Economies of Poor Nations Recover From 1980s Plight

MOST of the world's people enjoyed an improvement in their living standards last year. The same should be true this year.

That statement may raise eyebrows in industrial nations, troubled as they are by recession or slow growth. But some 80 percent of the 5.5 billion people on this globe live in developing countries, and most of them have been doing better economically.

"It used to be the reverse," says Christian Ossa, director of the Macroeconomic and Social Policy Analysis Division of the United Nations. He and some 14 other economists put together the UN's annual world economic survey. The 1993 version was released yesterday.

"The world economy remains listless," the report begins. "World output has been growing well below potential since 1990. For the third year in succession, in 1993 the rate of growth of world output will be below that of world population."

That's true in the aggregate. But it reflects the fact that 74 percent of world output takes place in industrial nations, including those of the former Soviet Union and Eastern Europe. The latter countries are described in this UN document as "economies in transition" - presumably from communism to capitalism. Output in this group dropped 16.8 percent last year and will decline another 10 percent this year, according to the UN report.

Several years ago the UN economists would not have been allowed to be so honest in regard to the then-Soviet Union. A Soviet official "looked very closely at what was said about them" and insisted on the use of official statistics, Mr. Ossa recalls. Such statistics "sometimes came with a slant."

The section on these transitional economies now draws on multiple statistical and other sources and makes some blunt judgments of the situations.

Another change from years ago is that UN economists have abandoned a left-of-center position to join the economic mainstream. It was the UN Commission on Trade and Development under its first director, economist Raul Prebisch, which promoted the theories of the new international economic order in the 1970s. These arguments for a kind of world welfare system, in which the rich countries would share their wealth with the poor countries, are not advocated in the 1993 economic survey. The report has appropri ate sympathy for the economic plight of the world's poor. And it is a professional report.

The UN economists predict 3 percent real growth in the United States this year, 0.5 percent in the 12-nation European Community, and 1.5 percent in Japan. Output in France and Italy is forecast to slow. German output will drop 0.5 percent.

"On the other hand," the report notes, "the developing countries as a group are growing at a pace not seen since the 1970s." That's especially so in Asia with the world's most populous countries and in the southern cone of Latin America. More than half of the people in the developing world live in countries with real growth rates of 5 percent or more a year. China, with 1.1 billion people, experienced 12.8 percent growth last year and the UN report expects 11 percent this year.

Total output in developing countries increased in real terms by about 5 percent last year, compared with 3.4 percent in 1991, which was close to the average rate of growth in the 1980s. In 1992, the report notes, the population of countries where per capita output increased accounted for 80 percent of the total population of the developing countries. High growth was not limited to a few countries. In a sample of 100 countries, 30 grew at an annual rate of 5 percent or more in 1992.

However, the report warns against any complacency, pointing out that 500 million people live in developing countries where output stagnated or declined last year. Africa's expected 3 percent real growth this year will merely stem the fall in per capita output that has been under way for many years. The same level of growth in Latin America will make only "limited inroads" in reducing the extreme poverty 40 percent of the region's population now live in.

Statistics on the world economy "fail to convey the appalling increase in human suffering" in countries hit by drought, such as in Africa, or by civil strife, the report adds.

A favorable trend for developing countries has been an inflow of financial resources. During the 1980s, the debt crisis prompted a large outflow of funds from the poor to the rich countries. But now some middle-income countries have access to international credit. Net transfers to developing countries were $51.9 billion in 1992, up from $47.3 billion in 1991. Much of that flow was private investment, not foreign aid. Multilateral institutions such as the UN and the World Bank made loan commitments of $38 .7 billion last year, down from $39.8 billion in 1991.

Latin American saw a "remarkable turnaround" from a $7.2 billion outflow in 1991 to a $6.9 billion inflow in 1992. That was the first positive net flow since the debt crisis began in 1982.

If anything, growth in the poor countries is helping the struggling economies of the rich nations.

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