The annual meeting of the World Bank and International Monetary Fund ended on a note of anxiety today, with officials projecting an inflation-plagued world economy for the next few years.
Although the consensus at the end of a week's public and private debate was that the world would avoid a recession as severe as that in 1974-75, the threat of another oil price increase creates considerable uncertainty. Underlying this general anxiety was a more immediate question of when and how the United States, West Germany and other major nations might act to stabilize the jittery exchange market and further puncture the gold price boom.
This was the last IMF-World Bank meeting of the 1970s, and as many governors noted, it has been a decade marked not only by strains, but by unfilled promises. That was a major theme of World Bank President Robert McNamara's principal address -- he fears that the problems of the 1980s will be even tougher to handle.
In fact, a sense of foreboding dominated the meetings. IMF Managing Director Jacques de Larosiere set the tone with an opening address in which he bluntly said that "the present world economic situation is gloomy."
In his concluding remarks today, in an effort to take the edge off this pessimism, Larosiere referred to that phrase, and added nonetheless that the right policies could "turn the situation around and get things moving again in the right direction."
Nonetheless, French Finance Minister Rene Monory noted that in contrast to the relative optimism at the 1978 annual meetings in Washington, "We meet [now] in dejection . . . Many of us are dubious, wondering whether the international community is capable of rising to a new challenge."
The consensus here was that greater international cooperation -- even to the point of enhancing the powers of the international institutions at the expense of national sovereignty -- will be necessary.
The immediate problems of inflation, economic stagnation, growth and the debt burdens of the poor countries remain the overwhelming ones while major reforms of the system seem very much on the back burner.
Chief among the most urgent concerns of the world's monetary counselors is what to do about the latest dollar plunge. Rumors persisted here that the United States would increase its holdings of West German marks -- that could later be sold for dollars -- as one way of stopping further declines in the dollar's value. Washington could get the marks by floating a mark-denominated bond issue in West Germany.
Part of the dollar's current troubles appear linked to the rush for gold which has caused an astounding rise in the price of the precious yellow metal. To relieve some of the pressure on gold prices, there were reports that the United States might also increase its gold sales.
It was further learned that West European officials used the United States to put limits on gold trading in futures markets as one way of beating back inflationary speculation.
"I can't understand why the Americans let it go on this way," said a Bank of England source. "It smacks of 1929, the way they run it."
At a press conference today, Larosiere refused to be drawn into a discussion of whether this week's events had demonstrated the need for the United States to adopt a stronger anti-inflation policy.
Instead, he commended Treasury Secretary William Miller's commitment in his address Wednesday to take whatever austerity measures are needed.
Later, Larosiere added that "a strong fiscal and monetary policy in the United States is absolutely essential."
In brief addresses to the final joint session, both Larosiere and McNamara struggled to alleviate the pessimism. Yet their remarks emphasized the problems that lay ahead for rich and poor nations alike.
McNamara cited increases in oil prices, the industrial nations' inflation, and low rates of growth in the rich nations as creating "an extraordinarily difficult situation for the developing countries."
On the plus side, however, McNamara announced that 86 governors had approved a general increase for the bank. This will enable the bank to raise the real level of its lending.
Larosiere spoke approvingly of the "priority" given by the interim committee to further study of what is called a "substitution account." This would provide a way for central banks to turn in their surplus dollars for an IMF asset. It will be discussed further in Hamburg next April.
Both Larosiere and Monory cited the problems facing developing countries which will have to trim back development plans. A chief reason is that they will be paying up to $15 billion more this year for the same amount of oil imports.
The split between the rich and the poor nations was more noticeable this year than ever. Although the IMF now formally gives attention to the "social and political objectives" of the poor countries, as well as to their economic priorities, the poor nations seek more help and better loan terms.
Larosiere promised that the IMF would take actions to "ameliorate" the borrowing terms for the poorest nations.
The Third World case was put in many ways, but notably and symbolically by Yugoslavia's President Tito, who urged the sessions to convert to the "new international order." He warned of the waste of human and physical resources, complaining that the improvements fostered by the existing system were too slow.
It was clear that Tito, who was well-received by this conference, was delivering not only Belgrade's views but was speaking as well for the majority of the countries that attended the recent Havana summit of nonaligned states. Those nations still are willing to work with the market-oriented economics of the West.