World Bank head says US should take lead in reviving world economyaid
Washington — The World Bank is central to the huge debt problems of developing countries. Its long-term mission is to help the poorest nations of the world ''pull themselves up by their bootstraps,'' as bank president A. W. (Tom) Clausen puts it.
But the World Bank, he stresses, works with limited financial resources, and the US, in particular, is cutting back on its commitments to development aid.
Mr. Clausen, an American who formerly headed the Bank of America, has some crisp suggestions as to what the United States should do to help nudge the world out of recession.
In an interview, Clausen cites the ''vested interests'' of the US in promoting the economic growth of developing lands.
Where does the international community begin to cope with the debts of developing countries?
Clearly the debt burden of an increasing number of developing countries is becoming very difficult. It has been dramatized by the large examples of Mexico, Brazil, and Argentina. But there are others - for example, the Poles and others in the Eastern bloc. The debt burden of developing countries has been the result of their declining foreign-exchange earnings. What we need to get us out of this mess is growth - noninflationary, disciplined growth.
Leadership cannot come from the poorest countries in the world. It cannot come from the newly industrialized countries. Europe is in a state of [economic] stagnation. Therefore, it seems to me, the strongest nation in the world must exert the role of leadership.
What policy changes should there be in the United States to exercise this leadership?
The United States gets an ''A+'' for its efforts to reduce inflation. On the other hand, the US has not done a good job at reducing its government budget deficits. Interest rates are very high relative to inflation. The reason why interest rates are so high is uncertainty over the magnitude of budget deficits and the consequent need for the government to borrow in the marketplace. . . . This keeps interest rates abnormally high.
Everyone wants the United States to remain strong. But it has been my advice that the increase in defense spending is a bit too steep. . . . Thirty-eight percent of the exports of the US go to developing countries. Is it not therefore in the vested interest of the United States to help those economies expand, so that more US goods and services can be exported, creating more [American] jobs?
Is there room for stimulus and growth within the US economy, in order to trigger growth elsewhere, without the danger of reigniting inflation?
There is always that danger. No one is recommending that we throw away the gains that we have made against inflation. But one agent for growth is an open trading system. I must say that protectionist pressures are very severe. If the United States can use its leadership in maintaining, and helping other countries to maintain, an open trading system, that is one way (to stimulate growth).
I would say that (US) support for development assistance - in assuring a reasonable, steady flow of such assistance - also be an engine for growth.
Given the magnitude of this world debt problem, how serious is the threat to the international finance system?
In my view, we are through the worst of it. Look at the way the international financial community responded to the crisis in Mexico. I applaud the way the commercial banks have risen to support debtor countries in refinancing, or rolling over, their debts, and coming up with additional lending.
There is now a consensus among countries on the need to increase the resources of the International Monetary Fund. To increase the quotas by 50 percent will be a very strong signal to the world (that rich countries intend to help the poor).
In short, I don't think the international financial system is going to destroy itself. To the contrary, I believe that 1983 will show more growth than 1982.
What is the special plight of the poorest among the developing countries?
If you were a pole vaulter, and needed maybe 50 yards to vault 18 feet, the developed nations have got that margin. But the poorest of the developing countries are trying to make that same leap with only 5 or 10 yards of running room.
The Reagan administration and Congress have cut US contributions to the International Development Association (IDA), or soft-loan window of the World Bank. What is the effect of this?
We should differentiate between the International Bank for Reconstruction and Development (or World Bank), which lends money at near market terms for 20 years , and IDA, which receives grant money from 33 donor countries. We then lend these grants with only a small service fee, at zero interest for 50 years. The IDA money goes to the poorest of the poor countries.
Of the 33 donor countries that have pledged support for the sixth replenishment of IDA, only the United States has said it cannot pay its commitment in the three years originally contemplated, but needs a fourth year.
All of the other 32 donor nations pledged that, notwithstanding this US stretch-out, they would pay their commitments in three years. In addition - what I call really an amazing display of understanding of the need to help the third world continue its development - these countries pledged an additional $2 billion to go along with the United States payment in the fourth year of the transition period, before we start negotiations for IDA's seventh replenishment.