CURRENT
ECONOMIC DEVELOPMENTS
World Economic Survey
1967 - Part Two
UNITED NATIONS
Department of Economic and Social Affairs
CURRENTECONOMIC DEVELOPMENTS
UNITED NATIONSNew York, 1968
NOTE
Symbols of United Nations documents are composed of capital letters combinedwith figures. Mention of such a symbol indicates a reference to a United Nationsdocument.
Ej4489jRev.lSTjECAjlOS
FOREWORD
Part Two of the Warld Ecanantic Survey, 1967deals with the salient features of current world economic developments. Chapter I provides a broadreview of world production and trade as well asthe principal developments in the three major groupsof countries of the world-the developed marketeconomies, the centrally planned economies and thedeveloping countries. Chapter II analyses recent international monetary and trade developments including, inter alia, the devaluation of sterling, reformof the internaHonal monetary system, implicationsof the Kennedy Round and trends in regional integration. Chapter III deals with changes in themethods of planning and management in the Unionof Soviet Socialist Republics and eastern Europe.
The survey of the current situation of the worldeconomy incorporates information provided by Governments in response to the Secretary-GeneraI's questionnaire on economic trends, problems and policies,
iii
circulated in December 1967. The data presented inthe Survey are those available to the Secretariatin May 1968.
For purposes of this report, the developed marketecono~ies comprise North America, western Europe,Oceama, Japan and South Africa; the centrallypla~ned economies comprise eastern Europe, theUnlOn of Soviet Socialist Republics and mainlandChina, and the developing countries comprise LatinAmerica, the West Indies, Africa, West Asia andsouthern and south-eastern Asia. Where, because ofstatistical exigencies, it has been necessary to departfrom these definitions of coverage, the nature of thedeviation has been noted.
The Survey is prepared in the Centre for Development Planning, Projections and Policies of theDepartment of Economic and Social Affairs of theUnited Nations Secretariat.
CONTENTS
Page
Explanatory notes V11I
Chapter
I. RECENT DEVELOPMENTS IN THE WORLD ECONOMY .
Summary of recent developments .
Policy problems raised by the slowdown in the developed market eco-nomies .
Developments in income and consumption in the centrally planned eco-nomies . .
Cross-currents in the developing countries .
II. INTERNATIONAL MONETARY AND TRADE DEVELOPMENTS
International payments and monetary problems
Implications of the Kennedy Round .
Trends in regional integration
1
1
4
5
6
8
8
16
18
III. PROGRESS IN ECONOMIC REFORMS IN THE SOVIET UNION AND EASTERN
EUROPE .
The conceptual background
Salient features of recent economic reforms
21
21
23
ANNEX................................................................ 29
v
List of tables
Page
1. World production: annual growth rates, hy country group, 1964-1967 1
2. World trade in 1967 and rate of increase, by country group, 1963-1967 2
3. United States and United Kingdom reserve assets, liquid liabilities andbalance of payments position, 1958-1968 9
4. New gold supply and use of gold, 1958-1967 . . . . . . . . . . . . . . . . . . . 10
5. United Kingdom and United States: hypothetical allocation of special drawing rights as a percentage of balance of payments deficit, five-year averages,1958-1967 11
6. United States: amount of swap arrangements under Federal Reserve reci-procal currency agreements, 1%2-1968 12
7. United States: utilization of selected credit facilities, 1962-1968 13
8. Selected countries : effective depreciation or appreciation of currency asmeasured by the country distribution of exports and imports, average1965-1966 14
9. Share of exports and imports in world trade, by country group, average1966-1967 14
10. Selected countries: share of exports to and imports from world, by group andcountry, average 1965-1966 15
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
Annex
World production of selected commodities, 1963-1967 .
Market economies: changes in industrial production, by country group, 1963-1967 .
Selected countries: recent change in industrial production, 1966-1967 .
World production of major agricultural commodities, 1963-1967 .
Major food crops: production in selected developing countries, 1964/65-1967/68 .
Annual changes in consumption and investment, by country group, 1964-1967
World trade: indices of export and import quantum, 1964-1967 .
World exports, by provenance and destination: value, 1965, and percentagechange, 1966 and 1967 .
World trade: indices of value of exports and imports, 1963-1967
World trade: recent changes in exports and imports, 1967-1968
World trade: changes in unit value of exports and imports, 1964-1967 ....
Export price indices of primary commodities and non-ferrous base metals,1964-1967 and first quarter, 1968 .
3]
32
32
33
34
34
35
36
38
38
39
39
23. Developed market economies: industrial production and gross national product,by region, 1965-1967 40
vi
Page
24. Developed market economies: gross national product and its main components,by region, 1965-1967 41
25. Developed market economies: gross national product and its main components,by country; actual 1965-1967 and forecast for 1968 41
26. Developed market economies: personal consumption and its main components,1965-1967 ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
27. Developed market economies: gross domestic fixed investment and its maincomponents, 1965-1967 45
28. Western Europe and North America: changes in production in selected manu-facturing industries, 1963-1967 47
29. Developed market economies: prices and earnings, 1965-1967 47
30. Developed market economies: employment and unemployment, 1965-1967 . . . . 49
31. Centrally planned economies: changes in national income, 1964-1968 50
32. Centrally planned economies : changes in gross agricultural output, 1964-1968 50
33. Centrally planned economies: changes in industrial production, 1964-1968 50
34. Centrally planned economies: changes in gross fixed investment, 1964-1968 51
35. Centrally planned economies: changes in volume of retail trade, 1964-1968 51
36. Centrally planned economies: external trade, 1963-1967 51
37. Developing countries: indices of agricultural and food production, 1960-1967 52
38. Developing countries: rate of growth in food production, 1966 and 1967 53
39. Developing countries: indices of industrial production, 1964-1967 54
40. Selected developing countries: indices of industrial production, 1964-1967 .. 55
41. Developing countries: distribution of changes in exports and imports, 1964-1967 56
42. Developing countries: indicated change between 1966 and 1967 in grossdomestic product, volume of imports and total supplies 57
43. Developing countries: changes in cost of living, 1966-1967 58
44. Developing countries: changes in the supply of money, 1966-1967 58
45. Developing countries: changes in government budgetary position, 1966-1967 59
46. Developing countries: balance of trade and changes in liquidity, 1%1-1967 59
47. Regional economic groupings: objectives, status and main features 60
vii
Explanatory notes
The fonowing symbols have been used in the tables throughout the report:
Three dots ( ... ) indicate that data are not available or are not separatelyreported
A dash (-) indicates that the amount is nil or negligible
A blank in a table indicates that the item is not applicable
A minus sign (-) indicates a deficit or decrease, except as indicated
A full stop (.) is used to indicate decimals
A comma (,) is used to distinguish thousands and millions
A slash (/) indicates a crop year or financial year, e.g., 1960/61
Use of a hyphen (-) between dates representing years, e.g., 1961-1963, signifiesthe full period involved, including the beginning and end years.
Reference to "tons" indicates metric tons, and to "dollars" ($) United Statesdollars, unless otherwise stated.
The term "billion" signifies a thousand million.
Annual rates of growth or change, unless otherwise stated, refer to annualcompound rates.
Details and percentages in tables do not necessarily add to totals, because ofrounding.
The following abbreviations have been used:
CACM Central American Common Market
CMEA Council for Mutual Economic Assistance
EEC European Economic Community
EFTA European Free Trade Association
GATT General Agreement on Tariffs and Trade
IMF International Monetary Fund
LAFTA Latin American Free Trade Association
OECD Organisation for Economic Co-operation and Development
SDR Special drawing rights
Where statistical presentation has rendered it necessary, the term "SouthAfrica" has been used to designate the Republic of South Africa, Botswana,Lesotho, Namibia and the High Commission territory of Swaziland.
The designations employed and the presentation of the material in thispublication do not imply the expression of any opinion whatsoever on the partof the Secretariat of the United Nations concerning the legal status of any countryor territory or of its authorities, or concerning the delimitation of its frontiers.
viii
Chapter I
RECENT DEVELOPMENTS IN THE WORLD ECONOMY
SUMMARY OF RECENT DEVELOPMENTS
The pace of growth
In terms of world output the year 1967 saw amixed performance. The over-all rate of growth receded from nearly 5 per cent between 1965 and 1966to about 4 per cent between 1966 and 1967. Worldindustrial production slowed down rather sharp1yfrom a gain of 7 per cent to one of 4.5 per cent-reflecting the sluggish conditions in the major developed market economies. Agricultural productionregistered a considerable increase, however, in thewake of favourable weather in some of the principaldeveloping countries (table 1).
The general deceleration in world growth wasmagnified in trade developments. The growth ofworld exports between 1966 and 1967 was less than5 per cent, not much more than half the rate achievedin the previous interval (table 2).
For the developed market economies the slowdown in the over-all rate of economic growth represented a continuation of the braking process-following periods of rapid growth in the early 1960's-withits restraining policies for restoring external or internal balance. The maj or exception to this patternwas Japan where economic activities had acceleratedsince 1965.
There were signs of a resumption of faster growthin the developed market economies in the latter partof 1967 and early 1968, especially in the FederalRepublic of Germany and the United States, wheredeceleration between 1966 and 1967 had been marked.
Although the export receipts and industrial activity of the developing countries were unfavourablyaffected by the slowdown in the developed marketeconomies, a dramatic improvement in the harvestsin southern and south-eastern Asia raised the rate
Table 1. Wodd production: annual growth rates, by country group, 1964-1967(Percentage change from preceding year)
Item and country group
G1'OSS domestic product at constant prices
Worldb..•.......•..... • •......•
Developed market economiesc.•.....••....•••.•
Centrally planned economies',· ..Developing countries f
.
Industrial production
Worldb.....•....•...•.•..••.•...•••.••.•••.•••
Developed market economies c....•.
Centrally planned economies·'< ..Developing countries f
Agrieultural produdion
Worldb. .
Developed market economies c. ..•.....
Centrally planned economies·" .Developing countries f
.......•..•...••..•.•....
1964
6685
8889
34
112
1965
5574
7697
1122
1966
5583
7785
359
-1
1967-
4375
4.52
104
4218
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on estimates of the StatisticalOffice of the United Nations and United StatesDepartment of Agriculture and other nationalsources.
a P'reliminary, based on incomplete coverage.b Average of the groups listed.c North America, western Europe, Australia,
1
Japan, New Zealand, South Africa.d Net material product.e Eastern Europe (other than Yugoslavia)
and Soviet Union.f Latin America and the Caribbean, Africa
(other than South Africa), Asia (other thanmainland China, Cyprus, Japan, Mongolia, NorthKorea, North Viet-Nam and Turkey),
g Based on gross values.
Table 2. World trade in 1967 and rate of increase, by country group, 1963-1967
(Bjllions of dollars; percentage)
Country group and item
Developed market economies"V~~~l~ .Percentage change from preceding year:
1963 .1964 .1965 .1966 .1967 .
Centrally planned economies"V~ue in 1967 .Percentage change from preceding year:
1963 .1964 .1965 .1966 .1967 .
Developing countries·Value ~ 1967 .Percentage change from preceding year:
1963 .1964 .1965 ..1966 .1967 .
vVorldd,e
Value in 1967 .Percentage change from preceding year:
1963 .1964 .1965 .1966 .1967 .
E%ports to
Developed Centrally planned Developing fY1orld d, "market economiesb countriesC
economiesn
112 6 30 149
11 10 5 916 23 13 1410 8 7 910 15 9 It,6 9 3 6
6 15 3 25
13 6 18 816 7 7 814 4 11 720 1 9 6
5 9 3 7
29 2 8 40
10 7 7 109 16 9 105 23 4 58 -2 5 73 -4 1 2
147 24 42 214
11 7 7 915 11 12 129 7 7 8
10 4 8 96 7 2 5
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on United Nations, MonthlyBulletin of Statistics.
Note: Because of lack of information onorigin and destination of all trade, and minordifferences in geographical coverage, the figuresin this table do not always conform preciselywith those indicated elsewhere in this Survey.
a North America, western Europe (includingTurkey and Yugoslavia, excluding Cyprus),Australia, Japan, New Zealand, South Africa.
b Soviet Union and eastern Europe (excluding
of over-all growth in these countries to about 5 percent between 1966 and 1967. In contrast to the experience in earlier years, this rate excee~ed thatachieved by the developed market economles.
In the European centrally planned economies, therate of growth between 1966 and 1967 was slightlylower than that recorded in the previous years butit surpassed the planned target. This growth reflectedan acceleration in industrial growth combined with
2
Yugoslavia), plus trade of mainland China,Mongolia, North Korea and North Viet-Namwith rest of the world.
C Latin America, Africa (other than SouthAfrica) and Asia (other than mainland China,Japan, Mongolia, North Korea, North VietNam and Turkey).
d Excluding trade among mainland ChinaMongolia, North Korea and North Viet-Nam:
e Special category exports from the UnitedStates are included in exports to the worldbut. are not included in exports to any of th~regIOns.
a deceleration in agricultural growth. The performance of agriculture in 1967 was, nevertheless, satisfactory since it followed an excellent harvest in theprevious year and the sector continued to exert afavourable impact on the economy as a whole, Inmainland China, activities associated with the "cultural revolution" tended to disrupt operations inindustry and communications, although in 1967grain output was 10 per cent higher than in theprevious year.
Preliminary data and projections l suggest that therate of world growth between 1967 and 1968 islikely to be somewhat higher than that between 1966and 1967, especially in the developed market economies as a group. The signs of renewed upswinghave been clearest in the countries in which theslowdown in 1967 was most pronounced. There hasalready been a sharp recovery in the Federal Republic of Germany. Even in the United Kingdom,where policies of restraint have continued to besevere, the rate of growth is almost certain to increase. A faster pace of growth in the United Statesis also apparent, though the recently enacted 10 percent surtax, combined with large cuts in the budget,will tend to hold down the rate of increase. InFrance, earlier expectations of a faster pace of growthfor 1968 have not been materially revised downwards.
In the centrally planned economies the plannedgrowth rates of national income for 1968 are verysimilar to the actual achievement of the previousyear. Most of the countries are expecting a higherincrease of agricultural output, under normal climatic conditions, and a small deceleration in industrial growth as compared with 1967.
The combination of better prospects in the worldmarket as well as the good agricultural performancein 1967/68 should place the developing countries asa group in a better position than they were in 1967.The food situation is likely to be much easier and thecombination of higher agricultural output and improved export earnings should facilitate a recoveryin industrial production and in investment.
The pattern of world production and trade2
World industrial production increased by 4.5 percent between 1966 and 1967 as compared with 7per cent between 1965 and 1966. The decelerationreflected mainly the slowdown in the market economies, especially in the more developed among them(table 1). In the centrally planned economies thegrowth of industrial production accelerated to almost10 per cent from 8 per cent.
The deceleration in the market economies wasaccompanied by a shift in the pattern of production.This was most pronounced in manufacturing. Thepace of expansion slowed only moderately in mining.Among the various branches of manufacturing, although the slowdown was general, clothing andtextiles, wood and basic metals registered the poorestperformance, especially in industrialized countries.In contrast, the expansion of food and other light
lBased in part on replies 'received from Governments tothe United Nations questionnaire of December 1967 on economic trends, problems and policies.
2 For background information, see tables 11 to 22 in theannex.
3
industries in the centrally planned economies wasvery rapid, reflecting a growing attention to the raising of consumption levels.
While the pace of world industrial expansion wasdominated by trends in the developed market economies, the acceleration in the rate of world agricultural expansion from 3 per cent between 1965 and1966 to 4 per cent between 1966 and 1967 resultedchiefly from the performance of the developing countries. For the first time in the Development Decade,the annual rate of increase in world agriculturalproduction approached that of industry. Moreover,the rise in food production outpaced the rise in population, especially in countries with relatively lowlevels of per mpita consumption. Large increases inthe 'Output of rice, maize, coffee and jute were onlypartially offset by declines in wheat, oats, cocoa andhard fibres.
The world production of unmilled rice in 1967/68rose by 9 per cent over the reduced crop level of1966/67. Substantial increases were achieved by mostof the maj or producing countries (India, Japan,Pakistan, United Arab Republic) despite less favourable conditions in some exporting countries in Asia.Record yields per acre are being reported from manycountries, reflecting significant increases in the useof high-yield seeds, along with fertilizers. Worldmaize production increased by 10 per cent between1966 and 1967. Record crops were reported fromArgentina, Brazil, Mexico, South Africa and UnitedStates.
The coffee output of 1967/68 is estimated to beabout 10 per cent higher than the low figure of1966/67. Large increases are expected for Brazil,Ivory Coast and Indonesia. Colombia, the secondlargest producing country, is expected to produce thesame amount as in 1966/67.
World production of jute, which has been risingsteadily, increased by C1ibout 10 per cent between1966 and 1967. Offsetting these major increaseswere reductions in the production of wheat, oats,cocoa and hard fibres. Wheat output in 1967 droppedabout 3 percentage points from the level of 1966despite major increases in Europe, Asia and SouthAmerica. In North America, notwithstanding a 12per cent increase in acreage, adverse weather inCanada and, to a less extent, in the United Stateskept crops below the preceding year's record level.Wheat output of the Soviet Union-producer ofnearly one-fourth of the world crop-was aboveaverage but substantially below the record level of1966.
The 1967/1968 world cocoa-bean crop is estimatedto be slightly below that of the previous season.The increase in the Ghanaian output is expected tobe offset by decreases in the production of Brazil,Ivory Coast and Nigeria.
The deceleration in world trade between 1966 and1967 was even more marked than that of output.Total trade in 1967 reached a level of $214 billion, a5 per cent increase over that of 1966, compared witha 9 percent rise between 1965 and 1966. While thisdeceleration was widespread among various groupsof countries, the centrally planned economies werean .exception, in the wake of a significant increase inintra-trade.
The acceleration of trade of the developed marketeconomies also reflected the predominance of intratrade and the slowing down in the 'pace of domesticactivities in these countries. By contrast, the trade ofAustralia, New Zealand, South Africa and Japanexpanded at a very rapid rate between 1966 and1967.
The slackening of trade of the developing countries was sharper than that of the developed marketeconomies. This again reflects the slowdown in economic activity in the latter. However, despite theincrease in production in the centrally planned economies their imports from the developing countrieswere smaller than in 1966.
The acceleration in the trade of the centrallyplanned economies was greater for imports than forexports. The growth in exports was unfavourablyaffected by the slowdown in economic activity inthe developed market economies while imports fromthem were less affected. Trade of mainland Chinawas sluggish; its exports to the world suffered anabsolute decline in 1967, reflecting principally a reduction in shipments to south-eastern Asia.
POLICY PROBLEMS RAISED BY THE SLOWDOWN IN THE
DEVELOPED MARKET ECONOMIES3
Among the policy problems highlighted by theslowdown in the developed market economies is therelationship between domestic activity and externalbalance. With a few crucial exceptions, decelerationin a country's economy has again been associated withan improvement in the trade balance and vice versa.The most conspicuous examples in 1967 were thesharp increases in the payments surplus of the Federal Republic of Germany and in the deficit ofJapan. At the same time, the need to improve theexternal account of the United Kingdom and theUnited States has drawn attention to the inadequacyof a short-term counter-cyclical policy in dealingwith persistent payments problems. To the extent thatthe beneficial payments impact of a slowdown derivesfrom the running down of stocks and thus imports,the effect is likely to be short-lived. As soon as revival sets in, stocks have to be replenished and thepayments position deteriorates.
This is at the root of the frustrating experience ofthe stop-go pattern of economic activities which
3 For background information, see tables 23 to 30 in theannex.
4
results in underutilization of capacity in the long runwithout, however, curing the fundamental paymentsproblem. The very nature of the short cycle reinforcesthe predominant role of stocks in the paymentspicture since longer-run factors in the trade performance, such as improvement in capacity, design andmarket penetration, can hardly take effect within ashort span of time. It is for this reason that, overand above the emergency measures that have beenadopted for restraining economic activities in theUnited Kingdom, attention has been directed towardsstructural improvements and long-term increases inproductivity, inter alia, through the rationalizationof industries.
To the extent that the payments problem isstrongly influenced by capital items and extraordinary expenditures, such as direct foreign investment abroad and foreign military expenditures, asin the case of the United States in recent years, reductions of domestic expenditure would have only alimited effect in improving the external balance.Attention has therefore been directed to specialmeasures governing these flows, as in the case ofvoluntary or direct controls of private investmentabroad and arrangements for German purchasesof United States bonds to offset the latter country'smilitary expenditures in the Federal Republic ofGermany.
