level of militancy and organization, socialist managers were forced to resort increasingly to borrowed capital to finance the industrial restructuring they needed to meet local demands and to regain control over accumulation. This was by no means the only response --the Soviets, for example, in 1972 faced with poor harvests also concluded the greatest grain pact in history with American grain companies to immediately increase food availability in the Soviet Union-- but it was a common and important one. When violence erupted again in Poland in 1976, this process was accelerated and even the Soviets felt forced to revise their 1976-1980 five year plan to increase the production of consumption goods.(24)

The Availability of Capital

Second, lets examine the question of how large amounts of loanable funds became available. The superficial answer to this is well known: the bulk of the money loaned during this period came from the Eurodollar market, in part the enormous dollar surpluses generated by the OPEC countries through their nationalizations and quadrupling of the price of crude oil in 1974. While part of those surpluses were used to import the goods required for development at home, the largest part of it, which exceeded their "absorptive capacity" in the short term, was deposited in Western financial institutions, especially American banks. Those banks then found themselves with huge new resources available for loans --loans which we have seen to be both desired and needed by a wide variety of borrowers.

But while this story is well known, we need to pause here and look behind the surface flows of dollars; we need to penetrate the fetishism of money and question the changes in social relations that underlay these rearrangements of world capital flows. To do that means first and foremost recognizing that the rise of OPEC and its extractions of petrodollars from the rest of the world was not simply an affair of governments and nation state competition, not in the OPEC countries, especially those in the Middle East, nor in the relations between the OPEC governments and the governments of the "oil importing countries."

In the first place, the motivations of the OPEC governments lay neither in simple greed, as they were popularly depicted in the West, nor even in justified repayment for decades of exploitation as some of their apologists have argued(25) Rather, the need for control over oil production, higher oil prices and balance of payments surpluses was dictated by the growing, uncontainable demands of the workers and peasants in those countries. To show this as clearly as it should be shown would require, once again, a detailed examination of each case. I will discuss only a couple of examples.

The most obvious case, and one central to the story of the debt crisis is that of Iran --whose government under the Shah at this time was attempting to carry out two simultaneous projects: development at home and becoming a major military power in the region. Both were costly, requiring a lot of money, and both were reflections of popular struggle in the area. With respect to development at home, the situation in Iran was similar to that in Latin American debtor countries --rising popular demands were met by a combination of police state repression and investment. The Iranian counterpart of the Brazilian "miracle" of accumulation based on repression, was the Shah as Modernizer who undertook a vast project of nation building backed by the torture chambers of Savak, the secret police.(26) With respect to the situation in the region --well, it is obviously a complicated story but suffice it to say, in this context, that every government in the Middle East fights a daily Orwellian battle to manage populations constantly threatening to escape control, and the most volatile and catalytic part of those populations, throughout most of the region are the Palestinians. The Shah's project of becoming the primary regional power clearly required dealing with those dispossessed and constantly insurgent people.

A second example of OPEC motivation, taken from outside the Middle East, is that of Nigeria in West Africa. The history of Nigeria since decolonialization is one of constant battle between the efforts of its neo-colonial governments to go on managing the structure of exploitation put in place by the British and the struggles of its workers and peasants to escape or reduce that exploitation. Time after time, the Nigerian government responded to popular demands by formulating multi-year development plans of accumulation only to see each one of them in turn undermined by popular resistance and upheaval. The culmination of one such cycle of struggle was the Nigerian civil war from 1967 to 1969. It involved a terrible cost for substantial sectors of the population (especially in Biafra) and but was eventually followed by the reemergence of growing social conflict. With a tradition inherited from the British of drawing surplus value from workers primarily through the manipulation of export prices --buying cheaply from Nigerian producers and selling at higher prices in world markets, the Nigerian government saw in OPEC and high oil prices a vital new source of capital to impose its development plans on both peasants and workers. It needed those external resources to restructure social relations at home in such a manner that more surplus value could be generated internally with less dependence on both volatile world markets and the workers who produced for them.(27)

To sum up this part of the argument: the immediate source of the money which financed the build up of debt derived from OPEC government responses to the struggles of people in their own countries and region.(28)

At the same time, we also know that the original source of the OPEC surpluses was the consumption income of Western workers as the higher prices for crude oil were passed on by business through the production processes to final prices of everything from gasoline to football helmets. The question must be why did Western policy makers allow OPEC to carry out this gigantic process of surplus value transferal from the West to the oil exporting countries? We know from past Western intervention in the Middle East, from the CIA overthrow of the government in Iran in 1953 through the British and French invasion of Egypt in 1956 and the American military intervention in Lebanon in 1958, to more recent support for the Shah and Saudi governments in the stabilization of the Persian Gulf, that the Western governments have never felt helpless or reluctant to influence the evolution of politics either in the region or in particular countries. We also know, now, from those who were involved that despite the official condemnation of the "extortionary" quadrupling of oil prices, and Kissinger's sending of the Marines into the Mohave to practice intervention into desert regions, that the U.S. negotiators quietly let the OPEC countries know that the U.S. government would not oppose oil price increases.(29) Why did those policy makers look upon those increases with such tolerance?

European commentators' cynical interpretations turn around the view that the price increases hit Europe harder than the U.S. and the inflation would undercut European competitive-ness with American goods.(30) There may be some truth to this but we can root even this understanding which explains things in terms of nation state competition in the changing social relations in both Europe and the United States. It is certainly true that the American trade balance went into deficit in early 1971 for the first time in decades, and that the devaluations of the dollar in 1971 and 1973, were aimed partly at correcting this imbalance --to some degree at the expense of Europe.(31) But, we must also recognize that the source of declining American competitiveness lay not only in the accelerating inflation which was pricing American goods out of world markets, but that inflation itself was a manifestation of popular insurgency at home and abroad --from American factories where workers were pushing wages up faster than productivity, through the riot torn streets of American cities where the programs of the Great Society were trying to regain control, to the rice fields of Asia where the vast expenditures of the war against Vietnam were fueling inflation at home and around the world.(32)

Against this background, which had precipitated the crisis in the first place, American policy makers saw a great opportunity in the OPEC price increases which went beyond any competition with Europe. That opportunity lay in the combination of a reduction of wage income in the United States through further price increases and the necessary recycling of the petrodollars that would make them available for the capital investment which was widely understood to be necessary to undercut workers' power and restore productivity and accumulation, not only in the U.S. but also in Europe and elsewhere. The Western tolerance for OPEC, stemmed, at least in part, from a vision as to how OPEC could be used as a financial intermediary to transfer value from Western consumers to Western capital --something that Keynesian management had failed to accomplish.(33) The emergence of the petrodollar surpluses which would fuel the debt crisis can thus be seen to have been a worked out compromise among various national managers of capital seeking to deal with popular insurgency in both the oil exporting and oil importing countries.

