A photograph of International Monetary Fund Managing Director Jacques de Larosiere in yesterday's Business & Finance section was identified incorrectly as that of World Bank President A. W. Clausen.
President Reagan told the world's poor nations yesterday to "believe in the magic of the marketplace" rather than aid from wealthier governments as the main route to achieving economic progress and a higher standard of living.
In a welcoming address to the opening session of the 36th annual meeting of the World Bank and the International Monetary Fund at the Sheraton-Washington hotel, Reagan pledged continued American support to the two key lending institutions.
But he warned that unless each less developed nation "puts its financial and economic house in order, no amount of aid will produce progress." He urged them to follow the example set not only by the United States but also by fast-growing smaller economies, such as those in Southeast Asia, which have performed spectacularly in recent years while emphasizing the private sector.
Reaction among poor-nation representatives was mixed. Most would have welcomed some new initiative from the United States. But foreigners, like Americans, expressed admiration for the president's ability to communicate ideas, and one termed the speech a "diplomatic success."
As for the American economy, Reagan predicted an era of prosperity and non-inflationary growth "the likes of which we have not seen for many years." But he said it "will require effort and patience."
Reagan's message was received politely and respectfully by the 3,200 of the 10,500 financial leaders and guests registered for the annual meeting who were able to crowd into the main hall. His call for the poor nations to rely more on the free enterprise system was the latest articulation of a determined American effort to reshape both the IMF and World Bank.
In general, the American position is that government aid to the poor nations must now be limited because of domestic budget stringency. And in conformity with its own ideology, the Reagan administration believes that recipient countries should be encouraged to give a warmer welcome to private business.
The president made plain in his speech yesterday that this theme will be batted up again next month to the North-South summit in Cancun, Mexico, where he will meet with 21 other heads of state in an effort to end what he said is "divisive rhetoric" between the North (rich world) and the South.
The president's call for the poor nations to trim their budget deficits and follow tighter monetary policies was echoed later in the session by IMF managing director Jacques de Larosiere, who said in his annual address that "this is a rough path indeed," but that "there is no other path to follow."
On the other hand, the administration's demand that the World Bank trim its sails, notably in the amount of subsidized aid it offers through the International Development Association, met a thorough-going rebuff from the new bank president, A. W. Clausen. In his speech yesterday to the joint meeting, Clausen staunchly defended IDA, and called on the United States to support a continuation of that agency, perhaps in a different form from the existing one. Details on Page D7
The administration's campaign to require the IMF to follow tougher lending conditions for its loans seems to have had an impact on the fund management, although de Larosiere asserts publicly and privately that the fund has been following a strict set of loan guidelines all along.
In his speech yesterday, the IMF director said that if "the hopes and aspirations of member countries for the coming decade are to be at all satisfied, there can be no relaxation now in economic adjustment policies. This message may seem an austere one. It is nevertheless realistic: the present state of the world economy imposes this discipline on industrial and developing members alike."
The policy-making board of the IMF, called the Interim Committee, had warned on Sunday that the poor nations, which last year had a total deficit of $83 billion in their international trade and services, could not keep on borrowing money to cover this shortage but had to cut back some of their spending programs at home.
Essentially, this was the message elaborated yesterday by de Larosiere. He acknowledged that many poor countries had already squeezed their budgets down in the wave of the second oil shock in 1979-80, but said there is "progress yet to be made."
De Larosiere acknowledged that the further belt-tightening now demanded would be costly in human terms, but insisted that neither the IMF nor the recipient nations could now follow any other course.