SUKHAMO Y CHA KRA VARTY*
Reflections on the Present World Economic Conjuncture
DID the engine of economic growth slow down during the 1970's? If so, what were the reasons? Are these reasons likely to apply to the 1980's? These are some of the questions which are being debated anxiously by ordinary people, professional economists and policy makers in the developed as well as the developing countries. In this paper, I propose to address myself to these questions with a view to indicating certain areas of enquiry which require more serious investigation.
On the fi/st question, the authoritative judgement given in knowledgeable circles is that since 1973, the world economy is going through an extended period of slower growth. According to the World Economic Survey published by the United Nations in 1980, developed market economies which recorded an annual average growth of 5 per cent over the period 1962-1972, at 1977 prices, witnesssed a modest growth rate of only 2.7 per cent in the years 1974-1979. The rate of growth of the last three years has not improved upon the record initiated in 1974. In its World Economic Outlook, 1981, the IMF has estimated a rate of 1.25 per cent for 1980, and 1.5 per cent for 1981 while it expected the rate to be no higher than 2 per cent in 1982.1 What is even more disquieting from the point of view of social concern is that while the average rate of unemployment in seven industrial countries (Canada, the US, Japan, France, FRG, Italy and the UK) over the period 1963-1972 was as low as 3 per cent, the corresponding rate for 1981 was as high as 6.6 per cent, with rates exceeding 10 per cent for the UK and nearly 8 per cent for the US. Furthermore, the rate of inflation has also been very high judging by the record of what was achieved during the first two decades after the Second World War. Taking the GNP deflator as a measure of inflationary pressure, the average rate of change over 1962-1972 was 4 per cent while the rate of change since 1973 has invariably exceeded 7 per cent for the large industrial countries, with the rates lying in the
•Professor, Delhi School of Economics, Univcr&ity of Delhi.