ThirdWorld Quarterly, Vol. 17, No. 1, pp 7± 17, 1996

Whitherthe North± South gap?

ROBINBROAD &CHRISTINAMELHORN LANDI

¼theeconomies of thedeveloping world ¼ are,in aggregate, growing faster than thoseof the major industrial countries. World Bank, GlobalEconomic Prospects andthe Developing Countries , 1994, p 5

Duringmuch of the Cold War, the central dilemma of development economics was howto reverse thegrowing economic gap between the rich and poor countriesof the world. In recent years, the World Bank has declareda victory onthat front. The Bank asserts thatnot only is thegap no longer growing, but indeedthat it has begunto narrow. Moreover, the Bank claims, the free market policiesit has spearheadedare atthe core of the developing country turnabout thatis closingthe North± South gap. Thisarticle challenges the World Bank assertion of anarrowingNorth± South gap.Rather, we argue, economic data from the World Bank and other United Nationsagencies suggest that the North± South gap continues to widenin allbut roughlya dozenThird World countries, and there remains a net¯ owof resources frommost Southern nations to the North. TheBank bases itsclaim of a closinggap on two primary assertions: that theeconomies of the developing countries are growingfaster thanindustrial countries’economies, and that large net capital ¯ owsare now¯ owinginto developingcountries. Based onanexaminationof World Bank and United Nations data, this article refutesboth of these assertions. We ® rst comparethe growth rates ofNorthern versus Southerncountries. Then we surveythe nature and levels of the® nancial ¯owsbetween North and South. As wediscover, a majorproblem with the Bank’ s gapclosing projections is thatthey are basedon aggregate data and often on the strength of only one to threeyears ofdatafrom the early 1990s. Disaggregating the data paints a vastly differentpicture of thedynamics and consequences of theseeconomic ¯ owsand trendsfor the majority of developing countries. A closerand longer look at North±South data reveals that, while the gap may be closing between a few developingcountriesÐ particularly the 10 `big emerging markets’ ( BEMs) pin- pointedby the US Departmentof Commerce 1Ðandthe industrial countries, the vastmajority of Third World countries are slippingfurther behind the North. Wefocus on the World Bank not only because it is themajor donor to the ThirdWorld. In recent years, its in¯ uence has outstrippedits lending and it has becomethe preeminent source of policy advice and development research and

RobinBroad is attheSchool of InternationalService, TheAmerican University, 4400Massachusetts Avenue, NWWashingtonDC., 20016± 8071, USA

0143-6597/96/010007-11$6.00 1996Third World Quarterly 7 ROBIN BROAD &CHRISTINA MELHORN LANDI writings.Its annualtextsÐ TheWorld Development Report , TheWorld Debt Tables, GlobalEconomic Prospects andothersÐ and its numerous publications ineffect de® ne the conventional paradigm of development. They are readin collegecourses, quoted by the media, and relied upon by policy makers. But theyare far tooseldom subject to carefulreview. And the fact that we canreach oppositeconclusions based partially on the Bank’ s owndata lends support to thosewho argue that World Bank development advice is basedtoo much on in¯exible ideological positions rather than rigorous analysis. 2 Tobe fair, many who criticise the World Bank’ s analysisof the state of the ThirdWorld base theirown predictions of a wideningNorth± South gap on the realityof the 1980s’ `lost decade’ . Butthis simplistic `one-gap’ analysis too is lacking,as thecurrent article will show.

