This paper discusses the employment of women in developing countries in the light of recent changes in emphasis on the strategy and objectives of economic development. The paper highlights that in the vast majority of countries—both developed and developing—the role of women is still limited and their responsibilities restricted. This paper examines automated manufacturing techniques in developing economies. The operations and transactions of the special drawing account are discussed. The paper also analyzes Latin America’s prospects for overcoming historical attitudes and other constraints to achieve wider economic integration.

Abstract

This paper discusses the employment of women in developing countries in the light of recent changes in emphasis on the strategy and objectives of economic development. The paper highlights that in the vast majority of countries—both developed and developing—the role of women is still limited and their responsibilities restricted. This paper examines automated manufacturing techniques in developing economies. The operations and transactions of the special drawing account are discussed. The paper also analyzes Latin America’s prospects for overcoming historical attitudes and other constraints to achieve wider economic integration.

Cyril H. Davies

On the surface the main preoccupation of Governors attending the Annual Meeting of the World Bank and its affiliates, the International Finance Corporation (IFC) and the International Development Association (IDA), appeared to be the international monetary crisis precipitated by the measures announced by the United States authorities on August 15. Underlying this preoccupation, however, was a sense of the great size and urgency of the problems facing the underdeveloped world, which were more intractable and far less susceptible of an early solution than the task of rebuilding the international monetary system.

Representatives of the developing countries were highly apprehensive that the monetary crisis might frustrate development. At the least, some feared, there might be a long period of uncertainty while monetary negotiations dragged out. A breakdown of negotiations might well mean a retreat, disastrous for the developing countries, of the big industrial nations into protectionism and exchange control. Mr. Tan Siew Sin, Governor for Malaysia, warned that, while protection might offer the industrial countries a short-term solution, in the long run it would be damaging to them, as well as to the developing countries. Many Governors for developing countries were concerned lest, in the negotiations, insufficient weight should be given to their point of view. Asserting the right of the developing countries to be heard, Mr. Mwai Kibaki, Governor for Kenya, said that “the world cannot be divided between a Group of Ten and the rest,” while Mr. Bernard Bidias a Ngon, Fund Governor for Cameroon, who spoke also for Chad, the Central African Republic, Gabon, and the People’s Republic of the Congo, spoke of the “contradiction” between the primary objective of the Bretton Woods Agreements—the promotion of the development of the poorer countries—and the difficulties they experienced in trying to make themselves heard within the international financial community.

For those who expressed misgivings of this kind there was some reassurance in the emphasis laid by spokesmen for the developed countries on the need to consider the interests of the developing countries. This note was struck in the opening address of the Co-Chairman, Mr. Karl Schiller, the Governor for Germany, when he said that the Governors, when facing the challenge of the monetary crisis, should not lose sight of the fact that “urgent and enormous” problems also existed in the development field. Mr. Anthony Barber, Fund Governor for the United Kingdom, said: “So much has been done in the past to promote the prosperity of the developing countries that it would be a tragedy to allow it now to be reversed by financial instability or trade restrictions. Much remains to be done. The fact that there are still millions of human beings existing in a state of degradation is an affront to our ideals and makes a mockery of our civilization.” Mr. Valery Giscard d’Estaing, Governor for France, after reminding the Governors that the countries which produced primary commodities were those likely to be hardest hit by monetary uncertainties, added that the concern of the developed countries for the developing countries did not in itself qualify the former to be the sole assessors of the effects of their decisions on the economies of the latter, and that a procedure should be devised to allow the voices of the developing countries to be heard in the search for final solutions.

The Real Problem

Mr. George M. Chambers, Governor for Trinidad and Tobago, urged that although the monetary problem presented dangers and difficulties it should not be allowed to deflect attention from the real problem, that of “how to overcome the poverty, the bad living conditions, and the high rates of chronic unemployment and underemployment in the developing world.” Some speakers feared that the crisis might be used as an excuse for reductions of aid, and reproached the industrial countries for the decline, already visible in 1970, in the amount of their official development aid. This, and any further decline, they said, not only represented a failure to adhere to the Second Development Decade targets to which the industrial countries were committed but also had no economic justification. The Bank and Fund, said Governor Kibaki, must not accept the proposition that an industrial country could only afford to provide aid when its balance of payments showed a surplus; a balance of payments deficit was not synonymous with poverty.

