AN INSIDER'S VIEW OF WORLD DEBT

''We have to forge our future, instead of waiting for it to happen," the soft-spoken, lightly bearded man said in an ominous tone.

Morris Miller, executive director of the World Bank during the Third World debt crisis of 1982, fears the world financial system will come crashing down if we don't act quickly."If I sound like an alarmist, that's good," he told me and winked. ''Somebody's got to sound the alarm."

Mr. Miller has issued a clarion call for the wise men of the world

financial scene to gather together and devise a new Bretton Woods agreement to end the turmoil in the foreign exchange markets and "encourage policy coordination that would provide the basis for trade and capital flows and promote global growth and equity."

Changes in the speed and direction of exchange rates and capital transfers are much too rapid and massive to be adequately handled in the conventional manner, he argues. The United States has joined the ranks of the debtor nations (in fact, it's leading the debt parade) and the debt crisis has taken on a dangerous global dimension, he warns.

"Coping Is Not Enough" (Dow Jones-Irwin) is the title of Mr. Miller's new book. It summarizes his insider's view of how the world debt crisis is being handled. The response of the International Monetary Fund, he says, has been "fire fighting without much water pressure." He claims the IMF is submissive to the United States and is "constrained from playing a major role, either as a source of liquidity or as a regulatory force in the international financial system."

Meanwhile, he says, "The press-ganging of the World Bank onto the figurative short-term debt-salvage ship poses dangers of diversion that could weaken it for the main task of helping assure a funding level for the developing countries that goes beyond debt servicing to a level adequate for the resumption of growth and hope."

He accuses the IMF and World Bank of "sleeping through" the first debt crisis and says a "second wave" is about to hit.

Developing country debt (government and private) passed the $1 trillion mark sometime last summer. The situation is analogous to that of the credit card holder who accumulates a bigger and bigger stack of plastic to pay the interest due on previous charges. And it contrasts with the behavior of the Japanese worker who saves up to half his/her paycheck.

Depressed commodity prices are preventing the developing countries from earning enough on their exports to pay back their bank loans. Thus, the crisis is chronic, Mr. Miller says, and has led to the hopelessness of the indebted nations "which see no light at the end of the tunnel of despair . . . unable to make any headway as rollovers of gigantic debts add to the ultimate bank bill."

He describes a vicious cycle whereby "the reduced ability of these countries to purchase U.S. goods and services aggravates the U.S. trade deficit, and as the United States takes steps to remedy its own plight through reducing its imports, this action in turn aggravates the plight of Third World debtors."

The debtor countries have to wonder, Mr. Miller says, whether it makes any sense to continue running up an escalator that is going down. "The pressure for action arises from both sides: the banking community is under extreme

pressure to 'get in deeper' and the debtor countries are sinking deeper into debt and also suffering from increasing social and political tensions and erosion of sovereignty," he adds.

In calling for a new Bretton Woods agreement, Mr. Miller says, "This does not imply one big meeting along the lines of the 1944 affair." As well as stabilizing exchange rates, the new accord should aim at reducing interest rates to the historic level of 2 percent and increasing resource transfers to the developing world, he says.

"In the prevailing debt management process, a higher priority is being placed on protecting bank balance sheets than on preserving democratic societies," Mr. Miller complains. "The roots of the crisis are deep and systemic" and can't be addressed by period meetings of the Group of Five, he says.

The sensible thing to do, he adds, is to appoint an international committee of experts, free of political constraints and able to consider the wide array of technical and political options.

He describes Treasury Secretary James Baker's initiative as "really a plea to 'do as I ask, don't do as I do.'

As a condition for receiving loans, he notes, developing countries would have "to accept as axiomatic that 'private is good and public is bad.' Should the international financial institutions become the blatant instruments for the imposition of this ideology, their analysis and advice would quite understandably be called into question."

Mr. Miller says the biggest danger of the Baker proposal is that "it may

put off consideration of measures more commensurate with the magnitude and seriousness of the problem." The players are skating on "perilously thin" ice, he cautions.

For the full story: Log In, Register for Free or Subscribe