The gap TheWorld Bank’ s assertionthat Southern countries are growingfaster than Northernones can be dissected in a numberof ways. First, one must consider thetime frame inwhich such an analysis is made.Whether one ® ndsthat the aggregategap between North and South is growing,remaining constant or shrinkingis determined,in part, by what time period one chooses to examine. Considerthe period 1960± 1990: in 1960 developing countries’ gross domestic product(GDP) per capita was 18%of theindustrial nations; in 1990,at 17%, the gapwas almostunchanged. 3 Onthe other hand, during the disastrous decade of the1980s (1980± 91), gross nationalproduct ( GNP)percapita increased only by anaverage of 1% in theSouth (and in sub-Saharan Africa, it declined by 1.2%), whileit increased 2.3% in the NorthÐ suggesting a wideninggap. 4 Recenthigher aggregate growth rates forthe South in the1990sÐ highlighted bythe Bank in, for example, its WorldAtlas 1995 and its GlobalEconomic Prospects1994 Ðmayhelp ameliorate some ofthe damage these countries sufferedin the 1980s, but they do not reverse it.In sub-Saharan Africa, for example,as theBank’ s 1994 GlobalEconomic Prospects pointsout: `Although growth¼ isexpectedto accelerate, per capita incomes until the year 2000 will bewell below the level reached in 1980.’ 5 Thus,key to assessing therelative positions of richand poor countries is not onlythe time period but also the phrase `in aggregate’ . Theengine of economic growthof the developing countries taken as awholeis notevenly distributed amongthe roughly 150 countries that now make up the South. (This 150 ballparknumber includes the countries of the former Second World.) More precisely,it isonlya smallnumber of leading Southern countries that are driving sucheconomic performance: the BEMsofEastAsia (especially ) and .Even the World Bank points out that `about one half of the acceler- ationof developing-country growth since 1990 is dueto East Asia, primarily China,where growth has averagedabout 10% a yearin the past four years’ (althoughit conveniently ignores this crucial caveat in its conclusions). 6 If thedata behind the highly touted economic trends of the early 1990s are disaggregatedbetween the BEMsandthe rest oftheSouth, then the gap is indeed closingbetween the BEM developingcountries and the industrial countries. As 8 WHITHER THE NORTH±SOUTH GAP? formerUS Commerceof® cial Jeffrey Gartennoted in a speechoutlining a US policytowards the BEMs, `ofall the world trade growth in thenext two decades, almostthree-fourths is expectedto come from the LDCs. Buta smallcore of those LDCs, thebiggest of them,just ten countries, is likelyto account for more thanhalf of that growth.’ 7 Thebottom line is thatabout a dozencountries have beendoing well for the past few years, while the vast majority of the South is eitherslipping backwards, stagnating, or growing slower than the North. Oncethese big emerging markets are excludedfrom the picture, the scenario forclosing the gap via economic growth appears more troublesome for the majorityof countries in the South. Consider the World Bank’ s projectionsfor growthin Latin America and Africa. (Note, however, that a decadeago, one of us examinedthe World Bank’ s projectionsfor economic and trade growth and foundthem egregiously over-in¯ ated. 8)Inthe World Bank’ s 1994 Global EconomicProspects ,Africais projectedto grow annually at 3.9% from 1994± 2003(with a lowprojection of 2.4%) and Latin America by 3.4% (with a low projectionof 0.8percent). 9 Letus givethe World Bank the bene® t ofthedoubt andassume thatAfrica does reach the higher projected growth rate of 3.9% a year.Compare this, however, to University of Sussex professorHans Singer’ s calculationthat sub-Saharan Africa would actually have to growby 8.8%a year for`very much more than a decade’Ð ormorethan twice the rate of the World Bank’s highend projectionÐ to return its average income levels to where they wouldhave been had its growth rates from1965± 1980 continued to thepresent. LatinAmerica and the Caribbean, Singer calculates, would need to grow annuallyby 10.5% in order to return to their 1965± 1980 trajectory. As Singer concludes:`In other words, the task is impossible(except perhaps for the upper-middle-incomecountries).’ 10

