1995 Symposium Proceedings: BUDGET DEFICITS AND DEBT: ISSUES AND OPTIONS General Discussion: Long-Term Tendencies in Budget Deficits and Debt Chairman: Gordon Thiessen Mr. Thiessen: Thank you very much, Kumi. We’re now open for questions. Mr. Bruno: I like the paper a lot and find nothing in it to argue with. On the part dealing with industrial countries, I’d like to add a comment. I’d like to add something to the contrast made between the developing countries and the developed countries, which may be of some relevance to the way we look at industrial countries. And it links up with discussions we will have tomorrow. In the paper, the contrast is made in terms of size of social expenditure, which is much smaller, and the ability of these countries to learn from bad experi- ence in industrial countries. Also there is mention of the lesson that we can learn from a country like Chile. In that context, I think it is important to make another contrast; namely, in developing countries there were large deficits. There still are large deficits, as the paper records. But it is important to note that in many countries, large deficits have been reduced very quickly. One of the reasons may be that the composition of finance is different. In industrial countries, it is mainly domestic debt finance. In developing countries where capital markets are underdeveloped, that option is much less. So you have to resort either to external debt or to the printing press. That, of course, can be sustained as long as the external creditors are willing to sustain it. But once it ends, it comes down in a big crash. A hard landing is very painful and unpleasant. But it may also have a quality side; namely, you can have a clean slate and change things. 89 I am very doubtful as to whether Chile would have adopted this beautiful scheme that we’re all very proud of, if it hadn’t gone through that kind of crisis. Is that recommended for industrial countries? Mr. Thiessen: Do you want to comment on that?