"The Third World Threat to the West’s Recovery," Business Week, February 7, 1983

"The Third World Threat to the West’s Recovery," Business Week, February 7, 1983.

  "IMF Austerity Prescriptions Could Be Hazardous," Business Week, February 21, 1983.

The Main Point

The basic argument of these two articles is to point out the fact that Industrial democracies once unaffected by developing nations are now vulnerable to such nations. Also, that cuts in third world imports might slow the growth in the industrialized nations.

The Summary

The first article begins by revealing the ever-growing importance of the third world market. It then talks about the “irrational system” that the industrial nations (mainly the Northern hemisphere) have in response to developing nations (known as the South). The second article goes into detail about the affects of third world trade on the rest of the world, mainly, the industrialized nations of the Northern hemisphere.

The Crucial Third World Market

The third world market is expanding at a rate much greater than the already developed nations. In 1980, it was at an average of 3.1% growth compared to meager 0.9% growth for the industrial nations. There is mention of the falloffs to exports to third world nations, which will have a big impact. An example is the U.S. and their exports to Mexico that fell by $5 billion in 1980. The result of this is that the Third World market is now crucial to any strategy for renewed growth in the industrial North.

Irrational System

The irrational system, which is the North’s domination of international economic structure, was denounced during the Non-Aligned Movement in June. In replacing it, Third World countries have been demanding a massive transfer of resources from North to South. The IMF and the World Bank through policies of stabilization would accomplish the replacement.

The Gaps are Closing In

The Industrialized and Developing countries, and the gap between them are closing in. Through trade, investment, and financial dependency. This “squeezing” together has made the Industrial nations more vulnerable to the economic distress in the Developing nations.

Effects of Cuts on Third World Imports

The IMF had decided to increase substantially its lending ability to developing nations. The austerity plan, which by many observers view, is not going to lead to an intended growth and manageable debt, but to sharp contractions in both developing countries and industrial nations. In order to accomplish such a plan, the IMF is also forcing spending cuts on the developing nations, in order to receive monetary lending. These spending cuts could possibly upset the world financial system. It is said that the IMF should take into account world economic conditions when it imposes its conditions. “When a country gets in trouble, not because of its own mismanagement, but because of the weak world economy, the IMF should be more generous than it would be if world demand were buoyant.”

Summary by Chinh Doan