IN TURKEY, BUILDINGS are going unheated this winter and industrial production is rapidly declining. Inflation and street violence are rising together, a double index of distress. The country is suffering acutely from lack of oil and the foreign exchange to buy it. As Americans grumble about the rising price of fuel, they might keep in mind that the effects here are very mild compared with those in the poor countries.
There the cost of oil is jeopardizing the whole crucial process of economic development and, with it, the stability of society. But some of Turkey's close neighbors are countries whose stability is, conversely, threatened by the sudden rush of new wealth extremes somehow, and to keep the oil flowing without diaster, is a test of skill and statesmanship that now urgently confronts the people who comprise the world's financial system. They haven't much time.
In the first oil crisis six years ago, there was immense anxiety over the process known as recycling. That meant lending oil revenues back to the buyers to enable them to buy more. As it worked out, recycling went surprisingly smoothly. THE OPEC countries put their surpluses in American and European banks that then passed them on to borrowers in the developing countries. Shortly, the OPEC surpluses began to decline, as the oil-exporting countries found ways to spend their new wealth faster than anyone had thought possible. After the first jolt, the poor countries' economies were soon growing nearly as fast as ever. As a broad generalization, you could say that the rich nations carried the burden of more expensive oil in the form of lower growth rates, while the poor ones carried it in the form of mounting debt.
But the success of that earlier experiment in recycling seems to have made the world overconfident and inattentive. The present strains are more ominous than those of 1974, and the last recycling operation probably cannot be repeated.
Many of the banks have already loaned to the developing countries as much as they consider safe. The Federal Reserve Board has begun to remind the American banks, tactfully but publicly, about the dangers of overexposure in the Third World. As for the OPEC governments, they are not likely to accelerate spending again as they did after 1974. Most of them consider Iran a warning of the consequences of spending too much too fast.
This time the developing countries will have to divert money from investment to oil payments; that means less growth. Turkey has already devalued drastically, as have Brazil and Korea. That can help, but it's hardly enough. If the OPEC governments do not rapidly begin lending directly, there can be no solution that does not impose severe deterioration of living standards on Turkey and other vulnerable countries throughtout Asia, Latin American and Africa. Henry C. Wallich of the Federal Reserve Board recently made the interesting suggestion that, instead of lending to the developing world on their own credit, the multinational banks might arrange direct loans by the oil-exporting countries. That would leave the risk with the sellers of oil, not with banks that are already carrying enough of it. OPEC created these risks and, as Mr. Wallich observed, it seems incumbent on OPEC to share them.