Southern debt crises

Paul Krugman (1995) writes that one of our contemporary conceits is that we think globalization is something novel and unique to our present time. A good case in point is the question of intermittent debt crises that usually are most evident in lesser developed countries (LDCs), or the South. Southern debt crises – situations where Southern countries default on their interest and/or principle payments to Northern lenders, are conventionally understood as isolated policy problems that occur on occasion.1 At the same time, these crises have recurred periodically since the early nineteenth century and before (Aggarwal, 1996; Eichengreen and Fishlow, 1998; Fishlow, 1989; Marx, Echague, and Sanleris, 2006; Suter, 1992; Tomz, 2007). Aggarwal (1996), for example, captures the periodicity in debt episodes summarized in Table 6.1, and the identity of the states experiencing debt problems clearly underlines their Southern tendencies. Studies often attribute these Southern debt problems to Northern excessive lending zeal and Southern corruption and mismanagement. We do not dispute that these factors play a role in Southern debt crises, but we believe that they are not the root of the problem.