Netprivate ® nancial¯ ows Duringthe `lost decade’ of the1980s, not only did the South grow more slowly thanthe North, but a dangeroustrend emerged of a net® nancial¯ owof resources fromSouth to Northas debtornations were pressed toservicegrowing debts.From 1985 to 1992, the net negative ¯ owfrom South to North on debt servicealone totalled $280 billion. 11 Thisnet negative transfer became a focal pointfor those arguing that the North± South gap was wideningprecipitously in the1980s’ `debt crisis’ ,creatinga polarisedworld of Northern winners and Southernlosers. The World Bank now asserts, however,that this negative ¯ ow has stoppedand, indeed, has startedto be reversed. The reason: anexplosion of newprivate capital ¯ owsinto the South. The World Bank points to record new levelsof foreign investment and bond and portfolio investment ¯ owinginto developingcountries since the early 1990s. Indeed, these ¯ owsare thebasis for manyof its projections about higher economic growth in the South. Whilecommercial banks, the centerpiece of the debt surge of the 1970s and1980s, have largely lost interest in the South, a varietyof other sources of privatecapital has emerged.Between 1991 and 1993, the movement of portfolio equity¯ owsinto the South surged from $7.6 billion to $46.9billion as anumber ofdebtor countries followed Bank advice (often in order to satisfy loan 9 ROBIN BROAD &CHRISTINA MELHORN LANDI conditionality)and opened their stock markets to foreign investors. 12 Over this same period,foreign direct investment ¯ owsinto the South rose from$36.8 billionto $66.6 billion; private sector bond ¯ owsjumped from $5.3 billion to $27.6billion. 13 Wenowturn to an analysis of theseshort-term capital ¯ ows,followed by an assessment ofthe status of the debt crisis. In a subsequentsection, we examine othersources ofcontinued South-to-North drain, namely the declining terms of tradesuffered by the South, as wellas humanand natural resource ¯ ows. Finally,we assess thesustainability of the factors that fuel the World Bank’ s optimismabout the North± South gap. Withthe new short-term private capital ¯ ows,the devil is onceagain in the detailsof disaggregation. First, as wesaw inlooking at economic growth rates, heretoo Africa is adistressingexception to the Bank’ s rosy® nancial¯ ows scenario.Africa barely ® guresin these ¯ ows; thecontinent is simplynot on the radarscreen ofmost ® nancialinstitutions and investors at the core of the new ¯ows.While the World Bank in its 1994± 95 WorldDebt Tables estimatesthat `aggregateprivate to private ¯ ows¼ accountedfor about 70% of the net long term¯ owsto developing countries in 1993, up from 45% in 1990,’ 14 that same publicationburies in a footnotethe fact that `in 1993 about 90% of { these} net ¯owsto the low-income countries excludingChina and ¼ came from of® cial sources’ .15 Thus,the large majority of poor countries remain outside thesenew types of capital¯ owsand any projected economic growth they might bring. Letus furtherdisaggregate these ® guresby lookingat themajor forms ofnew capital¯ owsone at a time. Foreigndirect investment ( FDI)is considereda valuedsource of capitalby the WorldBank and others because, unlike debt, it adds no recurring interest based onvariableinternational rates. In addition, FDI isseen as astampof approvalby globalcorporations in an international arena of competition and change; one ®rm’s interestoften piques others’ . TheWorld Bank also supports FDI as a sourceof capitalbecause it is consideredthe least volatile and `should allow for thetransfer of technology in production and management practices’ . 16 And FDI doeshave a growing,signi® cant role in North± South ¯ ows: inthe 1990s, over 40%of private capital ¯ owsto the South have been in the form of FDI.17 In addition,the percentage of global FDI thatwent to developing countries reached 37%of the world total in 1993, up from 29% in 1992. 18 However,once again, disaggregation reveals that these unprecedented FDI ¯owsdid not spread equally into all developing countries. During 1989± 92, 72% ofprivate capital ¯ owswent to only 10 countries: China, , Malaysia, Argentina,Thailand, , , Nigeria, Venezuela and South Korea. 19 (Notethat, of these, six are onthe US CommerceDepartment’ s BEM list.)On the otherhand, the approximately four-dozen least developed countries (a majority ofwhich are insub-Saharan Africa) received only 2%. 20 Inaddition, global FDI is highlyconcentrated by region.Sub-Saharan Africa received just 6% ofthe FDI that¯ owedto the South in the late 1980s. In 1993, East Asia and the Paci® c received55% of all FDI ¯owingto the South, Latin America and the Caribbean received24%, and Europe and Central Asia obtained 14%, while the Middle 10 WHITHER THE NORTH±SOUTH GAP?