Now, the success of the project of using petrodollars to finance development investment in the oil importing countries, especially the U.S. and other OECD countries, but also the Third World, depended on the ability of policy makers to convert higher oil prices into a reduction in the real wage, i.e., in holding down nominal wage increases in the face of oil boosted inflation. In terms of international trade accounts this would translate into reductions in consumption imports to offset the higher costs of oil imports. As we now know, despite the global recession of 1974-75 and substantially increased unemployment, this strategy failed to a considerable degree. Faced with the joint assault (of higher unemployment and accelerated inflation) on their standard of living, workers in the United States (on the average) were able to mobilize the power necessary to force increases in nominal wages large enough to offset the additional inflation. As this had the simultaneous effect of further undermining the profitability of investment in the U.S., petrodollars were diverted toward speculative rather than productive enterprise. Everywhere this happened around the world, to whatever degree, the result was a failure to limit non-oil consumption imports and the emergence of new or augmented trade deficits whose financing could only be accomplished through IMF coordinated action (the Special Oil Facility) and through the diversion of petrodollars away from investment loans by the private international banking system. These deficits and this diversion not only added to the growing burden of debt but also undercut the use of debt to finance productive investment.

Interest Rates and Recession

Let us now turn to the third essential moment of the emergence of the debt crisis in 1982: the global recession that undermined the debtors ability to earn foreign exchange and the rise in interest rates which dramatically raised the cost of debt.(34) Once again, we can situate these events as moments of the changing pattern of social conflict around the world.

We know the policy changes that caused both the recessions of 1980 and 1981-82 and the rapid rise in interest rates: the anti-inflationary shift in American monetary policies managed by Fed Chairman Paul Volcker that began under Carter and accelerated under Reagan. We should also know, by now, that throughout the 1970s "anti-inflationary policy" was increasingly a euphemism for "anti-wage policy." Throughout at least the second half of the decade many, including most notably the IMF had been calling, in increasingly urgent and strident terms, for a globally coordinated attack on inflation that would include not only tight money but also demand budget reduction measures (e.g., cuts in social welfare expenditures) and the breaking of "structural rigidities" in labor markets (e.g., trade unions and wage indexation).(35) In the United States, and later in Europe, these monetarist policies were accompanied by an explicitly supply-side effort to shift resources from workers to capital.(36) These are policy recommendations whose social meaning should be recognized for what it is: direct and indirect attacks on people whose struggles have escaped control and whose behavior must be brought back into line with accumulation.

This shift in monetary policy had the direct effects of 1) dramatically raising interest rates, first in the United States, and then in all major financial markets, and, 2) in conjunction with an initially mild fiscal stimulus (from tax cuts and increased defense expenditures --partially offset by reduced social expenditure) of precipitating the Reagan Recession. The shift constituted another major moment, after the shift to floating exchange rates and the recycling of debt, in the manipulation of money to regain control in of social conflict. This was the means by which, at last, the highest unemployment since the Great Depression coupled with reductions in income support for those losing their jobs was able to bring about substantial reductions in average real wages in the United States. To the degree that this occurred, the Carter-Volcker-Reagan monetarist attack on the working class succeeded, not only in the United States but elsewhere as interest rates rose and production slumped around the world.

Thus we can see that the dramatic rise in interest rates which raised the cost of debt service so substantially, as well as the global recession which increased the difficulty of earning foreign exchange, for those who had borrowed during the 1970s must be understood as another phase in a decade long effort by business and policy makers to turn the crisis against those who had precipitated it. In this case, the focal point was conflict with workers in the United States, but the size and centrality of the American moment of global accumulation meant the rapid circulation of this new phase in the conflict to all parts of the world. In the case of the other creditor nations, such as Europe and Japan, the effect would be to cause a similar monetary tightening and parallel attacks on the workers through high unemployment. In the case of the debtor nations, both East and West the result was to dramatically increase the pressure on local managers to resolve their local conflicts. The increased cost and difficulty of servicing the debt would be the proximate cause of the explosion of the crisis in August 1982 when Mexican capital declared its inability to cope and demanded a rescheduling of the debt in line with more realistic prospects of gaining control over accumulation.


Having located the origins of the debt crisis in an international cycle of social conflict, I now want to argue that the continuation of the crisis in the ability of borrowers to repay that debt lies in the failure of policy makers to overcome resistance and to restore conditions for a new cycle of accumulation.

The major characteristic of the last five years of debt crisis has been the continual wrangling between creditors and debtors over the schedule of debt repayment and the conditions for debt financing --i.e., of new loans to cover repayment of old debt. In this wrangling the IMF has played a central role as broker between creditors and debtors and as global enforcer of the capitalist rules of the game. It is well known that meeting the "conditions" set out by the IMF has become a requirement for gaining new loans, and that those conditions are essentially policies of austerity designed to increase the availability of foreign exchange (for repayment purposes) primarily by cutting imports and government expenditures. To the degree that local debtors are willing to make a serious attempt to follow IMF guidelines, they have been able to obtain the new loans necessary to roll over their debt. Where they have refused to meet those guidelines or tried and failed, they have been cut off not only from IMF money but from private loans as well. This central role for the IMF did not begin with the debt crisis, of course, it began in the mid-1970s as first the demands for debt began to accelerate and then as repayment difficulties began to emerge in the late 1970s. But, it was precisely that experience and the approaches worked out during that period that were brought to bear in the crisis phase that began in 1982.

The Debate over Debt

Within this context a wide ranging debate has sprung up between the architects and defenders of the IMF led bank approach to managing the crisis and critics who argue for other approaches. For the most part the debate has been between the IMF position that austerity, improved balance of payments and continued debt service are prerequisites to renewed growth and the critics' assertions that because growth is a better guarantor of both debt service and future growth, the current debt service load should be reduced and stimulative rather than contractionary policies pursued within the debt countries.

The IMF approach is hard nosed and insistent. Its austerity programs demand the shortest possible path to the restoration of debt service, trade balance, profitability and growth. That path is steep, rugged and painful. When we examine the typical IMF prescriptions we can see that they are aimed directly and self-consciously against those policies and institutions which are manifestations of popular resistance to exploitation in the debtor countries. For example, the almost universal IMF demand for cuts in government expenditures to reduce budget deficits is commonly aimed at cutting those expenditures which subsidize consumption, either directly through programs that provide cheap basic food goods, or indirectly through cuts of wages in the state and parastatal sectors. The attack on wages in the state and parastatal sectors has also been accompanied by pressure for denationalization or privatization --the selling off of state owned enterprises. Similarly, the common demand for the devaluation of local currencies also strikes directly at working class consumption of imported goods --which in many countries includes not only "luxury" but also basic subsistence goods.

The IMF's critics, more impressed with its failures than its successes, and sometimes tempered with an humanitarian sympathy for those hardest hit by austerity have sought to find easier paths to adjustment. The two most common critical responses to the typical IMF policy demands are first, that such policies don't work to restore growth (the major liberal argument) and second, that the IMF is placing the cost of resolving a crisis of capitalist development on the victims of that crisis rather than on those responsible (the major leftist complaint).

