A debate is unfolding over a new IMF proposal to avert future Argentina-style financial meltdowns: an international "Chapter 11" that would let a country declare bankruptcy, just like a troubled firm. Such a plan would represent an improvement over the current approach -- but it will not eliminate financial crises altogether.
The performance of the world economy in 1983 is difficult to characterize. For the industrialized market economies--members of the Organization for Economic Cooperation and Development--it was the year of the long-awaited recovery after the second oil shock of 1979-80. World trade began to revive after two years of stagnation and decline. There was continuing good news about inflation in the OECD area. Business and especially consumer confidence improved. A major rupture in the world financial system was averted through effective, concerted crisis management led by the International Monetary Fund, whose role was further enhanced by an infusion of new resources. The heavily-indebted developing countries demonstrated considerable progress in external adjustment: indeed the largest Latin American debtors accomplished an amazing turnaround in trade performance.
The international financial community can assess its management of the international debt "crisis" of 1982-83 with a certain sense of satisfaction. Creative ad hoc solutions to individual countries' problems kept adequate credit flowing. Unpredecented cooperation among the International Monetary Fund (IMF), central banks, and private lenders restored confidence and prevented the "crisis" from playing out to a tragic conclusion--massive defaults, the freezing of new credit, bank failures, and perhaps ultimately a worldwide depression.
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