ABSTRACT
This chapter examines the implications for political systems of financial inflows in the 1920s and outflows in the 1930s. It outlines some comparisons with the political economy of the debt influx and efflux of the 1970s and 1980s, and focuses on historical relationships between foreign loans and regime types. Just as debt accumulation aided all types of regimes, so net outflows to service debt wreaked havoc on both democracies and dictatorships. In comparative terms, the historical evidence suggests that debt infusion may be even more crucial to unpopular dictators than to broad-based democrats, but that debt hemorrhage may be even more damaging to the former. Equally important, democratic systems boast more varied and flexible means of absorbing, deflecting and diffusing the economic crisis. The public can register its discontent with a democracy’s economic performance by simply blaming and voting out the government.
