Austerity programs, put in place in the wake of the debt crisis and world recession, and cutbacks in investment have "broken the momentum of development," which over time "is a sure recipe for social and political upheavals," World Bank President A. W. Clausen warned yesterday.
Clausen told a dinner gathering, held by the Society of American Business and Economics Writers, that industrialized and developing countries should work together to expand world growth and trade and he called for "an expanding role" for the World Bank in the "cooperative effort" to revive the world economy. The Washington-based World Bank lends long-term money, mainly for development projects, to developing nations. It raises the money for these loans on the world capital markets, with the contributions of richer nations acting as capital for the bank.
"Foreign trade opportunities are the only way debt-laden countries can earn their way out of their cash-shortage problems," he said, adding that deepening recession in the Third World could damage growth prospects in the United States and other richer nations.
He criticized the United States for failing to come up with all the money that it promised for the concessional lending arm of the bank, the International Development Association (IDA).