International finance and the State in advanced and less developed capitalist countries

The international financial boom of the past 20 years presents features that, especiallyin comparison with past experience, have given rise to a number of analytical confusions.The first is that contemporary international finance is above or beyond the nationstate; yet the form of today’s Euromarkets is due largely to the impact of state policy, andthe markets hold together largely because of the implicit or explicit presence of the majorstates – especially the principal guarantor of the system, the United States. The second majorerror is to see Third World debt either as evidence of the success of developing countries’ inexorablemarch toward full economic autonomy or as evidence of their total loss of econom-ic independence. In fact, foreign borrowing has strengthened the hand of the domestic statesand of the elites that support it and are supported by it, providing funds essential for theconstitution of an integrated national economy. At the same time, however, this borrowingcan place major constraints on the debtor country, especially in periods of economic trouble.Contemporary international finance thus rests on strong support from the advanced capitalistcountries’ nation-states – a support which is now clearly aroding – and upon an implicitpartnership between lending banks and borrowing countries – a partnership now beingstrained to the breaking point by increasingly onerous demands their creditors are makingon the heavily indebted developing countries. JEL Classification: F34; F33; F32.