The first response involves such arguments as the following: the universal imposition of austerity, devaluation and import reductions to generate foreign exchange can't work because while it is possible for large numbers of countries to become poor, it is impossible for everyone to devalue simultaneously or for everyone to both cut imports and still think they can continue to earn foreign exchange by holding their exports steady or expanding them. A related argument is that the cuts in government expenditures and imports brought on by devaluations have not differentiated adequately between unnecessary consumption imports and the necessary importation of raw and intermediary industrial goods. As a result, the drop in consumption has been accompanied by a parallel drop in investment and production instead of the hoped for expansion.(37)

The second response, the blaming the victim critique, involves either the mechanical Marxist analysis that the debt crisis is an inevitable manifestation of capital's internal laws --a view in which the working class always appears as victim-- or the view that the origins of the crisis lie in business's incompetence and mismanagement: of corruption and capital flight and of greedy bankers who recklessly pushed loans without regard to risk, of the central bankers in the imperialist countries whose misguided monetary policies precipitated the crisis in the first place and of the IMF whose approach has made matters worse.(38)

In either the first or second responses, the prescription is for alternative approaches that tend to shift the burden of adjustment from the debtors to the creditors and from people to capital. Typically the alternatives include such things as: debt consolidation, stretching out the debt, reducing interest rates, or even converting part of the debt to grants in ways that force the banking system to absorb losses and thus share the cost of adjustment. More generally, the basic idea is by reducing the burden of the debt on the creditor countries and by pursuing growth oriented policies to stimulate investment, production and demand to create greater capacity to repay whatever part of the debt is not written off. Against the IMF's mailed fist of austerity, these critics propose the velvet glove of development.(39)

What we need to recognize when we examine the many sides of these debates is the common goal that runs through the various proposals and counterproposals: the restoration of accumulation. However the assorted prescriptions distribute the burden of adjustment, the ultimate object of all concerned is the reestablishment of the conditions and actuality of growth. In social terms this means nothing less that the overcoming of popular resistance and the launching of a new period of sustained corporate expansion. Implicit in this common goal is the understanding that the current period constitutes a crisis of business's ability to manage social conflict in such a manner as to generate expanded reproduction. What this embrace of the development alternative ignores is that the conflicts that led to the debt crisis were revolts against development, against precisely that accumulation of capital the humanitarians want to promulgate. To go beyond this blindness requires learning to see in the demands and struggles of people around the world not only what they are struggling against, but also how what they are struggling for are often self-defined paths of self-valorization which move in a wide variety of directions.(40)

The Continuing Crisis

The persistence of the debates over the best method to proceed is itself the result of the failure of past attempts to achieve this goal of a return to development. Similarly, the repeated reschedulings of debt, under whatever conditions, are the result of the failure of past methods. Those reschedulings periodize the attempts and failures by policy makers to regain control --when control means not merely the power to repress but also the power to earn profits. Let us examine briefly a series of examples characteristic of the difficulties in enforcing conditionality and reestablish development.

Among the earliest examples, in the OPEC-debt era, of the failure to impose creditor dictated austerity is the almost paradigmatic case of Egypt in 1976-77. Hard pressed to manage its people the Egyptian government turned to the IMF and to its Arab bankers for new loans. They in turn demanded the implementation of what would become typical austerity policies, especially the reduction of government subsidies for basic foods to finance an increase in agricultural prices. When his creditors insisted on these changes despite Egyptian president Anwar Sadat's warnings of possible consequences, the subsidies were cut. The result was a dramatic, overnight explosion of popular anger throughout the major cities of the country --an explosion that resembled, more than anything else, the similar eruption in Poland that same year. Within 24 hours Sadat was forced to rescind the cuts and the creditors supplied the loans without the previous conditions being met.(41)

Another example, this time of a much more vicious and persistent attempt to impose austerity and discipline has been Chile since the overthrow of Allende and the installation of the Pinochet military government. On the one hand, military repression has been able to inflict a serious defeat on demoncratic Chileans. But on the other hand, the persistent inability to put Chileans to work profitably, in the face of widespread passive (and sometimes not so passive) resistance has not only demonstrated the limits to a purely repressive policy but forced it into repeated borrowings and debt restructurings.(42)

The history of such conflicts in Brazil, after the military coup in 1964, has been mixed. The military did prove able to oversee a period of heavy investment, intense exploitation and rapid growth --the Brazilian "Miracle"-- but with remarkable rapidity Brazilian workers reorganized themselves and at the very moment of the attempt to move from tight military control to a more open and flexible system launched a new cycle of struggle. That cycle was largely responsible for the repeated failure of the Brazilian government to implement its agreements with the IMF, especially those concerning the control of wages. Time after time the government would pass a wage directive limiting wage indexation to less than inflation only to have massive demonstrations force the parliament into refusing to turn the directive into law.(43) In this situation it is not surprising that well known economists like Celso Furtado have become outspoken opponents of IMF austerity and passionate advocates of a growth solution to the debt program.(44)

In neighboring Argentina, the tremendous debt piled up by the military, first in its war against its own people and then in the war with Britain over the Falklands/Malvinas Islands, brought an end to military rule and a return to civilian government. But even with this shift to a more legitimate government, there has been a failure to manage the legitimization and repayment of the accumulated debt. In neither the Argentinian middle class nor in the Peronist-led working class has there been a willingness to accept the austerity demanded by the IMF. In Argentina, as in Brazil, the call for growth solutions have been widespread and have led Alfonsin to at least bargain hard with his creditors.(45)

In Eastern Europe the most dramatic case has been that of Poland. Following the upheavals of 1970 and 1976 and the constant build-up of debt during the decade of the 1970s, came the uprisings of 1980 and the birth of Solidarity --the most important rebellion in Eastern Europe since the Hungarian Revolution of 1956. Not a member of the IMF but accumulating substantial debt to Western Banks, the collapse of Polish government development strategy for dealing with growing popular demands led to the imposition of martial law, the outlawing of Solidarity and, shortly thereafter, to an official Polish demand for admission to the IMF. As we can see from Ronnie Phillips' paper on debt and social struggle in Poland, the strategy of the Polish government closely resembles those of other debtor governments in the West.(46). Affiliation with the IMF was sought both for the access it would give to increased Western loans to roll over its debt, and for the extra external legitimacy the IMF would provide for the imposition of austerity. This crisis in Poland not only saw a dramatic collapse in investment but a government forced to allow the money supply to expand to accommodate dramatic increases in nominal wages (and in consumer prices) as it fought to maintain social stability while outlawing Solidarity. In order to obtain debt refinancing and membership in the IMF the government renewed its attack on wage income in 1986 through food price increases and cuts in consumption subsidies. The inadequacies of those measures were made obvious in November of 1987 both by the governments' introduction of a national referendum on austerity and economic reform and by the defeat of the government proposals in the referendum.(47) The debt crisis in the East continues.

On the other side of the debt negotiations are the international banking system, the IMF and the policy makers of the major creditor nations. Here too there has been a similar resistance to making concessions. On the part of the banks, the reasons are obvious enough: the desire to protect profitable loan income, to avoid writing off debt that would cause a contraction of assets and profits and to avoid setting nasty precedents. Cooperating with debt relief in the present would only encourage more demands in the future. In the case of the IMF the hard line intransigence is perhaps more principled. The IMF is not only playing the role of global cop to enforce the capitalist rules of the game in areas where capitalists have lost some control, but its spokespersons clearly see themselves as the conscience of the global system as well. IMF surveillance and conditionality are vehicles for calling attention to the mismanagement of social relations and for lecturing managers who have forgotten the rules of the game.(48) As for American and European policy makers, their unwillingness to accept major policy shifts may partly be explainable in terms of their desires to protect their banks and the international financial system, but derives primarily, I think, from their ongoing problems at home. Let's look at the United States that, as we have seen, has played a key role in the emergence and evolution of the crisis.