In the same vein, Mr. McNamara, President of the World Bank Group, in his opening address, said that in recent years a serious obstacle to the achievement of the United Nations target of a transfer of public and private capital equal to 1 per cent of the GNP of the developed countries had been the preoccupation of some of the latter countries with the effect of aid transfers on the balance of payments. “Whatever steps are taken to improve the operation of the international monetary system,” he continued, “must be such as to permit a continuing increase in capital flows to meet the targets to which the developed countries have subscribed: an increase in public development assistance from $8 billion per year in 1970 to $12.5 billion per year in 1975.”

Mr. David Horowitz, Governor for Israel, sharply criticized the “affluent society” of the developed world for its “worship of the idol of consumption,” which made it unable to spare more than about three quarters of 1 per cent (i.e., about $13.6 billion) from its “two-trillion dollar economy” for the development of the “half-trillion dollar economy” of the remaining two thirds of humanity.

IDA Replenishment Delay

Many speakers expressed their regret that the Third IDA Replenishment had not yet become effective. To some degree they were reassured by the recollection that the similar crisis which had overshadowed the 1969 meeting had been favorably resolved soon afterward, and by the assurance given by Mr. John Connally, Governor for the United States, that his Government firmly supported the replenishment, and would exempt its own contribution from the 10 per cent cut to be generally applied to U.S. aid during the current fiscal year. On the other hand. Governor Connally reminded the Governors that, before the U.S. Congress could approve the contribution, it would have to be convinced, “as never before,” that the funds would be used efficiently, and that the United States could “safely assume the burden.”

There was general acclamation of those IDA countries—Australia, Canada, Denmark, Finland, Germany, Japan, Kuwait, the Netherlands, Norway, Sweden, and the United Kingdom—and of Yugoslavia—which had already made, or had announced their intention to make, advance contributions in order to avoid any interruption of IDA commitments pending completion of the Replenishment. It was noted with satisfaction that the Governors had already approved the transfer to IDA of $110 million out of the Bank’s profits for the 1971/72 financial year, although some speakers wished that the amount of the transfer had been much higher.

A number of speakers, from IDA countries, urged that the future replenishment of IDA’s funds should be placed on a more stable basis which would not give rise every two or three years to a crisis of uncertainty. In his closing remarks, Mr. McNamara said that the means for achieving greater stability should be explored in conjunction with the new monetary arrangements.

As in previous years, a number of speakers pointed out that, even with the full IDA replenishment, the supply of capital on concessionary terms would still fall short of what was needed if the gap between the richer and poorer countries were not to widen. They cited the study of the external debt of the developing countries prepared by the Bank staff in response to the concern expressed at the 1970 Annual Meetings as showing the heavy debt-service burdens borne by many developing countries, especially in Africa and Asia. Mr. R. J. Nelissen, Governor for the Netherlands, made a plea for an increase in the grant element of aid, which, as the debt study showed, had declined from 59 per cent in 1965 to 45 per cent in 1969.

Possible New Sources of Aid

In these circumstances, it was natural that there should be a renewal of support for various proposals for tapping possible new sources of concessionary aid. Governor Horowitz reminded the Governors of his plan whereby the Bank would increase its market borrowings so as to provide more money for IDA, the difference between the market rate of interest and IDA’s low service charge of three quarters of one per cent being subsidized by the Part I countries.

Several speakers expressed their disappointment that work on the scheme of supplementary finance to help developing countries faced with interruptions of their development programs due to unexpected shortfalls in export earnings, which UNCTAD had asked the Bank to elaborate, continued to remain in suspense in the absence of indications that the richer countries would be prepared to make substantial additional aid contributions for this purpose.

