The Political Performance of Third World Governments and the Debt Crisis

The developing countries' suspension of payments on their external debt is as much a consequence of the political weakness of their governments and the excessive politicization of their economic policies as it is a result of unfavorable structural changes in the international economy. Differences in debtor governments' political performances are treated as an explicit variable rather than as residuals to an economic explanation in estimating the probability of developing countries' suspending their external debt service payments. Using a logit model, I analyze fifty-eight developing countries for the years 1970–1984. The results show that political capacity can be decisive in corrrectly predicting the probability of a government's suspending its external debt service payments. The model predicts 96% of the total outcomes correctly and 80% of the debt payment suspension cases correctly.