Economic Policy and Social Conflict in the USA

American policy makers, it will be recalled, adopted monetary restraint and increased unemployment in the period after late 1978 as anti-inflationary/anti-wage weapons aimed at a supply-side shift of resources from the consumption of the American working class to the investment of the capitalist class. However, despite the contribution of these policies to the depression of wage income (along with deregulation, attacks on unions and cuts in social programs) and despite other policies aimed at raising business profits (tax cuts, deregulation and the give-away of public lands and resources) to stimulate investment, by mid-1982 not only had business investment not expanded to offset the depression of consumption but as a result the increased unemployment had grown into a major global recession. By the time Mexico declared its inability to repay its debt in August of 1982, the Reagan White House was involved in bitter disputation not only with a wide variety of groups whose resistance had effectively blocked further attacks on the social wage (after the initial reductions gained in the summer of 1981), but also with the business community over proper strategy. When, in the fall of 1982 under pressure both at home and abroad, Volcker reversed the key monetary policy from restraint to expansion to bring down interest rates, especially for consumers, he was effectively abandoning a central strand of the White House program. The subsequent recovery that dates from 1983 to the present represented a major failure in earlier policy. It was a failure because despite the fall in real wages and the social decomposition of a number of industries through deregulation, the successes achieved by the beneficiaries of social and entitlement programs in blocking further reductions coupled with ongoing resistance (both at home and abroad) to industrial restructuring prevented either a sufficient rise in profit rates on productive investment or the generation of state surpluses to induce or finance a new cycle of real investment. Instead, the recovery was consumption led --a return to the wage led growth of the Keynesian era-- with the only new investment to expand productive capacity being that induced by the expansion of consumption.(49)

Subsequently, and for the last five years, capital in the United States has opted for speculation over productive investment, fueling real estate bubbles, takeover mania and the long bull market on Wall Street --what even BusinessWeek has called "the casino society."(50) Yet, however many Wall Street traders have struck it rich in these years of almost 19th Century like capitalist greed and speculation, we must not lose sight of the fact that it all represented a tremendous avoidance of real investment, a gigantic capitalist aversion to precisely the supply side launching of accumulation which the Reagan White House had tried to induce. Moreover, we should not confuse ourselves by thinking that the avoidance and aversion were irrational acts. We should instead see in them responses to the failure of both recent and past attempts to decompose the labor force into a more profitably and malleable form. Long were the discussions during this period of the weaknesses of American management, especially vis à vis the Japanese. Few were the imaginative attempts to formulate new approaches to labor control.(51) What restructuring investment there was during this period mostly followed old paths, either continued automation, as in the automobile industry, or geographical displacement of existing technology into new pools of foreign labor as in the electronics industry or union-busting industrial reorganization as in the deregulated airline industry.

Two by-products of the failure of the Reagan strategy of cutting taxes and then using the deficit as a rationale to cut social expenditures and entitlement transfers were the constantly ballooning Federal budget deficit and an expanding trade deficit fed by the resurgence of consumption. Both of these deficits had to be increasingly financed by overseas borrowing. To attract the money necessary for that financing, the Fed, under both Volcker and Greenspan, has had to maintain enough monetary restriction to keep American interest rates attractive to foreign investors. That in turn has limited their ability to use lower interest rates to stimulate domestic productive investment. This they might well have done, given the drop in the inflation rate brought on by the global recession induced drop in oil prices together with the successful attack on real wages at home. The continuing failure to eliminate, or even substantially reduce, the budget and trade deficits makes major reductions in interest rates impossible, however, and has forced American policy makers to seek a coordinated international solution to the problem by demanding that the other major Western countries, especially Japan and West Germany cooperate to bring down the value of the dollar and pursue stimulative policies, including monetary expansions which will cut interest rates.(52) All these measures are aimed at improving the trade deficit (by raising the cost of American imports, further undercutting the real wage, and by cheapening American exports) while allowing the Fed to further lower interest rates in the U.S. Japanese and especially West German resistance to these American demands have stemmed from their belief that the U.S. government should put its own social relations in order, i.e., cut consumption fat out of the budget deficit and out of wage income, rather than undermining its allies' projects for maintaining control at home. The German Bundesbank's constant fear of inflation, which it always cites as a reason for limiting stimulative measures, despite unemployment at an historically high eight per cent, clearly reflects an underlying fear of a resurgence in German wage struggles. Its recent reductions in its rediscount rates were probably more a reaction to the October 19th stock market crash and growing fears of deeper recession than a capitulation to Washington's pressure.(53) Within this context, debtor demands for major interest rate reductions to ease their problems of imposing austerity will continue to encounter stiff resistance from monetary authorities in the creditor countries who need high rates for their own social purposes.

Today, not only does the debt crisis continue as a symptom of the continuing crisis in social control and of the continuing power of people to resist decomposition, but it has spread from the Second and Third World to the First. The foreign financing of the American federal budget deficit together with private borrowing of foreign capital add up to some $400 billion and make the United States the world's larger debtor nation. As a result we are now witnessing the beginnings of a debate over this debt which strikingly resembles the ongoing debates about other countries debt crises. The litany is familiar. Americans are living beyond their means, consuming the world's wealth with borrowed money. The build-up of debt is accelerating; it may reach $1 trillion by the end of the Century unless something is done. [In fact, the gross federal debt at century's end was $5.7 trillion, of which some $1.3 trillion was held by foreigners.] The solution? As always: a more or less severe constriction of consumption and a shift of resources toward savings and investment to generate the wherewithal to repay the debt.(54) Sound familiar? And what should be our response to the debt crisis in other countries and to what is rapidly becoming a debt crisis here at home? It was to help assess answers to this question that the forgoing was written. Let's now try to draw some conclusions.


We have seen how the debt, whose repayment is now in crisis, was incurred for the purposes of combatting and controlling social conflict around the world. The borrowed money bought time and resources for the local managers to build projects of repression and accumulation. Sometimes the money bought military and police manpower and hardware to repress, imprison or murder people in revolt against their exploitation. Sometimes it bought factories in which those people could be incarcerated and put to work more intensively. The availability of this money, we have also seen, derived from similar projects undertaken by the OPEC countries and the United States which sanctioned the oil price increases. Both the petroleum exporting countries which extracted the surpluses from the world's consumers and the American banks that received the petrodollars and recycled them to borrowers around the world were seeking to convert these enormous sums of money from wage revenue into investment capital. The fact that this was not always accomplished as planned, that some of the money was diverted to finance trade deficits or that some of the money was stolen by the rich or appropriated by the workers, does not change the basic motivations which underlay the accumulation of debt.

What are we to say about this gigantic theft of income and the attempt to use it against people around the world? Most obviously, of course, that it was a double crime: against those from whom the money was stolen and against those to be used and abused with it.(55) In short, the acquisition of the debt should in no way be viewed as a legitimate process which national governments or firms were carrying out in the interests of the people. This view can be argued on two levels. First, we can argue that those who did the borrowing were neither democratically elected nor representative of the people whom they now want to repay the debt. Second, we can argue that the uses to which they have put the borrowed money have been, on the whole, antithetical to the interests of those people.

