Business: Facts of Life

Cold-turkey talk, served up by World Bank President Eugene R. Black, was the main dish last week for finance ministers of the world’s underdeveloped countries. Meeting in Washington at the International Monetary Fund, sister of the World Bank, they heard Black give a polite accounting of the bank’s biggest ($332 million disbursed around the globe) year since the Marshall Plan era. But far less polite was Black’s accounting of how some of the loans were used.

With too many capital-starved nations, lectured Black, politics comes first and economics second. “The largest single cause of imbalance is the volume of unproductive investment which governments feel they have to undertake.” It makes no sense for a government (such as India ) to endanger its food supply “in order to build steel mills with labor driven from the land.”

Industrialization is not boosted or inflation cured by overspending for armaments, by constant overreaching for “too much,” by sheer “waste” from planning caused by pure political expediency. “If governments become the prisoners of their own more or less arbitrary development targets, in all probability something will have to give under the pressures of inflation and the impatience generated because practice is not living up to promise. And perhaps the greatest danger is not that development will give, but that government by the consent of the governed will be abandoned.”

Bill of Complaint. Smarting under the criticism, 20 Latin American countries swiftly drew up a four-point petition counter-criticizing World Bank operations. They wanted 1) speedier loan consideration, 2) loan approval by their own governments rather than the bank, 3) loans in their own national currencies as well as foreign money, 4) granting of “general” loans, not just specific ones. A more telling complaint was added by Pakistan’s M. A. Mozaffar: “The ratio of World Bank loans granted to the underdeveloped countries of Asia and the Middle East declined from 41.9% in 1955-56 to 29.3% in the latest fiscal year.”

In reply, President Black reaffirmed the bank’s policy that loans must be related to “the real credit worthiness of the borrowing countries,” that loans will be granted only for “specific projects soundly conceived,” and that each country and loan will be treated “on its individual merits.”

Prime Essential. The underdeveloped countries were also concerned over the fact that the inflationary boom in industrial countries is soaking up most of the world’s capital, while the huge new growth in world trade had developed mainly between advanced countries. No industrial nation denied the validity of this analysis, but to a great degree, they pointed out, it was the responsibility of the underdeveloped countries themselves.

Said President Robert L. Garner of .the International Finance Corp., year-old affiliate of the World Bank created to foster business in underdeveloped countries: “For the country desiring the benefits which can flow from vigorous, expanding private business, I consider the prime essential to be the development of an attitude of friendliness and cooperation rather than of suspicion and obstruction. This may sound too obvious to mention, yet we see too many examples of legislation, regulation and administration which reflect, at the best, mere tolerance of business, and frequently actual hindrance.”