Reagan administration officials believe an unpublished World Bank report calling for a reduction in some Third World governments could serve as a blueprint for a new international aid strategy.
The report on sub-Saharan Africa recommends a switch away from the public sector to freer markets.
Drafted by a team of World Bank officials headed by outside economist Elliot Berg, the report says the public sector is over-extended and has taken over too many functions that would be better left to the private sector, that the exchange rate and trade policies of many African countries have damaged growth by limiting free trade and markets and that far more attention should be paid to expanding agriculture rather than industry.
Reagan officials want to discourage loans to countries where markets and prices are controlled and to attach policy conditions on many more loans than now carry them. A Treasury source said yesterday that this is "entirely consistent" with the Berg report, which he called an indication that the Bank is beginning to follow the aid policies Reagan supports.
The Bank's new president, former private banker A.W. Clausen, is enthusiastic about the African document, sources say, which was commissioned by his predecessor Robert MacNamara.
But there is considerable opposition within the World Bank to the thrust of Berg's report, from African governments who would have to approve it before it is made public, and from some staff members.
Moreover, the report calls for a massive increase in foreign aid to African countries in return for their acceptance of the policy changes it recommends, while the Reagan administration wants to cut back aid spending.
Some African governments fear that the report will lead to more interference in their domestic policies by outsiders. Its tone already has been watered down considerably from the original produced by Berg, internal sources said yesterday. The central contention that too much government is the main cause of Africa's huge economic problems has been qualified significantly, one economist said.
However, many staff members believe the report still exaggerates the extent to which government policies have contributed to poor economic performance. International developments, such as the rise in oil prices and falling prices for tropical agricultural exports, have been far more important than Berg allows, one source said. African countries, such as Kenya and Ivory Coast, already following policies more like those urged by Berg, are also now running into severe difficulties.
In addition, one source pointed out, the report ignores that the state played a major role in the success of developing countries in Asia and Latin America, which are generally held up as examples by free-market advocates.
The report's stress on agriculture, on the other hand, is in line with the Bank's present thinking and deserves attention, according to one economist. However, a major expansion in agriculture is likely to require state aid, one source said.
The huge expansion of government in many poor African countries has occurred to some extent just because there was no private sector to carry out needed projects. It is the ineffectiveness rather than the size of state agencies that is a problem, one official remarked.
But even where the state is inefficient, it is unrealistic to expect governments to accept policies restricting their importance and power, another source said. It would be better for lending institutions to try to work with the large state organizations rather than push for them to be dismantled, he added.
To some extent the report accepts the need for a powerful and well-trained public sector. It says that stepped-up growth will be hard to achieve without improved public agencies and that more spending on education and health -- functions typically carried out by the public rather than private sector -- is crucial.
This apparent contradiction with the call for a smaller government sector has led some critics to claim that the report does not present a coherent strategy for development. It does not spell out how public agencies can be made more efficient, nor how "critically needed social and economic infrastructure" can be put in place with fewer public sector resources.
Clausen is due to discuss a revised version with African governments when they arrive in Washington for the annual meetings of the World Bank and International Monetary Fund at the end of this month.