Even if the link between domestic activity andexternal balance is a close one, the cost (in terms ofthe sacrifice of domestic production) of restraints imposed in the interest of external balance may be extremely heavy, as is the case with the United States,where the share of trade in the economy is small.This has attracted increased attention to the role ofequilibrating capital movements. Except in the caseof official operations, there is no assurance that capital movements will be equilibrating, especially whena confidence factor is involved. How free capitalmovements should be is therefore a matter for policyjudgement. Restrictions on the capital market hamperits efficient functioning and thereby reduce its equilibrating role. On the other hand, a more liberal policymay facilitate large-scale speculative movements andaccentuate the payments disequilibrium.
Another set of questions raised by recent developments relates to the responsiveness of price levelsto domestic activity. Here recent experienoe isvaried and complex. On the whole, the response hastended to be sluggish. Thus, the initial accelerationof activities in 1961-1965 was not accompanied byany pressure on prices and, conversely, the slowingdown in 1966 frequently coexisted with an acceleration in the rise in prices. This was partly the resultof favourable developments in productivity and costsduring the upswing and adverse developments dur-
ing the downswing. However, the long-run relationship may not be a simple one. If cost considerationsare more important than demand pressures in thedetermination of prices, a prolonged slackening mayfail to curtail an upward surge in cost when wagerises are not offset by productivity improvements. Atthe same time, a prolonged slackening in the activitieshas rarely failed to be reflected in prices. Here thequestion of "trade-off" between growth and stabilityarises. Increasing interest has, therefore, been manifested in incomes and price policies. The practicalimplementation of such a policy has, however, encountered serious difficulties in most countries mainlybecause, in the fmal analysis, the issue becomes apolitical one. In countries where moral suasion hasbeen relied on, official guidelines for wages and priceshave tended to be ineffectual. More strenuous effortsin scrutinizing wages and prices not only raise difficult administrative problems of enforcement but alsocourt political difficulties. As the market-place givesway to policy decision, grievances and inequities ofparticular groups become a direct responsibility ofthe Government. Moreover, wage drifts-i.e., risesover and above negotiated increases-elude the mostcareful control. Furthermore, wage restraint unmatched by comparable action in respect of profitsis likely to raise questions of equitable distributionof income; yet a squeeze on profits might wellhamper efficiency and growth. The search for aworkable incomes and price policy, in the contextof growth with stability, has thus become moreurgent, but recent experience has not pointed a wayto a speedy solution.
A third set of questions relates to the basic problem of growth in the developed market economies.The slackening of growth rates-and in some casesabsolute declines, even though only brief-haveserved warning that sustained growth is notto be taken for granted. It is not sufficient to beassured that policy instruments exist to stimulateeconomic growth. It is also necessary to know thecost of applying these instruments in terms of suchgoals as external and internal balance. The fact thatthe recent slackening of activities and below-capacityoperations in the developed market economies havebeen strongly influenced by restraining measures indicates that goals other than growth have playedan important role. At the same time, recent experience does not necessarily reveal the precise preference of policy makers with respect to the weightsattached to the various obj ectives. Economic calculations, however exact in a formal sense, remain crudeand uncertain. Thus, a policy of moderate restraintmay have been adopted because it was believed to beeffective in restoring balance of payments equilibrium. When it proved to be less than adequate,restraint may have been tightened, not because alower priority had been attached to growth in the
5
first place, but because there was little choice 111 anatmosphere of crisis.
These questions raise the issue of appropriatepolicy mix. Apart from uncertainty regardincr the
. . bpreCIse Impact of (and therefore the need for)specific policies, there is always likely to be a difference between what is theoretically correct and~hat can be implemented. Recent experience proVIdes many examples of the difficulty of arriving atan appropriate mix of monetary and fiscal policy.The inflexibility of fiscal policy in many instancesdoes not stem from a lack of appreciation of thefiscal role in the economy, rather it is a consequenceof political considerations and procedural difficultiesthat stand in the way of major budgetary changes.Consequently, reliance has often had to be placedon monetary policy. Though the lopsidedness of thepolicy mix has in many cases been partially corrected-by selective controls and compensating measuressuch as favourable treatment of export credit, government financing of mortgages and pegging of differentials between short-term and long-term ratesof interest-the policy measures have been more bluntand, paradoxically, also more complex than need be.
DEVELOPMENTS IN INCOME AND CONSUMPTION IN
THE CENTRALLY PLANNED ECONOMIES4
The rate of growth of the European centrallyplanned economies continued to be high in 1967.The rise in national income between 1966 and 1967amounted to 6.9 percent as against 7.5 per centin the preceding interval. The slight deceleration inover-all growth was entirely due to a slower rise inagriculture after bumper crops in 1966; industrialproduction accelerated in 1967 in every country except Czechoslovakia and even there it exceededthe planned rate.
The high rate of growth reflected substantial gainsin productivity. There was a 7 per cent increase inoutput per man in the centrally planned economiesin Europe as a group. In some countries, notablyCzechoslovakia, Eastern Germany and the Union ofSoviet Socialist Republics, this increase was connected with the faster introduction of new technology and with reforms in planning and management. In Czechoslovakia, the 7.1 per cent growthin industrial output was achieved by a 1.1 per centincrease in employment. In Eastern Germany, the¥rowth of output was more than accounted for by an111crease in productivity. Productivity also increasedmarkedly in Romania and Hungary. Only in Poland,where the rise in employment was significantly higherthan planned, did it contribute more to expansion ofoutput than improvement in productivity.
4 For background information, see tables 31 to 36 in theannex.
There was a rapid rise in the levels of consumptionbetween 1966 and 1967, made possible by previoushigh rates of investment but also reflecting currentpriorities relating to consumption. This representeda shift in policy and it was accompanied by a relatively fast eX'pansion of light industries and facilitatedby the good harvest as well as by additions tocapacity. In Hungary, the increase in the outputof light industries was greater than that in producergoods. In the Soviet Union, light industry productionrose at almost twice the planned rate.
In most of the centrally planned countries retailsales expanded at a considerably higher rate thannational incomes. In the Soviet Union, the rate ofgrowth in retail sales surpassed that in fixed investment for the third consecutive year. Current indications point to a continuation of this trend: a substantial acceleration in the growth of living standardsis the main feature of the national economic plan for1968, 1969 and 1970.5
The main exceptions to this development in 1967were Czechoslovakia and Eastern Germany. In theformer country, the large increment in national income went mainly into accumulation, especially ofstocks, which increased several times more than intended in the plan. This rise in stocks was largelyattributable to discrepancies between the forces ofsupply and demand. In Eastern Germany the tendency for the national income to increase considerablymore than personal consumption continued.
While the growth of consumption was accompanied by a general rise in incomes, in most countries the average income of farmers rose faster thanthat of urban workers and employees. As a result,the difference in the levels of living between thesetwo groups of population was reduced.
Although the growth in incomes and consumptionwas met to a great extent by expanding outputin consumer goods industries and services, itwas also supported by larger imports of consumer goods. On the whole, the equilibriumon consumer markets was maintained. However,the rapid expansion of incomes and the shifts indemand patterns did impose pressure on supply,particularly. in respect of certain types and qualitiesof goods offered to consumers. Though there havebeen substantial improvements in both the quantityand the quality of consumer goods during the pastfew years, factories have encountered difficulties inmaking adequate and prompt adjustments of outputto changing requirements. In some countries, modifications of retail prices were used to balance thedemand and supply of particular commodities. It is
5 Pravda (Moscow), 11 October 1967, cited in EconomicSurvey of Europe in 1967: The European Economy in1967 (United Nations publication, Sales No.: E.68.ILE.l),chap. II, p. 76.
6
the intention to eliminate the remaining tensions inthe consumer market mainly by a faster expansionof consumer goods industries and an increase inflexibility in supply, made possible by economicreforms now under way.
In mainland China in 1967, consumption also increased faster than in preceding years, in relation toinvestment. In contrast to the experience in the European centrally planned economies, however, thiscan not be attributed mainly to a deliberate shift inpriorities. The high rate of increase in agriculturalproduction in 1967, which provided the bulk of consumption, could be traced in part to past policyefforts and in part to the relatively slight involvement of peasants in the "cultural revolution". Moreover, there is some evidence that the rise in consumption was influenced by the manner in whichcentral authority gave way to local decisions in anatmosphere of change. There were unplanned increases in wages, and sometimes wages, and evenbonuses, were paid despite stoppages in production.The fact that working capital was sometimes divertedfor consumption for "revolutionary purposes" alsocontributed to the increase in consumption at the expense of accumulation.
CROSS-CURRENTS IN THE DEVELOPING COUNTRlES6
Perhaps the most important development in thedeveloping countries in 1967 was the recovery inagriculture, after two years of virtual stagnation occasioned by drought in southern and south-easternAsia and parts of Africa. The excellent crops offood-grains in several Asian countries reflect theturn in the weather; but also contributing was asharp rise in yield in a number of areas where newseed varieties had been used. Offsetting this gain,however, was the less favourable external stimulus,in the wake of the slowdown in developed marketeconomies. The substantial deceleration in the growthof export earnings and of import capacity limitedindustrial expansion.
Political and military disturbances in various partsof the developing world had an important impacton several of the countries directly or indirectlyaffected. Diversion of resources for military purposeswas harmful to the development efforts of a numberof countries. Others, however, reaped some benefitfrom the reallocation of demand as a result of theconflicts.
In spite of relatively stagnant exports, the developing countries as a whole managed to increasetheir imports yet accumulate international liquidity.This reflects in part an increased flow of resourcesfrom the rest of the world and the internationalagencies.
6 For background information, see tables 37 to 46 in theannex.
The gain in total supplies was large enough toprovide a moderate increase in per capita consumption and substantially expanded capital formationinduding an exceptionally large swing in inventorymovements-in the developing countries.
The over-all rate of growth in developing countriesaccelerated appreciably between 1966 and 1967. Thisreflects the improved performance of agriculture.Industrial production continued to decelerate, reaching the lowest growth rate in the 1960's. At 4 percent it was lower than that of agriculture for thefirst time in the 1960's. Preliminary estimates indicate that after rising 4 per cent between 1964 and1965, the combined gross domestic product of thedeveloping countries increased about 3 per cent in1966 and between 5 and 6 per cent in 1967.
The loss of momentum in industrial activity wasapparent in most of the maj or developing countries.In India and Pakistan industrial expansion washeld back by the low agricultural output of 1965and 1966 which limited industrial inputs and causedhigh food prices, with a negative effect on consumerdemand for industrial products. In Latin America,an industrial slowdown in Argentina and Brazil wasoffset by significant advances in Mexico and Venezuela. Economic activities in some of the principalcountries of Africa and the Middle East were seriously disrupted by military conflict.
The slowdown of world production and demandaffected the exports of developing countries. Theincrease in their export earnings was less than 3 percent between 1966 and 1967, compared with 7 percent in the previous interval. This deceleration inexport activities was common to all the regions.Among the countries that registered a reduction inexports between 1966 and 1967 were exporters ofcopper (Zambia), wool (Argentina, Uruguay), coffee (Brazil, Costa Rica, Guatemala, Kenya) andrubber (Malaysia); countries suffering as a resultof political and military disturbances (Iraq, Jordan,Nigeria, Syria, Republic of Viet-Nam and United
7
Arab Republic); and those with serious structuralproblems (such as Burma, Ceylon, Indonesia andSierra Leone). Those registering large increases inexports in 1967 were the petroleum-producing countries not involved in the Middle East crisis (Iran,Saudi Arabia, Libya), and exporters of rice (Cambodia), cocoa (Ghana, Cameroon, Ivory Coast), cotton (El Salvador, Nicaragua, Sudan), sugar (Dominican Republic) and manufactured products(China (Taiwan), Hong Kong, Israel, RepUblic ofKorea). Exports of China (Taiwan) and the Republic of Korea were stimulated by the surge indemand from the Republic of Viet-Nam.
Deceleration in the growth of imports occurred inall developing regions. In general, countries in whichexports slackened or declined cut back their imports.
For the developing countries as a group, the mainchanges in the pattern of resource availabilitystemmed from the relatively large increase in thesupply of agricultural commodities and the rathermodest increase in the supply of imported goods.Stocks 'Of agricultural commodities, which hadbeen drawn down for two successive years tosustain consumption and exports, seem to havebeen substantially increased. Small increases inthe volume of imports and in the output fromlocal heavy industries indicate modest expansion infixed investment in 1967. In addition, the slow rateof export growth suggests a rate of increase in theresources available for domestic use greater thanthe rise in total supply. In the aggregate, therefore,the rate of increase in gross capital formation, aswell as in consumption, was probably higher than in1966.
Reflecting the gains in total supplies in 1967, therewere indications of a general improvement in theinternal balance of the developing countries. Deceleration of price increases was significantly morefrequent, and acceleration rather less frequent, in1967 than in. 1966. The proportion of countriesregistering high rates of increase in the cost of living(10 per cent or more) also declined in 1967.
Chapter II
INTERNATIONAL MONETARY AND TRADE DEVELOPMENTS
INTERNATIONAL PAYMENTS AND MONETARY
PROBLEMS
The payments diseqnilibrium
The year 1967 saw a worsening in the paymentssituation of the reserve currency countries. A crisisof confidence developed and this led to a massiveattack on these currencies and a run on gold. TheUnited Kingdom was forced to devalue in November1967 and the gold pool countries suspended thesupply of gold to the private market several monthslater. The crisis necessitated various defensive measures, but it also induced some further steps alongthe road of international monetary reform.
The imbalance in the payments position of theUnited Kingdom and the United States was nota new phenomenon. The United Kingdom had experienced chronic payments difficulties in the postwar period and had remained in deficit ever sincethe payments crisis of 1964. There was a temporaryimprovement in 1966 but it proved to be short-lived:the surplus registered in the fourth quarter of 1966when the balance of payments responded to therestrictive measures undertaken in the middle of thatyear, did not last. In 1967 imports rose again, whileexport expansion came to a halt. Although the imbalance was attributable at least in part to shortrun developments-such as the slack in economicactivity in western Europe, the closure of the SuezCanal following the outbreak of hostilities in theMiddle East in June 1967, and the prolonged dockstrikes-the cumulative erosion of confidence insterling raised serious questions about its strength.This was a matter of public discussion, especially inconnexion with the British application for membership in the European Economic Community(EEC). Although it was widely known that theUnited Kingdom balance of payments had been infundamental disequilibrium for some time, when thecrisis oocurred it had a severe immediate impact.There was a massive onslaught on the pound that leftthe Government little recourse but to devalue.
Although the underlying strength of the dollar hasbeen much greater than that of sterling, the imbalance in the United States payments position hasalso been persistent. The cumulative effect of prolonged deficits was a decline in total reserve assets
8
from about $23 billion at the end of 1958 to lessthan $15 billion towards the end of 1967 (see table3). In the same interval United States liquid liabilities rose from about $17 billion to $33 billion.
While the United States balance of paymentsdeficit was welcomed in the early post-war years, asit resulted in replenishment of European reservesdepleted by the war and post-war reconstruction, bythe late 1950's concern regarding dollar shortagebegan to give way to doubts about the impregnabilityof the dollar. The turning point coincided with thegathering strength of the continental European currencies after return to convertibility in 1958, and themounting reserve losses suffered by the UnitedStates. Although intermittent improvements in thepayments situation gave rise to hopes of approachingequilibrium, the deficits have persisted throughoutthe ten-year period that has elapsed. In 1967 thedeficit of $3.6 billion was one of the largest of thewhole period. Restrictive measures designed to correct the imbalance grew more severe over the years.By 1968 some restrictions on the outflow of capitalwere made mandatory.
Under the circumstances, a gold crisis became thelogical counterpart of the crisis of the reserve currencies. For, under the gold-exchange standard ofthe post-war years, official holdings of dollars areredeemable in gold at the fixed price of $35 an ounce.By the end of 1967 the official gold holdings of theUnited States had declined to $12 billion from almost$23 billion at the end of 1957, while liquid liabilitiesto official institutions reached almost $16 billion ascompared with $9 billion a decade earlier. It thusbecame increasingly evident that unless confidencewas restored, a run on gold of massive proportionsmight develop.
N or was the source of attack limited to officialinstitutions, for gold became a favourite vehicle forprivate hoards as confidence in the reserve currenciesweakened. In addition, the demand for industrialuses, especially in connexion with defence, increaseddramatically. As a result, private absorption accounted for about $3 billion in 1967 in contrast to arange of between $0.9 billion and $1.8 billion duringthe period 1960-1966 and less than $0.6 billion in1958. The surge in demand for gold, moreover,coincided with a slackening in its supply. World
Table 3. United States and United Kingdom reserve assets, liquid liabilitiesand balance of payments position, 1958-1968
(Billions of dollars)
United States United Kingdom
Liq'Hid tiabilities C Liquid liabilitiesBalance ofBalance of
Total To central payments Total To central current andYearn reserve Gold
Total banks on liqui-- reserve GoldTotal 'monetary long~te1'm
assets stockband dity assets stockb
institu.~ capitalGovernments basis tions t1'ansactions
1958 ......... 22.54 20.58 16.85 9.65 -3.37 3.11 2.81 9.39 6.70 0.421959 21.50 19.51 19.43 10.12 -3.87 2.80 2.51 9.82 6.97 -0.301960 19.36 17.80 21.03 11.09 -3.90 3.72 2.80 10.87 6.32 -1.261961 18.75 16.95 22.94 11.83 -2.37 3.32 2.27 9.93 6.44 0.201962 .......... 17.22 16.06 24.07 12.71 -2.20 3.31 2.58 10.69 6.22 0.081963 ......... 16.84 15.60 26.32 14.35 -2.67 3.15 2.48 11.40 6.53 -0.111964 . . . . . . . . . . . . 16.67 15.47 29.00 15.42 -2.80 2.32 2.14 11.76 6.86 -2.171965 ............ 15.45 13.81d 29.12 15.37 -1.34 3.00 2.27 11.87 6.75 -0.961966 ............ 14.88 13.24 29.78 13.66 -1.36 3.10 1.94 12.50 7.46 -0.371967 14.83 12.07 33.14 15.69 -3.57 2.70 1.29 11.74 7.49 -1.41"1968:
January 14.62 12.00 33.08 15.25 2.75February 14.79 11.90 33.30 15.36 2.77March ... 13.93 10.70 2.72April .......... 13.84 10.55 2.77
Source: Centre for Development Planning, Projectionsand Policies of the United Nations Seoretariat, based onBoard of Governors of the Federal Reserve System, FederalReserve Bulletin (Washington, D.C.), May 1968, and International Monetary Fund, International Financial Statistics(Washington, D.C.), June 1968.
a End of period.b Including gold sold to the United States by the Inter
national Monetary Fund with the 'right of purchase, and golddeposited by the IMF to mitigate the impact on the United
production of gold had remained static since 1964and actually declined slightly to $1.4 billion between1966 and 1967. Furthermore, sales from the USSR,which rose from about $200 million to $500 millionannually in the first half of the 1960's ceased completely in 1966 (table 4) .
The translation from crisis of confidence to goldcrisis had occurred in 1960 when a run on golddeveloped as a result of the United States paymentsdeficit coupled with various political and economicuncertainties. The price of gold had surged above$40 per ounce in the London market. It was in response to this challenge that the gold pool was organized in 1961. Confidence was soon restored withthe help of favourable developments elsewhere. Although the gold market had to be supported by thepool from time to time, the combined strength of theworld's principal financial powers proved to beadequate for calming speculative fevers. The situationdeteriorated rapidly in 1967, however; in the middleof the year France ceased to take active part in thepool operations. The assault on the gold marketgathered strength after devaluation of sterling, asthe pressure on sterling was extended to the dollar.As a result, the loss of gold by the members of thepool amounted to about $1 billion in the first monthafter devaluation.
9
States gold stock of foreign purchases for the purpose ofmaking gold SUbscriptions to the IMF under quota increases.
C Because of changes in reporting coverage, figures shownfrom 1960 onwards are not comparable with those shownfor earlier yeacrs.
d Excluding $259 million gold subscription to the IMF inJune 1965 for a United States quota increase which becameeffective on 23 February 1966.
e Estimate.
The determination to hold the price of gold provedto be unconvincing as the prospects for a rapidelimination of the United States payments deficitworsened. The rate of gold loss reached extremeproportions in the final stages of the crisis in March,when the United States alone suffered a loss ofseveral hundred million dollars in a single day.
