Revitalizing growth and development must be a world-wide co-operative effort, UNCTAD reports
WITH that observation,Kenneth K. Dadzie, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), begins his overview of the Trade and Development Report, 1986 (Sales No. E.86.II.D.5), which focuses on the dynamics of the deflationary process described by Mr. Dadzie as "the single most pervasive threat to world prosperity' and its consequences for development.
The six-chapter, 172-page reportdeals with the 1980s depression and the setback to economic and social development; the macroeconomic setting: interaction of policies in major developed market economies; transmission of growth and the stability of the world economy; deflation, debt and trade; the world economy in 1985 and prospects for the near future; and debt, growth and development.
The report reviews the main characteristicsof the acute economic crisis now facing most of the world, outlining the evolution of problems and policies in the developed market-economy countries that have played a major role in shaping the current external environment for development.
The 1980s, the report states, havebeen marked by the widespread collapse of the development process, characterized by financial disorder and extended periods of negative or negligible growth in most developing countries. Declines in growth of gross national product (GNP) have been widely accompanied by reductions in investment likely to inflict serious damage on longer-term development prospects. Reduced output has been accompanied by widespread falls in living standards (most dramatic in a number of African countries), including rising unemployment rates.
There has also been a drastic slowdownin the pace of economic growth in major developed market-economy countries, the report says. After the deep recession of 1980-1982, economic activity recovered somewhat, due largely to the stimulus of recovery in the United States, but overall performance has remained extremely poor, with the GNP growth rate of seven major Organisation for Economic Co-operation and Development (OECD) countries averaging about 2.2 per cent per year between 1980 and 1985, compared with 5.7 per cent in the 1960s and 3.5 per cent in the 1970s. Moreover, expansion has concentrated primarily in Japan and the United States, while growth in major European countries barely exceeded 1 per cent.
A major feature of the economicrecession of the first half of the 1980s was the sharp downswing in commodities prices, the report states. Deterioration in terms of trade of commodity-exporting developing countries was a major cause of their severe balance-of-payments difficulties.
From 1981 to 1984, the cumulativeloss for developing countries in foreign exchange earnings from primary commodities exports reached $38 billion. Oil prices--long insulated by the Organization of Petroleum Exporting Countries system from cyclical variations in demand--also suffered from the world economic slowdown in the 1980s. In 1985, the system of price formation collapsed, and oil prices plunged from $28 a barrel to $12 a barrel in April 1986.
Deflationary pressures and othermonetary and financial disturbances over the first half of the 1980s significantly impaired the capacity of the international financial and trading systems to contribute to growth and development, and have fuelled protectionist pressures, the report asserts. A balanced expansion of the world economy would appear to be essential for reducing protectionist pressures and encouraging trading countries to fulfill their commitments to the multilateral trading system, it states.
Less favourable trade
As in earlier years, the report says,the evolution of major developed market economies continues to be the most important single factor shaping the external …