ABSTRACT
A country attempting to develop economically will tend to experience a sharp accentuation of social tensions. This may express itself in new and dangerous forms of political instability; and political instability, in its turn, may prevent the country from developing as fast as its people or leaders desire, or may even completely inhibit its development. As the Economic Commission for Latin America puts it, ‘the positive role of public expenditure to ensure economic growth would seem to have been more important than the negative effect of taxation on private and aggregate savings’. Much depends on the country’s existing level of development, its economic and social structure, its political system and national traditions. Foreign capital can be made available to underdeveloped countries in three ways, viz. through private borrowing, through government borrowing, or through direct equity investment. Direct government-to-government loans and grants have been incomparably more important.