Events thus made it clear that existing international monetary arrangements could not be maintained. Three main alternative courses of actionseemed to be open: a rise in the price of gold, theseverance of the link between the dollar and gold,or a compromise combining elements of both. Whilethe merits of the various alternatives had been thesubj ect of extended discussion in both official andunofficial circles, the dominant considerations governing the choice were fairly evident.
If gold were revalued, the benefit would accrueto a few major producers and countries which hadconverted a large part of their reserve holdings intogold. In contrast, those which had refrained fromthe rush into gold, either voluntarily or in responseto persuasions, would be penalized. Furthermore, itwas felt that raising the price of gold would onlyprolong the life of a system which was inherentlyunstable, and thus hinder efforts at reforms aimed
Table 4. New gold supply and use of gold, 1958-1967(Millions of dollars)
Sales Total Increase PrivateYear Cold by gold in absorp·
production USSR supplY" monetary tioncstockb
1958 ............ 1,051 220 1,271 683 5881959 ............ 1,127 250 1,377 746 6311960 . . . . . . . . . . . . 1,178 200 1,378 310 1,0681961 ............ 1,215 300 1,515 607 9081962 . . . .. . . . . . . . 1,300 215 1,515 372 1,1431963 ............ 1,356 550 1,906 825 1,0811964 ............ 1,406 450 1,856 712 1,1441965 ............ 1,440 550 1,990 213 1,7771966 . . . . . . . . . 1,440 1,440 -56 1,4961967 ............ 1,416 1,416 -1,630 3,0461967 :
First quarter ., . 355 355 -63 418Second quarter . 360 360 -142 502Third quarter .. 357 357 -13 370Fourth quarter . 344 344 -1,412 1,756
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat. based on International MonetaryFund, lnternat£onal F£t!anc£al Stat£st£cs, May1968.
a Based on gold production, excluding that ofUSSR, eastern Europe, mainland China andNorth Korea, plus sales of gold by the USSR.
b Including gold holdings of the InternationalMonetary Fund, Bank for International Settle-
at making the creation of reserves independent ofthe haphazard and inadequate growth in the supplyof gold. In addition to these basic considerations,there was the practical difficulty posed by the inability of the Government of the United States torevalue the dollar in terms of gold without congressional authorization. A full public debate onthe issue would undoubtedly have had an unsettlingeffect on the world's financial markets, especiallyif the debate had been a prolonged one.
Despite these considerations, it was technicallyfeasible for the United States to change the longestablished practice of free dollar-gold convertibility.The obligation of the United States as a member ofthe International Monetary Fund could be fulfilled,as in the case of other nations, by operations onthe foreign exchange market. The demonetizationof gold would, however, have had serious repercussions on the international monetary system in whichthe role of gold remained central. There would havebeen problems of the adequacy of foreign exchangereserves to maintain exchange stability. There wouldalso have been problems of relations with countrieswhich normally settle accounts by transfers of gold.These problems could have been dealt with only ifstrong international co-operation in the new international monetary system was forthcoming.
The actual solution to the gold crisis was a compromise. On 15 March 1968, the London gold marketwas dosed. During the following week-end, the Gov-
10
ments and European Development Fund, as wellas gold 'reserves of countries other than the centrally planned economies.
c Estimate of private absorption includes goldfor artistic and industrial uses and private holdings. The estimate of private absorption includessome gold acquired by monetary authorities butnot reported in official holdings compiled by theIMF. Private absorption should be revised upwards for 1966 and 1967 to the extent of goldsales, if any, by the USSR.
ernors of the Central Banks of the gold pool members decided at a meeting in Washington that officially held gold should be used only to effect transfersamong monetary authorities; they also decided notto supply gold to any gold market, and in view ofthe prospective establishment of a new reserve facility the existing stock of monetary gold was deemedsufficient, rendering further purchase of gold fromthe market unnecessary. The immediate effect of thisaction was to establish a two-price system for gold,one being the old price of $35 an ounce for officialsettlements and the other a free market price forprivate purchases.
It is as yet too early to assess the workings ofthe two-price system. The free market price of goldhas risen considerably above the level of $35 anounce, and has penetrated the previous highs around$40 per ounce. The question arises whether a widening of the gap between the two prices might notendanger the system. In the first place, there mightbe reluctance on the part of central banking institutions to settle accounts by sales of gold at a pricemuch below that on the private market. As a consequence, official gold holdings might be largelyimmobilized as a part of international liquidity. Inasmuch as the United States continues to maintainconvertibility of the dollar into gold, it could losemore gold even if its payments balance were restored,since foreign official holdings of dollars remainsubstantial.
Reform of the international1nonetary system,
In the final analysis, the long-term viability ofthe two-price system will depend on the outcomeof the evolving international monetary system. Theneed for reforming the gold-exchange standard hadbeen debated for a long time, but it took severalmore years of discussions and negotiations before anew reserve facility was finally conceived.
On 26 August 1967 the Ministers of Financeand the Governors of the Central Banks of theGroup of Ten agreed in London on the outline ofa contingency plan for the establishment of a newreserve facility. In September of the same year theBoard of Governors of the International MonetaryFund at their meeting in Rio de Janeiro adopted aresolution which requested the Executive Directorsto complete their work on the establishment in theFund of a facility for special drawing rights (SDR).On 29 and 30 March 1968 the Ministers and CentralBank Governors of the Group of Ten met again inStockholm and gave their approval (with France dissenting) for the immediate presentation of the proposed amendment to the Articles of Agreement ofthe Fund, which was to be attached to a resolutionand submitted by correspondence for a vote to theGovernors of the Fund. The Governors have sinceadopted the resolution. The proposed amendmentwill go into effect after it has been accepted by sixtyfive members having at least 80 per cent of the totalvoting power. It is expected that ratification willtake about a year.
The plan, if adopted and activated, would bethe most significant extension of the functions ofthe IMF since its inception. The key feature of theestahlishment of a new facility based on special drawing rights is the deliberate creation of a supplementto existing reserve assets as the need arises. Sincethe special drawing rights are intended to be reserveassets rather than reserve credits, they are unconditional in character. The new rights contrast withthe bulk of the Fund's credit tranches which areconditional; they also differ from the automaticdrawing rights since they will be deliberately created.For these reasons the special drawing acoount willbe separate from the general account which will continue the present operations and transactions of theFund.
At the same time, provlslOns are made to ensurethat reserve creation will be decided upon with anaffirmative vote of 85 per cent as contrasted withthe present 80 per cent applicable to quota increase,and the simple majority for all other decisions.1
Furthermore, provision has also been made for a
1 See, however, amendments on voting requirements inInternational Monetary Fund, Proposed Amendment ofArticles of Agreement (Washington, D.C., 1968).
11
member of the Fund to "opt out" as well as to "optback in". Once the new reserve asset is created itsacceptability is assured by obligations of participantsto accept it for settlement of payments. Measures fordiscouraging participants from using up the newreserve assets as fast as possible have been devised,though their adequacy remains to be demonstrated.
The extent to which the new asset might supplement the existing international liquidity will dependon the willingness of the principal Powers to createthe asset. A creation of between $1 billion and$2 billion annually for five years would amount toan addition of $5 billion to $10 billion as comparedwith the total world liquidity of about $70 billion atpresent. Compared with the average deficit in thepast ten years, the possible country allocation wouldbe sizable in such countries as the United Kingdom,but relatively small in the case of the United States(see table 5).
vVhile the precise relation between the new reservefacility and the reserve requirements obviouslyvaries from country to country, there is no doubtthat the facility is designed to meet the long-termneeds of international liquidity rather than as ashort-term remedy for payments imbalances. Indeed,major imbalances in the world's payments couldimpede the orderly activation and smooth functioning of the new facility. There is, therefore, an understanding that both the United Kingdom and theUnited States will endeavour to eliminate theirpayments deficits. Inasmuch as the United Kingdomhas accumulated external debts, especially in connexion with the recent sterling crisis, it is envisagedthat it will move to a position of substantial surplus.
Table 5. United Kingdom and United States:hypothetical allocation of special drawing rightsas a percentage of balance of payments deficit,five-year averages, 1958-1967
Period United UnitedKingdom States
1958-1962 . . . . . . . . . . . . . . . . . . . 47.6 5.41959-1963 ................... 29.3 5.71960-1964 ................... 12.4 6.11961-1965 ................... 13.7 7.51962-1966 . .................. 11.4 8.21963-1967 .. , ................ 8.1 7.3
Source: Centre for Development Planning, Projectionsand Policies of the United Nations Secretariat, based ondata from national sources.
Note: The hypothetical allocation of special drawingrights is based on a total annual allocation of $1 billion toall members' of the International Monetary Fund in proportion to their existing quotas in the Fund, taking into accountthe reconstitution requirements for a five-year period. Thepayments deficit for the United Kingdom refers to balanceson cur,rent and long-term capital account, while that for theUnited States refers to liquidity balance.
International credit and the debt problem
This raises the question of the adequacy andappropriateness of international co-operation as wellas of domestic policies. The immediate question iswhether the international credit so speedily providedduring the crisis days has posed a serious problemof repayment. While full information is not availableon the precise amount of credit actually utilized bythe United Kingdom, the almost $3 billion of externalcredit announced at the time of devaluation consisted of a $1.4 billion stand-by agreement fromthe International Monetary Fund and $1.5 billionfrom central banks. The central bank credits wereshort-term in character, and although they couldnormally be renewed there was inevitably someuncertainty. A funding operation would thu; relievethe pressure. For this reason, the United Kingdomdecided to draw the $1.4 billion stand-by creditfrom the Fund and use the proceeds to repay partof the central bank credits. It is significant that thiswithdrawal occurred immediately after the drawingfrom the Fund of $745 million2 by France in June1968 in face of pressures against the franc. Thecombined result of the two drawings has been todeplete further the resources of the Fund. Evenbefore these massive drawings, only about $3 billion(other than the dollar and the sterling) of theFund's holdings of currencies totalling $18 billionwere available for lending. The drawings thus necessitated activation of the General Agreement toBorrow as well as sales of gold from the Fund
2 Subsequently, a further drawing. of $140 million wasmade by France.
to obtain the needed currencies. At the same time,the Fund's holdings of currencies readily availablefor lending have been further reduced.
A far greater repayment problem for the UnitedKingdom than the central bank credits stems fromthe almost $12 billion of sterling balances. Therehave been indications that a part of the balanceshas become volatile, especially after the devaluationof sterling. Thus a number of countries with sterlingbalances have diversified their holdings by converting sterling into gold or other currencies. In the caseof Hong Kong, agreement has been reached to givea limited exchange guarantee on the value of theLondon balances. While such a guarantee mightprovide an incentive for keeping sterling balances,it could also establish a precedent. To some extent,the problem of the sterling balances had been recognized by the Basel arrangements; part of thatcredit was explicitly granted for the purpose ofoffsetting fluctuations in sterling balances. In February 1968, a $1 billion credit was again made forthat purpose; this was for a year as contrastedwith three months normally applicable to swapfacilities made earlier. Discussions are currentlyunder way for a possible broadening of fundingarrangements, the desirability of which has beenrecognized by a number of central bankers inEurope.
In the case of the United States, central bankswap arrangements rose markedly from about $700million in 1962 to over $7 billion in March 1968(table 6). During this period the duration of thesearrangements had been extended from the usual
Table 6. United States: amount of swap arrangements under Federal Reserve reciprocal currencyagreements, 1962-196Sa
(Millions of dollars)
Institution
Austrian National Bank .National Bank of Belgium .Bank of Canada .National Bank of DenmarkBank of EnglandBank of FranceGerman Federal Bank ..Bank of ItalyBank of JapanBank of MexicoNetherlands BankBank of Norway .Bank of Sweden .Swiss National Bank .. , .Bank for International Settlements:
Swiss francs/dollars .Authorized European currencies/dollars
Total .
1962
50250
505050
50
100
100
700
1963
5050
250
500100150150
50
50100
100
1,550
1964
5050
250
500100250250150
100
50150
150
2,050
1965
50100250
750100250450250
100
50150
300
2,800
1966
100150500
1,350100400600450
150
100200
200200
4,500
1967
100150500100
1,350100400600450130150100100250
250300
5,030
19M!
100225750100
1,500100750750750130225100200400
400600
7,080
Sottrce: Centre for Development Planning, Projectionsand Policies of the United Nations Secretariat, based onBoard of Governors of the Federal Reserve System, FederalReserve Bulletin, various issues.
12
a Data refer to 31 August of year stated except for15 September for 1966 and 8 March for 1968. '
three to six months to as long as a year in somecases. At the same time, the United States hadreinforced this swap network with longer termtreasury issues of special certificates and bondsdenominated in the European currencies (table 7).
Impact of sterling devaluation
The expressions of international co-operationcalled forth by the recent monetary crisis were notlimited to the extension of credit facilities andthe reform of the world's monetary system. Theywere also evident in the reaction to sterling devaluation.
The fundamental problems of sterling had longbeen in evidence. One of the reasons why devaluation had been resisted was apprehension aboutpossible adverse international reaction. Since sterlingremained a major trading and reserve currency ofthe world, there was uncertainty as to whether thebeneficial impact on the external position ofthe United Kingdom might not be offset by competitive devaluation in other countries. There wasalso fear that the forces unleashed by widespreaddevaluation might be unsettling in their impact onthe world economy as a whole.
The reaction of the nations of the world boretestimony to a high sense of concern for the stabilityof the international monetary system. Unlike afterthe devaluation of 1949, none of the major industrialcountries followed suit in 1967 (table 8). Thosewhich did devalue were on the whole smaller countries, accounting for about 6 per cent of world trade(table 9). This reflects the general consensus thatexchange rates of sterling had been out of line.But it also reflects some international harmonizationof policies. Indeed, had not the United Kingdombeen reasonably sure of the reaction pattern of other
major countries, the magnitude of the devaluationmight have been closer to the 1949 figure of 30.Sper cent rather than the 14.3 per cent that was infact adopted. \'Vhen account is taken of the differingadjustments made by other countries, the "effectiverates" of the two devaluations were in fact remarkably close (table 8).3
The non-sterling countries which devalued in thewake of the United Kingdom were Denmark, Israeland Spain (not counting countries such as Brazil,whose action was not attributable to the Britishmove). In all these countries the decisions wereinfluenced by payments problems encountered priorto the sterling devaluation. Furthermore, althoughthe share of trade of these countries with the UnitedKingdom ranged from about a tenth to nearly aquarter, the United Kingdom was more importantto these countries (except in the case of Israel) asan export market than as a source of imports(table 10).
The decision for Israel was, in fact, a difficultone. Devaluation was chosen in spite of an oppositerecommendation by an economic study group. It islikely that the prospects of gains of Israeli exportsin other markets weighed more in the decision thanthe avoidance of losses in the United Kingdommarket. Moreover, devaluation as an export assistance spared the Government from the need to offerto exporters financial assistance, and was thus moreacceptable from the budgetary point of view. It wasalso in line with the reflationary policy recentlyadopted by Israel.
\Vhether to follow the lead of the United Kingdomwas a choice open to the sterling countries also.
3 For a comparison of the effective rates of the two devaluations, see International Moneta'ry Fund, InternationalFinancial Statistics, January 1968.
Table 7. United States: utilization of selected credit facilities, 1962-1968(Millions of dollars eqttivalent)
United Statesdrawing TTa:fTSacticns by Federal Reserr/c Syste''''' United States
of fm'eign under Tedprocal currenc::y a1Tangcments treaSt/1'Y
Year currencies securities-from the Dro'l.f.J-- RePay· Net Net out- foreign cur-
l11 ternational ings ments drawIngs standing rency sen:esMonetary amount o'ut~
Pund standing a
1962 ......... 421 191 230 230 2991963 768 614 154 384 7601964 ......... 525 475 564 -89 295 1,0861965 ......... 435 690 850 -160 135 1,2081966 .. , ...... 680 710 565 145 280 8601967 . . . . . . . . . 1,278 1,791 1,2001968b . . . . . . . . . 200 -1,234 557 1,490
SOlwce: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on Board of Governors of theFederal Reserve System, Federal Reserve Bulletin. various issues.
a Amount outstanding as of 31 December of
13
year stated or 1 January of following year.N on-marketable United States treasury bondsand notes issued to official institutions payablein foreign cUHeneies.
b Up to 8 March 1968.
Table 8. Selected countries: effective depreciationor appreciation of currency as measured by thecountry distribution of exports and imports,average 1965-1966
(Percentage)
Table 8. Selected countries: effective depreciationor appreciation of currency as measured by thecountry distribution of exports and imports,average 1965-1966 (continued)
ElJective depreciationor appreciation
measured bydistribution of
Ct>1tntry group Total trade E:rPorts I mport.r
Source: Centre for Development Planning, Pr~jections
and Policies of the United Nations Secretariat, based onInternational Monetary Fund, Intemational Financial Statistics, June 1968, and table 8 above.
.. vVarld total trade excludes that of centrally plannedeconomies and Cuba.
b Devaluation took place in November 1967.
Countries that devaluedb 14.3 12.9 15.8United Kingdom .... 8.3 7.8 8.8All other countries that
devalued .. ' 6.0 5.1 7.0Sterling 2.9 2.7 3.1Non-sterling 3.1 2.4 3.9
Countries that did not devalue 85.7 87.1 84.2Sterling 8.3 8.1 8.4Non-sterling 77.4 79.0 75.8
100.0
Imports
-9.0-8.3
-6.1-9.5
-10.9-7.9
-10.2--':10.6
100.0
Effective depreciationor appreciation
meas'u,red bydistribu,tion of
E:rports
-9.8-6.2
-9.1-3.1
-13.8-4.8
-10.6-12.1
100.0
Devaluation
relativeto gold
-14.3--':14.3
-14.3-14.3-19.4-14.3-14.3-14.3
Share of exports and imports in world"by country group, average 1966-1967
(Percentage)
Group andcountry
JamaicaMalawi
Malta .Mauritius .New Zealand .Sierra Leone .Trinidad and TobagoUnited Kingdom .....
Table 9.trade,
World" .. ,
Source: Centre for Development Planning, Projectionsand Policies of the United Nations Secretariat, based onInternational Monetary Fund and International Bank hrReconstruction and Development, Direction of Trade (\Vashington, D.C.), annual issues for the years 1962-1966, andInternational Monetary Fund, International Financial Statistics, ] anuary 1968.
Note: Minus sign signifies depreciation. and no sign appreciation. Devaluation took place in November 1967.
This option reflected the informal nature of therelationship that prevails among the countries ofthe sterling area. It 1S significant that virtuallyall the major countries of the sterling area chosenot to devalue, although they were outnumberedby those that did.
A crucial factor in the decision of these countrieswas that the United Kingdom was not a majorexport market, although it was important as a sourceof supply for most of these countries. The main
1.20.90.72.51.8
1.31.2
4.41.84.51.84.9
2.62.63.75.02.4
3.34.6
Imports
5.25.93.2
-10.8-11.2-8.3
-10.7-14.3
-8.1-3.6-6.3-7.4
-7.3-3.8
-17.5-6.2
-4.8-10.2-11.3
2.11.4
E:rports
1.41.31.03.01.7
4.93.55.2
4.14.03.73.83.8
3.23.01.85.73.2
3.85.4
-10.4-13.3-6.5
-10.7-16.4
-7.9-2.1-7.4-6.1
-8.8-3.4
-21.9--4.1
-4.2-12.0-12.1
Devaluation
relativeto gold
-14.3-14.3-14.3-14.3-20.0
-14.3-8.9
-14.3-14.3
-14.3-5.7
-24.6-14.3
-7.9-14.3-14.3
Group andcountry
UgandaZambia
Sterling area countries thatdevalued
Aden .Bahamas .Barbados .Bermuda .Ceylon .
Cyprus .Fiji .Gambia .Gibraltar .
Guyana .Hong Kong .Iceland .Ireland .
Non-sterling area countriesthat devalued
Denmark .Israel .Spain .
Sterling area cottntries thatdid not devalue
Australia .Burma .Ghana .India .Kenya .
Kuwait .Libya .Malaysia .Nigeria .Pakistan .
Singapore .South Africa .United Republic of Tan-
zama .
Selected industrial countriesthat did not devalue
Canada .France .Germany (Federal Repub-
lic of) .Italy .Japan .Sweden .United States .
14
Table 10. Selected countries: share of exports to and imports from world,by group and country, average 1965-1966
(Percentage)
Share of exPorts to Share of imports from
GrouP andcountry
Selected industrial countries that didnot devalueCanada .France .Germany (Federal Republic of) ..Italy .Japan .Sweden .United States .
