The Political Dimensions of Military Spending and Debt Service in Southeast Asia
Although the imperatives of external debt service have led to a reduction in the size of defence budgets in most Third World countries, the impact of military spending cannot be understood separately from the political attractiveness of external borrowing in the 1970s. While the cumulative impact of defence expend itures has been to worsen Third World borrowers' debt levels and hamper their debt servicing efforts, this is of secondary importance compared to the low political capacity of many debtor governments to mobilize and redirect the human and material resources under their nominal control towards that end. Many Third World countries used much of the borrowed capital to fin ance current budget deficits, government consumption and arms imports. Generally, the four major Southeast Asian borrowers ? Indonesia, Malaysia, the Philippines and Thailand ? did not use foreign capital to finance their budget deficits, but appear to have invested some borrowed funds in domestic defence indus tries. One result is an apparent arms import-substitution effect: their arms imports actually declined as a percentage of total imports even as their external debt increased. Thus, their arms imports do not impair their debt service performance the way they have worsened the debt service problems of heavily indebted Third World countries elsewhere.
Military Expenditure, Arms Imports and Third World Debt During the 1980s
One of the ‘costs’ of military imports and military expenditures by developing countries occurs to the extent that these are financed by incurring foreign debt. This article estimates that, for 61 severely and moderately indebted developing countries, military imports during the 1980s were equivalent to about 28% of new foreign debt incurred. When military expenditures as a whole are examined, the proportion is around 77%. Had these countries made no military expenditures during the 1980s, they could have borrowed very little and/or allocated far more of the borrowed resources to productive purposes, thus making future debt servicing burdens much lighter and/or easier to meet.
The Quest for economic stabilisation: The IMF and the Third World
In these two companion volumes, Graham Bird, Tony Killick, Jennifer Sharpley, and Mary Sutton of the Overseas Development Institute in London, through employing classical liberal economic theory, seek to examine the role of the International Monetary Fund in the general context of stabilisation programmes designed to promote development, which they implicitly define as increased G.D.P. per capita growth. The Quest for Economic Stabilisation: the IMF and the Third World analyses the problem's theoretical causes, the relevance of econometric models to the developing countries, the general institutional functioning of the I.M.F., as well as the characteristics, effects, and proposed reforms of its programmes. The IMF and Stabilisation: developing country experiences focuses upon three empirical case-studies in Asia, the Caribbean, and Africa: Indonesia throughout the 1966-70 period dominated by Sukarno and Suharto, Jamaica during the 1972-80 era of Michael Manley, and Kenya from 1975 to 1981. In addition, there is an analysis of relevant experiences in Chile and Peru. The focus of the first volume is on economic management; namely, the use of policy matters to avoid, or to offset, the adverse effects of destabilising forces. Killick and Sharpley offer the following key definition: