World Bank Document

World Devlelopment Report 1985 focuses on the contribution that international capital makes to economic
development. The financial links between industrial and developing countries have become as inte-
O
gral to the world economy as trade has hitherto been. This growing interdependence is a development&
of profound significance. The Report notes that recovery in industrial economies in 1983-84, policy
adjustments by many developing countries, and flexibility by commercial banks in dealing with debtservicing
difficulties have all helped to calm the atmosphere of crisis. This does not mean, however,
that the world economy, has regained its momentum of the 1960s or that development is again making 0
rapid progress. Growth has slowed in most developing countries that experienced debt-servicing
difficulties and in many of those that did not. Dozens of developing countries have lost a decade or
more of development.
The experience of the past few years has raised many questions about the role of international
capital in economic development. The Report examines these questions from a broad and long-term
perspective. It emphasizes that international capital can promote global economic efficiency and can 0
allow deficit countries to strike the right balance between reducing their deficits and financing them.
The availability of international capital also involves risks, however, that countries may borrow to
delay making needed policy reforms or may borrow too much if they misjudge the future course of
economic events.
The financial links between industrial and developing countries depend on three elements: (a) the
policies of industrial countries, (b) the policies of developing countries, and (c) the financial mech~nisms
through which capital flows to developing countries. The analysis of the Report includes all
three elements. In doing so, it reveals a wide range of country experience and addresses the question
of why some countries have borrowed and encountered debt-servicing difficulties, while others have
not.
In reviewing prospects for the next five years, the Report concludes that there are policy choices
available to governments that would contribute to faster and more stable growth for both industrial
and developing countries and to improved creditworthiness for every group of developing countries.
For the industrial countries, the policy objectives are smaller budget deficits, more flexible labor
markets, and freer trade. The developing countries rgust continue policy reforms designed to restructure
economies, ease debt-servicing burdens, and restore economic growth. These policies need to be
complemented by collaboration between debtors and creditors, including multiyear debt restructurings,
in the context of countries' adjustment efforts.
The Report includes a statistical appendix and multicolor maps and graphics to supplement the text.
The final portion of the Report, "W1orld Development Indicators," presents 28 two-page tables containing
economic and social profiles of 126 countries.
World Development Report has been published annually by the World Bank since 1978. Each edition
examines the current world economic situation and prospects as they relate to development and offers
a detailed analysis of a particular topic or sector of importance in economic and social development.
ISBN 0-19-520481-6
ISSN 0163-5085
o*