Are national leaders beginning to accept that the world's economic crisis can only be solved by nations working together--that the world after all is round? Is the Washington administration in the midst of a radical reassessment of its international economic policy?
These were questions that were uppermost in Ottawa last week, where the Brandt Commission, made up of prominent people from both North and South, met to approve a new emergency report to be published early next year, and to issue a warning about the dangers of purely natonal reactions. "In this crisis," said their statement, "the fate of the rich and the poor countries, the industrial and the agricultural communities, is inextricably linked."
Three years ago, the commission, headed by Willy Brandt, published its first report, "A Program for Survival." It insisted that the world was facing "much greater dangers than at any time since the Second World War," and argued that the richer countries were involved in a web of mutual interests with developing countries in which it was dangerous to ignore their economic plight--quite apart from humanitarian arguments for helping the poorest countries.
Those arguments for mutual interests were treated with some skepticism at the time -- particularly in the United States. After the hostage crisis in Iran and the invasion of Afghanistan, the mood in Washington was not receptive to any arguments about more help for the Third World.
The Brandt report did open up new discussions about how North and South could cooperate, and it did achieve one of Willy Brandt's chief objects -- a summit of world leaders from North and South to thrash out common problems, which took place at Cancun in Mexico a year ago. But Brandt was personally disappointed by the formality and limitations of the Cancun meeting, which did not lead to any further attempts to break the world deadlock. Every Western nation was preoccupied with its own fight against inflation and the worsening economic storms, and was convinced that it must put its own house in order before attending to others.
But the events of the last few months have rapidly brought a new perspective to the economic crisis -- particularly in the United States. The near-default of Mexico, with its huge debts to American banks, followed by financial crises in Brazil and Argentina, brought home the facts of interdependence -- and not only to the bankers. Many industrial corporations that looked to Latin America for much-needed exports now faced a dwindling market, with slender prospects of export credits.
George Shultz at the State Department and Donald Regan at the Treasury could not ignore the urgent necessity to rescue economies that were so dangerously close--with direct loans as well as help from the International Monetary Fund. And this immediate need has already led to a wider concern with the world's economic and monetary workings, so that Reagan has even discussed the possibility of a world monetary conference to consider revising the global system that was established at Bretton Woods at the end of World War II.
The acceptance of some mutual economic interests with developing countries has come closer, and some of the arguments of the Brandt report about interdependence -- arguments that seemed heresy three years ago -- now seem like platitudes. But for Brandt, the bankers' crisis is only part of the larger and more serious danger--that economic disasters will bring political upheavals and chaos in many parts of the world, as they did in the depression of the 1930s, which led to World War II, and that the poorest countries, which are too poor even to borrow, will face political breakdowns and mass starvation.
Brandt and his fellow commissioners insist that new loans from bankers and the IMF, though essential, are not enough to bring economic health to the Third World, and that only a rapid increase in world liquidity -- through a large issue of special drawing rights by the IMF -- can reverse the decline in world trade and replenish the weakened reserves in developing countries. They call for much greater direct aid to the poorest countries to alleviate their immediate suffering. And they believe that inflation -- though it must constantly be guarded against -- is now a less serious danger than a recession which can rapidly deepen into a depression.
To help revive the developing economies they propose, as well as more SDRs, a doubling of the quotas (or contributions) of the IMF, which would provide another $32 billion of usable currency over three years. This increase, they point out, would only represent 5 percent of the value of world imports -- the same ratio as 10 years earlier.
They also propose that the IMF borrow more money from both surplus countries and from capital markets, partly to tide over the time lag before quotas are ratified; that the World Bank rapidly lift its ceiling for "program lending" (non-project loans, which can be dispensed much more quickly than loans for projects) from $1.3 billion to $3.9 billion; and that lending governments should waive all official debts of the least-developed countries.
These measures, the commissioners insist, "constitute the minimum emergency action which we believe nations must now take together."
Behind all the concern lies the political question: how can sovereign nations be persuaded to look beyond their immediate self-interest, and to see that purely national measures can damage countries in other parts of the world, whose troubles then boomerang back? How bad must a world crisis become before it forces countries to cooperate?
For people in many developing countries, the signs of change seem depressingly slow. But to Willy Brandt, who as a young man saw the rebuilding of his own wrecked country with the help of the unparalleled generosity of the Marshall Plan, there is still grounds for hope. "Situations are seldom hopeless if they are not accepted as such," he said in his introduction to his first report three years ago: "and hope itself is the most important element in overcoming obstacles."