Out of debt: Can US spur an Asian miracle in Latin America?
There is only one sensible way out of the Latin American and African debt crisis. The debtors' economies have to grow out of it. But there's the rub. To grow, they need capital to invest to increase productivity to expand exports to earn dollars to pay debt and provide capital to grow, etc, etc. And it was borrowing capital for all those purposes that created the debt crisis in the first place.Skip to next paragraph
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The debtor nations need to sell more shoes, steel, clothes, sugar, tools, and furniture to America, Europe, and elsewhere in order to earn the dollars to pay back American and European banks - and to modernize their shoe and tool plants.
Given this reality, the June 12 vote of the International Trade Commission (ITC) in Washington to recommend some form of trade protection for five types of American steel products is exactly the wrong trend to set.
The ITC is handing President Reagan a political Bessemer furnace. He will have to accept, reject, or modify its recommendations by Sept. 26. His choice, just six weeks before the election: stick to free-trade principles, or bow to industry and steelworker pressures from the nine big-steel states - states with 83 percent of the electoral vote needed to win. If he erects trade barriers against steel, other lagging American industries will increase demands for similar help. And America's allies in Europe and Asia will be tempted - and justified - to retaliate.
American consumers would pay more for many basic goods. Consumers in Mexico, Argentina, and several dozen less-affluent lands would suffer doubly.
They have already been asked to tighten belts and work harder under loan plans from the International Monetary Fund (IMF). Fair enough. Austerity and a renewed work ethic are a prelude to growth.
But is it fair to ask those nations' citizens to (1) pay more for imports; (2 ) pay higher taxes; and (3) work harder to export more - and then tell them, ''sorry, no added exports welcome here''?
Questions involving trade and tariffs often sound logical in the abstract, but are heart-wrenching when put in terms of jobs for the workers on all sides.
In this case, the AFL-CIO's Lane Kirkland is arguing that charity begins at home. He is telling American voters they ought to think first of the jobs of steelworkers in Pennsylvania and other states. And beyond them, the textile, shoe, and other workers.
Sympathy is natural. But, taken to its logical end, this argument is a Scrooge argument. Instead of expanding the world economy, it calls for pinching off growth - first in poorer countries, then in all countries. It calls for preserving inefficient management, less-productive-per-dollar workers, and outmoded factories and processes in the United States, to America's eventual disadvantage - and to the risk of more upheaval in the debtor nations.
It's not always wise to reduce complex international problems to homely parallels. But it's useful in this case to imagine yourself as the holder of mortgages on your neighbors' houses. Neighbor A can't sell his chickens for as high a price as when he signed the mortgage. Neighbor B can't afford his higher heating-oil bill. Interest rates on the variable-rate mortgages you hold have been raised to match world lending rates. Your tenants threaten default unless terms are stretched.
As a landlord you have basically two choices: (1) help your tenants by stretching payments while they find better ways to earn money for mortgage and oil bills, or (2) foreclose and sell to someone else.