Though it might have amused Karl Marx, a recent story with the headline “Soviets Could Crush West With Debts” startled Toronto Star readers:
“The Kremlin can take over the world simply by defaulting on colossal loans it has had from the West. International bankers and Western diplomats see the scenario, which sounds -like a plot for a sensational thriller, as chillingly possible.”
The newspaper was referring to $77 billion in loans from Western banks in Europe and North America to the Soviet bloc countries. About $20 billion of these credits has gone to the deeply troubled Polish economy. Presently, Poland is desperately seeking help from Russia and Western countries to raise the $4.5 billion needed every year just to pay the interest on these loans.
Of course, bringing down the international financial system of the West would incur the loss of markets and crucial supplies which the Soviet bloc nations need. But the increasing worries of international capitalist bankers may include second thoughts about making Western economies so vulnerable to and dependent upon socialist debtors.
Multinational banks, like other multinational corporations, possess no conservative ideology. Rather, commercial expediency takes them wherever they can obtain high interest rates or profit. Less this trait be considered admirable risk-taking, it is noteworthy that the bankers have no intention of being left holding the bag in case of massive defaults by their debtors.
A variety of government bailouts and additional props by international public institutions can always be solicited to avoid a global financial collapse.
The Soviets can jolt Western economies in other ways than by borrowing.
In the early ’70s, the huge Soviet grain deal secretly negotiated with large grain export corporations in the United States produced major inflationary shock waves behind food, transport and other prices to consumers. It can happen again, especially with a shrinking American grain reserve and continuous losses of our country’s agricultural lands.
Bankers usually avoid mentioning in public the shaky state of the world economy. So matters must be getting shaky indeed for Chase Manhattan Bank president William Butcher to tell his shareholders he was going to assertible a “24-hour-a-day” crisis team to monitor what he termed “the most uncertain (economic climate) I can recall in my better than three decades as a banker.”
American conservative leaders are beginning to criticize the large banks’ international currency speculations and their over-extension of overseas credit. They also oppose U.S. multinationals who finance and sell high-technology products to the Soviet Union.
Conservative Republican Congressman Jim Leach of Iowa even calls for Western government regulation of the “precarious” $1 trillion Euro-currency market. “The rise of the Euro-currency market is the most potentially disruptive economic development since World War II” and challenges “the ability of sovereign governments to determine their own economic destinies,” Leach warned.
Despite the advent of the Reagan regime, multinational corporations soon may find themselves confronting a powerful critique from the Conservative Right that what is good for big multinational corporations may not be good for America.