Poorer nations making strides World Bank reports important gains around the globe

Global economics

September 29, 1997|By DALLAS MORNING NEWS

WASHINGTON -- Yes, it's true. Good news often gains less attention than bad.

The World Bank recently pointed this out with a report on the world economy that found glowing news from all points of the compass.

"Global Economic Prospects and the Developing Countries, 1997" says economies in every region of the world are growing. Per-capita income levels are also rising.

The per-capita numbers are important as a measure of poverty in the developing world. And, by that standard, the number of people in poverty is declining.

Per-capita income in India, which stood at $350 in 1995, is rising nearly 5 percent a year. Mexico's per-capita income grew hardly at all between 1973 and 1995, when it reached $2,725, thanks to multiple economic shocks. But it increased 3.2 percent last year.

Per-capita incomes are rising throughout Africa, Asia and Latin America, as well as in the United States and other wealthy nations. The big exception last year was Russia, but the World Bank says President Boris Yeltsin's reform government can look forward to growth this year and beyond.

"Prospects for the global economy are among the most promising for growth and poverty reduction in developing countries in many decades," the report declares.

Joseph Stiglitz, who last year was chairman of President Clinton's Council of Economic Advisers, is now the World Bank's chief economist and principal author of the new report.

He sees three major reasons that economies around the world are growing: economic freedom, fiscal restraint by governments and, most of all, open trade.

Economic freedom means reform toward market-based economies, a path that's become globally popular in the wake of communism's collapse.

Fiscal restraint by governments is the biggest reason growth is up while inflation is down.

Inflation averaged nearly 20 percent a year throughout Latin America between 1987 and 1996. It is expected to average less than half that in the next decade.

Inflation in Brazil averaged 765 percent a year from 1991 through 1995. Last year, it was down to 16.9 percent.

Market reforms and spending restraint have encouraged foreign investment, which last year exceeded $100 billion in the developing world.

Foreign capital flows are still extremely sensitive to risk and can distort local currencies, as Southeast Asia is painfully learning this summer.

But investment now easily outstrips aid programs in importance throughout the developing world.

Stiglitz puts his biggest emphasis on trade liberalization, however. The global economy is gaining momentum, with trade leading to ever-greater integration among nations.

The World Bank's report does not see an array of poor countries furiously exporting shoes and toys to America while erecting barriers against imports. What's happening is more evenly based than that. Even in China, which is running huge trade surpluses with the United States, the overall trade picture is much more balanced. China's imports, as well as its exports, are growing at more than 10 percent a year.

The World Bank argues that there is little evidence in economic literature that imports from developing countries are causing large job losses in the United States and Western Europe. Instead, the report suggests, the biggest force unsettling labor markets is technology.

Some environmental groups have criticized the World Bank's optimistic view and suggest that rapid growth in countries such as China and India will put unsustainable demands on global resources such as food and energy.

Stiglitz's team sees no such threats. Market forces and wealth will lead to greater efficiencies in energy use and global food production, heading off such threats before they take hold, they say.

The bigger risk, World Bank economists say, is that nations will lose faith in free trade. It's happened before.

Toward the end of the 19th century, governments reversed economic integration. The United States raised tariffs after the Civil War. Bismarck raised tariffs in Germany in 1879 in part to cover a sharp rise in military spending.

Protectionism rose as economies collapsed into the Great Depression of the 1930s. It was only after World War II that trade integration was seen as a remedy rather than an ill, not just for economic well-being but for peace.

Pub Date: 9/29/97

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