Undoubtedly, however, the approach to the problem which appealed most to the developing countries remained, as at the 1970 meeting, the creation of a link between the Fund’s: special drawing rights (SDRs) and development finance, possibly by channeling part of them directly or indirectly into the hands of the Bank and IDA. Some speakers expressed disappointment that the studies of this question which the Fund had initiated were not yet available. Governor Horowitz, inveighing against “the priests of ultra-orthodoxy” who held that any redistribution of the world’s GNP was “anathema,” said that, for them, “Keynes might just have not been born at all.”

The Climate for Private Investment

Led by Governor Barber and Governor Connally, who said that official aid alone was not enough, a number of speakers stressed the importance of private investment. Both Governor Barber and Governor Connally, however, said that private investors needed reassurance about the investment climate in a country in which they were considering investing. Governor Connally emphasized the harmful effect, extending beyond the parties immediately concerned, of the treatment by developing countries of private investment in a manner “not accepted by international law.” He supported the creation of the proposed International Investment Insurance Agency (IMA), for which UNCTAD had requested the Bank to draft a charter, still under consideration by the Executive Directors; he also urged greater reliance on the Bank-sponsored International Center for the Settlement of Investment Disputes (ICSID). Governor Connally added that the policies followed by the Bank in situations in which existing investments were unfairly treated would “importantly affect the future climate for the flow of public development assistance as well as for foreign private investment.”

Some spokesmen for developing countries differed from these views. General Francisco Morales Bermudez, Governor for Peru, speaking also for 22 other Latin American countries and the Philippines, said that all these countries opposed the setting up of the proposed III A. Mr. Hugh Desmond Hoyte, Governor for Guyana, said that it was inevitable that the governments of developing countries should increasingly act so as “to transfer economic power from foreign to local hands” by such means as nationalization. The Bank, he continued, must not be deflected from its duty by the “plausible but basically irrelevant arguments of those who have a vested interest in maintaining the status quo.” Mr. Ismail Mahroug, Governor for Algeria, defending the principle of the sovereignty of states over their national resources, said that the Bank and other international agencies should exhibit “great caution” in the “particularly complex and delicate sphere of nationalization.”

A number of speakers commended IFC’s record during the past year. In particular, IFC’s establishment of a Capital Markets Department was welcomed as an aid to the mobilization of local savings in developing countries. Mr. Duck Woo Nam, Governor for Korea, expressed appreciation of IFC’s role as both “midwife” and equity investor in the new Korea Investment Corporation, which was expected to play an increasing part in guiding domestic and foreign private capital into productive ventures in Korea. Mr. Aleke K. Banda, Governor for Malawi, said that the review of the evolution of IFC’s policy in its Annual Report encouraged him to hope that in future IFC would accept a larger proportion of government ownership in enterprises that it financed. Mr. Janko Smole, Governor for Yugoslavia, welcomed IFC’s first investment in a Yugoslav enterprise, which had been made possible by a decision on the part of IFC’s Board of Directors that enterprises in Yugoslavia were private enterprises in the sense required by the Articles of Agreement. While commending IFC’s positive contribution to development in Latin America, Governor Morales added the reservation that IFC should not expect governments to give it more favorable investment terms than they gave to other foreign investors.

The Bank Group’s Performance

Although the future might be clouded by uncertainty, there was no doubt that the Bank Group had had a very satisfactory fiscal year. Outlining its achievements in his opening speech, Mr. McNamara said that new loans (Bank), credits (IDA), and commitments (IFC) had totaled $2.6 billion, compared with $2.3 billion in 1970, $1.9 billion in 1969, and $1.0 billion in 1968. The Group, which had thus committed a total of $6.8 billion in the three fiscal years 1969, 1970, and 1971, was therefore well on the way to reach or even to exceed its target for the five years 1969-73 of $11.6 billion, which represented a doubling of investments in that period compared with the five previous fiscal years, 1964-68. The sectoral composition of the $6.8 billion total for the fiscal years 1969-71 was also consistent with the five-year objectives of trebling lending for education and quadrupling lending for agriculture.