Eastand North Africa received 3%, Sub-Saharan Africa received 3% and South Asiajust 1%. 21 China,by far thelargest recipient of these ¯ ows, 22 completely skews the FDI tables:the annual average growth rate of FDI ¯owsto the World Bank’s lowincome Southern countries (de® ned by theWorld Bank as countries with a 1993 GNP percapita less thanor equal to $695) in 1990± 1993 was a staggering70%. But once China is removed,the average was 6%. 23 Thereis oneother component of foreign direct investment that affects the North±South gap to theSouth’ s detriment.According to theWorld Bank, around halfof the new foreign direct investment into the South in 1992 left those countriesas pro®ts. 24 Stillmore dollars leave the South as royaltyand licensing payments,a stream ofcash thatwill probably increase with the new trade-related intellectualproperty rights ( TRIPs) rulesof the Uruguay Round of GATT. Otherforms ofcapital¯ owsto the developing countries that have burgeoned inthe last few years are portfolioequity and bond issuance. Once again, however,these are highlyskewed in terms ofwho received the ¯ ows. Speci®cally, Latin America and East AsiaÐ the main regions in which the BEMs are locatedÐ`together accounted for more than 90 percentof thegross portfolio equity¯ owsto developing countries between 1989 and 1993’ . 25 To be more precise,only 10 countriesissued nearly 90% of all developing country bonds in 1993:26 Mexico,Brazil, Argentina, Hungary, South Korea, Greece, , China,Venezuela and Thailand (listed in descending order of thedollar value of bondsissued). 27 (Noteagain how the disaggregated lists of `winners’ overlap; sixof these are onthe Commerce Department’ s BEM list.)Of these, the top ®veaccounted for 58% percent of all bonds issued that year by developing countries.28 Inaddition, in recent years, foreign purchases of bonds have grown to encompassa signi®cant proportion of theseemerging bond markets. In Mexico, forexample, foreigners held more than $23 billion in Mexican government securities(a thirdof the market) as ofMay 1994, up from $1.8 billion in 1990Ðroughly a 1200%increase. 29 Theextreme concentration of portfolio¯ owsis onlyone element of thehighly problematicnature of these ¯ ows.Since a majorsource of the stock market boomsin several Southern nations has beenthe privatisation of state enter- prises30 (a practicepromoted by the World Bank), this source has a®nitelife giventhat there is a®xedamount of capital for divestment. In other words, at leastsome ofthis privatisation represents a one-time,non-replicable increase in portfolio¯ ows. Overall,these new private capital sources reinforcethe conclusion we reached on GNP growth® gures: perhapsa dozencountries are theprime bene® ciaries and are notcurrently suffering a South-to-Northresource drain; the rest ofthe Southerncountries have not bene® tted to any signi® cant extent.

Thedebt crisis Forthe majority of Southern nations left out of the new private ¯ ows,do debt obligationsstill translate into a netnegative drain? The evidence suggests that they do. 11 ROBIN BROAD &CHRISTINA MELHORN LANDI

Whilethe World Bank has proclaimedthe `twilight of the commercial debt crisis’ ,31 alookat the debt situation in developingcountries reveals the existence ofstillburdensome debt stocks. There are threemain dimensions to the current debtsituation: the debt burden (as measuredby the ratio of debt servicing to exportearnings and of debt to GNP),internationalinterest rates andthe changed natureof new debt. First,a lookat the overall debt burden. Let us beginwith the relatively good news.Debt-to- GNP anddebt-to-export ratios did peak for almost all countries in thelate 1980s and are decreasingÐexcept for Africa, where debt as apercentage of GNP is growing,reaching 75.5% of GNP in1990. However, even those decreasingamounts remain taxing. According to the United Nations Conference onTrade and Development ( UNCTAD),theratio of debt to GNP peakedin 1987 forall developing countries at 42.4% of GNP.By1990,it was still32.3% of GNP forall developing countries; in Latin America it was 36%. 32 Thedifference between the aggregate and regional ® guresis accountedfor partiallyby EastAsia, which has forthe last few decades maintained a relatively lowand stable debt burden because of high investment, increased productivity and GDP,andexport growth. Thus, the region brings down the aggregate debt ratiosfor developing countries. Also,as some ofthe above statistics reveal, while it is truethat across time debtburdens are relativelylower compared to the onerous levels of the 1980s, thisdoes not negate the still high absolute levels of debt obligations. The overall stockof Third World debt continues to rise byaround $100 billion a yearand reached$1945 billion in 1994. 33 As the1994 World Bank WorldDebt Tables noted,even assuming full application of the additional bilateral debt relief offeredby the enhanced Toronto terms andParis Clubreschedulings of of® cial developmentassistance, 29 of the 32 severely indebted low income countries wouldstill have debt-to-export ratios exceeding 200%. 34 Commercialbanks may nolongertotter at the edge of collapse;the debt burden of developing countries, however,continues to exert a coston their national plans and possibilities as wellas ontheir citizens. Second,let us lookat interest rates. The World Bank emphasises that internationalinterest rates havestabilised at levels that are adequatefor develop- ingcountries to servicetheir debts: the Bank predicts that if internationalinterest rates are sustainedfor ® veyears atthe Bank’ s forecastedlow levels, this will addhalf a percentagepoint to the annual GDP growthof developing countries. 35 However,this 1994 assessment ofstabilisationfailed to foresee eventsthat were thenalready on the horizon: the 1994 fall of the dollar in international markets, thepeso plummet and the bailout of Mexicoby theUSA. Whilean appreciation oftheUS dollardecreases dollar-denominateddebt stocks (for example in 1991, byan estimated $24 billion), in 1990 the fall in the US dollarincreased dollar-denominateddebt stocks by $51.5billionÐ atrend that continued with the dollardevaluations of 1993 and 1994. 36 Overall,the World Bank’ s rosypredic- tionsof stabilisation on this front deny the fragility of ® nancialmarkets. With instantaneousmarket response and computerised investment and speculation, projectingstabilisation over the medium to long term seems disingenuous.Debt is nota problemthat is goingaway quickly or smoothly. 12 WHITHER THE NORTH±SOUTH GAP?

