World's Slow Economic Recovery

October 7, 1977

Report Outline
Factors Inhibiting Recovery
Background of Current Impasse
Outlook for Return to Prosperity
Special Focus

Factors Inhibiting Recovery

Short-Lived Comeback From 1974–75 Slump

The world's recovery from the 1974–75 recession is proving to be much slower and more painful than economic experts had anticipated. Although the inflationary surge is gradually slowing down, unemployment remains at unacceptably high levels in most industrial nations and shows no indication of subsiding. Equally perturbing is the lack of any strong prospect for a significant improvement in the economic growth rates of the “locomotive” economies of the United States, West Germany and Japan during 1978. Massive balance-of-payments problems, caused largely by costly oil imports, are forcing most of the industrial countries to be far more cautious in their economic planing than in prosperous decades that preceded the recession.

The recovery tapered off quickly in many of these countries last year. This has been viewed by some experts as an indication that either the expansionary policies had been inadequate or that a quick return to the ways of economic growth was no longer as easy as in the 1960s. In the brief span of four years, two economists at the Brookings Institution have suggested, “general optimism about the outlook has been replaced by uncertainty, and assumptions about the adequacy of the international system are being questioned.”

The threat of another recession is viewed by Western finance ministers currently as a greater problem than inflation. Those views were expressed repeatedly at the joint annual meeting of the International Monetary Fund and the World Bank in Washington, D.C., Sept. 26–30. While the IMF in its Annual Report, issued two weeks before the meeting opened and based on mid-1977 conditions, saw some improvement over two years ago, it nevertheless found a “great majority” of the 131 member countries still in the process of attempting to restore order to their economies. Their problems, particularly with regard to unemployment, had brought about protectionist pressures to restrict imports. More restrictions on foreign trade, the IMF warned, will do further harm to the world's economy.

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