Clausen says US must take lead to get world moving
World Bank president A. W. Clausen has called on the United States for greater economic leadership in the world.
''We need to find a way to bust out of this negative reverse spiral,'' he said in an interview with Monitor editors. He was speaking of the world recession in combination with efforts by many nations to increase exports but decrease imports. ''What we need to do is to get growth.''
In a talk to the World Affairs Council of Boston, he said, ''If the nations of the world are to recover sustained economic dynamism, we will need vigorous US leadership on global economic issues, including issues of particular concern to the developing countries.''
Specifically, Mr. Clausen, a former chief executive of the Bank of America, urged the US to lead a greater degree of coordination among the major industrial nations' ''macroeconomic policies'' - that is, their domestic fiscal and monetary policies. He lamented what he called the ''gaping inconsistencies'' between fiscal and monetary policies in the industrial nations, most of them experiencing major budget deficits and tight money.
Further, he spoke of the need for more international cooperation in trade. ''The winds of protectionism are now blowing stronger than at any time in my memory,'' he said.
And he said there is ''an urgent need'' for US leadership on issues relating to third-world development. ''In recent times,'' he said, ''especially with regard to multilateral economic assistance, the US has been less than forthcoming, often hesitant, rather than bold. Sometimes it has left a leadership vacuum that, given today's international political realities, no other nation can fill.''
The United States has failed to live up to its promises to contribute to the International Development Association, the World Bank affiliate that makes 50 -year loans at no interest to the world's poorest nations. An international agreement called for donors to the association to make their payments over three years; the US has stretched out its contributions over four years.
Mr. Clausen told Monitor editors that the United States was $400 million behind in its payments. He argued that the US would get more ''real security'' from spending on such foreign aid than from increasing military expenditures so much and so fast. The World Bank official said he was in favor of increased defense spending, but thought it was too much.
He pointed out that the nations of the world spend $600 billion a year on defense. But he sees the ''economic anguish'' of the developing countries as having ''disturbing effects on world security'' and deserving more financial attention.
''Economic malfunction and increasingly severe poverty, if they continue, may well have long-term weakening effects on the legitimacy - and stability - of political and economic institutions in all parts of the world.''
Clausen is concerned about the debt problems of the poor nations, saying that it is ''getting tougher and tougher'' for these countries to service these loans because of a decline in world trade and non-oil commodity prices.
A newly released study (see below) by the Organization for Economic Cooperation and Development (OECD) notes that although the debt has usually been used to increase a nation's productive capacity, ''this can only be turned to positive account in the context of renewed growth in world trade and economic activity.''
The study goes on: ''The financial structures created over the last decade are hardly tenable in a context of prolonged stagnation in world trade and economic activity.'' It says the world is experiencing the ''most serious economic difficulties . . . since the 1930s.''
The OECD economists also maintain some developing countries have borrowed unwisely, ''using some of the resources to finance consumption and investments of dubious value, rather than to strengthen their productive potential . . . overeagerness by banks to lend has sometimes allowed borrowing governments to delay necessary adjustments.''