Rescuing the debtors

The world debt problem need not generate hysteria or fear, but it can be ignored only at grave risk to global financial stability. That is why the United States seeks to join other industrial nations in a $20 billion emergency plan to bolster the International Monetary Fund and help the developing countries cope with the servicing of their $500 billion debt. Will the US Congress have the sagacity and foresight to appropriate the estimated $9 billion asked for as an increase in the US share of the IMF budget?

The American lawmakers will bear a heavy responsibility for potential chaos if they do not. As former West German Chancellor Willy Brandt - and many other a world leader - now pointedly warns, only a new ''spirit of solidarity'' can avert an economic collapse, political instability, and possibly even a disintegration of societies. Those are tough, importunate words and the American legislators had best be listening.

This is not a problem in the wild blue yonder somewhere but one that impinges in a direct way on the US economy. William Cline of the Institute for International Economics estimates that, if, say, Argentina, Brazil, and Mexico defaulted on one year's payments on interest and principal, and the banks wrote off those payments because they could not make additional loans, the nine largest banks in the US would lose nearly $14 billion, or one third of their entire capital. Add to this the debts of other countries as well, and it can be seen how the banks' difficulties could undermine recovery of the US economy.

Moreover, if the developing nations cannot borrow more money - and commercial banks would probably cut their lending without IMF help for the debtors - they themselves will experience slower economic growth. This means the US and other industrial countries will not be able to expand their exports, today accounting for a rising share of the gross national product, and their own growth will be constricted. As often as it has been said, it bears repeating: Global interdependence is a fact not a theory. The health of America's economy literally depends on the vitality and dynamism of every other economy.

This seems so self-evident that it is hard to understand the reasoning of some in Congress. Senator William Proxmire argues that if the US is going to lend $9 billion it could better be lent to home builders or automobile buyers. Other lawmakers would sooner put the money into a jobs program. The argument is fallacious. It is not a matter of either/or. There is no alternative to a massive effort to stabilize the world financial system, for without such an effort an American jobs program or even a huge defense buildup could become irrelevant. The world financial system must be kept from unravelling. Furthermore, a $9 billion appropriation for the IMF would not affect the budget deficit because the IMF, in return for the dollars it uses, provides offsetting credits on its books that earn interest.

What of the argument that the world's private bankers and developing nations have gotten themselves into trouble and there is no point in ''bailing them out, '' in throwing good money after bad? It is not an argument to be dismissed lightly. Opinion is in fact divided on whether the problem of the debtor nations is one of illiquidity (cash flow) or insolvency. If it is the latter, a case could be made that the banks should cut bait and run.

Yet, according to Mr. Cline and many other analysts, the fundamental problem is one of illiquidity - caused largely by the drop in commodity prices, shrunken export markets, and disinflation. It is believed that once economic recovery gets underway and export earnings start to grow, these financially strapped countries will once again be able to service their debts. Experts are known to have been proven wrong, of course, but certainly there is a moral as well as financial imperative to avert wholesale bankruptcies, with all the political and social consequences that could entail. The point is to keep developing nations from becoming insolvent.

This is not to minimize the long-term implications. The problem will not be solved quickly, and a $9 billion appropriation could be followed by a continuing need for support from the public sector, until the world economy improves enough to stabilize the situation. Commercial banks themselves should not escape having to tighten their lending practices as the price of helping the IMF rescue operation. But help there must be - and the US Congress has an obligation carefully to consider it.

Will it display a myopic parochialism or a far-sighted ''spirit of solidarity'' with the world community as it does so? On that may hinge a boisterous US turnaround.

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