Restructuring the World Economy

Abstract

The future consequences of the present disequilibrium in the world economy and adjustment processes through which equilibruim can be restored are discussed. There are a few commodities whose high prices or short supplies are likely to have an important effect on the economic welfare of large numbers of people: petroleum, major foodstuffs, and fertilizer. The rise in oil prices is the most dramatic of a series of events that have been operating to change the distribution of world income through the system of international trade and capital flows. In order to analyze the possible adjustments to the oil problem, the varying positions of the principal oil exporters must be understood. Nonetheless, the type of adjustments that are likely to be required involve reducing nonessential energy needs, developing new energy sources, and persuading producers to reduce prices. Lesser developed countries have more limited adjustment mechanisms than those that can be employed by developed nations. Through cooperative efforts the resumption of satisfactory rates of development throughout the world should be possible.