N on-sterling area countries thatde'valuedDenmark .Israel .Spain .
Sterling area countries that did notdevaltteAustralia .Burma .Ghana .India .Kenya .Kuwait .Libya .Malaysiab , ............••..•••Nigeria .Pakistan .Singaporeb ..............•.•.•••••
South Africa , .United Republic of Tanzania .Uganda .Zambia .
Sterling area countries that devalued"Aden , .Bahamas .Barbados .Bermuda ........................•Ceylon .Cyprus .Fiji .Gambia .Gibraltar .Guyana .Hong Kong .Iceland .Ireland .Jamaica .Malawi .Malta .Mauritius .New Zealand .Sierra Leone .Trinidad and Tobago .
United Kingdom .
UnitelfKingdom
5.812.14.63.94.72.4
13.05.9
18.622.912.112.1
20.416.4
6.022.717.621.517.417.2
8.337.412.517.533.428.317.634.7
33.521.6
6.043.823.625.432.942.248.057.123.313.718.569.926.954.430.378.545.064.715.0
Othercountries
thatdevalued'
6.22.45.77.15.26.7
12.16.3
4.64.57.23.6
7.411.419.73.07.15.85.64.74.33.1
11.017.25.3
10.98.21.8
4.75.51.3
11.01.15.6
12.38.6
15.33.69.81.54.62.96.30.43.61.5
10.9
17.0
Allcountries
thatdevalued
12.014.510.311.09.99.1
25.112.2
23.227.419.315.7
27.827.825.725.724.727.323.021.912.640.523.534.738.739.225.836.5
38.227.1
7.354.824.731.045.250.848.057.138.617.328.371.431.557.336.678.948.666.225.9
17.0
UnitedKingdom
5.86.85.04.44.72.1
15.06.8
13.516.619.29.2
21.125.610.027.110.131.216.015.121.430.815.017.127.731.837.321.2
25.411.49.3
30.312.817.232.421.552.842.531.810.313.651.223.135.438.225.836.930.716.7
Othercountries
thatdevalued'
4.52.23.14.82.82.48.96.2
1.81.51.32.2
3.44.02.53.91.42.43.03.17.03.01.8
11.62.74.63.80.9
3.84.22.45.22.72.56.6
10.8
2.613.7
1.39.13.25.12.73.52.65.87.93.7
16.6
Allcountries
thatdevalued
10.39.08.19.27.54.5
23.913.0
15.318.120.511.4
24.529.612.531.011.533.619.018.228.433.816.828.730.436.441.122.1
29.215.611.735.515.519.739.032.352.845.145.511.622.754.428.238.141.728.442.738.620.4-
16.6
Sotwce: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on International MonetaryFund and International Bank for Reconstructionand Development, Direction of Trade, annual
15
issues for the years 1962-1966.a All areas listed plus other British territories
and Faroe Islands.b 1966 only.C Excluding United Kingdom.
exceptions were India and South Africa. In the caseof India, devaluation had taken place as recentlyas 1966. For Ghana, a devaluation occurred earlierIn 1967. In the case of South Africa, the effectof its relatively heavy dependence on the UnitedKingdom market was lessened by the fact that itsmajor export, gold, had a ready world market. Atthe same time, a devaluation would have resultedin increased earnings of the export sector in termsof rands as well as higher costs for imports. Sucha development was to be avoided at a time whenthe domestic economy was buoyant and the paymentsposition strong.
In the case of Malaysia, in spite of the decliningprice of rubber and the British withdrawal frommilitary bases there, the balance of payments position remained strong. In addition, owing to theregional ties with Singapore and Brunei, a unilateraldecision would have disrupted the recently established system of interchangeability of national currencies among them.
Regional considerations were also present in thecase of the East African countries. Kenya, Ugandaand the United Republic of Tanzania made a common decision not to devalue, in the framework ofthe recent East Africa Treaty. The decision ofZambia not to devalue was apparently also influencedby the similar choice in neighbouring countries.
For several British territories such as Bermuda,British Honduras, Fiji, Gibraltar, Mauritius andSeychelles, the devaluation was apparently considered automatic. An important exception was HongKong, which followed devaluation to the full extentbut quickly revalued to reach a new rate only 5.7per cent below the pre-devaluation rate. The latitudepermitted in the case of Hong Kong illustratesfurther the great flexibility of the sterling area.The decision to revalue was apparently influencedby the very strong external position of the territoryas well as considerations of price stability.
Most of the independent sterling countries thatdid devalue were faJced with a difficult choice.Opinion was often divided as to the appropriatepolicy course. Yet the decision had to be madealmost instantaneously, as uncertainty would havecaused confusion in the market. Indeed, a majorfactor in the decision to devalue was the fear thatdoubts about the abilitv of the currency to maintainthe rate might trigge~ a flight of capital and anattack on the currency. Such a flight might havereached alarming proportions in a very short time,especially as the banking institutions of those countries were often closely linked with major financialcentres abroad.
IMPLICATIONS OF THE KENNEDY ROUND
The fact that the payments difficulties of recentyears have not, on the whole, led to the adoption
16
of defensive trade restrictions reflects in part thesuccess in dealing with the international financialcrisis. In part, it also reflects the momentum in tradeliberalization. Quantitative restrictions of trade wererejected as an instrument of payments policy notonly because they were in conflict with the provisions of the General Agreement on Tariffs andTrade but also because they could rarely be implemented within a short period of time for lack ofadministrative machinery. In addition, there wasapprehension that retaliatory measures might beadopted. As to tariff measures, the completion ofthe Kennedy Round negotiations in mid-1967 madetheir adoption very unattractive: the achievementsof four years of negotiations could hardly be lightlynullified.
The outcome was especially noteworthy in viewof the obstacles. In the first place, there was thequestion of the principle {)f linear cuts. Secondly,whether linearity was accepted or not, there wasthe question of equivalent concessions at differentlevels of tariff rates, and the size of the exceptionslist. Furthermore, it had become increasingly clearthat tariffs could not be isolated from non-tariffbarriers, including disguised subsidies, and methodsof customs valuation, which touched on importantareas of domestic policy and anti-dumping measures.The significance of a complex set of policies in thenegotiations was especially evident in the case of theEuropean Economic Community whose positiondepended in part on the progress of communityaffairs, such as the agreement on a common agricultural policy.
The actual negotiations demonstrated that linearcuts could not replace the traditional product-byproduct approach. Complex package deals had toserve the purpose of balancing mutual concessions.
Though the result of the negotiations was lessthan originally envisaged, it amounted to a furthermajor liberalization. In aggregative terms, averageduties would ultimately be cut by almost a third(those for industrial products by 38 per cent). Theparticipants together account for about 75 percentof total world trade, and the concessions wouldaffect trade valued at just over $40 billion. The maindeveloped countries conceded tariff reductions onabout 70 per cent of their dutiable imports (otherthan cereals, meat and dairy products). Two-thirdsof these imports would be affected by cuts of 50per cent or more, while almost one-fifth would be inthe range of 20-50 per cent tariff reduction. On afurther 15 per cent there would be cuts of less than20 per cent. Most of these tariff reductions wouldbe staged in accordance with either of the twoalternative procedures: (1) reductions in five equalannual instalments beginning from 1 January 1968and ending 1 January 1972; (2) a two-fifths reduction on 1 July 1968 and subsequent one-fifth
reductions on 1 January 1970, 1971 and 1972.Canada and the United States were among themajor trading countries to follow the first procedure,while the European Economic Community and theUnited Kingdom followed the second. An exceptionwas made in the case of some tropical products anda few other items on which full concession wouldbe made effective in one stage. For some of these,the entire duty reduction would become effective on1 January 1968.
'While the chief outcome of the Kennedy Roundnegotiations was undoubtedly this liberalization oftariffs, agreement was also reached in severalnon-tariff areas. The negotiation on cereals coveredinternational pricing policy as well as food aid andresulted in the subsequent International GrainsArrangement. Specific provisions were made to bringabout modification in such practices as the AmericanSelling Price system of valuation for certain importsof chemicals and the taxation of automobiles bycertains European countries. Anti-dumping ruleswere clarified to provide a clearer guide for implementation and to guard against abuses.
The significance of tariff reductions on such ascale can be assessed by a comparison with the rateof internal tariff cutting in the European EconomicCommunity and the European Free Trade Area(EFTA). A reduction of about 8 per cent per yearfor industrial products under the Kennedy Roundapproximates the 10 per cent rate achieved in thetwo regional groupings. The pace of tariff reductions in the five-year period after the KennedyRound was therefore comparable to that of the firstphase of EEC and EFTA. The one important difference was that the impact of the first would tendto stimulate trade among the developed countriesas a whole, while the regional grouping had theeffect of liberalizing intra-trade and at the sametime increasing the degree of discrimination againstnon-members. A consequence of the Kennedy Roundwas thus not only the expansion of world trade butalso the cushioning of the impact of discriminationof the regional groupings, which had progressivelyincreased as the final stages of integration werereached.
The removal of trade barriers and the implicitreduction in trade restriction by the continentalwestern European countries should in themselvesfacilitate the process of adjustment of the deficitcountries. Consideration has in fact been given foran acceleration of the tariff reduction on the part ofcontinental western European countries as a partialsolution to the balance of payments problems of theUnited States and, to some extent, also of the UnitedKingdom. In April 1968 the EEC proposed toadvance the one-fifth reduction scheduled for 1January 1970 by one year. Furthermore, the EECindicated that it would not oppose United States
17
postponement of the second instalment cut of onefifth from 1 January 1969 to 1 January 1970. It hasbeen estimated that this EEC acceleration of tariffcuts would be worth $80 million in trade termsand that the United States postponement wouldmean an additional $70 million benefit for theUnited States balance of payments in 1969. Thisconcession was conditional on the abolition by theCongress of the United States of the AmericanSelling Price valuation system for chemicals by theend of 1968 and on the assurance that no bordertax, export subsidies or other protectionist measureswould be enacted by the United States. Severalother countries have also indicated willingness toaccelerate the Kennedy Round reductions, subjectto certain conditions.
'While the conclusion of the Kennedy Round negotiations and current discussions of possible acceleration in the EEC have reaffirmed the broad trendtowards trade liberalization, the impact on thedeveloping countries is less certain. 'While the developing countries, without reciprocal concessions,would be able to benefit from tariff reductions negotiated primarily among the developed countries, theextent of this benefit is likely to be limited. Anexamination of the tariff profile indicates that therate of tariff reduction for a list of products ofinterest to developing countries was lower than thatfor the developed countries.4
A comparison of the treatment of products inwhich the developed countries dominate worldexports with other products confirms the heavyconcentration of tariff cuts for the former category.Moreover, non-tariff barriers remained the chiefobstacle to exports of many primary products. Fordomestically supported food-stuffs such as grains andsugar, the EEC variable levies and the correspondingagricultural support measures in the non-EEC countries remain high in terms of ad valorem tariffequivalents. It is still not clear to what extent theagreement on the grain prices and on food aid wouldaffect the conditions of market access for grains.A number of vegetable oils, apart from being subject to relatively high tariffs, continue to be affectedby non-tariff barriers. Cotton textiles remain subjectto quantitative restrictions under the Long-TermCotton Textile Agreement and tariff reductions ofthese products were contingent upon the renewalof the Long-Term Agreement.
It is evident that much remains to be done in thetrade relations between developed and developing
4 While the precise result might have been influenced byincompleteness of the sample as well as the degree of disaggregation, it is clear that the major concessions negotiatedaffect products not exported to any great extent by thedeveloping countries. See United Nations Conference onTrade and Development, "The Kennedy Round: preliminaryevaluation of results, with special reference to developingcountries" (TD/6 and TD/6/Supp.1-4). .
countries. A first step towards broadening thebenefits of the Kennedy Round to developing countries would be advance implementation of concessionsin favour of developing countries and reduction orelimination of tariffs on products of export interestto them. Although a number of developed countrieshave made some progress towards this goal, thepace has so far been slow.
TRENDS IN REGIONAL INTEGRATION
During 1967 a surge of interest in regional integration was evident around the world. This reflectsthe growing appreciation of the significant progressmade in a number of well-established regionalgroupings, such as the European Economic Community. It also reflects the awareness of problemsof development posed by relatively small States.In many parts of Africa, for example, the politicaland economic fragmentation concomitant with theachievement of independence, is most evident. Thecombined domestic product of thirty-nine developing independent African States (excluding SouthAfrica) is equivalent to less than two-thirds of thatof Italy. Six African States have populations ofless than 1 million each and another twentyhave less than 5 million inhabitants. The very smallsize of the typical national markets constitutes anobstacle to the formulation of an effective strategyfor development. The diseconomies resulting fromindustries of small size or limited potentialities havealready caused concern; duplicate facilities in neighbouring countries competing for small markets haveemphasized the need for some kind of regional cooperation.
While the increasing interest in regional integration was accompanied by a general movementtowards that goal, the pace of progress was unevenand the objectives and forms of the regional groupings were varied. In some cases, the conditions formeaningful integration were totally lacking as anatmosphere of antipathy or even hostility prevailed.In others the traditional and ethnic ties or similarities in outlook formed a basis for closer co-operation.However, there was also some appreciation ofregional grouping as a vehicle for removing deeprooted conflict or rivalry, a possibility of whichthe European Economic Community has given anotable demonstration.
Nor did the increasing trend towards regionalgrouping always have the same effect on neighbouring countries. In 1967 the United Kingdom Government, which had reversed its earlier stand, soughtentry again into the European Economic Community. While this move in turn stimulated a similarone among the members of the European Free TradeArea, the position of EEC members continued tobe divided and little progress was made towards the
18
merger of the two groups in Europe. In Africa,progress in the East African Common Market hadinduced many countries to apply for membership.
The diversity of conditions in the various regionsgave rise to a variety of regional groupings, rangingfrom full-fledged common markets, through freetrade areas to looser forms of co-operation (seetable 47 in the annex). This is especially the casewith the recent proliferation of regional groupingsamong the developing countries. Some of the characteristics and the problems posed are examined below.
Africa
vVhile subregional groupings in Africa were alegacy of the colonial period, the new groupingswere not to be limited to either the former Britishor French territories. Three meetings were held,one in May 1967 at Accra, another at Dakar inDecember 1967 and the other in Monrovia in April1968, in an attempt to bring into closer economicco-operation, perhaps through a common market orcustoms union, the various English-speaking andFrench-speaking West African countries. The extentto which the conferences could lead to concreteaction would depend on how some of the difficultiescould be solved. A major difficulty involved in theformation of a West African Economic Communityis the reluctance of the French-speaking AfricanStates to abandon the preferential trading arrangements they have with the industrial countries ofthe EEC. 'Moreover, the terms of association of theseFrench-speaking West African States with the EECtend to inhibit preferential treatment of commercebetween franc-zone States on the one hand andsterling and dollar neighbours on the other.
In Central Africa, the subregional meeting ofGovernments held in 1966 endorsed the principleof subregional co-operation. Thus far, however, noconcrete action has been taken to establish linksbetween the existing Central African Economic andCustoms Union (UDEAC), a closely knit tradinggroup established in 1966 on the basis of preindependence relationships, and the Democratic Republic of the Congo, the only subregional countryoutside the UDEAC.
The East African Common Market, embracingKenya, Uganda and the United Republic of Tanzania, provides a barely viable basis for manybranches of industry. For this reason, there appearsto be a real possibility for its enlargement to includea number of the neighbouring countries, such asEthiopia, Malawi, Somalia and Zambia, which alsoneed to associate with the Common Market in orderto break out of their own economic isolation andthe constriction of their economic progress causedby their small size.
In North Africa, the four Maghreb countrieswhich had established in 1964 a system of joint institutions with a view to the co-ordination of theirdevelopment-agreed in 1966 with the Sudan andthe United Arab Republic to explore jointly thepossibilities for extending co-operation withinthe framework of the Maghreb institutions to allsix countries of the subregion.
Another difficulty common to many regionalgroupings was the tendency for the benefits ofintegration to concentrate on the more developedmembers of the group. The relatively advanced stageof industrialization of Kenya in East Africa was asource of uneasiness on the part of Uganda andUnited Republic of Tanzania, and at one time quotarestrictions were imposed by them on imports fromKenya. A solution was finally arrived at by meansof a "transfer tax" under the Treaty of East AfricanCo-operation. This provision permitted less industrialized members to impose a tax on their intraCommon Market imports of manufactures undernarrowly defined conditions and for a limited period.The tax can be imposed only by countries with anover-all deficit in their intra-Common Market tradein manufactures, namely, Uganda and the UnitedRepublic of Tanzania. Furthermore, it can be imposed only on imports from the partner countrywith which the importing country has a deficit.
Besides the transfer tax, the Treaty contains otherprovisions intended to redress the industrial imbalance prevailing among the three member countries.The new jointly financed Development Bank is togive priority in its lending operations to Ugandaand the United Republic of Tanzania. In addition,the corporations that administer the common services of the three countries, chiefly railworks, harbours and communications services, are required togive priority in their own investment programmesto projects in Uganda and the United Republic ofTanzania.
Similar problems of industrial imbalance havearisen in the Central African Economic and CustomsUnion, signed in 1966, and in the West AfricanEconomic and Customs Union (UDEAO), alsosigned in 1966. The Central African EconomicUnion (UEAC), established in April 1968, is basedon "equal sharing of benefits", and whether it willin fact be implemented will almost certainly dependon whether this principle can be given practicaleffect.
This concern for equitable sharing of benefits hasdrawn attention to harmonization of developmentpolicies in some African regional groupings. TheUDEAC Treaty provides specifically for the harmonization of national development plans as anessential part of the integration programme. So doesthe Organization of Senegal River States (OERS),
19
newly established in March 1968. Finally, theMaghreb institutions aim primarily at the co-ordination of development plans and programmes, whilegeneral trade liberalization is not envisaged for thetime being.
Asia
In southern and south-eastern Asia, regional cooperation has been hampered by political difficulties,although the need for closer integration has beenincreasingly felt.
The Association for South-East Asia, inauguratedbetween Malaysia, the Philippines and Thailand asearly as 1961 for the purpose of promoting economicand cultural co-operation, had been suspended forseveral years. In 1967 it was revived as the Association of South-East Asian Nations, consisting ofIndonesia, Malaysia, Philippines, Singapore andThailand. Its activities are spread over economic,social, cultural, scientific and administrative fields,with emphasis mainly on trade liberalization in whichinitial exploration of the possibility of a free tradezone is being undertaken.
Though its full potential has yet to be tested, theAssociation of South-East Asian Nations is facedwith the problems of a limited variety of exports,non-convertible currency and lack of a common language. All the member countries export roughlythe same commodities-tin, rubber, rice and timber.Less than 21 per cent of the member nations' tradeis with one another, and their economies are competitive rather than complementary. These factors,together with the free-port tradition of Singapore,cast shadows over prospects for a customs union.
In West Asia, a common cultural and linguistictradition has long favoured an Arab CommonMarket. Recent events have tended to reinforce thecommon interest and objectives. At a meeting inDecember 1967, the Arab Economic Unity Councildecided to reduce customs tariffs among membersto 80 per cent on agricultural products and to 40per cent on industrial products. The meeting alsoreviewed final measures for the implementation ofa unified identity card system for nationals of member States (to induce free movement of labouramong member countries).
Trade agreements concluded in 1967 between Iraqand Syria, and Iraq and Jordan (three members ofthe Arab Economic Unity Council) provide for theelimination of customs duties among these countries.These countries have also agreed to work out andcomplete the unification of their tariffs vis-a.-vis theoutside world and to intensify trade among themselves, trade barriers between Iraq and the UnitedArab Republic having already been removed. Thefree trade agreement between Iraq and Syria provides for the establishment of a joint permanent
organization to co-ordinate foreign trade, customs,financial and monetary policies, development planning and industrialization with the aim of achievingthe economic integration of the two countries. Following upon closer trade relations with the UnitedArab Republic, Syria and Jordan, Iraq has concluded an agreement with Kuwait to facilitate themovement of goods. Kuwait will give financial aidto Iraq for a paper mill or a power station. Thepossibility of establishing joint industrial projects-steel mills, petrochemical plant-is being considered.