Inaddition, debt is changingin nature, and this portends some newpotential problemsand challenges for developing countries, as partiallydiscussed above. Anewform of debtis becomingprominent in overall debt stocks of developing countries:the issuance of bonds.In 1993, this accounted for 92% percent of net privatedebt ¯ ows. 37 Onone hand, this may be a positivechange to the extent thatit representsdiminished exposure to thevagaries of commercial banks. But, onthe other hand, considering the withdrawal of investment from Mexico after theDecember 1994 peso plunge, switching the vagaries of thecommercial banks forthose of private investors may not be much of an improvement. Overall,the ease withwhich a positivein¯ ow canswitch to a netout¯ ow, and thehigh level of foreign ownership, raise crucialquestions of vulnerabilityÐ questionsthat go unasked and unanswered in many of the Bank’ s hopeful projectionsabout capital ¯ ows.

Terms oftrade Thereis anothersource of South-to-North ® nancialleakage that seldom enters theBank’ s calculationsof the status of the North± South gap: the diminishing purchasingpower of Southerncommodities in internationaltrade or theso-called declining`terms oftrade’ . Inasmuchas primarycommodities continue to be central to the foreign exchangeearnings of most non- BEM Southernnations, the prices derived from commodityexports remain the most important terms oftradeindicator. In 1992, theoverall real price of commodities, with 1985 as thebase of100, was only 71.38 Differentregions have been affected to differing degrees. In 1991, with 1987as thebase yearof 100, sub-Saharan Africa’ s terms oftrade was 85and SouthAsia’ s terms oftrade was 94. 39 Thesemovements can translate into billionsof dollars:the 3.5% decline in Africa’s terms oftradefrom 1992± 93, for example,meant that the purchasing power of the continent’ s exportsfell by some $3billion. And this was notan isolated `bad’ year for Africa; from 1991±92, its terms oftrade had fallen by 3.4% and from 1990± 91, by 7.9%. 40 Expandingthe focus from Africa, if one looks speci® cally at exporters of non-oilprimary products, the terms oftrade record remains dismal. From 1974±80, the terms oftrade deteriorated by 5.7% a year; from1981± 86, terms oftrade for these non-fuel primary product exporters declined by 3% a year; from1987± 93, the decrease was 1.8%a year. 41 Yet,in its 1994 GlobalEconomic Prospects,theWorld Bank advocated primary commodities as afoundationfor economicdevelopmentÐ using studies of theUSA andAustralia to bolstersuch assertions. 42

Non-®nancial ¯ows Inaddition to ¯ owsof investment and trade, there are twoother ¯ owsof resources betweenNorth and South exercising a drainon the South in recent decadesthat merit mention, if only brie¯ y: humanresources andnatural resources.These `social and environmental’ ¯ owshave only recently begun to beincluded in some quantitativeassessments ofresource ¯ owsbetween the 13 ROBIN BROAD &CHRISTINA MELHORN LANDI