With respect to the first argument, about the non-democratic, non-representative character of those who did the borrowing, this is easy enough to show in some cases, i.e., in countries like Brazil, Argentina, Chile or Poland, where dictatorships hold power. It is somewhat more compli-cated in other cases, e.g., the United States and Western Europe where the illusion of democracy is widespread. The fact that it is complicated, however, hardly makes it impossible.

With respect to the second argument, about the illegitimacy of the uses to which the money was put, the case against borrowing to finance repression is obvious and easy to make. The case against borrowing to finance development, however, is less obvious to many and convincing them of its criminal character depends upon making a case against exploitation, on the one hand, and making the case for non-capitalist forms of self-valorization on the other.

A first conclusion, therefore, is that we can and should carry on a campaign to delegitimize the debt. We need to tell people the story of its origins and its purposes and attack the banks' arguments that a contract is a contract and fair play requires paying back money you have borrowed.

Once you accept the argument that the debt is not now, nor ever has been, a legitimate burden acquired by the bulk of the people in any country, then there is clearly no moral or ethical reason for continuing to repay it. In the case of consumer debt, where individuals take on debt to finance their own consumption, it is a little harder (but not impossible) to argue that the burden of debt service was illegitimately imposed from the outside by someone, or some institutions, bent on exploitation and control and that therefore individuals have the moral or ethical right to unilaterally cancel the debt.(56) In the case of the international debt which we are discussing here, however, the moral and ethical case is much easier to make.

The political case for repudiating the debt is also obvious, once you accept this kind of social and political perspective. The borrowing was done by business and the state, for business and against workers, peasants and many other kinds of people. While the use of the borrowed money to create jobs and wages was clearly not as painful for workers as that used to finance repression and murder, it was nevertheless used for the purposes of exploitation and the pacification of social conflicts. Domination's velvet glove may be less oppressive than its mailed fist, but it is no less desirable for all that. To accept the desirability of development, as I have argued elsewhere, is to remain bound within the project of accumulation and to be limited to disputing its form and the social origins of its managers.(57) We can do better than this. All around the world are people in communities who have been elaborating social projects of self-valorization, ways of being and interacting which go beyond the work-centered, alienated existence offered by capitalist development. These projects provide points of departure for alternative paths of social evolution. What is needed are the spaces and opportunities for their expansion. Either we believe in our ability to craft a new world, or we do not. Those of us who are convinced that we, collectively, have this ability can not accept being limited to some variation of accumulation.

All this is true not only in the debtor countries of the Second and Third world, but also in the United States. We have seen how the so-called "American" debt, which we are now told that we will have to repay through lower standards of living, was partly accumulated to finance a tremendous military build-up to support intervention abroad and the threat of war at home. It was also partly the by-product of an unsuccessful attack on government social expenditures coupled with tax cuts that primarily benefited the rich. While it can be argued that part of the costs of those programs which Reagan was unable to cut was shifted from taxpayers to debt, we do not have to accept the conclusion that because the debt was financing social expenditures for the working class, workers should be willing to repay it. In the first place, government borrowing is not done by program and we can equally well argue that the borrowed money was used to finance the military build-up that Reagan refused to finance with increased taxes. In the second place, even if we accept the argument that the borrowed money was used instead of taxes to finance social programs, we have only to argue that the debt replaced the taxes of the rich and the corporate taxes that the Reagan administration cut most. To make the rest of us pay for this accumulated debt would be to deliver to business interests, at a later date, the goal that has eluded the Reagan Administration during both terms: such a dramatic shift in costs and benefits of government spending from workers to business as to reverse the social gains of the last fifty years.

The social history of debt provides any number of examples of how credit and debt have been used as weapons against workers and how, on the other side, debt repudiation has been a potential or actual weapon in the hands of workers against their rulers. Here I want to mention only a few examples. In the ancient world: the ruin of the plebein debtors in Romethat ended in their replacement by slaves.(58) The use of the state by early capitalist business for the concentration of wealth in their own hands by making loans to the government which were repaid with taxes extracted from the citizenry.(59) This, of course, has been a business practice ever since, not simply a phenomena of early capitalism. From the epoch of dollar diplomacy when Western banks backed by their nations' gunboats vied for slices of the Imperial Chinese debt to the current debt crisis where the gunboats have been replaced by the IMF. In general in capitalism debt is used by business to overcome "obstacles" to accumulation --the most important of which has always been the popular resistance.(60)

The role of debt in the ruin of the workers in Paris during the Revolution of 1848. In that case, which Joe Ricciardi has shown to be so like the current debt crisis, the new government by refusing to repudiate inherited state debt to the haute banque and by taxing the peasantry to pay for the debt turned those peasants against the workers in the capitol and defeated the Revolution.(61) Writing shortly after those events, Marx concluded that this capitulation to the sanctity of credit spelled the doom of revolution. It was clear to him that the repudiation of the debt would have made possible an alliance between the workers in the city and the peasantry in the countryside through which the revolution would have advanced rather than been defeated. Years later, at the time of the Commune, Engels saw how the failure to attack the banks once again weakened a later revolutionary movement.(62)

A second conclusion, therefore, is that we should not only denounce the debt but we should fight for its repudiation --not only in the so-called debtor countries, but also in the United States. Not only should international debt be unilaterally repudiated but so should any domestic debt which has been used for the purposes of exploitation and control. The lessons of history are clear.

Once we have dealt with the moral or ethical case and the political one for repudiating the debt, we still must confront the practical issue. Would not the repudiation of international debt result in the isolation of any country daring to carry it out and a cut off of any further access to international finance? Most commentators argue that the likelihood of such retaliation against any country that carries out such an act on its own is probably great. The obvious implications for creditor strategy have also been argued: the most likely way to minimize such retaliation would be for large numbers of debtors to act in concert --the famous idea of a "debtor's cartel." Such a cartel, it is often said, not only couldn't be isolated and punished (being too large and having too many internal resources vital to the world as a whole) but would also be in a better situation to negotiate the terms of future credit. There is probably some truth to these arguments. The problem with them is that for all their radicality, they remain within the more general rules of the game. The way in which such a concerted default and collective negotiation of future borrowing have been discussed to date really amounts to little more than a gigantic negotiation over debt relief and debt rescheduling --whose purpose has always been the management of debt so as to enable its repayment. In the short term the immediate debt, and thus the burden of debt service, would probably be dramatically reduced --and that of course is in the interest of most people-- but the medium term object would be the restoration of new flows of credit, for basically the same social purposes as the old --and that is not at all in the interests of those same people. What we need is not the restoration of international finance but the creation of spaces free of its control within which various people can elaborate their own alternative visions and social projects. Given that foreign loans and the accumulation of debt have been used by local governments in their struggles with workers, they are not likely to decide on their own to permanently abandon the weapons provided by international credit, debt and the pressure of the IMF. The only possibility of real debt repudiation lies in the insurgency of the working class against both repayment and development.