Latin America
Latin American integration was given a furtherimpetus in 1967 when the Presidents of the American Republics agreed on a plan of action for theeconomic and social development of Latin America,including the creation of a Latin American CommonMarket, scheduled to commence in 1970 and to besubstantially in operation by 1985. This goes beyondthe existing groupings, namely, the Latin AmericanFree Trade Association (LAFTA), established bythe Montevideo Treaty of 1960, and the CentralAmerican Common Market (CACM), created bythe Managua Treaty in the same year.
Progress towards an all-embracing Latin AmericanCommon Market would depend on the progressiveconvergence of the existing groups and other LatinAmerican States. Thus far, the pace of integrationof LAFTA towards regional economic integrationis less rapid than that of CACM. Since 1961 therehave been six rounds of negotiations within LAFTAand concessions have been granted on some 9,000items that are traded within the region. About 80 percent of these concessions were granted in the firstfew years of LAFTA and few have been made onmanufactured goods which were conceived to be thebasis for a dynamic regional industrial development.The concessions involved are those on raw andsemi-processed materials that have traditionally comprised the bulk of Latin American intra-regionaltrade. Since the formation of LAFTA in the early
20
1960's, the intra-regional trade of this group ofcountries has regained the proportion of fifteen yearsago but has not increased beyond that.
On the other hand, the progress achieved byCACM from its inception in 1961 has been encouraging. More than 95 per cent of the tariff items havebeen freed, though it should be pointed out that tradein such important products as coffee, cotton and sugar-representing 20 per cent of the group's total trade-have not yet been liberalized.
The long gestation period for the attainment ofthe goals of a Latin American Common Market andthe many intermediate steps contemplated in the Action Programme are a recognition of the formidableobstacles that remain in the way of integration ofthe region. Trade among the Latin American Statesremains meagre. It accounts for only 10 per centof the total foreign trade-most of primary products-of those countries. The greatest share of the tradeis accounted for by three countries-Argentina,Brazil and Venezuela. In view of the long distancesbetween countries in this region and geographicalbarriers to land transport, sea transport remains thedominant factor in the foreign trade of these counties. Moreover, the lack of diversification which ischaracteristic of the economies of Latin America,has led, especially in agriculture, to several countriesconcentrating on the same product, such as coffeeand meat-a poor basis for intra-regional trade.Chronic monetary instability and steep inflation havealso inhibited intra-regional trade and co-operationand may upset the balance of benefits that these countries expect to gain by regional economic co-operation.
A Caribbean Free Trade Area was formed in mid1968 with a view to evolving into a customs union,partly in recognition of the role of subregionalgroups in the move towards broader integration.A joint Caribbean Development Bank has also beenestablished. Several major countries of the regionwere, however, conspicuously absent from the group.
Chapter
PROGRESS IN ECONOMIC REFORMS IN THE SOVIET UNION
AND EASTERN EUROPE
The year 1967 and the early months of 1968 saw acontinuation of the changes in the methods of planning and management initiated earlier in the Unionof Soviet Socialist Republics and other socialist countries of eastern Europe. In some of those countries-Bulgaria, Eastern Germany and the Soviet Union-these changes have been under way for some years,and further changes were introduced and additionalbranches of the economy were covered. In Polandthe efforts for improving the efficacy of economicplanning and management continued, while in Romania a set of measures for improving the management and planning of the national economy was approved at the end of 1967. In Czechoslovakia, a morecomprehensive reform in methods of planning andmanagement was implemented at the beginning of1967, while in Hungary the implementation of themajor principles of a new system of managementwas begun in January 1968.1
It is now widely recognized that both the theoretical ideas that provide the justification for theeconomic reforms currently under way in the centrally planned economies in Europe and the practicalexperience with these reforms are of major importance to the future development of the countriesconcerned.
THE CONCEPTUAL BACKGROUND
The discussions that have been taking place inrecent years among economists in eastern Europe andthe USSR have subjected the ,strictly centralizedsystem used previously to critical scrutiny. It hasbeen pointed out that the central organization of production and the strict distribution of the bulk of theoutput have served the Soviet Union well, raising
1 For discussions of the eaJrlier phases of these economicreforms see World Economic SurveY,1964, Part Two: C~wrent Economic Developments (United Nations publication,Sales No.: 6SJI.C.2), chapter 4; World Economic SU1~Jey,1965, Part Two: Current Economic Developments (UnitedNations publication, Sales No.: 66.II.C.2), page 18; WorldEconomic Survey, 1966 Part One: Implementation of Development Plans: Probl~ms and Experience (United Nationspublication, E/4363/Rev.l-ST/ECA/99), section B; WorldEconomic Survey, 1966, Part Two: Current Economic Developmeltts (United Nations publication, E/4396/Rev.1-ST/ECA/lOO), pages 41-44.
21
it to a major industrial Power.2 With the growth inwealth and the increase in complexity of the economy,earlier methods of planning and management havebecome less appropriate. It has become necessaryto evolve economic management techniques that arebetter suited to the greater size and diversity in output, able to cope more effectively with the acceleration in technological progress and adapt the production process more rapidly to the needs of the morecomplicated and changeable market.
Similar needs have been felt in the eastern European countries. New planning methods have beensought in order to improve the over-all efficiencyof economic performance and to make productionmore responsive to changes in demand emanatingfrom both domestic and foreign sources. The earlysystem of planning and management were provingtoo rigid.
Among the common features of the current reforms are efforts to improve both the scientific basisand the methodology of national planning and to increase the use of electronic computers for achievingplan optimization. These efforts will reduce what hasbeen called "voluntaristic planning"-that is,planning which does not take real possibilities adequately into account-thereby improving the realismand effectiveness of national plans. In this connexion, all countries assign a major role to mediumterm (mostly five-year) plans, which are fastbecoming the most important component in theplanning system.
Another common feature is the increase in theauthority of individual enterprises and associationsof enterprises in both the planning of developmentand the decision-making process. This has been accompanied by a continuous decline in the numberof centrally determined targets. The range of products subject to rigid central allocation is being reduced substantially, while direct contractual deliveryrelationships among trading partners are allowed toexpand.
2 For a recent discussion of the evolution of central planning in the Soviet Union, see L. Pekarskiy, V. Tabelev andB. Tsvetkov, "Sovershenstvovanie upravlenia i planirovaniav usloviyakh ekonomicheskoy reformy" (Improving management and planning under the economic reform), VoprosyEkonomiki, No. 11, 1967 (Moscow).
As a corollary to this, there has been an enlargement of the degree of financial independence as wellas of the responsibilities of individual enterprises.Both the current expenditures and the investmentoutlays of enterprises are now more strictly tied totheir earnings. As a result of assigning a greater roleto enterprise funds and bank credits in investmentfinancing, a direct incentive is provided for enterprises to achieve greater economy in capital spendingas well as better utilization of existing fixed assets.This tendency is further strengthened by a tax onemployed capital which has been imposed in mostof the countries. The emphasis of these reforms ison influencing the behaviour of enterprises andemployees towards raising economic efficiency andimproving over-all economic performance. The general aim is to link the financial activities of enterprises more closely with their own profit. In mostcountries, in addition to the regular wage fund, apremium fund has also been set up to provide asystem of rewards as a further inducement to higherefficiency on the part of managers and employees.As a result of the stress placed on the financial interest and responsibility of enterprises, financial toolssuch as prices, taxes, credit and interest are assuming increasing importance as instruments of economicplanning and management.
In addition to these common features, certaindistinctive characteristics in both theoretical outlookand practical measures are beginning to emergeamong the eastern European countries. While it istoo early to say if these differences will result inseveral distinct models of economic development,present evidence indicates the emergence of at leasttwo different approaches. Broadly speaking, one ofthem relies primarily on directive planning of theeconomy from the centre, improving and supplementing it by an extensive range of measures, includingthose summarized above as common features of thereforms. The other method departs from the principleof implementing national plans through administrative orders passed on to individual enterprises bycentral organs, and in its place assigns primacy toindirect methods of government intervention throughthe use of various instruments of financial and fiscalpolicy designed to induce planned development.
The differences between the two models reflectdifferent approaches to the role of the market in a,socialist economy. By and large, the advocates of themore decentralized model consider the influencesemanating from the market as decisive for the determination of the volume and composition of output ofenterprises, making directive targets prescribed forenterprises in the central plan superfluous. In thisview, the continuous impact on enterprises of theinfluence of the normally functioning market constitutes the most effective means of bringing aboutthe complete fulfilment of the needs of the national
22
economy as well as of ensuring the most efficientperformance of all enterprises. At the same time,this approach accepts the legitimacy and desirabilityof government intervention in the market throughfinancial and investment policy measures in order toinfluence the development of the economy in theplanned direction. Thus, the purpose of the nationalplan would be to lay down the broad direction inwhich the economy is expected to advance and toserve as a directive to central economic organs andthose in charge of government economic policy. It isthis kind of economic model which, in principle,has been accepted as the basis of the latest economicreforms in Czechoslovakia. Basically, the same modelunderlies the reforms instituted in Hungary at thebeginning of 1968, though the nature and extentof the economic tools used would be different, andwould probably involve a higher degree of centralregulation.3
The other, more centralized, economic model isbased on the assumption that the composition of output and its growth must be centrally determined bymeans of a system of balance-sheets and efficiencycalculations. The output directives, together with alimited number of other important indexes, arepassed on to individual enterprises in the form ofobligatory plan targets. Within this central direction,it is intended to introduce measures to increase therights, responsibilities and material interests of individual enterprises. All enterprises would operatewithin the frame provided by the plan and the incentives would be linked with the fulfilment of theplanned targets.
Some advocates of this model minimize the roleof the market in the development of the socialisteconomy, seeing a contradiction between the imperativesof central planning and the tendencies of thefully functioning market. For instance, some EasternGerman economists have argued that the sheer complexity of modern technology and production makessuch a contradiction inevitable and that the marketeconomy with full autonomy of enterprises is outdated.4 Another contradiction is pointed out by aPolish author who argues that the unrestrained useof the market mechanism would focus the attentionof producers on consumers in the high-incomebrackets to the detriment of the basic needs of thepeople. He explains that
"the employment of the market mechanism in therunning of factories means in practice a changein the aim of production, at least on the factory
3 "The characteristic of the Hungarian reform is that themarket, controlled with the help of the central plan, has arelatively bigger 'role, and the task of the enterprises is aflexible satisfaction of the demands of would-be buyers onthe market." See Dr. J. Wilcsek, "Reforms of the economicmechanism in the socialist countries," Magyar N emzet(Budapest), 3 March 1968.
4 See Neues Deutschland (Berlin), 18 May 1968, p. 13.
level. The direct motivation is no longer the supply of mass needs, it is the consideration of howmuch profit the factory will make by supplyingthose needs."5
The concept of profit as the main criterion of efficiency of enterprises and the right of enterprisesto decide the disposition of their net profits arecharacterized by the Soviet economist S. Strumilin,as "ignoring the dialectics of social accumulationand consumption".6
Other commentators on the reforms accept the positive influence of the market on economic development but stress its secondary role. Thus, in theirreview of the process of economic reform, £ovieteconomists Pekarskiy, Tabelev and Tsvetkov state:
"While maintaining centralized planning, it became necessary to take fuller account of the actionof the market mechanism. This mechanismstrengthens the influence of the consumer on theproducer and performs the function of controllinga correspondence between the production of outputand national economic needs: this means that itserves as an effective means for increasing theefficiency of social production.
"A fundamental difference between the socialistmarket and the capitalist market consists in thefact that monetary relations in the former arebased not on private but on public ownership ofthe means of production. It is this which makes itpossible to develop them not in a spontaneous waybut under the 'controlling influence of the plan.Consequently, at their basis, market relations arecapable of being controlled under socialism. Theold reform of such categories as price, profit andcredit are filled with new social and economiccontent. Money exchange relations like alleconomic relations under socialism, reflect thecommunity of interests between each producer andthe entire people".7
The discussion regarding the concepts and modelsmost appropriate for each economy is still continuingvigorously in all the countries of eastern Europe.The economic reforms at present under way do notfall neatly into the two categories discussed abovefor purposes of exposition. Most of them embodyelements of both approaches, adapted in each caseto the particular iStructure of the economy concerned.
SALIENT FEATURES OF RECENT ECONOMIC REFORMS
Economic changes of a far-reaching nature, including a radical price reform, were introduced in
5 Mieczyslaw Krajewski, "Demokracja socjalistyczna a'socjalizm rynkowy'" (Socialist democracy and market socialism), Trj!buna Ludu (Warsaw), 29 March 1968.
6 Academician S. Strumilin, "An acute question" J(011t
somolskaia Pravda (Moscow), 16 February 1968, p. '2.7 L. Pekarskiy, V. Tabelev and B. Tsvetkov, "Improving
management and planning under the economic reform"Voprosy Ekon01l1iki, No. 11, 1967. '
23
Czechoslovakia at the beginning of 1967. The newincentives succeeded in raising the rate of growth ofindustrial. output much above the planned level,largely as the result of increased labour productivity.Other components of production costs, especiallymaterial costs, declined substantially. On the otherhand, the high rate of inventory accumulation provided evidence of the inability of enterprises to adaptthe assortment, quality and technical level of theirproducts to the consumers' requirements. Theeconomy has not yet become fully responsive to thepressures and influences radiating from the marketmechanism and this has been a matter of continuingconcern to economists studying the first phase ofthis experiment.
It is believed that a major cause of this insufficient responsiveness lay in the imperfections of theprice reforms. Because of shortcomings in thegroundwork for the preparatory stage of the reformand because enterprises tended to exaggerate theircosts submitted for the computation of the new prices,the profits of enterprises after the price reform exceeded their anticipated levels. This provided littleincentive for restraint on enterprise spending andcontributed to inflationary demand-supply imbalances.The authorities responded by setting limits on wageoutlays, introducing restrictive clauses in the provision of investment credits and adopting measuresrestraining the start of new projects. These antiinflationary measures inhibited the proper functioning of the new system and eventually resulted incertain restrictions on the rights of enterprises proclaimed in the reform. The inflationary situationmade it difficult to achieve planned improvementsin the demand-supply relationships aimed atstrengthening the influence of buyers on the production process.
One of the principal features of the Czechoslovakreform was a uniform rate of tax, especially on employed capital and on the gross income of industrialenterprises. However, the chief purpose of this reform-namely, the establishment of uniform andobjective measures of the efficiency of enterpriseswas not attained. Existing price relationships, differences in the level of technical equipment and otherconditions beyond the control of individual enterprises, made it necessary to "individualize" tax obligations indirectly by a system of subsidies and additional payments set for individual enterprises. Thetemporary character of these exemptions wasstressed, and lagging enterprises were exhorted toincrease their efficiency in a specified period of timeor face the prospect of eventual liquidation. The scaleof the exemptions that were granted has beencriticized by some economists on the ground that itlowered the effectiveness of the reforms by continuing the practice of higher taxation of more efficient enterprises and lower taxation of poor per-
formers. The planning authorities, however, claimedthat the subsidies were necessary concessions in thetransitional period.
The abolition of direct targets for enterprises inthe national plan was not fully reflected in increasedindependence of individual concerns. because theassociations in which enterprises are grouped oftenimposed targets and interfered in the activities oftheir constituents. Some of the interference by central organs in the activities of enterprises was doubtless made necessary by the persistent imbalances inthe structure of clemand and supply as well as bybottle-necks in eiisential imports. The lack of experience of managers at all levels in their essentiallynew role of socialist entrepreneurs was an additionalfactor slowing down the full implementation of thenew system. Most of the difficulties seem to havebeen prohlems typical of transition, when shortcomings of both the old system and the new combinedand reinforced one another.
Progress in the implementation of the Czechoslovak reform received a new impetus at the beginning of 1968, as part of the economic policy of thenew Government. The drive to increase the efficiencyof the production process is continuing, and thenecessity of weeding out inefficiency by the gradualelimination of subsidies has been explicitly recognized. Further reform of the price system is alsoconsidered to be an essential requirement for theproper functioning of the new system. The pricesreconstructed in 1967 in accordance with the newsystem of taxes, but without regard to the market,are to be adapted to the requirements of demandsupply relationships of individual commodities. TheGovernment has indicated its intention to take stepsto establish a proper relationship between domesticwholesale prices and domestic retail prices on theone hand and foreign prices on the other, therebystrengthening the influence of the market on the production process. The Government hopes to establishfree convertibility of the Czechoslovak crown in fiveto seven years.
Most Czechoslovak economists recognize the competitive process as a powerful stimulus to improvement and innovation in production. In encouragingcompetition, a distinction is drawn between monopolies resulting from the concentration of production made necessary by economic or technologicalfacts and monopoly created administratively by subordination of individual enterprises in the sameindustrial branch to an association. The latter isbelieved to be an obstacle impeding the initiativeof individual enterprises in competition with othersin the same line of production. According to thisview, CBmpetition should be induced wherever theorganizational structure of production makes it possible, as in light industry, services and trade.
24
Similarly, actual or potential competition from foreign-made products, on both the domestic and worldmarkets, should be encouraged as a dynamic supplement to the competition of domestic producers. It isrecognized, however, that the revival of the marketmakes it necessary to create or strengthen the legalprotection of the consumers against the possibility ofundesirable or harmful practices on the part ofproducers.
If these views are acted on, the role of the individual enterprise in the economy will tend to increase in importance. According to the prevailingview, the enterprise should be entirely independentof the ministries or other administrative organs,subject only to the accepted restraints of legal provisions and regulations. The enterprise would have fullresponsibility not only for the discharge of its dayto-day activities but also for long-term developments,including investments. These powers would be vestedin each case in an "enterprise committee" newlycreated as the highest organ in the enterprise, takingdecisions on the most important problems concerningthe development of the enterprise, including the appointment of directors. Opinions differ regarding thecomposition of these enterprise committees. Someeconomists stress the independence of enterprisesand feel that most of the committee members shouldbe elected by the employees while others would prefera more important representation of organs outsidethe enterprise-banks, central organs, research institutes and consumers, for example. As far as theassociations of enterprises are concerned, the individual enterprise would have the right to decidewhether to become a member or not. The enterprisesthemselves might create different kinds of associations or common undertakings whenever the needarose.
While the new system of management in Hungarywas officially inaugurated on 1 January 1968, certainplanning and management reforms were made in1%7. There was a reduction in obligatory targetsprescribed in the plan, the investment system wassimplified, the wage system and employment policywere made more flexible, their incentive characterincreased, and a new system of service contractswas introduced. These and other measures increasedthe independence of individual economic units, andset the stage for the reforms introduced in January1968.
In the new system, the fulfilment of the plan willnot be regulated by obligatory targets set at thecentre, but by the use of indirect methods or "economic regulators". Within the framework and conditions set by central authorities, enterprises will beallowed to prepare their own plans, without any central direction regarding form and content.
The central distribution of commodities has, ingeneral, been abolished. Material balances no longer
play an operative administrative role in the commodity circulation. Since the beginning of 1968, salesof most commodities have taken place as the result ofdirect negotiations between producers, the wholesaleand foreign trade enterprises and consumers. Insome exceptional cases, however-where there wereabnormal shortages in the market, for example, orbecause of balance of payments problems-the system of central allocation has been retained.
A price reform has been introduced whose mainpurposes are to bring prices and costs closer together,to make prices reflect more accurately the marketforces of demand and supply (in harmony with therequirements of economic policy expressed througheconomic regulations) and to bring the domesticprice relationships closer to those on world markets.The effect will he a more flexible price control. Priceswill be fixed centrally only for the most importantbasic materials and consumer goods. The movementof the prices of other commodities will be eithergoverned by official regulations-through pricechange limits, for example-or entirely free. In1968, according to some estimates, the system offree prices will cover about 28 per cent of the outputin raw material industries, 85 per cent in manufacturing industries and 23 per cent in consumer goodsindustries (including services). There are, however,some temporary regulations limiting excessive priceincreases during the initial period.
In Hungary, as in other countries, the methodof distributing profits by enterprises has been oneof the most important objects of the reform. Individual enterprises had been allowed to use for theirown purposes only a small proportion of their profits;in 1968 they will be able to use, by their own decisions and for their own needs, up to four timesthe previous amount. This should increase the directinterest of enterprises in their own performance.
The remaining profit of the enterprise will beused according to central regulations for three purposes: development, additional remuneration of employees and as a reserve fund. There will be a flattax (60 per cent in 1968) on that part of profitthat goes to development; what is left will be putby the entrepreneurs into their development fund tobe used at their own discretion for investment forfixed or circulating capital. The development fundis also fed from amortization, of which the enterprise can retain an average of 60 per cent.
