Bank calls for more trade, aid to poor nations

By , Business and financial editor of The Christian Science Monitor

Prospects for world growth have deteriorated in the past year. This is because the world has been "impaled on the trident of inflation and recession in the developed countries and much more expensive oil," states the World Development Report, 1980, the third in an annual series issued by the World Bank.

If the gloomy expectations of the World Bank prove true, they have especially serious implications for poor nations:

* "Many developing countries will find it hard to maintain political stability."

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* "Hundreds of millions of very poor people will live and die with little or no improvement in their lot."

Indeed, the number of people below the "absolute poverty line" could actually increase over the next decade from 780 million today to 800 million.

This grim scenario is not inevitable. The World Bank has two projections, one a little more optimistic than the other. But the study finds "some disturbing signs that the seeds of the low case are already being sown." For instance, the current prospects for an increase in foreign aid for low-income countries are "not encouraging." Moreover, some middle-income countries are already experiencing both debt and political difficulties. The world is finding it more difficult to adjust to higher energy costs and international payments imbalanced.

Under the bank's low case scenario, the growth of per capita gross national product (GNP) -- the production of goods and services per person -- in the oil-importing, developing countries falls to about 1.8 percent a year in the first half of this decade. That compares with 3.1 percent in the 1960s and 2.7 percent in the 1970s.

In the bank's high case scenario, the oil-importing developing countries, where four-fifths of the population of developing nations lives, would grow at about 2.4 percent per year per capita. By 1990, there would be 80 million fewer people in absolute poverty than in the low case.

To make the faster-growth projection come true, the oil-importing countries would have to step up their efforts to increase exports and investment. And they would have to improve the efficiency of both new and old investment, the study says.

Further, the oil-exporting developing countries would have to invest their oil revenues productively in nonoil as well as oil sectors of the economy. Some oil- exporters, such as Indonesia, can use every oil dollar they get for development.

OPEC members with surplus petrodollars "can contribute to efficient recycling by expanding their holdings of real and financial foreign assets, by avoiding disruptions in oil supplies or sharp price fluctuations, and by extending more direct financial support -- concessional and nonconcessional -- to development countries," the report states. They should buy more from the nonoil developing countries and continue to employ their migrant workers.

The industrialized countries, the report continues, "can help by avoiding excessive deflation." They should also promote technical and political innovations aimed at overcoming "structural constraints" that would inhibit rapid resumption of sustained growth. Presumably such constraints include systems for setting wages and prices that prompt more inflation with rapid growth.

Moreover, the rich countries should continue to import more from the poor countries, liberalizing their trade rules. And they should reverse the tendency for foreign aid to fall as a share of GNP. Both actions are usually politically unpopular.

The World Bank points out that some "impressive changes" have occurred in the lives of people in the developing nations over the past three decades.

"But there is still a long way to go. More than three- quarters of a billion people have barely enough income to keep themselves alive from week to week. In the low-income countries people on average live 24 years less than they do in the industrialized countries. Some 600 million adults in developing countries are illiterate; a third of the primary-school-age children (and nearly half of the girls) are not going to school."

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