Northand South, and they add signi® cantly to theconclusions of suchanalyses. Notableis therecent work by Keith Grif® n andTerry McKinley for the United NationsDevelopment Programme. 43 Interms ofhuman resource ¯ owsfrom South to North, Southern nations investbillions of dollarseach year in theeducation of skilled workers who often leavethe country for greener pastures in the North. The United Nations estimatedthat between 1961 and 1972, Northern nations received around $51 billionof `humancapital’ through the migration of Southern professionals. 44 The movementhas grownsubstantially since then. Today, for example, there are moreFilipino doctors and nurses overseas thanthere are inthe Philippines. Some60,000 middle and high-level managers left the African continent between 1985and 1990. From four Asian nations aloneÐ the Philippines, India, China andSouth KoreaÐ nearly 150,000 scienti® cally trained workers came tothe UnitedStates between 1972 and 1985. 45 One® nalcomponent of the South-to-North resource ¯ owthat is dif®cult to measure,but that will be a crucialdeterminant of future development problems andpossibilities, is theexport of non-renewable Southern natural resources to theNorth in the form of forest products, minerals and marine resources. At the economiccore of mostcolonial relationships was theexploitation of silver,gold, timber,® sh andother raw products for Northern use, and many of thesepatterns continueto the present. Analysisby the World Resources Instituteindicates that South-to-North naturalresource ¯ owsare greatestin petroleum and minerals, but the South is alsosending more resources tothe North than vice versa inindustrial raw materialssuch as cottonand rubber, and food and agricultural raw materials. 46 Inaddition, one of the least studied South± North ¯ owsoccurs offshore and henceoff camera: the® shing¯ eets ofthe North, having depleted ® sheries off Newfoundland,New England, the North Sea andelsewhere, have increasingly movedinto the rich ® shingbanks of the South. 47 WhileSouthern governments receiveforeign exchange for their exports of natural resources, the depletion of theseresources hurtsmillions of small farmers and® sherfolkwho face falling yieldsas aresultof deforestationand over-® shing. The real wealth of Southern nationsis beingdepleted in the process.

Sustainability Inthe World Bank’ s 1994±95 WorldDebt Tables ,itput forward the argument thatthe short-term ¯ owsthat are thebasis ofso much of the Bank’ s optimism concerningthe future of the South are `sustainable’, meaningthat one could counton themto helpfuel growth in years tocome.Part of theBank’ s argument aroundsustainability is thatchanges in theworld economy that are bene®cial to developingcountries are `structuralrather than temporary’ . 48 TheBank pinpoints `factorsunderlying the much higher private capital ¯ ows{ that}are unlikelyto bereversed in the aggregateÐ the sea changein developing countries’ policies thatmakes themmore creditworthy and more attractive to international in- vestors,the integration of global ® nancialmarkets, and the fall in international interestrates fromtheir highs in the 1980s ¼ ’ 49 And,the Bank continues in its 14 WHITHER THE NORTH±SOUTH GAP? lengthyexposition of its sustainability thesis, `the upward FDI trendis being drivenby structural and secular (as opposedto cyclical) developments such as theglobal integration of production’ . 50 Ouranalysis of these ¯ owssuggests that the Bank’ s `sustainability’con- clusionis premature.Rather, we would agree with the United Nations’ 1993 WorldEconomic Survey’ s bluntwarning: `developing countries are hostinglarge stocksof volatilefunds’ . 51 Onecannot help but question the Bank’ s de®nition of structural. Muchof our discussion thus far alreadysuggests this point. Case inpoint is thevolatility of the dollar which has ahugeeffect on debt stocks held by developingcountries. The recent ¯ uctuationsin the dollar, where the dollar’ s valuehas beenfalling against the yen in internationalmarkets, do notaugur well forstable and sustainable debt reduction in the near and medium term for developingcountries. Considerthe case ofMexico,a model BEM.Thecollapse of theMexican peso inDecember 1994 led to the¯ ightof around$10 billion in short term US funds fromthat country in just the last week of 1994.Within days of the onset of the Mexicancrisis, stock markets and currencies from Brazil and Argentina to Thailandand India plunged in value. These events reveal how increasingly deregulatedinternational ® nancialmarkets, with a growingarray of ® nancial instruments,are interconnectedand volatile in ways that are onlybeginning to beapparent. 52 Anotherbasis forthe World Bank’ s hypothesisof sustainability is itsassertion thatdeveloping countries are becoming less dependenton the performance of industrialcountries. 53 Hence,the Bank’ s argumentgoes, slower growth in industrialcountries should not have much of a negativeimpact on the South. Yet,elsewhere, the Bank seems tocontradictitself by arguingthat `if growth in industrialcountries were much higher than expected, this would fuel in¯ ationary expectationsÐpushing up interest rates andslowing growth in these countries. This,in turn, could hurt developing-country growth and erode developing- countrycreditworthinessÐ dampening private capital ¯ ows.’ 54 Inother words, an industrialcountry± developing country performance link still exists and the South remainsvulnerable to growth trends in the North.