Another part of the answer to the issue of retaliation is less clear: just how much damage would such isolation and refusal of future loans actually inflict upon the people of the countries involved? On the one hand, this again depends on the number of countries acting in concert: the larger the number the more internal resources would be available to blunt such damage. On the other hand, it depends on the strength of those people. In both rescheduling negotiations and in calculations of the costs and benefits of default, it is commonly recognized that the hardest variable to evaluate is the degree of social upheaval in response to the imposition of payment. The expected outcomes of the negotiations surrounding each major debt rescheduling turn, in large part, on how different observers believe the people of the debtor countries will react to various policy alternatives. The necessity of this political economic calculation has been drummed into the heads of central bankers and government leaders by periodic popular explosions strong enough to force the abrogation of miscalculated agreements.(63) What this experience shows is the power of those outside the formal policy making inner circles to determine both the negotiating positions of governments and the outcome of such negotiations. Where people are strong and able to resist, conditions have been less onerous; where they have been weak, the IMF and debtor governments have been better able to use the crisis against them. The same would be true regionally and nationally in the case of debt repudiation. The only hope for sufficient coordination and cooperation to limit the ability of business to retaliate also lies in the power of popular refusal. How the costs (of whatever level of reprisal did emerge) would be distributed would depend on the distribution of power within the grassroots and between it and business, i.e., on the global social composition.

The emergence of the United States as a prominent member of the league of debtor countries creates a unique possibility. Given that most of the largest multinational banks holding outstanding debt are based in the United States and are subject to governmental regulation, an international struggle for the repudiation of the debt can include the demands of American citizens that its government take action against the debt and for the protection of debtors from possible reprisal. The strength of such demands could be a major determinant of the outcome of such a conflict.

A third conclusion, therefore, is that the struggle for repudiation must be organized internationally and demand not only the collective refusal of debt but cooperation in developing policies to cope with possible reprisals and to create space for the elaboration of creative alternatives to development. Let us be clear, I am not talking about an international organization of governments, but rather of the international organization of popular struggle around the debt issue in order to limit state options and force actions in the interests of the working class.


(1)One well known example of an analysis which deals with the crisis primarily in terms of capital's own categories, is Cheryl Paper's work. While careful in tracing and critiquing the actions and interactions of the capitalist players in the debt story, Payer hardly recognizes everyday people as substantive actors. For example, in her article on the "Causes of the Debt Crisis," in the new URPE collection The Imperiled Economy. we learn much about the actions of private banks, the U.S. government, and various international agencies (such as the IMF). Of workers and their power we learn almost nothing: workers in the developed countries can be threatened by debtor country exports (pp.199, 203) and "poor people" (presumably at least some of these are considered workers) have been hurt by the debt crisis.

(2) This approach to the analysis of the debt crisis is rooted in the tradition of what I call, for lack of a better title, autonomist Marxism. For an introduction to that tradition see the introduction to my book Reading Capital Politically. Previous work on international monetary and debt crises within this tradition include: Christian Marazzi, "Money in the World Crisis: The New Basis of Capitalist Power," Zerowork #2, 1977, pp.91-112; Ronnie J. Phillips, Global Austerity: The Evolution of the International Monetary System and World Capitalist Development, 1945-1978, Ph.D. Dissertation, University of Texas at Austin, 1980; Joseph Ricciardi, Essays on the Role of Money and Finance in Economic Development, Ph.D. Dissertation, University of Texas, 1985; Christian Marazzi, "Aspects internationaux de la recomposition de classe," in Marie-Blanche Tahon et André Corten (eds) L'Italie: le philosophe et le gendarme, Montréal, VLB Éditeur, 1986, pp. 157-169; and Nathan S. Dudley, Worker Struggle and Wage Compression: The Rise and Fall of Indexation in Brazil, M.A. Thesis, University of Texas at Austin, 1988 (forthcoming).

(3) At his most perceptive, Lenin saw the connection between imperial expansion and social conflict at home. However, in his book Imperialism, which set the framework for most Marxist analysis of imperialism since, Lenin is almost totally focused on changes in the form of capitalist organization --the rise of monopolies and finance capital-- to the almost complete neglect of the power of workers. Although in Chapter 5 he quotes two imperialists, Rhodes and Wahl, on how social conflict at home has driven imperial expansion, Lenin's own discussion (in Chapter 8) follows Engels and is limited for the most part to the way capital has used its imperial gains to accentuate the wage hierarchy and produce a pacified strata of labor aristocrats. Unfortunately, throughout the book he tends to fetishize commodity trade, the search for raw materials and capital export rather than interpret them in terms of the global class composition.

(4) Although the "world systems" literature is generally associated with the work of Immanuel Wallerstein and coworkers, the basic perception of the comprehensiveness of the capitalist world was spelled out earlier in the work of Andre Gundar Frank and other dependistas in Latin America which their preoccupation with the ways in which the "center" had annexed and underdeveloped the "periphery."

(5) This is the view of the essential character of capital as social relation that I have elaborated in a number of places, including Reading Capital Politically (1979) and which has been explicit or implicit in much of the recent contributions to the tradition of autonomous Marxism; see, for example, Antonio Negri, Marx beyond Marx, Bergin and Garvey, 1984. Marx's comment about people being reduced to "mere worker" is in the Grundrisse.

(6) For a brief discussion of the concept of class composition see the introduction to the first issue of the journal Zerowork (1975), or for a more extensive discussion see Yann Moulier, "L'opéraisme italien: organisation-representation-idéologie, ou la composition de classe revisitée," in Marie-Blanche Tahon et André Corten, L'Italie: le philosophe et le gendarme, VLB Éditeur, 1986.

(7)The concept of the political recomposition of class power which occurs through social conflict is also discussed in the references in the previous footnote.

(8) This identification is carried out in section II of this essay for the Keynesian period from the Great Depression to the late 1960s.

(9) It is worth reemphasizing here the view that the autonomist Marxist perspective is one which emphasizes "class struggle" and is thus complementary with "capital-logic" and other perspectives which emphasize the point of view of capital mis-specifies the issue. "Class struggle" in the writings of autonomous Marxism is not just one emphasized variable among others, nor is it a reductionism in which everything is explained in terms of that one variable. Rather, the perspective insists on approaching everything from a working class point of view in which, at least as far as capital is concerned, there are only the depredations of the enemy on one side and our struggles against it on the other. From this point of view there is no such thing as capitalist activities outside the class struggle because all such activities (e.g., competition among capitalists) are merely enemy reorganizations in their war on us.

(10) The use of military metaphors to discuss class struggle is useful but misleading in one respect. Military confrontations are usually thought of as being conducted by generals and other military commanders. No such Leninist implications should be imputed to the use of these metaphors in this text.

(11) Examples of this kind of loss can be found in two otherwise interesting radical books on the current crisis in international monetary affairs: Al Watkins, Til Debt Do Us Part: Who Wins, Who Loses, and Who Pays for the International Debt Crisis, New York, University Press of America, 1986 and Howard Wachtel, The Money Mandarins: The Making of a Supranational Economic Order, New York, Pantheon, 1986. It was partly frustration with the complete lack of a social perspective in these books which prompted me to write this essay.

