From Debt to Development: Alternatives to the International Debt Crisis, and: Bank Lending to Developing Countries: The Policy Alternatives, and: Financial Intermediation Beyond the Debt Crisis, and: The Current Crisis in International Lending (review)

260 SAIS REVIEW Nevertheless, the intensity of the opposition clearly matched the "soft" support in every body of opinion—the public, the Senate, and the international banking and business community. Both treaties passed, of course, but byjust one vote more than the necessary two-thirds Senate majority. However, as Zbigniew Brzezinski noted, it was a Pyrrhic victory for the president. While foreign and domestic supporters reacted enthusiastically, the domestic political costs were substantial. Moffett, who was assistant to chief-of-staff Hamilton Jordan for the last two years of the Carter presidency, was in an excellent position to evaluate the effects of the battle on the administration. He aptly describes the president as "the victim of a shifting [public] mood," much as Woodrow Wilson had been in his attempt to reorient American foreign policy after World War I. In Moffett's analysis, president Carter was perceived as having failed to protect American interests. Moffett has struck a superb balance between political-scientific analysis and historical review. In so doing, he shows us, in addition to "the limits of victory," the very real limits of influence that characterize presidential politics in the post-Vietnam era. From Debt to Development: Alternatives to the International Debt Crisis. By John Cavanagh, Fantu Cheru, Carole Collins, Cameron Duncan, and Dominic Ntube. Washington: Institute for Policy Studies, 1985. pp. 69. Bank Lending to Developing Countries: The Policy Alternatives. By C. Fred Bergsten, William R. Cline, and John Williamson. Washington: Institute for International Economics, 1985. pp. 221. FinancialIntermediation Beyond the Debt Crisis. By Donald R. Lessard and John Williamson. Washington: Institute for International Economics, 1985. pp. 126. The Current Crisis in International Lending. By Jack M. Guttentag and Richard J. Herring. Washington: The Brookings Institution, 1985. pp. 55. Reviewed by Timothy Krause and Matthew Ryan, M.A. candidates, SAIS. Given that economic strength and not military might is the true source of national power, it is surprising and indeed disappointing that our political leaders seem incapable of integrating international economic issues into their strategic conception of the world. Arguably the greatest threat facing the United States and the West today is the parlous state of the world financial system, brought to crisis by the inability of the developing countries to pay back their loans. Response to the crisis has thus far been unsatisfactory from both North and South. In the United States the problem is usually conceived in terms of how the banks will get their money out. Absent from the calculations is any consideration of the continuing need for investment capital in the developing world, without which it is condemned to poverty and political instability. The United States and other developed countries must recognize the strategic interest they have in facilitating the development of the South, for the solution to the capital flow problem of today will be the basis for economic relations in the twenty-first century. The first priority must be a return to responsible macroeconomic policy, in order to promote trade, reduce real interest rates, and encourage economic growth. The U.S. fiscal deficit causes distortions in the foreign exchange and credit markets that aggravate world financial and trade imbalances. The U.S. trade deficit leads policymakers into BOOK REVIEWS 261 the temptation of protectionism but delivers them from the unpleasantness of making economic policy. An increase in U.S. tariffs and quantitative restrictions will be disastrous for the indebted countries. And no amount of domestic bank reform will save the international financial system once the earth starts to shake beneath it. Four recent studies examine the debt problem from the perspective of what the developed countries can do to mitigate the damage to the international financial structure and to the developing countries. The first of these, From Debt to Development, published by the Institute for Policy Studies in Washington, sees the debt problem as a reflection of a faltering world economic system where structural inequalities discriminate against developing countries. The authors eschew quick, symptomatic cures for far-reaching solutions with considerable popular appeal. In this rendition of the debt tragedy there are many victims but only a few easily recognizable culprits: transnational banks, the U.S.-dominated imf, and U.S. fiscal...