Conclusion TheWorld Bank has longargued that it has thesolution to Southern problems. Forsome 15years, it has implementedits solution through the vehicle of structuraladjustment loans ( SALs) indozens of countries; it has beenone of the leadingÐand most effectiveÐ advocates of privatisation, freer tradeand in- creased emphasison exports. 55 Its publicationsof recent years havedeclared success. Notonly is theSouth growing, it argues, but the North± South gap is nownarrowing. Travellingthrough the data on the past, current and projected economic prospectsof industrial and developing countries reveals a morecomplex and problematicsituation than the World Bank suggests in its conclusions. It is not 15 ROBIN BROAD &CHRISTINA MELHORN LANDI enoughto simply look at aggregate growth rates ofdeveloping and industrial countries.Equally important are thedisaggregated statistics which offer a strikinglydifferent picture of the dynamics between North and South. Therepresentation of the South as amonolithwas ¯awedback in the 1960s, but,in lightof thediscussion above, it isincreasinglymisleading today. Over the nextgeneration, if current trends continue, some 10±12 Southern nations are likelyto join the ranks of the North or at least move much closer to Northern levelsof economic performance. The remaining 140-odd Southern nations, however,are likelyto slip further behind. Yet, since the 10± 12 rapidly growing Southernnations include some ofthe largest economies in the world, including thoseof China and India, aggregated ® guresof the South’ s performancewill increasinglymask acomplexpattern of afewwinners and a muchlarger group oflosing nations. Itis ironicthat we reach the conclusions we doÐ conclusions very different fromthose of the BankÐ in large part based upon closer examination of World Bankdata. The World Bank provides many of the elements for uncovering the volatility,vulnerability and variability of the increasingly complex South, but neglectsto connect the dots that would illuminate the shifting landscape of rich andpoor in the global economy.

Notes 1 Jeffrey Garten,then US UnderSecretaryof Commerce forInternational Trade, in January 1994 identi® ed the 10 BEMsas: China,Indonesia, India, South Korea, Mexico,Argentina, Brazil, SouthAfrica, Polandand Turkey.Jeffrey Garten, `Thebig emerging markets: changingAmerican interests inthe global economy’ , remarks beforethe Foreign Policy Association, New York,20 January 1994, pp 2, 8. 2 See, forinstance, Susan George & FabrizioSabelli, Faithand Credit: The World Bank’ sSecularEmpire , :Penguin, 1994; and Bruce Rich, Mortgagingthe Earth: The World Bank, Environmental Impoverishment,and the Crisis ofDevelopment ,Boston,MA: Beacon Books,1994. 3 UnitedNations Development Programme, HumanDevelopment Report 1994 ,New York:Oxford University Press, 1994,p 143. 4 World Bank, WorldDevelopment Report 1993: Investing In Health ,New York:Oxford University Press, 1993, p 239. 5 World Bank, GlobalEconomic Prospects and the Developing Countries 1994 ,Washington,DC: World Bank,1994, p 5. 6 Ibid., p 9. 7 Garten,`The big emerging markets’ ,p8. 8 RobinBroad & JohnCavanagh, `No more NICs’ , ForeignPolicy ,72,Fall 1988, pp 93± 94; and Robin Broad &JohnCavanagh, `Flawed World Bank report could cause wrongpolicies for Third World’ , Third World NetworkFeatures ,176,1987, pp. 1± 5. 9 World Bank, GlobalEconomic Prospects 1994 ,p20,table 1.4. 10 HWSinger,`Beyond the debt crisis’ , Development:Journal of the Society for International Development , 1,1992, p 35. 11 Calculatedfrom World Bank, WorldDebt Tables 1992± 93: External Finance for Developing Countries , Vol 1: Analysisand Summary Tables ,Washington,DC: WorldBank, December 1992,p 160. 12 World Bank, WorldDebt Tables, 1994± 95: External Finance for Developing Countries , Vol 1: Analysisand SummaryTables ,Washington,DC: WorldBank, 1994, p 11. 13 World Bank, WorldDebt Tables 1994± 95 , p 11. 14 Ibid, p 10. 15 Ibid,p 24,note 1 (emphasis added). 16 Ibid, p 16. 17 Ibid, p 18. 18 Ibid,pp 3± 4. 19 UNDP, HumanDevelopment Report 1994 ,p62,New York,Oxford University Press. 16 WHITHER THE NORTH±SOUTH GAP?