Mr. McNamara said that the task of attaining the objectives of the Five-Year Program had appeared arduous at the outset and remained so despite the encouraging results hitherto obtained. Already, however, preliminary plans were being sketched for a second Five-Year Program to cover the fiscal years 1974-78, and these plans would be elaborated with a view to their discussion with the Governors at the next Annual Meetings. Governor Nelissen suggested that these plans, in addition to indicating the Bank’s own targets, should define the role of the Bank in coordinating a very important part of the development effort of the whole world.

These solid achievements of the Bank Group during the past fiscal year received general praise from the Governors, as much for their qualitative as for their quantitative aspect. The Bank’s increasing emphasis on what speakers called “social projects” was welcomed. Mr. Hannes Androsch, Governor for Austria, raising the question whether, as the Bank’s lending expanded it should become more diversified, or increasingly concentrated on a few particular sectors, recalled that H.G. Wells had once described human history as “a race between education and survival.” Governor Androsch added that without any doubt the highest possible return on capital investment lay in education.

The Pros and Cons of Flexibility

As at past meetings, praise of the Group’s general progress was accompanied by suggestions, many of them familiar, for modifying its lending policy in various directions. Impatience was expressed with the limitations imposed by the Articles of Agreement of both the Bank and IDA on lending in support of general development programs, as distinct from specific projects, and on the financing of local costs, although some speakers spoke appreciatively of the increase in local cost financing in recent years. The Bank and IDA were also criticized for too inflexible an insistence on international competitive bidding. Mr. Y.B. Chavan, Governor for India, referring to these aspects of Bank-IDA policy, expressed his concern that “twenty-five years after the Bretton Woods Conference, the Articles written then are regarded as gospel truths, not susceptible of interpretations or changes which would be more in keeping with the current needs of the developing world.”

Governor Chavan said that the essence of development was to build up domestic capability in its widest possible sense, and criticized the Bank for allowing no more than a 15 per cent margin of preference in favor of local suppliers of equipment, and no preference margin at all in favor of local construction contractors. On the latter point he was supported by Governor Morales and by Governor Chambers, who hoped that the Bank would not insist on international competitive bidding for moderate-sized civil works contracts.

While a number of representatives of developing countries deplored the heavy burden imposed on poorer countries by the Bank’s current lending rate of 7¼ per cent, it was widely recognized that, given the rates at which the Bank currently borrowed in the market, the Bank could hardly charge less.

Mr. B.M. Snedden, Governor for Australia, saw dangers in some of these suggestions. There was considerable doubt, he said, whether the cause of development would be served if the Bank were “to lower its lending standards” in an effort to accelerate disbursements; such a course was likely to lower its ability to raise money in the world’s capital markets, and could mean, not only less money, but more expensive money. Governor Snedden went on to say that it was nowadays argued that certain policies, such as emphasis on project finance, adherence to international competitive bidding, and lending at rates that yielded an adequate financial return, were outdated; nevertheless, if the Bank abandoned these policies it might well find itself on the way out of business. It was better to have the Bank strong and active. Although IDA’s funds did not come from the capital market, he added, the same principles applied; every donor government would wish to have assurance that the funds it provided were directed toward “economically viable projects and programs.”

Noting with satisfaction that, in spite of the uncertainty of capital markets, the Bank had successfully fulfilled its borrowing program during the past fiscal year. Governor Nelissen reminded the Governors that its borrowing rate had for a long time been much higher than its lending rate, and warned that this state of affairs could in the long run lower the Bank’s standing in the market.

