1 Introduction

1Introduction The past few years have produced so much turbu- mature into sustained and rapid growth of the lence in the world economy that governments and kind the world enjoyed for twenty-five years after businesses have naturally been preoccupied with World War II. the short term. Now that recession is giving way to That much is clear from a review of the past, recovery, they can start to take a longer view. For which is the subject of Chapter 2. It concludes that developing countries in particular, the shift is wel- the 1980-83 recession was not an isolated event come: development is quintessentially long term, caused, for example, by the second oil price rise of yielding its best results when policies and pro- 1979-80. Its roots went back farther, to the rigidi- grams can be designed and sustained for years at a ties that were steadily being built into economies time. from the mid-1960s onward. The rising trends in Long-term needs and sustained effort are under- unemployment and inflation were the manifesta- lying themes in this year's World Development tion of increasingly inflexible arrangements for set- Report. As with most of its predecessors, itis ting wages and prices and for managing public divided into two parts. The first looks at economic finances. performance, past and prospective. The second The chapter emphasizes that policy failings have part is this year devoted to populationthe causes characterized both the industrial and the develop- and consequences of rapid population growth, its ing countries. Because of the industrial countries' link to development, and why it has slowed down predominance in the world economy, the conse- in some developing countries. The two parts mir- quences of their economic failure have weighed ror each other: economic policy and performance heavily on the developing countries. In particular, in the next decade will matter for population the much publicized debt difficulties of the past growth in the developing countries for several two years came to a head because of the unusual decades beyond; population policy and change in combination in 1980-83 of recession and high real the rest of this century will set the terms for the interest rates in the industrial countries. Industrial whole of development strategy in the next. In both countries provide a market for about 65 percent of cases, policy changes will not yield immediate ben- the developing world's exports. Their buoyancy efitsall the more reason for starting to act imme- or lack of itand the amount of trade protection diately. Delay will reduce the room for maneuver they choose to employ have a critical influence on that policymakers will have in years to come. the foreign exchange earnings of developing countries. These earnings in turn will largely determine The economic outlook whether the "debt crisis" gradually subsides, or seriously retards the growth prospects of develop- The recession of 1980-83 was the longest in fifty ing countries for many years to come. years. It increased unemployment, reduced invest- That is one of several contrasting alternatives ment, and undermined social programs in almost highlighted by the scenarios presented in Chapter every country in the world. It put great strain on 3. These scenarios look ahead as far as 1995, but the international trade and financial systems and they are not intended as forecasts of what will hap- caused friction between governments everywhere. pen. They merely illustrate what might happen, But it provided many valuable lessons for eco- depending on the policies pursued by govern- nomic policy because it highlighted longstanding ments and the effectiveness of governments in weaknesses in every economy and in international tackling economic problems. They show, for exam- arrangements. Unless policymakers learn from its ple, that GDP in the developing world could grow lessons, the recovery now under way will not at 5.5 percent a year in 1985-95 if the industrial 1 countries regain their momentum of the 1960s, but until well into the twentieth century, the world's at only 4.7 percent a year in that period if the population grew at the then unprecedented rate of industrial countries do no better than in the past about 0.5 percent a year, faster in today's devel- ten years. That would make the difference oped countries, slower elsewhere. World popula- between almost every country in the world raising tion size doubled again, this time in about 150 per capita incomes and people in many of the years; it had reached about 1.7 billion by 1900. In world's poorest countries growing steadily poorer. the twentieth century, growth continued to accel- Chapter 3 also explores the gains that develop- erate, from 0.5 to 1 percent until about 1950 and ing countries could make by improving their own then to a remarkable 2 percent. In just over thirty economic policies, irrespective of what happens in years, between 1950 and today, world population the industrial countries. It concludes that, if they nearly doubled againgrowing from 2.5 billion to make such improvements, some countries might almost 4.8 billion (see Figure 1.1). be able to add close to an extra percentage point to Since 1950 population growth has been concen- their economic growth rates. None of these trated largely in the developing countries. Though improvements can be regarded as unachievable, a postwar baby boom combined with falling mor- since they have already been achieved by some tality in the industrial countries, the population developing countries. The chapter stresses the growth rate never exceeded 1 percent in Europe valuable contribution that appropriate pricing poli- and seldom exceeded 1.5 percent in North Amer- cies can make to faster economic growth. In partic- ica. At its peak, fertility in the United States meant ular, it contrasts the record of countries that have that families had on average little more than three adopted outward-looking trade policies with those children; in Europe and Japan postwar families that have concentrated on import substitution. were even smaller. By the 1970s, in most devel- The predicament of sub-Saharan Africa is a oped countries fertility had fallen to a level near or recurring theme throughout this Report. Though even below "replacement' 'about two children its total GDP growth was not much slower than in per couple being the level which, over the long other regions in the 1970s, Africa's population run, holds population constant (demographic grew faster; for the region as a whole, GDP per terms are defined in the glossary). capita fell during the 1970s. It could well do so The postwar experience of developing countries again in the years up to 1995. Of the policy failings was not only different but historically unprece- that contributed to slow growth in other develop- dented. Driven by falling mortality and continued ing countries, all can be found in more or less high fertility, their population growth rate rose chronic form in many African countries. The scope above 2 percent a year. It peaked at 2.4 percent in for raising growth rates by improving policies is the 1960s. It is now around 2.0 percent a year, therefore greatest in Africa. In addition, however, because of a slightly greater decline in birth rates many of Africa's weaknesses require extra conces- than in death rates (see Figure 1.1). Further decline sional aid if they are to be tackled effectively. in population growth will not come automatically. Much of the slowdown so far can be attributed to Population and demographic change China, where fertility is already low, close to an average of two children per family. Most families While the causes of poor economic performance in other developing countries now have at least can be traced back twenty years, the links between four children, in rural areas five and more. In a few demography and development can be understood countries in which fertility fell in the 1970s, there is only by going back even farther into the past. In evidence that it has leveled off recently. For parts the long run of history, the second half of the of South Asia and the Middle East, forecasts of a twentieth century stands out for its remarkable lower rate of population growth are based more on population growth. Consider that in the year 1 the hope than on present trends. For much of Africa world had about 300 million people. Its population and Central America, population growth rates are then took more than 1,500 years to double. rising and could rise still further. In Africa couples Though the general trend was rising, population say they want more children than in fact they are growth was not steady; the balance of births over having, while mortalitythough highcan be deaths was tenuous, and crises such as war or expected to decline. plague periodically reduced populations in parts of Furthermore, population "momentum" means the world. Only in the eighteenth century did the that growth rates in developing countries will number of people start to rise steadily. From 1750 remain high for several decades even if couples 2 FIGURE 1.1 Past and projected world population, A.D. 1-2150 Population (billions) 12 11 10 Birth and death rates, 1950-80 Crude rate Crude rate (per thousand) (per thousand) 9 Developed countries AL 8 p Developing countries 2 .8 Births -7 Deaths -6 1960 1970 1980 2000 -5 -4 -3 -2 Total world populn I Developed countries' population AD. I 1000 1200 1400 1600 1800 2000 Sources; Durand, 1977; UN, 1966. 3 Box 1.1The arithmetic of population growth: compounding and momentum Rates of population growth among coun- fertility (between four and eight births ard World Bank country projection for tries tend to fall into two main groups: per woman) but by the "momentum" Senegal (the broader pyramid); and fer- rapid growth countries of Africa, Asia, created by the high fertility and falling tility instantaneously falls to replacement and Latin America, with annual growth mortality of the past three decades.

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