World Economic Growth, Systemic Leadership, and Southern Debt Crises

Conventionally, Southern debt crises are thought to be isolated policy problems that take place from time to time. This article extends the leadership-long cycle approach to international political economy to explain the recurrence of Southern debt crises. The focus is on global debt crises that affect many Southern countries at the same time, as opposed to localized crises that affect a single country or few countries. The unit of analysis is subsystemic, where countries are classified as belonging to the South (less developed) or the North (developed). Within this context, Southern debt problems are part of a structural process associated with long waves of global economic growth and technological innovation. Radical innovation in the North discontinuously stimulates growth in the North. Northern prosperity increases the demand for Southern exports. To meet the increased demand, the South borrows from the North but is then unable to meet interest payments when Northern economic growth and Northern demand for Southern commodities decay. Three other forces of significance are the levels of systemic leadership, Northern conflict, and the inherent inertia of Southern debt problems. Testing this argument with annual data from 1870 to 1989 on the proportion of Southern countries in the international system that experience debt crises, it is found that Southern debt crises, systematically and significantly, are less likely in the presence of strong systemic political-economic leadership and world economic growth, and are more likely in the presence of Northern conflict and past Southern debt crises.