128/YOUR MONEY OR YOUR LIFE!
WORLD BANK JUSTIFICATION FOR INCREASED
INDEBTEDNESS
Until 1973, McNamara argued that the growth-oriented
programmes of developing countries had to be backed. Government
assistance from the developed countries was totally insufficient, he
said, and these same developed countries were not dismantling dis
criminatory measures against imports from developing countries in
spite of promises to do so. McNamara even publicly criticised the
North's protectionism and the low level of official development
assistance (ODA) on numerous occasions (see McNamara, 1973).
The World Bank, he argued, should therefore lend increasing sums
to developing countries to help them achieve consistent growth rates
and earn sufficient revenues to pay back their debts. As a result, the
World Bank set itself the mission of providing as much credit as
possible to developing countries, as a way to make up for inadequate
levels of ODA.
This approach was clearly at odds with McNamara's own
warnings concerning debt levels whose rate of growth outstrips that
of export earnings.
From 1973 onwards, following the rise in the price of oil and other
raw materials, McNamara argued that developing countries could
use borrowed funds to develop their communications infrastructure,
increase electricity production and boost export-oriented activities.
His underlying assumption was that the price of these countries'
exported goods would continue to increase on the world market, or
remain stable at the very least. As a result, he forecast that their
export earnings would continue to rise thanks to increases in export
volumes. These increased earnings, he said, would enable developing
countries to service their debts (interest and principal) while
reinvesting a portion in the improvement of export-oriented
industries. This was expected to have a cumulative effect, leading to
or accelerating development while anchoring these countries firmly
in the camp of the Western countries. McNamara argued that debt
obligations were a powerful material incentive for developing
countries to modernise their export-oriented agricultural and
industrial sectors. This line of reasoning was repeated in a number of
his talks and writings. The virtuous circle of 'debt-increased
exports-debt servicing' would develop the South and boost world
economic growth. The actual course of events has given the lie to this