Enterprises are to be taxed progressively on thatpart of their profit which is devoted to raising personal income. The rates of taxation-ranging fromo to 70 per cent in 1968-have been fixed by theGovernment in proportion to wages. Sharp progression is considered necessary to avoid wide disparities in personal income arising from the favourable facilities of certain enterprises rather than from
25
superior performance of the staff. In spite of thisprogressive taxation, it is expected that some enterprises will be able to provide abnormal wage increases. Therefore, the Government introduced additional temporary regulations setting a ceiling forannual wage increases. Enterprises are to put thatpart of the profit left over after taxation into aseparate fund, called the shares fund. From thisthey may payout premiums, bonuses and otherawards-such as end-of-year profit shares and nonmonetary social benefits-and maintain their social,cultural and sporting institutions.
A part of the new enterprise income policy is theobligatory setting up of minimum reserves out ofboth development and share funds. Under the neweconomic system, the risks and responsibility ofenterprises will be greater and so will be the chancesfor temporary imbalances. State subsidies on production in certain fields, particularly in mining, synthetic material industries and in the agriculturalmachinery industry, have been made necessary bythe existing production and marketing conditions.
The new Hungarian system has reduced the proportion of investments that are centrally planned andfinanced from the state budget, and expanded theproportion financed directly from the developmentfund of enterprises or by means of bank credit. However, the share of the centrally planned investmentis considered to be one of the most important toolsof the Government in guiding long-term economicdevelopment, and will exceed 50 per cent of totalindustrial investment in 1968. The volume of investment credits is determined by the plan in accordancewith the investment requirements of the main sectorsand of certain special branches. It is presumed thatdemand for credit will exceed its availability: it isto be granted according to the rule of competitivebidding on the basis of efficiency criteria. An innovation in the credit system is the effort of the Government to induce the enterprises to deposit theirtemporary surpluses in the bank.
The system of central limits and regulations inprice, income and investment policy adopted for theinitial year of the reform, as well as the limits placedon enterprise funds, indicates the cautious approachof Hungarian economists to the introduction of thenew system. The aim is to minimize the danger ofinflationary tendencies, in both investment and consumer markets, and thereby facilitate the transitionto a new model of management relying more on theindirect tools of financial policy.
In the Soviet Union, the process of economicreform started in 1966 and continued in 1967. Bythe end of 1967, 7,000 industrial enterprises-producing about 40 per cent of the total output of thecountry-had been transferred to the new system ofmanagement. This process is expected to be completed in 1968.
The economic results of the reforms so far seemto have confirmed the soundness of the principleson which they were based. The growth rates experienced by these enterprises have been substantiallyhigher than those for industry as a whole. Higherlevels of profit and output have also made possiblea faster rise of workers' salaries.
The evaluation of experience with the reform sofar has brought to light certain shortcomings, mostlyconnected with the initial stages. As long as themajority of industrial enterprises still operated underthe old conditions the effectiveness of the new toolsof planning and financial incentives was restricted:conditions in material supply and commodity circulation did not correspond fully to the new system,and stable trade relations between the enterpriseswere not established. Another cause of imperfectionin the functioning of the reform was the inabilityof some managers immediately to overcome habitsand patterns of conduct practised under the old administrative system of management. It has beenpointed out, for example, that some ministerial central organs were to blame for arbitrary assignmentof plan indexes, for imposing unnecessary additionaltargets on enterprises and for changing the approvedplans several times during the year.
Soviet economists have proposed various measuresto improve the performance of the new system.Among these, the improvement of the material supply system has received special attention. Someeconomists8 believe that one of the major prerequisites of success in carrying out the economic reformis the transfer of the functions of the administrativesupply system to the mechanism for regular tradeand to direct economic ties between suppliers andbuyers. According to this view, the planning of distribution of output should involve only centralizedglobal balances to ensure the over-all proportionalityin the development of all branches; it should notrequire centralized allocation of deliveries throughadministrative rationing. It is argued that rationingreduces the effectiveness of the reform by restrictingthe opportunities to use the incentive funds in thehands of individual enterprises, generated by thesevery reforms.
The introduction of new wholesale prices as partof the reform was completed on 1 July 1967. Thenew prices are e.,'\:pected to ensure the establishmentof a profitability level sufficient for introducing autonomous financing for every normally operating enterprise. It is believed that the new prices, whichbrought the profitability of individual branches closerto the average, will make it possible to impose uniform standards for allotments to incentive funds forgroups of enterprises instead of for individual ones.
-8See Ye. Liberman and Z. Zhitnitsky, "Ekonomicheskiei administrativnye metody Khozayistvendvo rukovodstva"(Economic and administrative methods of management),Planovoie Khoziaistvo, No.1, 1968 (Moscow).
26
This change should create better conditions for theobjective evaluation and rewarding of economicprogress in individual enterprises of the same branch.
In Eastern Germany, the reform of prices wascompleted at the beginning of 1967. At the sametime, gradual introduction of additional changes inthe economic system continued. New regulations ininvestment financing, experimentally applied in previous years, were put in general operation on 1 J anuary 1968. All industrial enterprises are now responsible for their own reconstruction, modernizationand expansion, which are to be financed from depreciation reserves, net profits and new credits. InApril 1968, a further stage in the introduction of thenew economic system was approved in broad outlines.New measures are intended to bring together previously accepted changes into a comprehensive system. This includes improvements in central planning,particularly in the field of structural changes in thenational economy and in new regulations for distributing the income of enterprises. Long-term normshave been set for taxes on capital and on net profit,for centralized depreciation allowances as well as forpremium funds. These are designed to create conditions for increasing the independence, responsibilityand financial interest of enterprises.
The reforms in Bulgaria have been introducedgradually. By the end of 1967, the bulk of the industrial enterprises were operating under the newsystem and the remaining enterprises are to be shiftedto the new conditions before the end of 1968. TheBulgarian reform is at present characterized by anincrease in the rights of enterprises (for example,in the field of wages), within the framework ofcentral directive planning of the main indexes suchas output in physical terms (expressed as government orders), volume of investment and of materialinputs, and foreign trade targets and limits. Theapplication of the new methods has given rise to anumber of problems, and in 1967 these engaged theattention of Bulgarian economists. One difficultyrelates to the implementation of new prices. As theseare to be based on world prices, they may be lowerthan the costs in some branches of domestic industry.A system of budget subsidies to cover the losses ofindividual enterprises has been suggested in caseswhere it is in the national interest to produce thecommodity, despite its relatively high cost.
In Romania, directives on "Perfecting of management and planning of the national economy" wereapproved at the end of 1967. Suggested changes areto be implemented gradually in the course of severalyears. Special emphasis is placed on changes in thestructure of industrial management and on the rightsand responsibilities of individual enterprises. Industrial associations, grouping enterprises either on avertical or on a horizontal basis, are to becomerelatively independent units, with a decisive role in
the management of industry. The directives providefor the establishment of collective management inenterprises as well as for improvements in economicincentives. Methods of central planning are to beimproved and some of the powers exercised centrallyso far are e.,'\:pected to be transferred to industrialassociations. There will also be an expansion in theshare of the income of enterprises remaining at theirown disposal.
In Poland, the introduction of various measuresaimed at improving the existing system of planningand management continued in 1967. The number of
27
directives given by the central planning bodies tothe enterprises was further reduced. The aggregatedtargets of output are still maintained as the directivesto the enterprises, but they are used exclusively asan instrument to control the movement of the wagebill. The obligatory limits covering employment havebeen abolished for the majority of enterprises, andby 1968 experiments with abolishing the obligatorylimits of the wage-bill were well advanced. In viewof the existing conditions of persistent labour scarcityand pressures for wage increases, this measure isbeing implemented with a good deal of caution.
ANNEX
Table II. WorId production of selected commodities, 1963-1967
(Millions of tons, o:cept as indicated)
Item and region Amount Inde". (1963 = 100)
in 1963 1964 1965 1966 1967
CoalaWorldb ............................ . 1,947 103 105 105 105
Developed market economiesc ........ 1,052 103 104 103 102Centra!!y planned economiesd ......... 800 104 107 108 109Developing countriese ................ 95 98 103 105 109
Petroleum, crude
Worldb . . . . . . . . . . . . . . .................. 1,298 108 116 126 135Developed market economiesc ........ 425 102 105 111 119Centra!!y planned economiesd ......... 223 108 117 127 138Developing countries· . . . . . . . . . . . . . . . . 649 112 122 134 145
Natural gas (billions of cubic metres)
Worldb .... ,., ....................... . 602 110 116 126 136Developed market economiesc ........ 465 107 111 119 127Centra!!y planned economiesd . . . . . . . . . 107 119 139 155 172Developing countries· ................ 30 115 122 130 141
Electricity (billions of kilowatt-hours)
Worldb ....... , ........................ 2,812 109 117 125 133Developed market economiesc ........ 2,065 108 116 124 131Centra!!y planned economiesd ......... 580 111 122 132 142Developing countries· ............... . 166 114 124 128 131
Pig ironf
Worldb ................... ............ . 264 113 120 124 129Developed market economiesc ........ 175 117 124 126 130Centra!!y planned economiesd ......... 77 107 113 120 128Developing countries· ................ 12 104 105 111 108
Steel, crude
Worldb ....... , ........................ 375 113 118 123 128Developed market economiesc ........ 253 116 121 123 129Centra!!y planned economiesd . . . . . . . . . 108 106 113 121 128Developing countries· ................ 13 108 114 123 127
Cement
Worldb ................................ 367 110 115 123 127Developed market economiesc ........ 224 111 113 120 122Centrally planned economiesd ......... 94 108 118 129 137Developing countries· . . . . . . . . . . . . . . .. 49 109 119 127 132
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on United Nations, MonthlyBulletin of Statistics and Statistical Yearbook.
a Including lignite (as coal equivalent).b Sum of regions shown.c North America, western Europe, Australia,
Cypruo, Japan, New Zealand, South Africa,
31
Turkey.d Eastern Europe, Soviet Union, North Ko
rea, North Viet-Nam.• Latin America, Africa (excluding South
Africa) and Asia (other than mainland China,Cyprus, Japan, Mongolia, North Korea, NorthViet-Nam and Turkey).
f Including ferro-a!!oys.
Table 12. Market economies: changes in industrial production, by country group, 1963-1967(Percentage change from preceding year)
Manufacturing
Groupa altd year Mining Non- MetalTotal Lightb HeavyC Food Tex- Cloth- Wood Paper Chem-i- metall1:c Basic prod-
tiles ing eals mineral metals netsproducts
All market economies1963 ................ 3 5 4 6 3 4 5 4 6 9 5 7 51964 5 8 6 9 4 5 5 7 8 9 11 14 8
1965 4 7 5 8 3 3 5 6 6 8 4 5 9
1966 4 7 5 8 4 4 3 4 7 10 5 4 10
1967d ............ 3 2 1 3 2 -1 2 7 2 2
Industrialized countries1963 2 5 4 6 3 4 4 3 5 10 5 6 51964 4 8 5 9 4 4 5 7 8 10 10 14 71965 . . . . . . . . . . . . . . . . 2 7 5 8 3 3 5 5 6 8 4 5 91966 3 7 5 8 4 5 3 4 7 10 4 3 101967d 2 2 1 3 3 -1 -2 2 7 1 2
Less industrialized cormtril!s1963 ................. 5 5 4 6 3 4 7 9 10 7 4 13 31964 9 9 8 12 6 9 8 9 8 8 11 10 171965 7 7 6 9 6 2 7 11 11 7 8 6 11
1966 7 6 5 7 6 1 5 4 9 9 8 11 61967d 5 4 3 4 2 5 5 5 3 6 4 4 2
SO~trce: Centre for Development Planning, Projectionsand Policies of the United Nations Secretariat, based onUnited Nations, ~Mollthly Bulletin of Statistics, May 1968.
a The country groups are those made in the source. Theclassification of countries as "industrialized" or "less industrialized" is made according to whether per capita valueadded in manufacturing during 1958 was above or below$125. The groups correspond broadly to those used elsewhere in the Survey: "industrialized countries" compriseall the countries classified as developed market economies,plus Israel, minus Greece, Portugal, Spain and Turkey; cor-
respondingly, "less industrialized countries" comprise allthe countries classified as developing market economies, plusGreece, Portugal, Spain, Turkey and Yugoslavia, minusIsrael.
b Food, beverages and tobacco; textiles and clothing; woodproducts; leather, rubber and related products; printing andpublishing.
C Paper; chemicals; non-metallic mineral and metalproducts.
d Preliminary.
Table 13. Selected countries: recent change in industrial production, 1966-1967(Percentage change) a
1966 1967Country
First Secmtd Thin! FOH-rth First Second Third Fourthqu,arter quarter qua1'ter qUG1'ter quarter quarter qllade-r qua-rter
Austria 15 4 -4 7 -10 7 -7 7Belgium .......... -4 4 7 -4 -7 15Bulgaria 17 16 8 9 12 12 17 14Canada 10 3 3 7 -3 3 6 6Eastern Gennanyb 8 5 5 8 5 7 8 10Finland 3 4 2 7 4 8 2France 4 7 11 -3 7 7Germany (Federal Republic
of) ... . .. , ........... 11 -7 -7 -7 11 18Greece 13 20 15 16 13 5 10 5Hungary 6 7 7 7 5 5 5Italy ... 15 11 11 7 17 3 -9 21Japan .. 14 21 23 22 14 17 25 21Luxembourg -10 -4 8 -7 -4 4Netherlands 3 7 3 10 3 10 16Nonvay 4 7 7 7 10 -6 17
32
Table 13. Selected countries: recent change in industrial production, 1966-1967 (continued)
1966 1967
CO"ZtHtry First Second Third Fourth Ftrst Second Third Fourthquarter quarter quarter quarter quarter quarter quarter quarter
Poland ................... 6 8 8 7 10 9 8 7Portugal 26 13 -33 7 18 -21 11Romania .......... 10 11 13 14 14 10 14 11
Senegal 13 11 12 15 7 2 -6
Spain . . .................. 19 16 10 11 3 7 4 -2
Sweden ........... 7 3 -3 7 3 7 10
Switzerland .......... 16 -4 15 -4 -4 -4 15
USSRe ....... 8 8 9 9 11 11 10 9
United Kingdomd 4 -4 -7 7
United States 18 7 7 3 -6 -3 7 3Yugoslavia ............ 5 5 5 3 2 -1 -1
Zambia . . ......... 2 -8 -14 -18 -25 2 17 22
Soune: Centre for Development Planning, P'rojectionsand Policies of the United Nations Secretariat, based onUnited Nations, Monthly BLtlletin of Statistics, and Organisation for Economic Co-operation and Development, MainEconomic Indicators (Paris).
a For OECDcountries, percentage change of seasonallyadjusted data from preceding quarter at annual rate; for
other countries, percentage change f,rom corresponding quarter in preceding year.
b Including fishing.
e Including fishing, logging, waterworks, steam heat andpower; excluding publishing.
d Including construction.
Table 14. W orId production of major agricultural commodities, 1963-1967a
Co1n1nodity
Wheat . .Rice (unmilled) . .. ..Maizee .Barley . .Oats .Sugard .
Coffee .Cocoa . .Tea... . .Vegetable fats and oils .Cotton . ., .Wool .Jute .Hard fibrese .Rubber:
Natural .Synthetic .
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on United States Departmentof Agriculture, World Agricultural Productionand Trade (Washington, D.C.); InternationalRubber Study Group, Rubber Statistical Bulletin (London).
a Data 1"efer either to calendar years or tocrop years beginning in the year shown. Forrice, maize, tobacco, tea, jute, hard fibres andrubber, the data refer to calendar years. Forcoffee and cocoa beans, the data refer to crop
Production(millions of tons) Index, 1967
1963-1965 1966(1966 ~ 100)
a'verage
242.7 285.5 97248.0b 262.0 109187.0b 227.0 11085.3 106.3 10543.0 44.3 9758.9 64.8 101
4.0 3.6 1101.3 1.3 980.9 1.0 100
35.6 37.7 10111.2 10.4 992.6 2.7 1012.3 2.7 1100.9 0.9 94
2.3 2.4 1022.8 3.4 102
years beginning July to October of the yearshown; for sugar, 1 May of the year shown to30 April of the following year, and for cottonbeginning 1 August of the year shown. Forother commodities, harvests in the northernhemisphere beginning in the year shown arecombined with southern hemisphere harveststhat immediately follow.
b 1964-1965 average.e Excluding mainland China.d Centrifugal only, raw value.e Sisal, abaca and henequen.
33
Table 15. Major food crops: production in selected developing countries,1964/65-1967/68(Millions of tons)
Other grains and p1llsesIndia 35.1
S01lrce: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on United States Departmentof Agriculture, World Agricultural Productionand Trade and World Agriwltural Situation,
WheatAlgeria 1.1Argentina . . . . . . . . . . . . . . . 11.3Chile 1.2India . . . . . . . . . . . . . . . . . . . . . . . . 12.3Mexico .. 1.8Morocco . . . . . . . . . . . . . . . . . . 1.2Pakistan 4.6Tunisia 0.4United Arab Republic 1.5
Rice (1lnmilled)Brazil 6.3Burma 8.2Ceylon 1.1China (Taiwan) 2.9Colombia 0.6India 58.6Indonesia 13.0Pakistan 17.8Philippines 4.0Republic of Korea 5.4Thailand . . . . . . . . . . . . . . . . . . . . . 9.6United Arab Republic 2.0
BarleyLatin America 1.1North Africa 1.8India 2.5Republic of Korea 1.4
Crop and country 1964/65 1965/66 1966/67 1967/68-
1.3 0.7 1.46.2 6.4 7.41.2 1.1 1.2
10.4 11.52.0 1.6 2.21.3 0.8 1.14.0 4.30.5 0.3 0.31.6 1.5 1.5
6.6 6.8 7.08.1 7.4 7.50.9 1.03.1 2.9 3.40.7 0.7 0.7
46.0 46.4 62.313.7 14.1 14.317.7 16.4 18.04.1 4.2 4.44.8 5.39.2 11.8 10.01.9 2.0 2.3
1.0 1.21.9 0.8 1.42.4 2.42.0 1.9
28.6 33.3
Foreign Agricultural Report No. 38 (Washing-ton, D.C.); Commonwealth Secretariat, RiceBulletin (London).
a Prelimin3!ry.
Table 16. Annual changes in consumption and investment,by country group, 1964-1967
(Percentage change from preceding .'l'ear)
Personal consumption Fixed investmentCountry group
1964 1965 1966 1967- 1964 1965 1966 1967-
Developed market economiesb 4 6 5 3 9 6 5 2Centrally planned economiesc 5 9 8 9 9 8 7 9Developing countriesd 5 3 3 5 10 4 5 4
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on United Nations, Yearbookof National Accounts Statistics; replies of Governments to the United Nations questionnaire ofNovember 1967 on economic trends, problemsand policies; reports on plan fulfilment, andother national sources.
a Preliminary; based in the case of the developing countries, on partial data, estimatesand indicators.
b North America, western Europe, Australia,Japan, New Zealand and South Africa.
34
c Eastern Europe and the Soviet Union; personal consumption is based on retail sales;country indices have been combined by weighting them by coefficients derived from estimatesof relative value of retail sales and gross fixedinvestment, respectively, as indicated in Sopostavlenie Urovnia Ekonomicheskovo RasvitiaS ocialisticheskikh Stron (Moscow, 1965).
d Latin America, Africa (excluding SouthAfrica) and Asia (other than mainland ChinaCyprus, Japan, Mongolia, North Korea, NorthViet-Nam and Turkey).
Table 17. World trade: indices of export and import quantum, 1964-1967
(1963 = 100)
Region ana group1964
Ezport quant"m
1965 1966 1967" 1964
Import quant"m
1965 1966 1967-
World .
Developed countries .North Americab ............•..••...
Western Europe .EEC ..EFTA .Rest of western Europe
Northc ..Soutlrd .
South Africa .Japan .Australia and New Zealand .
Developing countries .Latin Americae .Africaf .
West Asiag .
Southern and south-eastern Asiah .
110
111114109111106
106118101124106
107102112114105
118
120115120124113
110125101159108
113106121122109
127
130127129136118
118138112184110
119111126133114
134
138132135145118
124154131193126
121115124141121
no110108110109111
118106127115115
109108109112107
118
120123118118116
126127140116126
113106114123112
128
130143126127121
129146127136
122
121116117132121
136
139156130131127
127147145171125
126123117136130
Source: Centre for Development Planning, Projectionsand Policies of the United Nations Secretariat, based ondata from the Statistical Office of the United Nations.
a Preliminary; based for some countries on less thantwelve months' returns.
b United States and Canada.c Finland, Iceland and I'reland.
