14 - Debt, Trade, and the Prospects for World Economic Growth

Abstract

This chapter describes the debt, trade, and the prospects for world economic growth. During the late 1960s and early 1970s, a large number of developing countries had grown accustomed to relatively significant rates of growth in real income and product. Much of this growth was predicated on a similar growth in real imports, the vast majority of which, apart from oil, came not from other LDCs, but rather from the developed OECD world, in the form of manufactured investment or intermediate goods. The unspent OPEC and other surpluses had a contradictory effect on the world economy as a whole. In particular, the oil price increase acted much like an increase in taxes on all oil-consuming nations. Had the post-October 1973 price increases for oil not occurred, these sums would have been part of purchasing power in the oil consuming countries, and part of that purchasing power would have spilled over on to imports for LDCs exports of manufactured goods and raw materials. A near depression occurred in the developed oil-consuming countries, and it provoked a slump in demand for LDC exports.