Basic HTML Version
~~one
could easily
predict a real and
world disaster
situation in the least
developed countries
if things aren't done
in the near future
to alleviate it.
"
11
...
we can say
safely that the
countries hit hardest
wi/1 be the poor
countries.
"
12
is a truism in economics that
whenever you get a recession the
party that's hi t earliest, hardest and
longest is the party closest to the
beginning of the production process
- in other words, the producer of
the raw materials.
So overall, we can say safely that
the countries hit hardest
will
be the
poor countries.
O.
Which countries would fare the
worst?
HOWE:
It will be those countries
which are peculiarly dependent
upon oil and which have no offset–
ting bonanza in the forro of rises in
the prices of their exports. 1 would
say that India wi ll probably be hit
as hard as any country; Korea prob–
ably
will
be adversely hit; Sri Lanka
will also be hit hard.
O.
Wbat about African states?
HOWE:
Probably the countries of
poorest Africa will be hurt as well.
Their import bill won't go up very
much because they don't have a
large, modern sector. Still, any ad–
verse impact wheo you're living as
clase to the margin as tbey do will
hurt. In Asia, Thailand will proba–
bly be hurt; the Philippines will be
hurt; Vietnam will be hurt.
O.
lt
has been said that tbe increase
in the cost of oil wiU more tban wipe
out tbe benefi ts of foreigp aid tbat
developing nations receive. Is this
true? How can they aft'ord to pay for
the petroleum imports?
HOWE:
The figures 1 gave you sug–
gest a direct increase in their oil
im–
port bill of between $9 and $10
billion. Official development assis–
tance from
all
16 members of the
European-Japanese-North Ameri–
can community of donors presently
comes to a little over $8 billion. Jf
you add the Communist aid pro–
grams to that, you still don' t get
more than between $9 and $10 bil–
lion. Therefore it will just about
wipe out the etfect of total devel–
opment assistance in the world. The
problem here is that there
is
a
~p
of countries of perhaps 30 or 40 of
the poorest countries which are
really very close to the margin. They
have limited monetary reserves and
really don' t have any way of paying
for the increased oil prices in cash,
under current terms, unless they're
given sorne help by outsiders.
O.
Would the United States and
other industrialized countries be af–
fected by a recession in tbe devel–
oping world?
HOWE:
They would be hurt if de–
mand for their manufactures fell off
in the developing countries. The
United States, for example, sells one
third of its imports to developing
countries. So we'd be hurt
if
there
were a total collapse over there, or if
they had to make a choice between
continuing to import sorne of the
things that they get from Europe,
Japan and the United States. It
would not be a catastrophic blow to
us orto Japan, but it would hurt.
SEWELL:
There is one factor we
should be aware of here. In many
ways, the poor countries pay a num–
ber of penalties, the biggest and the
most obvious is the increase in oil
prices. But, in addition, they're also
paying or will be paying a greatly
increased amount for food and for ferti–
lizer, most of which come from the
rich countries. In the case of food , it
comes predominantly and almos t ex–
clusively from North America - the
United States and Canada. And 1
think our best figures indicate that
the food bill next year for the least
developed countries will be around
$3 to $4 billion a year increase over
what they paid the previous year.
Most of that goes into the pockets of
people working in the United States
in related industries.
So, therefore, in many ways, the
United States has gotten a windfall
profit from increased higher food
prices
in
much the same sense that
the Arabs have gotten a windfall
from increased oi l prices. In both
cases, the main victirns in this par–
ticular set of circumstances have
been the developing countries. They
have had to pay vastly increased
amounts for food and oil. Coming
on stream now is a similar problem
with fertilizer. Its cost is going up
because petroleum is such a big in–
put in its manufacture.
PLAIN TRUTH April 1974