35
d Greece, Spain, Turkey and Yugoslavia.e Twenty republics.f Continental Africa (other than South Africa).g Aden, Bahrein, Iran, Iraq, Israel, Jordan, Kuwait, Leba
non, Qatar, Saudi ATabia, Syria.h Rest of Asia (other than mainland China, Japan, Mon
golia, North Korea, North Viet-Nam and Turkey).
Table 18. Wodd exports, by provenance and destination: value, 1965, and percentage change,1966 and 1967
(Millions of dollars; percentage)
preceding year:
E.rporting regionand item
Worlda
Value in 1965 .Percentage change from preceding year:
1966 .1967 .
N arth AmericaValue in 1965 .Percentage change from
1966 '"1967 '"
World'
186,420
9.25.2
35,300
12.05.7
NorthAmerica
28,730
17.25.9
10,230
20.412.6
WesterllEuropeb
84,560
8.54.0
11,060
5.53.0
Otherdeveloped
marketeconomiesc
13,250
6.515.3
3,950
3.918.5
USSRandeastern
Europed
19,030
3.37.5
420
33.3-34.8
China(mainland) •
2,120
8.04.4
97
75.3-50.0
LatinAmerica!
9,320
11.71.4
4,030
11.9--2.6
8,170
-0.22.2
813
17.7-20.1
WestAsiah
4,450
13.00.4
844
11.8-4.2
Southernalld south
easternAsia
12,890
10.22.8
3,235
12.54.1
Otherdevelop
i~1g
countries I
2,750
7.37.1
608
11.89.6
Western Europeb
Value III 1965Percentage change from
1966 ..1967 .
preceding year:79,030
9.25.3
7,400
19.34.6
50,840
8.94.8
3,710
1.111.5
3,310
13.016.8
370
35.128.0
2,700
13.34.9
4,490
-2.73.0
2,060
13.11.3
2,960
3.4-3.9
820
8.51.1
Other developed market economiescValue III 1965 .......Percentage change from preceding year:
1966 .1967 .. ..
USSR and eastern E,uroped
Value in 1965 ..Percentage change from preceding year:
1966 .1967 . .
Chi.no (mainland)eValue in 1965 .Percentage change from preceding year:
1966 .1967 .
Latin A mericof
Value III 1965 .Percentage change from preceding year:
1966 .1967 .
13,850
12.77.0
19,710
6.19.1
2,020
9.9-9.9
11,060
5.10.6
3,427
20.3
185
31.46.6
15
40.019.0
3,850
8.6-1.4
3,660
7.71.3
3,690
17.14.4
305
24.6-7.9
3,630
6.33.1
1,448
8.820.2
234
31.251.1
245
32.7-8.6
513
9.710.7
342
7.3-15.8
12,460
0.89.4
600
-13.3
730
-4.1-4.3
445
-5.820.5
700
8.66.6
205
-12.2-38.9
453
10.213.4
590
23.712.3
125
-36.0-12.5
1,080
7.4
912
-1.614.9
610
18.0
78
34.614.3
91
-56.025.0
339
19.84.7
235
34.017.5
30
66.7-16.0
51
23.5-9.5
2,513
20.313.6
650
-9.2-6.8
620
16.1-15.3
66
37.91.1
243
16.517.3
6
-83.3
840
-4.83.8
AfricaE
Value in 1965 .Percentage change from preceding year:
1966 . .1967 . .
West Asiah
Value in 1965
Percentage change from preceding year:1966 .1967 .
Southern and south-eastern Asia
Value in 1965 .Percentage change from preceding year:
1966 . .1967 . .
Other developing countriesi. .
Value in 1965 .Percentage change from preceding year:
1966 .1967 .
7,750
9.40.5
6,510
9.55.6
9,310
4.94.2
1,880
5.92.0
605
17.5-5.2
464
4.5-20.6
1,800
5.68.4
755
16.65.7
5,280
8.51.0
3,160
10.88.3
2,200
3.2-0.9
710
-4.2-2.9
290
31.318.2
1,195
12.713.5
1,544
7.412.4
95
10.55.7
455
4.43.2
120
4.24.0
570
5.3-1.7
100.0
115
-28.7-12.2
22
18.23.8
170
-11.83.3
35
34.3-38.3
99
25.3-8.0
125
-12.09.1
87
-11.55.2
600
-6.7-7.2
235
14.9
310
6.5
37
-32.4
120
12.5
550
-3.6-3.8
230
8.7-2.0
4
-25.066.7
160
15.6-8.1
400
15.08.7
2,280
6.12.1
20
70.05.9
6
83.3190.9
65
-1.54.7
54
68.59.9
115
17.411.1
Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on United Nations, Monthly Bulletin ofStatistics.
a The figures for total exports include certain eports which are not includedelsewhere in the table because their regions of destination could not be determined.
b Including Turkey and Yugoslavia.C Australia, Japan, New Zealand agd South Africa.d Albania, Bulgaria, Czechoslovakia, Eastern Germany, Hungary, Poland and
Romania.e Estimates are based in part on import data of trade partners. Where exports
to China (Taiwan) could not be distinguished from exports to mainland China,they are shown as exports to mainland China. Exports of and to Mongolia, NorthKorea and Viet-Nam are included under the heading. Trade among these countries and their trade with mainland China are excluded.
f Twenty republics.g Continental Africa and associated islands, excluding South Africa.h Middle East countries in Asia, including Cyprus and Iran.i Chiefly islands in the Caribbean and Pacific areas.j Estimate for 1966 trade is $1 million and the rate of increase from no trade
in 1695 is not calculated.
Table 19. Wodd trade: indices of value of exports and imports, 1963-1967
(Vahle in billions of dollars)
Grou.p and regionnValue,1963
Ezports, f.o.b.
Indez (1963 = 100)
1964 1965 1966 1967b
Value,1963
Imports, c.i.f.
Inde.~ (1963 = 100)
1964 1965 1966 1967b
World .Developed countries .
North Americac .Western Europe .
EEC .EFTA .
Rest of western Europe:North .South .
South Africad .
Japan .Australia and New Zealande .
Developing countries .Latin America .West Indies! .Africa .West Asia .Southern and south-eastern Asia
135.4104.029.963.737.622.1
1.82.21.45.53.6
31.59.71.66.25.38.4
112113115112113109
113117104122111110109101116115105
122123119124128118
121130106155105116114102124123110
133136134136140126
130154121179111124120108136135116
140144141143150130
134167136192116127120110137142121
143.4110.825.173.740.426.5
2.2
4.61.76.73.6
32.78.72.16.73.6
11.2
112113111112111114
120110127118117111111109111115109
122124127122122120
129132145121129116111113118128114
134137151132133126
134156135141127125123118122140123
141144160136136133
135155158173131130126122123143132
Source: Centre for Development Planning, Projectionsand Policies of the United Nations Secretariat, based onUnited Nations, Monthly Bulletin of Statistics; International Monetary Fund, International Financial Statistics.
a As defined in table 17.b Preliminary; based for some countries on less than
twelve months' returns.
C Imports f.o.b.; United States includes special categoryexports.
d Imports f.o.b.e Aus~ralia: imports f.o.b.i Consisting mainly of Barbados, British Honduras, Guade
loupe, Guyana, Jamaica, Martinique, Netherlands Antilles,Surinam and Trinidad and Tobago.
Table 20. World trade: recent changes in exports and imports, 1967·1968
(Value in billions of dollars)
Region and group
North Americaa .Western Europeb ...•............•.
Japan .Australia, New Zealand and South
Africa .Developed market economiesc .Developing countriesd .
Total, above .
Ezports, f.o.b. Imports, c.i.f.
I ndez (correspond- I ndez (c01"respond.ing period ;ng period
Value, in preceding Value, in preceding1967 year = 100) 1967 year = 100)
1968, first 1968, first1967 quarter 1967 quarter
43 106 106 40 106 11590 105 109 99 103 10710 107 115 12 122 115
6 108 101 8 107 98150 106 108 159 105 10939 103 101 42 104 98
189 105 107 200 105 107
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on International MonetaryFund, International Fhwncial Statistics, June1968.
a United States and Canada.b Austria, Belgium-Luxembourg, Denmark,
Federal Republic of Germany, Finland, France,Greece, Iceland, Ireland, Italy, Netherlands,
38
Norway, Portugal, Spain, Sweden, Switzerland,Turkey, United Kingdom.
C Total of the preceding countries.
d Latin America and the Caribbean (excludingCuba), Africa (other than South Africa), Asia(other than mainland China, Cyprus, Japan,Mongolia, North Korea, North Viet-Nam andTurkey).
Table 21. World trade: changes in unit value of exports and imports, 1964-1967
(1963 = 100)
Unit value of exports Unit vah,e of imports Terms of tradeb
GrouP and region"1764 1965 1966 1967· 1964 1965 1966 1967· 1964 1965 1966 1967-
World ....................... 102 103 105 104 102 103 104 104Developed countries ........ 102 103 105 105 102 103 105 104 100 100 100 100
North America . . . . . . . . . . 101 104 105 107 102 103 104 103 99 101 101 103Western Europe .. , ...... 102 104 105 105 102 103 105 104 100 101 100 101
EEC . . . . . . . . ......... 102 103 103 103 102 103 104 104 100 100 99 99EFTA ................ 102 105 107 110 103 103 105 105 100 101 102 105
Rest of western Europe:North ............... 106 111 110 110 102 103 104 107 105 107 106 103South .... .......... . 100 104 112 108 105 105 108 106 95 99 104 102
South Africa " . . . . . . . . . . 103 105 107 104 101 106 108 109 102 99 99 95Japan ........ , .......... 99 97 97 99 102 105 104 102 96 93 94 97Australia and New Zealand 105 97 101 94 101 102 104 105 103 95 97 90
Developing countries . . . . . . . 103 102 104 103 101 102 103 103 102 100 101 101Latin America ........... 107 107 108 105 102 106 105 105 105 102 103 100Africa ...... ........... . 104 103 107 110 102 103 105 104 103 100 102 105West Asia ........ 100 100 101 101 103 103 105 106 98 98 97 96Southern and south-eastern
Asia .. . .......... 100 101 101 100 101 102 101 102 99 100 99 97
Source: Centre for Development Planning, Projections b Unit value of exports, divided by unit value of imports.and Policies of the United Nations Secretariat, based onUnited Nations, Monthly Bulletin of Statistics. C Preliminary, based for some count,ries on less than
a As defined in table 17. twelve months' returns.
Table 22. Export price indices of primary commodities andnon-ferrous base metals, 1964-1967 and first quarter, 1963
Commodity and groupIndex, 1963 = 100
Index (correspondingquarter of preceding
year = 100)first quarter
Primary commodities .Food .
Cereals .Wheat .Rice .Maize .
Beverages .Coffee .Tea .Cocoa .
Meat .Beef .Mutton and lamb .
Dairy products .Sugar .Other food .
Agricultural non-food .Fats, oils and oil-seeds .
Olive oil .Copra .Coconut oil .Ground-nuts .Ground-nut oil .Palm kernels .Palm kernel oil .Palm oil .Linseed oil .
1964
103105103104100101121133102
9'11211281171027996
10210464
10611010910899
107107111
39
1965
103103
9995
103104111124100
6612613512711353
10410311472
118126118109121139116100
1966
105106105102116105113120104
9412513011911253
1051041117299
107110105103139107
90
1967
10210510810313699
11111210411011712011411755
10296
10275
10511510310210312710495
1967
98101109110121103969099
126939197
10493
1009592
104898598
10085829693
1968
98989693
1079398
10088
10310210211599
1199597
1001011431557092
1229792
125
Table 22. Export price indices of primary commodities and non-ferrousbase metals, 1964-1967 and first quarter, 1968 (continued)
Commodity and groupIndex, 1963 = 100
Index (correspondingquarter of preceding
year=100jfirst quarter
Linseed .....Soya beansSoya bean oilCottonseed oil
Textiles .Wool .Cotton .JuteSisal . .
Wood and wood-pulp .Other agricultural non-food
Minerals .Metal ores
Iron ore ..Bauxite .Copper ore . . . . . . . . . . . . . . .Lead ore .Zinc ore .Tin ore .Nickel ore .Manganese ore .Chrome ore .
Fuels .Petroleum .Coal .
Crude fertilizer .
Non-ferrous base metals .Aluminium .Copper .Lead .Tin .Zinc .
1964
9910010310310210310010589
10591
1021089899
14115814713410010399
100100102103
119105120159140153
1965
97105123114928697
11262
10894
10411499
10018417514515410011599
101100103109
135109145183155147
1966
92115132132929094
12356
108109104115100100230147129142101116109101100104115
156108192152142135
1967
991051091118877
10011649
10797
103109
95108169129127132111107116101100104111
142111166132132130
1967
989887899789
10310892
10181979092
10067779487
108100107100100100100
9510295768693
1968
1179789999890
10784899896
1011051041251221019694
1109086
1001009999
1121001191019494
Source: Centre for Development Planning, Projections and Policies of the United NationsSecretariat, based on data from the Statistical Office of the United Nations.
Table 23. Developed market economies: industrial productionand gross national product, by region, 1965-1967
(Percentage change from preceding year)
Percentageshare in Industrial production Gross national procPu-ctaco'mbined
Region ana grou.p gross 1965 1966 1967 1965 1966 1967nathnJ.alproduct3
1966
Developed ma'rket economiesb . 100 6 7 2 5 5 3North America .... 53 8 9 1 6 6 3European Economic Com-
munity . . . . . . . . . . . . . . . . . . . 22 4 5 2 4 4 3European Free Trade Area. 12 4 2 3 2 2Other western Europe ...... 4 11 9 3 7 7 4Japan ..................... 6 3 13 19 4 11 12Oceaniac and South Africa .. 3 4 4 3 7 3 5
S ouree: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on data from United Nations,Yearbook of National Accounts Statistics; Organisation for Economic Co-operation and Development, Mail~ Economic Indicators (Paris),and official national sources.
40
a At constant prices and 1966 exchange rates.
b For country coverage, see table 11.
C For Australia, fiscal years ending 30 June,and for New Zealand, fiscal years beginning1 April of years indicated.
Tahle 24. Developed market economies: gross national productand its mam components, by region, 1965·1967
(At constant prices and 1966 exchange rates; percentage change from preceding year)
Region and yearGross
nationalproduct
Personalcon
sumption
Publiccon
sumption
Fixedinvestment
Foreign trade ingoods andservices
Exports Imports
Changein
invenforiesu.
Developed market economiesb
1965 .19661967 .
North America196519661967
European Economic Community
1965 .1966 .1967 .
European Free Trade Area196519661967
Other western Europe
1965 .19661967 " .
Japan
196519661967
Oceaniac and South Africa1965 .1966 .1967 .
553
663
443
322
774
41112
735
653
753
543
322
575
68
10
544
488
31111
534
345
1395
285
1095
652
85
-1
331
424
894
21020
1451
695
395
1197
64
-1
21711
24165
312
10127
11167
885
534
2213
71225
16
7
1.41.3
1.21.40.7
1.00.8
1.30.9
3.43.3
1.72.63.3
3.91.22.9
Source: As for table 23.
a At current prices, as percentage of grossnational product at current prices.
b For country coverage, see table 11.C For Australia, fiscal years ending 30 June,
and for New Zealand, fiscal years beginning1 April of years indicated.
Tahle 25. Developed market economies: gross national product and its mamcomponents, by country; actual 1965-1967 and forecast for 1968
( A t constant prices; percentage change from preceding year)
Australiac
Countryaand year
Grossnationalproduct
Personalcon
sumption
Publiccon
sumption
iFixedinvestment
Foreign trade ingoods
and services
Exports Imports
Changein
inventor£esb
196519M19671968
Netherlands1965196619671968
Ireland1965196619671968
726
5353.5
2245
534
7353.5
122
41
10136
353.5
312
136
-1
5771
10-5
6
112
8677.5
27
11
1841
7847
426
3.51.02.0
1.61.4
2.30.90.4
Table 25. Developed market economies: gross national product and its maincomponents, by country; actual 1965·1967 and forecast for 1968 (continued)
Foreign trade i-a ChangeGross Personal P1<blic IFi:ced goods in
Countrya national con- can- invest· and services inven-and year prod1<ct sumptiof/, s'l,tmption ment tories b
Exports Imports
Portugal1965 ...... ................ . 7 6 7 10 13 13 1.51966 ..... 3 4 5 11 5 3 1.51967 · . . . . . . . . . . . . . . . . . . . . . . 5 6 7 DD 5 -41968
Denmark1965 ............. 4 4 4 5 8 7 1.51966 ,_ .................. 2 4 4 3 3 6 1.21967 ....................... 3.5 4 6 7 6 7 0.71968 3
Japan1965 ............ " .......... 4 6 2 2 24 7 1.71966 11 8 8 9 16 12 2.61967 · .. . . . ................ . 12 10 5 20 5 25 3.31968 ....... ............... . 8 6 5 8
Luxembourg1965 ... . ........... 2 3 0 -18 5 -1 1.31966 ......... 1 3 6 -3 1 11967 · . . . . . . . . . . . . . . .. . . . . . . 2 0 2 -16 3 -31968 .................. 2.5 2 1 2.5 3 2
Finland1965 ... ............. , .... 7 5 4 9 5 9 3.41966 ... 2 4 4 1 7 5 2.91967 .. , ............. 3 4 4 -2 5 -2 2.51968 ......... .... , ......... 3 3.5 3 -1 7 -1
Norway1965 .... ................ , .. 4 3 10 7 7 9 1.41966 ..... . ............. 4 5 4 6 8 8 1.61967 ....................... 5.5 4 5 10 11 121968 .......... 4 3.5 4.5 -0.5 5.5 -0.5
Belgium1965 ....................... 4 4 7 3 8 8 0.51966 .......... ....... ....... 3 3 7 6 4 8 0.81967 · . ..................... 3.5 2 4 -3 6 31968 ............. 4 2 3.5 2 5.5 6.5
Sweden1965 · . .................... 4 4 6 4 4 11 1.91966 · . 3 2 7 4 6 4 0.71967 ....... . . . . . . . . . . . . . . . . 3.5 3 10 3 6 3 0.31968 ............. 3.5 2.5 6 2 6.5 6
South Africa1965 . . . . . . . . . . . . 5 5 10 17 11 4.71966 ................. 6 6 2 4 6 -9 0.61967 ....................... 7 5 4 4 10 18 5.11968 ............... 5 5 6 6
ItalJ'1965 · . . . . . . . . . . . . . . . . . . . . . . 4 2 4 -8 21 2 0.71966 · . .............. , 6 6 4 4 13 13 1.21967 · . . . . . . . . . . . . . . . . . . . . . . 6 6 3 10 6 14 1.61968 . . . . . . . . . . . . . . 5.5 5.5 4 9 7 11.5
United Kingdom1965 .. , . ................... 2 2 3 4 5 2 1.21966 ....................... 1 2 3 1 2 1 0.61967 ....................... 1 2 4 5 -2 4 0.21968 ....................... 2.5 3 4 12.5 1
France1965 ....................... 4 4 4 5 11 4 0.31966 ....................... 5 5 3 6 7 11 0.91967 ....................... 4 4 5 8 4 6 0.81968 ....................... 4.5 4 5.5 6.5 7 9.5
42
Table 25. Developed market economies: gross national product and its mamcomponents, by coullltry; actual 1965·1967 and forecast for 1968 (continued)
Countryaand year
Grossnationalproduct
Personalcon-
sumption
Publiccon-
sumption
Fixedinvestment
Foreign trade ingoods
and services
Exports Imparts
Changein
inventoriesb
Switzerland1965 .1966 .1967 .1968 ,
AUSI1-ia1965196619671968
Turkey1965196619671968
Germany (Federal Repl!blic of)1965 .1966 .1967 .1968 .
Greece1965 .1966 .1967 .
Canada1965196619671968
United States196519661967 ..1968
Spain196519661967
Iceland1965196619671968
New Zealandd
1965 .196619671968
431.52.5
2522.5
596
52
-0.54
885
7634
6635
883.5
54
-32.5
65
-2
423
5533
487
63
1.5
75
D
6554.5
7534
58
D
58
-3
84
153
-1432
267
7141.5
175
A
3733
311117.5
2115D
855
D
118
-1
57
10207
6
-105.5
1316D
1211
-21
84
-14
58
DD
-21715D
101
1262
676
1366
711107
103124
51310
2945.5
-62011
1110
-725
33
344
12103
626
-5
153
10
2144
13135
111678.5
3S15
-1
9167
-3
16
0.80.70.7
1.43.11.8
1.80.3
-0.8
3.71.0
1.81.70.4
1.21.40.7
3.54.3
2.0
0.3
3.83.72.1
Source: Centre for Development Planning,Proj ections and Policies of the United NationsSecretariat, based on data from United Nations,Yeai'book of National Accounts Statistics, andofficial national sources.