(12) Excellent examples of the kind of historical analysis I am sketching here, on this same period, can be found in Peter Linebaugh, "All the Atlantic Mountains Shook, Labour/Le Travailleur, No. 10, Autumn 1982, pp. 87-121 and Ricardo Salvatore, Class Struggle and International Trade: Rio de la Plata's Commerce and the Atlantic Proletariat, 1790-1850, Ph.D. Dissertation, University of Texas at Austin, 1987.

(13) Ibid.

(14) Karl Marx, Capital, Volume I, Chapter 13

(15) The most comprehensive statement of this interpretation was set out in the two issues of Zerowork #1 (1975) and #2 (1977). Parallel analyses of the European crisis were developed earlier in Italy by the theoreticians of Autonomia and at about the same time in France and Germany by like-minded Marxists. See, for example, the Italian articles from the early 1970s translated and published in Red Notes, Working Class Autonomy and the Crisis, London: Red Notes and the Conference of Socialist Economists, 1979.

(16) We could almost as well call this the Fordist Era, in the sense that Keynesianism is a generalization and institutionalisation of Fordism at the national and international level. By Fordism I understand the organization of society on the basis of mass production and rising productivity in the factory and the instrumentalization of growing wages and working class consumption for the reproduction of this order.

(17) A key work on this interpretation of Keynesianism is Antonio Negri, "John M. Keynes and the Capitalist Theory of the State in 1929," in Toni Negri, The Revolution Retrieved : Selected Writings on Marx, Keynes, Capitalist Crisis and New Social Subjects, 1967-83, London, Red Notes, 1988?. (forthcoming) Originally in Contropiano, 1968. N.B.: Where the Left traditionally sees only defeat in the salvaging of the capitalist order, Negri sees the power of the working class not only to rupture capitalist accumulation but to impose a new, progressive order more in its interests.

(18) Again, note the change in emphasis. While the end of colonialism is usually celebrated as a new era of freedom in bourgeois history, it is usually deprecated by Marxists who see only the substitution of neo-colonial domination for colonial domination. Within the perspective being set out here, the end of colonialism was the result, above all, of the struggles of colonial peoples to bring it to an end. That the struggle then had to shift to another terrain is regretable but we must not lose sight of the popular power manifested in the transition.

(19) It is important that we recognize how these reforms in the Soviet Union and Eastern Europe appeared in response to workers struggle. This is most obvious in places such as Hungary and Poland where worker revolt was quite open. In Hungary the reforms by Kadar came in the wake of the Hungarian Revolution and the more radical reforms of Nagy. In Poland too, Gierek took over from Gomulka following the student revolt of 1968 and the massive explosion in 1970. In Czechoslavakia and the Soviet Union where the growing pressures of working class resistance were less overt but no less effective, there has been a tendency to see the reforms purely in terms of the varying strategies of national leaders, e.g., Khrushchev and Dubcek.

(20) There is no room here to do more than suggest the manifold linkages through which social conflict circulated around the world in this period. The argument, however, asserts the existence of such circulation as the basic dynamic of the observable cycle of struggle.

(21) I don't want to ignore the more private but all too common motives of borrowers: the corrupt practice of skimming personal wealth off the edges of the massive loans and, often, depositing that wealth in foreign banks. Muckrakers have had a neverending source of dirt in this regard, but given the amounts that have actually been spent on investment in social control, I see no reason to think this is a prime motivation. Regardless of the percentages diverted into capital flight, be they high or low, the real issue in such flight is the reason for the export of capital --and that reason is to be found in the exporters' perception of high risk in their own countries as a result of intense class struggle-- the same perception that motivated the official borrowing in the first place.

(22)The successful utilization of borrowed money to finance accumulation is not a "gain" to be recognized and defended by the Left, as Robert Wood claims in an otherwise interesting article on the debt crisis in Socialist Review in 1985, but rather simply another case of the putting to work and exploitation of people -- the standard capitalist method of social control, whether carried out by private or state capitalists. When Wood quotes Peter Kilborn of The New York Times that "few Brazilians would undo much of the work of the technocrats...networks of roads, banking, telecommunications and electric power.. a widely diversified industrial base," he shows little empathy with the mass of the Brazilian people whose virtual forced labor created these wonderful byproducts of development and whose lives continue to be rendered miserable by them. Do we have to repeat endlessly the case against roads built for the rape of a country and its people, against banks whose only purpose is ripping off a share of surplus value, against telecommunications which serve primarily to facilitate social control and against electric power, 90 per cent of which is used for exploitation and pollutes rather than improves peoples' lives, against "diversified industry" which in Brazil not only exploits people and nature but produces mainly for the rich and foreign markets. See Robert E. Wood, "Making Sense of the Debt Crisis," Socialist Review 81, Vol. 15, No. 3, 1985. For more on the case against "development" see footnote 41 below.

(23) In some cases it may be that famine was simply substituted for, or complimented, more military forms of repression with the ultimate object being the rehabilitation and integration of the desimated populations into a development plan. Surely the various aid clubs and international agencies which have played a role in those regions have sought such development. For an analysis of famine as an underdevelopment strategy see Harry Cleaver, "Food, Famine and the International Crisis," Zerowork #2, 1977.

(24) Ibid.

(25) As in the case of those who borrowed the OPEC surpluses, there can be no doubt that any number of government officials, their kin and cohorts in the OPEC countries benefited disproportionately from the massive amount of money that flowed through their hands. But even the taste for ostentatious consumption diverted only a small proportion of the total surpluses into personal gain. The argument that OPEC acted to stem a decades long drain of wealth, and was especially motivated to do so after the decade of the 1960s which saw a steady decline in the terms of trade between oil and Western manufactured goods is undoubtedly true. But this explanation does little to explain the timing of shift in policy (which began well before the 7 days war) nor the uses to which the money was put.

(26) It is normal to attribute development projects to the benevolence of farsighted rulers and policy makers. Certainly,this was the case with the American portrayal of the Shah as a forward looking modernizer in the midst of Medieaval backwardness. Yet, from time to time commentators have recognized the underlying social pressures to which the Shah and his state were reacting. One example is an article "Why Oil Prices Go Up: OPEC wants them," in Foreign Policy #25, Winter 1976-77 by T.H. Moran which shows how those pressures were prompting Iran to demand ever higher prices within OPEC negotiations.

(27) In a remarkable work that analyses the entire history of Nigeria from colonialism through to the 1980s, Izielen Agbon has delineated, in considerable detail, the cycle of struggle that led up to the Civil War and the one that has followed it. He has shown how each of the Nigerian development plans has been undermined and subverted by worker and peasant struggle. See Solomon Izielen Agbon, Class Struggle and Economic Development in Nigeria: 1900 -1980, Ph.D. Dissertation, University of Texas at Austin, 1985.

(28) Thus we can see the applicability of Midnight Note's analysis of the energy crisis (as a crisis in capitalist ability to impose work rooted in high working class entropy) in the OPEC countries as well as elsewhere. See: Midnight Notes, The Work/Energy Crisis and the Apocolypse, 1981.

(29) See: V.H. Oppenheim,"Why Oil Prices Go Up: We Pushed Them," Foreign Policy #25, Winter 1976-77.


