The Promise and Pitfalls of Baker's Third World Debt Plan

Publication Date: December 1985

Publisher: Heritage Foundation (Washington, D.C.)

Author(s): Bruce Bartlett

Research Area: Economics

Keywords: Trade and foreign aid

Type: Report

Abstract:

The Administration is to be commended for recognizing the seriousness of the Third World debt problem and offering a substantive proposal for dealing with it that relies on free markets and economic growth, rather than bailouts. However, there seems to be too little emphasis on important details and an apparent overemphasis on the interests of the MDBs and the private banks, with the danger that this proposal could become a bailout, or at least be ineffective. The long-term solution ultimately requires an orderly write-down of bad loans. A strong World Bank president like Simon or Middendorf could lead the way to a permanent, lasting solution to this serious problem.