World Development Report 1984

1 Introduction
The past few years have produced so much turbu- mature into sustained and rapid growth of the
lence in the world economy that governments and kind the world enjoyed for twenty-five years after
businesses have naturally been preoccupied with World War II.
the short term. Now that recession is giving way to That much is clear from a review of the past,
recovery, they can start to take a longer view. For which is the subject of Chapter 2. It concludes that
developing countries in particular, the shift is wel- the 1980-83 recession was not an isolated eventcome:
development is quintessentially long term, caused, for example, by the second oil price rise of
yielding its best results when policies and pro- 1979-80. Its roots went back farther, to the rigidigrams
can be designed and sustained for years at a ties that were steadily being built into economies
time. from the mid-1960s onward. The rising trends in
Long-term needs and sustained effort are under- unemployment and inflation were the manifestalying
themes in this year's World Development tion of increasingly inflexible arrangements for set-
Report. As with most of its predecessors, it is ting wages and prices and for managing public
divided into two parts. The first looks at economic finances.
performance, past and prospective. The second The chapter emphasizes that policy failings have
part is this year devoted to population-the causes characterized both the industrial and the developand
consequences of rapid population growth, its ing countries. Because of the industrial countries'
link to development, and why it has slowed down predominance in the world economy, the consein
some developing countries. The two parts mir- quences of their economic failure have weighed
ror each other: economic policy and performance heavily on the developing countries. In particular,
in the next decade will matter for population the much publicized debt difficulties of the past
growth in the developing countries for several two years came to a head because of the unusual
decades beyond; population policy and change in combination in 1980-83 of recession and high real
the rest of this century will set the terms for the interest rates in the industrial countries. Industrial
whole of development strategy in the next. In both countries provide a market for about 65 percent of
cases, policy changes will not yield immediate ben- the developing world's exports. Their buoyancyefits-all
the more reason for starting to act imme- or lack of it-and the amount of trade protection
diately. Delay will reduce the room for maneuver they choose to employ have a critical influence on
that policymakers will have in years to come. the foreign exchange earnings of developing countries.
These earnings in turn will largely determine
The economic outlook whether the "debt crisis" gradually subsides, or
seriously retards the growth prospects of develop-
The recession of 1980-83 was the longest in fifty ing countries for many years to come.
years. It increased unemployment, reduced invest- That is one of several contrasting alternatives
ment, and undermined social programs in almost highlighted by the scenarios presented in Chapter
every country in the world. It put great strain on 3. These scenarios look ahead as far as 1995, but
the international trade and financial systems and they are not intended as forecasts of what will hapcaused
friction between governments everywhere. pen. They merely illustrate what might happen,
But it provided many valuable lessons for eco- depending on the policies pursued by governnomic
policy because it highlighted longstanding ments and the effectiveness of governments in
weaknesses in every economy and in international tackling economic problems. They show, for examarrangements.
Unless policymakers learn from its ple, that GDP in the developing world could grow
lessons, the recovery now under way will not at 5.5 percent a year in 1985-95 if the industrial
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