(31) The Europeans were insensed more by Nixon's unilateral abrogation of Bretton Woods in August 1971 and his imposition of a ten per cent import surtax than they were at the devaluation of the dollar. It is also true that following the OPEC price increases international holdings of dollars (OPEC accepted payment for oil only in dollars) skyrocketed and any European hopes for the dethroning of the dollar from its key role in the international monetary system evaporated for the forseeable future.

(32) Economists have traditionally treated these class forces in terms of either a cost-push (the excess of wage increases over productivity increases) or demand-pull (Great Society and Vietnam War) inflation. Some Marxists prefer to see it as a "profit squeeze" inflation. All are correct but the point is to see how, each characterization reflects the same underlying phenomena: social conflict which has ruptured the managerial abilities of capital. Competitiveness is always a question of the relative ability of capitalists to harness working class energy --to put it to work productively. Those capitalists who are best at this harnessing generally win the competitive battle. Thus the preoccupation of American capitalists these last years in learning the managerial techniques used in Japan whose manufactured products have been successfully invading U.S. markets.

(33) At least two parts of the economic discussions of the early 1970s have to be combined to see this clearly. The first is made up of the preoccupations with a "capital shortage" --Martin Feldstein's work is a good example of this. The second is associated with the Trilateral Comission whose study groups on the international monetary crisis and the energy crisis were among the first to see the opportunities in the new situation. See: Triangle Papers #'s 5, 6 and 7. Together this material illustrates capital's own view of what Midnight Notes has called the neo-ricardian strategy of manipulating the prices of basic goods to undermine wages and shift value to capital. Midnight Notes, op.cit.

(34) The recession acted in two ways to cut foreign exchange earnings: first, through the reduction in the import capacity of the countries in recession, especially the United States and the countries of Western Europe, and second the associated drop in the prices of primary product exports.

(35) See the IMF's Annual Reports for the mid- and late-1970s

(36)For a more detailed treatment of supply side economics and capitalist strategy in this period, along the lines of the argument of this essay, see: Harry Cleaver, "Supply-side economics: Splendori e miserie," Metropoli, 7, Anno 3, Numero 7, Dicembre 1981, pp. 32-48.

(37) One of the statements of an emerging liberal consensus around a critique of the IMF along these lines was the report Promoting World Recovery: A Statement on Global Economic Strategy published by the Institute for International Economics in Washington D.C., in December 1982 and signed by twenty six prominant economists. Signers of the document included Richard Cooper, C. Fred Bergsten, William Cline and Lester Thurow.

(38) See, for example, Michael Moffitt, "Global Banking Goes for Broke," The Progressive, February 1983, Alfred J. Watkins, Till Debt Do Us Part, op. cit., etc.

(39) An excellent example of such alternative approaches is the Debt Crisis Network's book From Debt to Development: Alternatives to the International Debt Crisis, Institute for Policy Studies, Washington D.C., 1986.

(40) For an example of a recent, articulate expression of the refusal of development see: Gustavo Esteva, "Mexico's State and Political Regime as seen from the Perspectives of Grass Roots Movements," 1984(?) and Gustavo Esteva, "Cease Aid and Stop Development: An Answer to Hunger," 1985. The term "self-valorization," which denotes the positive side of social conflict to go beyond capitalist valorization and found new self-determined directions, is Toni Negri's, see his Marx Beyond Marx, op.cit. For a discussion of the applicability of this concept in the Third World see Harry Cleaver, "Development or Autonomy?" and the prefaces to the Mexican and Korean editions of Reading Capital Politically.

(41) "Those Patient Egyptians lose Their Patience," The Economist, January 22, 1977, p.59. "Egypt: The Sound and Fury of the Poor," Time, January 31, 1977.

(42) Cites

(43) See Nathan Dudley, op.cit.

(44) See Celso Furtado, No to Recession and Unemployment: An examination of the Brazilian Economic Crisis, London, Third World Foundation, 1984.

(45) Cites

(46) Ronnie Phillips, "Debt, Class Struggle and the IMF in Eastern Europe," 1987.

(47) NYT's articles etc

(48) De Larosiere's speeches

(49) For a more extensive discussion of this collapse of the Reagan offensive, see Harry Cleaver, "Reaganisme et rapports de classe aux États-Unis," in Marie-Blanche Tahon et André Corten (eds) L'Italie: le philosophe et le gendarme, Montréal, VLB, 1986.

(50) Cover story, BusinessWeek, To some degree, it has been argued that at least some of the spate of takeovers and mergers of these last years, have been aimed at an industrial restructuring designed to give management more control over the labor force, lower costs and in general higher efficiency. To the degree that this is so, such changes must be considered part and parcel of the process of decomposition capital has been attempting in order to regain control.

(51) During this period of reassessment of managerial style and methods, capital has had some openness to experimentations with worker participation in profits and in management. Increased attention has been paid to various forms of worker participation in Scandinavia and to co-determination in Germany. We have seen some movement in this direction from ESOPs to worker buy outs and take overs of firms in trouble. This attention has been encouraged by a burgeoning socialist literature on economic democracy and workers' control. See Martin Carnoy and Derek Scherer, Economic Democracy, etc.

(52) NYT & WSJ articles

(53) NYT & WSJ articles

(54) Wake Up America issue of BusinessWeek Amazingly, some would-be radicals have also embraced such demands for austerity to stabilize accumulation. In his book The Money Mandarins, Howard Wachtel goes so far as to call for "sacrifices by all parties," and to argue that "greater monetary stability has to be purchased at everyone's expense." (pp.210-211) Similarly, in the October 31, 1987 issue of The Nation, I.F. Stone joins the attack on "the biggest consumer binge of all time" and writes "The United States needs a dose of austerity as surely as do Argentina, Brazil and Mexico." With radicals like these who needs the IMF?!

(55) To the degree that this money was appropriated by workers in the countries where it was borrowed and diverted from accumulation, what occurred was a transfer of wealth from the workers who consumed the higher priced oil to those who appropriated the money. In some cases this may have resulted in a more equitable global distribution of income. But given the complexity of the situation it is not at all clear that this was true on the whole. Not only were virtually all income classes of workers hurt by the increased oil prices in the oil importing countries, but those countries included a great many Third World countries and not just those of Northern America and Western Europe.

(56) The case here is one aspect of the more general one that has been made by critical theorists, namely the critique of the instrumentalization of working class income for social control. As usual, however, this case sees only capitalist manipulation. We should note that when Volcker cracked down on credit in 1979-80, he took special trouble to formulate specific attacks on consumer credit which was soaring and where new borrowing was outstripping repayments subsidizing consumption, a development which was seen as crowding out savings and investment. The current attack on consumption in the United States, e.g., the calls for consumption taxes and the encouragement of savings is based on the same supply-side desire to shift resources from consumption to investment.

(57) See footnote 39.

(58) Karl Marx, Capital, Volume I, Chapter 3, Section 3b.

(59) Ibid., Chapter 31.

(60) Karl Marx, Capital, Volume III, Chapters

(61) See Joseph Ricciardi, Essays on the Role of Money and Finance in Economic Development, Ph.D. Dissertation, University of Texas, 1985, Chapters 3 and 4, as well as his paper submitted to this conference.

(62) See Joe Ricciardi

(63) As in the 1976 case of Egypt discussed above and any number of cases since.