THE WORLD BANK'S job has traditionally been to make loans for development projects in the Third World. The International Monetary Fund, meanwhile, made loans for currency stabilization. In the turbulence created by last year's enormous increases in oil prices, those two assignments now overlap. The annual meetings of the Bank and the Fund, held here last week, showed both of them to be evolving rapidly toward larger responsibilities than they have previously carried.
In the past, the case for expanding the World Bank was primarily the altruistic and moral one of the rich countries' obligation to help the poor. Providing the reserves for the IMF was, in contrast, essentially self-interest, since the troubles of any one currency rapidly make trouble for the others. But now those two motives as well overlap. One country's developing economy is, after all, another country's expanding export market.
All development and trade expansion is now threatened by the effects of the higher oil prices. After the first great surge of oil prices in 1973-74, the commercial banks handled most of the recycling of the oil surpluses. The oil-exporting countries deposited their new revenues in the banks, which then lent the money back to the oil-importing countries. But that won't work a second time. By the time the second oil crisis ararived last year, most of the Third World countries had borrowed as much as they could manage and, in some cases, more. As for the banks, they are beginning to get warnings from government regulators not to go much further in making loans in those developing economies that are already over-burdened with oil debts.
The distribution of the world's debts has shifted dramatically over the past two years. In 1978, the oil-exporting countries surpluses had declined to $5 billion But this year those surpluses will be around $115 billion -- which, by way of comparison, is twice the value of all the automobiles that will be produced in the United States this year. In contrast, the industrial countries were collectively running a fat $33 billion surplus two years ago. This year they will have a deficit -- possibly more than $50 billion, the IMF estimates. Most of that gigantic swing, incidentally, comes at the expense of three countries -- Germany, Italy and Japan. As for the developing countries that must import oil, they were already running deficits totaling $36 billion in 1978. Those deficits will be twice as large this year, with far fewer opportunities to finance them through the commercial banking system.
At best, the prospect for growth in most of those countries is somber. In some there will be severe cuts in standards of living. The only question is the extent of those cuts, and the amount of social damage that they will inflict. The answer depends largely on the rich countries' willingness to expand, rapidly, the operations of the Bank and the IMF. The industrial countries -- particularly the United States -- are likely to react to their own rising deficits by cutting their contributions to these institutions. It's a bad way to save money. They are contributions to the stability of the system by which all the trading countries, rich and poor alike, now earn their livings.