UN Contributions to Development Thinking and Practice

6 The 1980s: Losing Control and Marginalizing the Poorest

138 Ideas and Action 138 6 The 1980s: Losing Control and Marginalizing the Poorest • The Debt Crisis • UN Proposals on Debt • An Era of Economic Liberalization • The Washington Consensus and UN Reactions • Neoliberal Policies in the Transition Economies • UN Ideas on Transition in Central and Eastern Europe • The Least-Developed Countries • Three International Conferences: Commitments and Performance • Concluding Remarks The 1980s witnessed three remarkable changes for development. They marked a decisive turning point in development policies pursued by most developing countries. They constituted a watershed in the role the UN system played in generating ideas and influencing strategies for development.Finally, they witnessed a serious erosion of the authority and influence of developing countries in shaping international economic policies.Behind all these changes we find the severe economic problems encountered by the industrial countries from the mid-s and the policy responses they fashioned to cope with these difficulties. This chapter first describes the forces that ushered in the global trend in favor of economic liberalization. It discusses the content of these policies as they spread rapidly through the developing world and the UN response to them. Because foreign debt played a critical role in the“lost decade”of the s and the adoption of the new policies, there is, first, a discussion of the emergence of the debt problem and efforts made to deal with it.After the presentation of the “new” policies, there is discussion of how they affected the situation in two distinct groups of countries—the erstwhile centrally planned economies The 1980s 139 in Europe and the least-developed countries, mostly concentrated in sub-Saharan Africa, most of which suffered regression and marginalization in the s. The Debt Crisis The debt crisis burst upon the world economic scene in the early s. Since then, it has remained a critical issue in discussions on international economic policy. It has had a major impact on the evolution of national development strategies and policies over the period. Few developments have exerted such profound effect on economic growth, unemployment, and the poverty situation in developing countries over this period. The approach that was adopted to tackle the debt problem and the policies that were evolved to cope with it shed some light on global financial power politics and the priority accorded to development objectives. Understandably, the international financial organizations and the creditor countries and commercial banks have determined the overall approach and policies to handling the debt problem. The influence exerted by the UN system in this domain was all but negligible. Nevertheless, UNCTAD did some useful analytical work on external debt, especially in the mid-s, and outlined a different approach to dealing with the debt problem.1 While the burden of external debt has been an issue in discussions on international development from at least the s, it became a major global preoccupation only in the early s.2 Even in the s, the G- members were overwhelmingly preoccupied with threats the debt posed to their own economic well-being.3 When these threats eased in the mid-s, concern with the continuing debt crisis in developing countries slipped from being a high priority of the global agenda until the late s. In developing countries, debt service as a proportion of exports of goods and services rose from less than  percent in  to around – percent after . The regional differences are quite considerable. For Latin America, the ratio rose sharply from  percent in  to nearly  percent in  but fell to  percent in . For North Africa, the proportion rose from around  percent in  to  percent in  before falling to  percent in . The debt-service ratio rose sharply for sub-Saharan Africa from less than  percent in  to around  percent in the s. For Asia as a whole, the proportion has been remarkably stable over the entire period between  and  percent, although for West Asia it has risen nearly threefold from around  percent in  to about – percent in the s.4 140 Ideas and Action The composition of debt underwent major changes in the s and s. For instance,in ,for all developing countries,two-thirds of their mediumand long-term debt consisted of overseas development assistance (ODA) and official export credits from the OECD countries and multilateral organizations .5 By , the share of the concessional and official debt had fallen to  percent and that of loans from private banks had risen to...