The Priority of Population Planning

Mr. McNamara took up once more and carried further the thesis that he had developed at previous meetings: that development could not be reduced to purely quantitative terms, and that it was not enough to invest the maximum available resources in the projects with the highest rates of return. In the majority of developing countries, any program which sought to maximize GNP without taking account of the population explosion would fail in the long run to increase GNP per capita. Even in countries where there were as yet few signs of overpopulation, Mr. NcNamara said, population planning must have priority, the reason being that “much more time is required than is generally imagined to translate population-planning programs into reductions in the birth rate sufficiently large to result in reasonable rates of growth.” Even where, as in many countries, population planning, was not held back by the absence of strong political support, decades would pass before the rate of population growth could be reduced to an acceptable level. Recent estimates indicated, he said, that if a net reproduction rate of one (i.e., an average of two children per couple) was not reached in the developing countries until 2040, their total population by that year would have increased fivefold to 14 billion. If the net reproduction rate of one could be reached 20 years earlier, the peak population would be reduced by as much as 4 billion, or more than the world’s total population today.

Development programs had not yet taken account of the consequences of this continuing population growth, continued Mr. McNamara. Two of these consequences, widespread malnutrition and chronic and growing unemployment, required particular attention.

Mr. McNamara summed up his argument on malnutrition in the following propositions:

Malnutrition is widespread;

It is a major cause of high mortality among young children; It limits the physical, and often the mental, growth of hundreds of millions of those who survive; It reduces their productivity as adults;

It is therefore a major barrier to human development.

After substantiating these propositions statistically, Mr. McNamara said that “the nutrition problem represents less a need for new and immense amounts of development capital than a need for realistic understanding of the situation.” An expenditure of $8 a year was enough to make up the deficiencies of diet that deprived a child of one fourth of his protein and one third of his caloric needs. Mr. McNamara indicated a number of promising possible low-cost agricultural and industrial ways of increasing the nutritional value of food, such as crop shifts from low-protein cereals to high-protein pulses, the introduction of more nutritive strains of conventional cereals, the fortification of basic foods to increase their nutritional value, and the development of entirely new low-cost processed foods from oilseed proteins.

Starting from the fact that the fall in death rates, which caused the population explosion in developing countries, affected the youngest age groups first, Mr. McNamara showed that unemployment and underemployment, already at a rate of 20-25 per cent in most developing countries, would in all probability become worse. Bad as the urban unemployment problem was, he noted that the rural problem—usually taking the form of underemployment—was almost everywhere worse, and was a principal cause of the wide gap between urban and rural incomes. Statistics suggested that income distribution was less equal in developing than in developed countries. A highly disturbing fact about the increase of underemployment and rural poverty, Mr. McNamara pointed out, was that they had occurred at a period of rapidly increasing aggregate GNP. Over the period 1960-70, the average annual growth of GNP of the developing countries exceeded 5 per cent. The distribution of this increase had been so unequal, however, between countries, regions, and socioeconomic groups, that it had led to a “reaction against growth as the primary development objective, and a demand for greater attention to employment and income distribution.” The lesson of the last decade was that economic growth could not be depended on alone to solve these problems. Tax collection practices were too inadequate and political pressures were too great for fiscal policy to be counted upon as an effective means of redistribution. “The only effective solution,” Mr. McNamara concluded, “is to raise the incomes of the poorest groups by increasing the number of productive jobs available to them.”

Turning to the question of what measures could provide satisfactory rates of both job creation and economic growth, Mr. McNamara said that the solution to the worst problems must be sought in the countryside, in the first place by extending the “Green Revolution,” so far largely confined to wheat, rice, and maize on irrigated land to other crops, and to unirrigated land. This could not be done without a great increase of research, and the Bank had joined with the FAO and the UN Development Program to sponsor a consultative group which would mobilize funds in order to continue and expand the work of existing international research centers, and to establish new ones. There was always a danger, however, that the wealthier farmers would monopolize technological advantages, and in many areas some redistribution of excessively large holdings to landless or small farmers would be desirable, not only on grounds of equity but of efficiency as well.

