Background

The past ten years have witnessed major changes in the positions of industrial and developing countries in the world economy. Over this period, the developing countries have grown more, and have invested a relatively larger part of their GNP, than have the industrial countries. Developing countries have also increased significantly their role as export markets for the OECD countries, with their share of OECD exports being currently 40% of the total. They have in addition greatly increased trade among themselves. Many factors contributed to these developments, including resource pricing policies and a decline in the competitive position of industrial countries in certain markets. This decline has occurred both in heavy industries such as steel, and also in skill-intensive manufactures such as electronics. The reverse side of this coin is that many developing countries have increased their dependence on food imports from industrial countries.

Financial markets mirror the developments in goods markets. The current strains in the international monetary system reflect the lag with which our institutions adjust to a changing world economy. An example is provided by the genesis of the current debt crisis. Oil surpluses contributed to the growth of developing country borrowing during the past decade. At the end of the 1970s, high interest rates emerged in the United States and the United Kingdom partly as a policy response to concerns about inflation in an era of higher oil prices.