The Sheraton-Washington Hotel would have been a brighter place this week if finance ministers could fashion economic policies the way Barber Conable, the new president of the World Bank, can turn a phrase.
Mr. Conable, not long ago an upstate New York congressman, introduced
himself at the bank's annual meeting to the bank's 151 member-nation constituents.I was born in a town named Warsaw, he said. I was educated in Ithaca . . . fortwenty years in the Congress of the United States, I represented the citizens of Lima, Attica, Avon, Castile, Java and Greece.
All towns, of course, in his old congressional district.
For a moment, his inaugural speech lit up the hotel ballroom, which otherwise labored under the pall of a continuing debt crisis in the developing countries and the economic uncertainties of the United States, Japan and Europe.
Some economic eminences at the week-long meeting of the International Monetary Fund and World Bank accentuated the positive. Jacques de Larosiere, the IMF's managing director, suggested that better times are ahead. The main impact of lower oil prices and interest rates is yet to be felt, he announced. His agency forecasts a slight pickup in the economic growth of the industrial nations next year.
Finance ministers from 10 industrial nations, including the United States, noted that low commodity prices are impairing developing countries' export earnings. However, they said, their difficulties . . . should be alleviated by the decline in interest rates and by the pickup of activity now under way in industrial countries.
Another group of finance ministers, from the developing countries, appeared to see a different world. They spoke of deteriorating prospects for future growth and a standard of living in many developing nations below levels of a decade ago.
They bemoaned, among other things, sharply lower commodity prices, wider international payments deficits and grossly inadequate flows of funds from industrial nations and international aid agencies.
Debt service demands on the developing nations are becoming an intolerable burden, ministers from the so-called Group of 24 said. Even the International Monetary Fund, they noted, recently has taken more funds out of the developing world than it has injected into it.
The G-24 is not short on urgings - more foreign aid, a resumption of voluntary commercial bank lending, more debt reschedulings, lower interest rates, less rigidity by the IMF in its lending conditions, new IMF programs for countries strapped by high interest rates and falling commodity prices, and more IMF special drawing rights.
The Reagan administration and other industrial countries support some of these calls - lower interest rates, renewed commercial bank credits and debt reschedulings, at least where appropriate.
But problems loom even on the question of replenishing the International Development Association. The Reagan administration, along with the governments of over 30 other countries, is close to concluding negotiations for an $11.5 billion or more increase in IDA resources. But will Congress go along with it? The Senate Appropriations Committee recently said it could not approve U.S. contributions to IDA at the level the administration is negotiating.
Under its present capital structure, the bank may reach its maximum lending capability within a year. James A. Baker 3rd, Treasury secretary, said this week that the Reagan administration also does not foresee the need to start talks to expand the IMF's lending resources. The IMF, he noted, has over $30 billion in usable lending resources.
In another thrust the G-24 does not welcome, Mr. Baker called for a review of the IMF's compensatory financing fund, which the IMF uses to extend credit to countries whose exports temporarily decline.
And the United States held fast in opposing any new issue of IMF special drawing rights, a foreign reserve asset that is supposed to help assure adequate international liquidity. Another prominent problem at the meeting is the massive imbalance in payments flows among the world's key players: the United States, West Germany and Japan. The United States is incurring huge deficits, the other two countries piling up big surpluses. The Reagan administration is insisting that Japan and Germany boost their economic growth, to help right the situation. Otherwise, it hints, it will again try to talk down the dollar.
But an IMF staff report, released last weekend, raises disturbing questions about how much Japan and Germany, by spurring their economies, can help the United States. It is unlikely, the staff said, that a 1 percent increase in domestic growth in Japan and Germany (maintained over three years and with allowance for induced effects on growth in other countries) would alter the U.S. trade balance by more than $5 billion to $10 billion.
And if the United States decides to talk down the dollar, the IMF staff did not offer much greater hope of its having a big trade impact. A 10 percent real effective depreciation of the dollar, with sustained budget deficit cuts, would in time reduce the U.S. trade deficit by 1 percent of GNP, it calculated. Which, as of now, amounts to about $36 billion.
The deficit this year is projected at close to $170 billion.