Paris, Wednesday, April 19, 2000Two Speeds Ahead
The meetings in Washington of the World Bank and the International Monetary Fund, now mercifully concluded, took place against a background of two contrasting trends in the developing world.
On the positive side, the emerging markets that succumbed in 1997 and 1998 to financial crises have recovered far more quickly than expected, thanks at least partly to IMF bailouts. South Korea is growing at an annual rate of 13 percent; Thailand and Indonesiaare growing at around 6 percent, Russia at nearly 9 percent, and Brazil at 3 percent or so.
But this success is balanced by worrisome news from countries too poorto aspire to a financial crisis, notably those in Africa. There, growth crawls along at around 2 percent annually,AIDS is driving life expectancy downward and a disastrous famine loomsin Ethiopia.
This divided picture should be kept in mind when assessing the meetings' outcome. There was much discussion, for example, of ways to prevent future financial crises. The delegates agreed that countries should provide more information to investors, that they should manage their debts more cautiously and that they should shore up their banks. There was also vague talk about formalizing the ad hoc procedures for bailouts. But however worthy, this debate seems less pressing than it did a year ago. Whatever the inadequacies of the existing system, it has been proved capable of financial rescue missions that work.
The same cannot be said for measures to assist the very poorest countries. The final communiqué in Washington included fine words about the need for poor countries to gain better access to rich countries' markets. But protectionists in the rich world areexpert at suffocating the kind of trade that would benefit poor countries most powerfully, such as trade in agricul-ture and textiles.
Equally, the meetings devoted considerable time to Third World debt relief, emphasizing the good news that every Group of Seven country has agreed in principle to cancel the obligations of the poorest nations.
But the governments have yet to come up with all the money necessary to do this, and congressional foot-dragging has ensured that the United States lags badly.