20 Ibid. 21 World Bank, WorldDebt Tables 1994± 95 ,p4,® gure2. 22 Ibid, p 3. 23 Ibid,p 160,table A 5.2.The de® nition of `low income’ is onp 186. 24 Some$19 billion of the $38.3 billion in new directinvestment left thecountries. World Bank, World Debt Tables,1992± 93 , pp 16, 17. 25 World Bank, WorldDebt Tables 1994± 95 , p 14. 26 Ibid, p 12. 27 Ibid,p 12,table 1.3. 28 Calculatedfrom World Bank, WorldDebt Tables 1994± 95 ,p12,table 1.3. 29 Ibid, p 13. 30 Ibid, p 15. 31 Ibid, p 4. 32 UnitedNations Conference on Trade andDevelopment, Handbookof International Trade and Development Statistics1992 ,New York:United Nations, 1993, p 420,table 5.14. 33 World Bank, WorldDebt Tables, 1994± 95 , p 25. 34 Ibid, p 43. 35 World Bank, GlobalEconomic Prospects 1994 , p 1. 36 World Bank, WorldDebt Tables 1991± 92: External Debt of Developing Countries , Vol 1: Analysisand SummaryTables ,Washington,DC: WorldBank, 1991, p 13. 37 World Bank, WorldDebt Tables 1994± 95 ,calculated fromp 7,table 1.1. 38 UnitedNations, Department ofEconomic and Social Information and Policy Analysis, WorldEconomic Survey 1993:Current Trends and Policies in theWorld Economy ,New York:United Nations, 1993, p 227, table A.21. 39 UNDP, HumanDevelopment Report 1994 ,pp168±169, table 20. 40 UnitedNations, Department ofEconomic and Social Information and Policy Analysis, WorldEconomic and SocialSurvey 1994:Current Trends and Policies in the World Economy ,New York:United Nations, 1994, p.96 and p. 277, table A.20. 41 World Bank, GlobalEconomic Prospects 1994 ,p15,® gure1.5. 42 Ibid,p 34.Note, however, that in its 1995 GlobalEconomic Prospects ,theBank problematised such a plan, pointingout that `¼ thelong-term outlook for commodity prices remains unfavorable’(p 7). 43 See, forexample, KeithGrif® n&TerryMcKinley, `A new framework fordevelopment cooperation’ , paper presentedto the UNDP Roundtableon Change: Social Con¯ ict orHarmony?, Stockholm, 22± 24 July 1994. 44 From a 1982 UNCTAD studycited in Martin Khor, `South± North resource ¯owsand their implications for sustainabledevelopment’ , ThirdWorld Resurgence ,46,1994, p 25.See thiswhole issue of Third World Resurgence entitled`The Drain from the South’ . 45 UNDP, HumanDevelopment Report 1994 , p 65. 46 WorldResources Institutein collaboration with United Nations Environment Programme andUnited NationsDevelopment Programmme, WorldResources 1994±95: A Guideto the Global Environment , New York:Oxford University Press, 1994,ch 1 andp 263. 47 `Over® shing:causes andconsequences’ , TheEcologist ,25(2) (3), 1995. 48 World Bank, WorldDebt Tables 1994± 95 , p 18. 49 Ibid, p 4. 50 Ibid, p 8. 51 UnitedNations, WorldEconomic Survey 1993 , p 104. 52 See RichardJ Barnet &JohnCavanagh, GlobalDreams: ImperialCorporations and the New World Order , New York:Simon and Schuster, 1994, part IV. 53 See, forinstance, World Bank, GlobalEconomic Prospects 1994 , p 8. 54 World Bank, WorldDebt Tables 1994± 95 , p 18. 55 See RobinBroad, UnequalAlliance: The World Bank, the International Monetary Fund, and the Philippines ,Berkeley,CA: Universityof California Press, 1988;George & Sabelli, Faithand Credit ; and Rich, Mortgagingthe Earth .

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