Seoul plan for world growth
THE Reagan administration's proposals to increase international loans to financially strapped third-world nations add up to a complex -- but promising -- outline for global growth. As outlined this week at the joint annual meeting of the International Monetary Fund and World Bank in Seoul, the plan would require the cooperation of private commercial banks and international lending agencies, as well as both industrial nations and the debt-burdened third-world countries. In other words, quite a team lineup!
Still, parts of the plan could be carried out without too much difficulty, such as widening the lending role of the World Bank. The bank now has the capacity to increase lending without the need for any additional capital.
Similarly, a new $2.7 billion IMF fund agreed upon in Seoul to aid poor countries -- especially in drought-stricken sub-Saharan Africa -- can be financed through use of current loan repayments without the need for additional assessments on member nations.
Clearly, the world community has a stake in continued global growth. It is commerce, trade, that enables hardpressed debtor nations to raise the revenues to meet their $900 billion in existing loan obligations.
Unfortunately, neither real gross world product nor world trade is showing the zip necessary to enable many third-world nations -- with their rising birthrates -- to stay ahead of their precarious financial positions. The world is now growing at a less than commanding 3 percent a year or so. And world trade is posting only so-so spark -- growing at between 3 percent and 4 percent instead of the close to 5 percent required to provide economic breathing space for third-world nations.
Although the details of the US lending plan do not constitute a breakthrough regarding the world debt issue, they do suggest a new tone, a new urgency, by the administration about the concerns of debtor nations.
In backing new bank lending to the third world, for example, the administration is clearly signaling that it does not believe the ``debt crisis'' is resolved, as it had been suggesting not so long ago. And by calling for a larger role for the World Bank, the administration is bolstering the position of an international agency that it has frequently criticized.
The difficult parts of the administration approach involve the call for stepped-up lending by private commercial banks as well as the call for debtor nations to streamline their economies. Major structural readjustments should continue to be made in third-world nations on a case-by-case basis.
At the same time, however, the industrial nations must put their own economic houses in order. For Europe and Japan, that should mean spurring greater domestic growth, although in such a way as not to rekindle inflationary pressures; for the United States that should mean reducing deficits to spur American exports. Clearly, the demand of the moment is for an expansion of world economic growth.
And, particularly, the determination to get on with it.