989, p. 36). In reaching this deficit position, the value of US claims on foreign economies has not retrenched. Rather, the growth of foreign claims against the American economy has accelerated. The development of the external deficit of the US from 1979 through 1988 is presented in Table 1, which may be found on the following page.
As the data presented in Table 1 indicate, the growth in the value of US assets abroad slowed significantly in the 1983 1985 time period, and the improved growth rates subsequent to 1985 have not recovered to pre 1983 levels. By contrast, the growth in the value of foreign assets in the US slowed only slightly in 1983 and 1984, and, with the exception of particularly strong growth in 1986, maintained annual growth between 14.6 percent and 19.0 percent in all other years. The combined effects of these differing rate of growth led to the transformation of the US from a creditor to a debtor country.
The character of the American external deficit, as well as its magnitude, must be considered. In the case of developing countries, the bulk of the external debt is comprised of commercial bank loans, loans from international organizations
Development of US External Deficit
1979 1988 (US$)
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Year US Assets Annual Foreign Annual Surplus/ Annual Abroad Change Assets Change Deficit Change
1979 527.3 bil +17.7% 428.9 bil +15.4% + 98.4 bil +29.0%
1980 606.7 bil +15.1% 486.1 bil +13.3% + 120.6 bil +22.6%
1981 719.8 bil +18.6% 578.7 bil +19.0% + 141.1 bil +17.0%
1982 824.9 bil +14.6% 688.1 bil +18.9% + 136.9 bil 3.0%
1983 873.9 bil + 5.9% 784.5 bil +14.0% + 89.4 bil 34.7%
1984 896.1 bil + 2.5% 892.6 bil ...