The Export Problem of the LDC’s

Even at best, however, Mr. McNamara continued, agricultural employment would not grow fast enough to absorb the growing rural labor force, and a rapid expansion of industrial production would be required. While the industrialization process in developing countries usually begins with import-substitution behind tariff barriers, it is uneconomic to carry this process beyond a certain point, although unfortunately many developing countries have done so. The more fruitful course in such countries is to shift the manufacture for export of goods based on domestic raw materials and to take advantage, through labor-intensive methods, of the relative abundance of labor in relation to capital. This course is also most likely to generate increased foreign exchange earnings to pay for the increase of imports (estimated by the UN at 7 per cent a year) that the developing countries needed to sustain economic growth and to meet debt service. Even if foreign aid grew at a rate sufficient to attain the UN target for the Second Development Decade of 1 per cent of the annual GNP of the developing countries, the export earnings of the developing countries would still have to grow at a rate of more than 7 per cent a year, which would mean a doubling by 1980: To make this possible, developing countries would have to increase their exports of manufactures at a rate of 15 per cent per annum so as to offset the slow growth of primary exports.

Mr. McNamara stressed that existing tariff structures and other restrictions oh imports, such as quotas, subsidies, and preferential arrangements, often discriminated against manufactured goods from the poorer countries, and that to make possible an expansion of exports from the poorer countries would require policy changes in rich and poor countries alike—”changes which will necessitate difficult economic adjustments and require astute political leadership.”

This subject was evidently one of painful interest to the representatives of the developing countries, who were concerned not only by the obstacles to their manufactured exports which already existed but also by the danger that the monetary crisis would lead to their increase. U. Kyaw Nyein, Governor for Burma, stated the position of many of his colleagues when he spoke of the developing countries as follows:

Their peculiar lot, never very favorable, has been rendered more precarious by the recent international developments. Their terms of trade with the richer industrial nations have steadily worsened in the past two decades; their traditional primary product exports have increasingly yielded ground to similar exports by industrial countries made on concessional terms; their remaining exports have now come to be supplanted by increased production and trade between advanced countries themselves; and the ventures of their industrial products to find markets abroad have met with protective walls in the industrial nations.

Speakers for developed countries showed sympathetic recognition of these problems. In his opening address Co-Chairman Schiller had linked “the readiness of the industrialized countries to open their markets still more to the products of developing countries” with “a greater willingness of all countries to focus their physical and moral capacities on peaceful development” and “a flexible adaptation of traditional social and economic structures to the requirements of a modern industrial society” as basic principles of development. Endorsing the need for greatly increased exports of manufactured goods by developing countries, Mr. Benson, Governor for Canada, emphasized strongly that the elimination of trade restrictions, whether against developing or developed countries, would be a major step forward. He agreed with Mr. McNamara that it was desirable for developed countries to assist industries which would be seriously injured by increasing imports from developing countries, and added that programs to assist developing countries in marketing techniques had proved helpful and could usefully be expanded.

As far as solutions to the vital questions discussed at the Meeting were concerned—whether the ultimate terms of settlement of the monetary crisis would take fully into account the interests of the developing countries, and the prospects for completion of the Third IDA Replenishment, for the attainment of the DD II aid targets, and for the expansion of the exports of manufactures from the developing countries—the participants left Washington little wiser than before, and perhaps the only conclusion on which they might have unanimously agreed was that, as Mr. McNamara said in his opening address, “in the end, development is like life itself, complex.”

A Constructive Approach

Nevertheless, many were reassured by the spirit in which these issues were discussed, and the evident desire, on the part of both developed and developing countries, to avoid at all costs a fruitless confrontation from which all would suffer. This cooperative spirit bore fruit, unexpected at the beginning of the Meetings, in the constructive terms of the Resolution adopted at their end by the Governors of the Fund on how they should set about dealing with the problems of the international monetary situation. It was evident that the existence over more than a quarter of a century of both the Bank and the Fund had built up a tradition of the serious, sophisticated, and constructive discussion of developmental and monetary issues which would stand the world in good stead.