Note: Where the direction-but not themagnitude-of a change is known or predicted,the symbols A, D and DD are used:
A refers to an acceleration; D to a deceleration; DD to an actual decline.
43
a Countries are arranged in descending orderaccording to the degree of acceleration in therate of growth of gross national product between 1966 and 1967.
b At current prices, as percentage of grossnational product at current prices.
C Fiscal years ending 30 June of years indicated.
d Fiscal years beginning 1 April of years indicated.
Table 26. Developed market economies: personal consumption and its maincomponents, 1965-1967
(At constant prices; percentage change /I'om preceding year)
Countr:y:tand year
TotalFood,
beverages}tobacco
Clothing DwellingDurables
Hou·sehold Passengergoods carsb
Australiac
1965 .1966 .1967 .
Netherlands1965 , .1966 .1967 , .
Ireland1965 .1966 .1967 .
Denmark1965 .1966 .1967 .
japan1965 .1966 .1967 .
Finland1965 .1966 .1967 .
Norway1965 .1966 ..1967 .
Belgium1965 .1966 .. . .1967 .
Sweden1965 .1966 .. . .1967 .
South Africa1965 .19661967 .
Italy1965 .1966 . .1967 ..
United Kingdom1965 .1966 .1967 ..
France196519661967
Switzerland1965 .1966 . .1967 ..
534
735
122
444
68
10
544
354
432
423
565
266
222
454
423
345
72
354
385
345
343
23
222
753
254
-121
33
52
44
422
6
5
554
558
-2104
144
32
2
2
574
76
4
14
12
444
33
43
632
438
444
554
22
542
364
333
433
54
33
9
2
146
-1
816
91111
42
-283
55
311
454
-456
1-2
2
16
21
6-11
2
24-21
15
4-8
-1519
-4
94425
22-21-13
278
16-1
3
17-26-11
10-824
71517
-6-5
5
1142
455
Tahle 26. Developed market econo:mies: personal consumption and its maincomponents, 1965-1967 (continued)
Cattntr:yaand year
TotalFood,
beverages)tobacco
Clothing DwellingDnmbles
Household Passengergoods carsb
Austria196519661967
Germany (Fedeml Reptlblic of)1965 .1966 .1967 .
Greece196519661967
Canada1965 .1966 . .1967 .
United States
1965 .1966 .1967 ..
5 2 6 3 75 2 5 5 63 3 1 1
6 5 7 5 53 2 2 5 4
1 7
7 4 11 7 65 6 8 8 1
D
6 4 4 6 85 2 2 6 85 5 5 3 1
7 4 7 6 95 3 9 4 113 2 4 3 6
169
-2
13-1
-10
3-1-3
16-3-8
Source; Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on data from United Nations,Yearbook of National Accounts Statistics, andofficial national sources.
"Countries are arranged in descending order
according to the degree of accelerati~\n in therate of growth of gross national product between 1966 and 1967.
b Registration of new passenger cars.e Fiscal years ending 30 June of years in
dicated.
Tahle 27. Developed market economies: gross domestic fixedinvestment and its main components, 1965-1967
(At constant prices; percentage change from preceding year)
Co'untryaand year
Netherlands1965 .1966 .1967 .
Ireland196519661967
Denmark196519661967
japan
196519661967
Finland196519661967
Norway196519661967
Total
577
10-s
6
537
29
20
91
~2
76
10
Housing
117
14
20-8
83
12
1777
955
555
45
!VIann·factnring
11
9-4
-58
19
52
7198
Generalgovernmentb
12
1-13
15
10d
13d
_d
13-5-2
3
Table 27. Developed market economies: gross domestic fixedinvestment and its main components, 1965-1967 (continued)
Country'and year
Belgium196519661967
Sweden1965 .1966 .. , .1967 .. .
South Africa1965 .1966 " .1967 .
Italy1965 .1966 .1967 .
United Kingdom1965 .1966 .1967 .
Frana:1965 .1966 .1967 .
Switzerland19651966 .1967 .
AHstria1965 .1966 , , .1967 .
Germany (Federal Republic of)1965 .1966 .1967 .
Housing Manu-facturing
11-8 6-4
3 11-2 10
16 1
14e 197e 2
12e -7
-6 -Zoe-1 lOe
4 12e
2 lO-3
9 -5
9 Ig~
3 ~
1-2 1
1
1 5h
1 --h
1 _h
3e 94e -2
-7e -12
17 349
767
2
3f
6f
15f
lldlOd
1018
14124
1316
14
13
2318
66
-1
-927
Generalgovernntentb
1720
-lh
37h
zo18
-2
511
-3
-3-12-5
1744
415
6
Total
1316D
57
568
443
84
-1
-1
-21715
1211
-2
-84
10
36
-3
-lO
States
Greece196519661967
Canada196519661967
United196519661967
Iceland196519661967
Sotlrce: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on data from United Nations,Yearbook of N ational Acco~mts Statistics, andofficial national sources.
a Countries are arranged in descending orderaccording to the degree of acceleration in therate of ,growth of gross national product between 1966 and 1967.
b Excluding government enterprises.
e Including mining, quarrying, construction,electricity, gas and water.
d Including public corporations and government enterprises.
e Including non-residential buildings andother construction and works.
f Including government enterprises.g Including construction.11 Including mining and quarrying.
46
Table 28. Western Europe and North America: changes in production in selected manufacturingindustries, 1963-1967
(Percentage change from corresponding period in preceding year)
North AmericaPeriod All manu
facturing Food
Western Europe"
Textiles Chemicals Metal All manuproducts factttring
Food Textiles Chemicals Metalproducts
1963 51964 71965 41966 41967b 1
1966:
45232
52
-24
---4
10139
107
4654
57991
33342
2596
977
105
56
13131
First quarter .Second quarter .Third quarter .Fourth quarter .
1967:b
First quarter .Second quarter .Third quarter .Fourth quarter .
5542
3
3333
863
-1
-6---4-0-1
9119
10
8768
5451
-2
---44
910108
3
3454
3422
7852
-3-3-1
6
1011109
6546
15131411
41
-1-3
Source: Centre for Development Planning, Projectionsand Policies of the United Nations Secretariat, based onUnited Nations, Monthly Bulletin of Statistics, November1967 and May 1968.
a Including Yugoslavia.
b Preliminary.
Table 29. Developed market economies: prices and earnings, 1965-1967(Annual average; percentage change from preceding year)
Implicit Wa.Qe
Country" Wholesale Consumer E",port Import dellatian earningsunit unit of gross in
and year prices prices value value national manu",product factMing
Australia1965 .... , .... , ......... 3 4 -7 2 2.8b 401966 ................... 4 3 4 2 3.7b 401967 ................... 2 3 -5 1 3.0b 50
Netherlands1965 ................... 4 5 1 6.0 1101966 ................. o. 5 5 -1 6.2 13°1967 ................... 1 3 1 4.1 7c
Ireland1965 ................... 4 5, 1 3 4.4 51966 ................... 2 3 2 3.3 101967 ................... 3 3 1 4.1 7
Portugal1965 ................... 3 3 1 3.31966 ................... 4 5 4 5.51967 ................... 4 6 2
Denmark1965 ................... 3 7 1 1 7.4 121966 .. , ................ 3 7 4 1 7.7 121967 ................... 1 7 -3 -1 5.9 10
Japan1965 ................... 1 7 -1 -2 5.9 91966 ................... 2 5 1 4 3.9 121967 ........... , ....... 2 3 1 -4 3.9 12
Finland1965 ................... 4 5 4 1 2.6 9d1966 ................... 2 4 -1 1 4.8 8d
1967 ................... 3 6 -1 6 6.8 8d
47
Table 29. Developed market economIes: prices and earnings, 1965-1967(continued)
Countrya. Wholesale ConsumeraHd year prices prices
Exportunit
value
Importunit
value
Implicitdeflationof grossnationalproduct
Wageearnings
inmanu
facturing
Norway1965 3 41966 2 31967 2 4
5
-11
-1
6.23.64.0
Belgium1965 . . . . . . . . . . . . 1 41966 2 41967 -1 3
3-1
-11
-1
5.14.23.3
994
Sweden1965 5 51966 3 61967 4
3
-2
21
-2
6.15.65.3
l1d
9d
10d
346
3.72.82.1
4.92.32.5
241
-121
5-5
-3-1
1
524
22
South Africa1965 3 4e
1966 4 4e
1967 2 3e
Italy196519661967
United Kingdom1965 .1966 31967 -1
542
142
2-1
4.74.13.7
France196519661967
22
-1
333
141
21
-1
2.52.72.6
Switzerland1965 .1966 .1967 .
12
354
163
132
3.54.54.1
77
Austria196519661967
412
524
3-2
11
-2
6.23.73.6
5d
12d
8d
Tttrkey
196519661967
955
48
15
2.83.4
1710
Germany (Federal Republic0/)1965 21966 21967 -1
331
22
-1
31
-2
3.73.70.7
1074
Greece196519661967
231
352
-22
-2
121
4.43.0
9139
Canada196519661967
242
344
142
3.04.53.9
566
48
Table 29. Developed market economies: prices and earnings, 1965-1967(continued)
ImPlicit Wa.qe
Country a FVholesale Consumer Export I",port deflation earningsunit "Unit of gross inand year prices prices
'value value national manu-product facturing
United States1965 ............ 2 2 3 2.0 31966 ......... , 3 3 1 2 2.7 41967 . . . . . . . . . .......... 3 -1 -1 3.0 4
Spain1965 ........... 10 13 7 -2 11.2 171966 3 6 7 3 6.7 171967 ........ . .......... 1 6 -3 -1
New Zealand1965 ........... 1 3 -2 1 I.Of 61966 ... , ........ 1 3 -2 2 0.8f 51967 6 -S 5
Source: Centre for Development PlaJ1J1ing,Projections and Policies of the United NationsSecretariat, based on data· from Statistical OfOffice of the United Nations, Monthly Bulletinof Statistics; International Monetary Fund,International Financial Statistics, and officialnational sources.
a Countries are arranged in descending orderaccording to the degree of acceleration in the
rate of growth of gross national product between 1966 and 1967.
b Fiscal years ending 30 June of years in-dicated.
c vVage rates.d Including mining and quarrying.e White population.f Fiscal years beginning 1 April of years in
dicated.
Tahle 30. Developed market economies: employment and unemployment, 1965-1967
Estimated Percentage cha"ge fromcivilianCountrjlR labour force preceding ~'ear in Perce"tage unemployed"total civilianin 1966 employment(millions)
1965 1966 1967 1965 1966 1967
Australia ............... 4,225 0 5 3 2 0.3 0.5 0.6Netherlands ......... 4,187d 1 1 0.9 1.1 2.2Ireland ................. 1,106 -1 .....:1 2e 5.6 6.1 6.7Denmark ... ............ . 2,094d 2 1 1 2.4 2.6 3.2Japan . . . . . . . . . . . . . . . . . . . 48,910 2 2 2 0.8 0.9 0.9Finland . . . . . . . . . . . . . . . . . 2,033d 1 -2 1.4 1.6 2.8Norway . . . . . . . . . . . . . . . . . 1,406d 1 2 1.2 1.1 1.0Belgium ................. 3,5120 3 2.4 2.7 3.7Sweden ................. 3,244d 1 1 -1 1.1 1.4 1.8South Africa ..... 5,692d lle 5e 4e
Italy .................... 19,653 -2 -2 1 3.6 3.9 3.5United Kingdom ......... 24,6170 1 1 -2 1.5 1.6 2.5France . . . . . . , . . . . . . . . . . . 20,269f 1.3 1.4Switzerland . . . . . . . . . . . . . 2,691g 1Aus~ria ........... 3,3700 1 1 -1 2.7 2.5 2.6Germany (Federal Repub-
lic of) ................ 27,161 1 -3 0.6 0.7 2.1Canada ...... . . . . . . . . . . 7,383 4 4 3 3.9 3.6 4.1United States .......... 80,164 3 3 2 /4.5 3.8 3.8New Zealand ............ 1,022 3 4 2 0.1 0.1
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on data from United Nations,Monthly Bulletin of Statistics; InternationalLabour Office, Yearbook of Labour Statistics,1967 (Geneva), and official national sources.
a Countries are arranged in descending orderaccording to the degree of acceleration in therate of growth of gross natiDnal product between 1966 and 1967.
49
b Annual figures are generally computed asarithmetic averages of the twelve monthlyfigures. Data are not necessarily comparablebetween countries.
c 1961.d 1960.e Manufacturing only.f 1967.g 1965.
Tahle 31. Centrally planned economies: changes in national llcome,a 1964-1968
(Percentage change from preceding year)
COlintry
Bulgaria .Czechoslovakia .Eastern Germany .Hungary .Poland .Romania .USSR .
Total, aboveb .
1964
9.60.64.55.07.0
11.59.48.4
1965
7.13.44.61.07.09.57.26.8
1967 1968,1966Actual Planned planned
11.0 9.0 8.6 10.510.8 8.1 6.0 5.34.4 5.0 5.0 5.46.0 8.0 4.0 5.0-6.07.0 7.0 3.4 4.87.9 7.57.5 6.7 6.6 6.87.5 6.9
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on reports of fulfilment ofplans, national statistical yearbooks and statistical bulletins, and replies of Governments to theUnited Nations questionnaire of December 1967on economic tren~s, problems and policies.
a Net material product at constant prices.b Weighted by coefficients derived from the
estimates of relative value of net material product of various centrally planned economies, asindicated in Sopostavlenie Urovnia Ekonomicheskovo Razvitia Socialisticheskikh Stran (Moscow, 1965).
Tahle 32. Centrally planned economies: changes in gross agricultural output,1964-1968
(Percentage change fj'om preceding year)
1967 1968,Country 1964 1965 1966 plannedActual Planned
Bulgaria ..................... 11.4 1.8 15.0 1.3 5.0 10.0Czechoslovakia ............... 2.5 -3.9 10.5 3.5 2.9 1.7Hungary .................... 4.7 -5.3 6.0 1.0 3.0 3.0-4.0Poland ...................... 1.3 7.7 5.5 2.3 4.2 -1.5Romania ..................... 6.3 6.7 11.2 1.0 5.8 7.5-8.5USSR ....................... 14.4 2.0 10.0 1.0 3.0 7.4
Total, abovea .............. 11.0 2.3 9.4 1.1 3.4 5.9
Source: See table 31.a Weights are derived from data on the rela
tive value of agricultural production in various
centrally planned economies, as i[1dicated in thesource quoted in table 31, foot-note b.
Table 33. Centrally planned economies : changes in industrial production,1964-1968a
(Percentage change from preceding year)
1967 1968,COllntry 1964 1965 1966Actual Planned planned
Bulgaria ..................... 10.0 15.0 12.2 13.4 11.3 10.6Czechoslovakia ............... 4.1 7.9 7.3 7.1 5.3 6.0Eastern Germany ............ 6.7 6.3 6.4 6.8b 6.0b 6.4b
Hungary ..................... 9.0 5.0 7.0 9.0 6.0 6.0-7.0Poland ...................... 9.4 9.0 7.0 8.0 6.2 7.1Romania ..................... 14.0 13.0 11.7 13.8 11.3 12.3USSR ............ '........... 7.3 8.7 8.6 10.0 7.3 8.1
Total, abovec ............. . 7.5 8.6 8.2 9.6 7.1 7.9
Source: See table 31."Gross value of output, unless otherwise
stated.b "Commodity production" equivalent to gross
output less work in progress. During recentyears, the differences between the rates of
50
change of 'commodity production and of gros'soutput have not been significant.
e Weights are derived from data on the relative value of industrial production in variouscentrally planned economies, as indicated in thesource quoted in table 31, foot-note b.
Table 34. Centrally planned economies: changes in gross fixed investment,1964-1968a
(Percentage change from preceding year)
Source: See table 31.a Unless otherwise stated, the data are ex
pressed at constant prices and refer to totalinvestment in the case of Czechoslovakia, Eastern Germany and the Soviet Union, and to the
Country
Bulgariab .Czechoslovakia .Eastern Germanyb, c .Hungary .Poland .Romania .USSR .
1964
10.211.99.84.23.6
10.79.0
1965
8.17.8
9.40.8
10.48.78.2
1967 1968,1966Actual Planned planned
24.0 15.6 13.9 10.0
9.8 2.6 4.2 5.47.1 9.0 9.0 10.76.0 15.0 4.7 1.0-2.09.0 11.0 8.1 5.8
10.2 17.1d 17.0d 8.6d
6.0 8.0 7.9 5.7
socialized sector only in the case of Bulgaria,Hungary, Poland and Romania.
b At current prices.eNot including capital repairs.d State investment only.
Table 35. Centrally planned economies: changes in volume of retail trade,1964-1968
(Percentage change from preceding year)
1967 1968!,Country 1964 1965 1966 plannedActual Planned
Bulgaria ..................... 5.8 7.8 8.4 11.5 9.0 8.5
Czechoslovakia .............. 2.8 5.6 5.2 6.5
Eastern Germanya ............ 3.3 4.3 4.1 4.0 4.5 3.9
Hungary .................... 7.5 3.7 8.0 10.0 3.4 7.0
Poland ...................... 4.7 8.6 6.8 7.7 7.4 6.8
Romania ..................... 7.8 7.9 9.9 9.8 9.0 8.0
USSR ....................... 5.3 10.1 8.7 9.4 7.4 7.8
Source: See table 31. a At current prices.
Table 36. Centrally planned economies: external trade, 1963·1967(Millions of dollars)
Country 1963 1964 1965 1966 1967
BulgariaExports ...................... 834 980 1,176 1,305 1,458Imports ...................... 933 1,062 1,178 1,478 1,572
Balance .................... -99 -82 -2 -173 -114
CzechoslovakiaExports ...................... 2,462 2,576 2,689 2,745 3,013Imports ...................... 2,160 2,429 2,672 2,736 2,680
Balance .................... 302 147 17 9 333
Eastern GermanyExports ...................... 2,713 2,932 3,070 3,205 3,456Imports ...................... 2,331 2,634 2,810 3,215 3,279
Balance .................... 382 298 260 -10 177
HungaryExports ...................... 1,206 1,352 1,510 1,594 1,702Imports ..................... . 1,306 1,496 1,521 1,566 1,776
Balance .................... -100 -144 -11 28 -74
PolandExports . . .................... 1,770 2,096 2,228 2,272 2,527Imports ...................... 1,979 2,072 2,340 2,494 2,645
Balance .................... -209 24 -112 -222 -118
51
Table 36. Centrally planned economies: external trade, 1963·1967(continued)
Country 1963 1964 1965 1966 1967
RomaniaExports ......... ...... " .... 915 1,000 1,102 1,186 1,396Imports ...................... 1,022 1,168 1,077 1,213 1,546
Balance .................... -107 -168 25 -27 -150
USSRExports ......... , ............ 7,272 7,683 8,175 8,841 9,649Imports .............. - ....... 7,059 7,736 8,058 7,913 8,536
Balance .................... 213 -53 117 928 1,113
TotalExports . . . . . . . . . . . . . . . . . . . . . . 17,172 18,619 19,950 21,148 23,201Imports . . . . . . . . . . . . . . . . . . . . . . 16,790 18,597 19,656 20,615 22,034
Balance .................... 382 22 294 533 1,167
Source: Centre for Development Planning, Projections and Policies of the United NationsSecretariat, based on reports on fulfilment of plans, national statistical yearbooks, United Nations,Monthly Bulletin of Statistics, May 1968, and information from Council for Mutual Economic Assistance Secretariat, Statistical Department, March 1968.
Table 37. Devel{lping countries: indices {If agricultural and food production, 1960-l967a
(1963 = 100)
Item and region
Total agricultural prod~tetion
Total developing countries .Latin Americac .Africad .
'West Asiae .Southern and south-eastern Asiaf .
Per capita agricultural prod~lction
Total developing countries .Latin Americac .Africad .
West Asiae .Southern and south-eastern Asiaf .
Total food produ,ctiong
Total developing countries .Latin Americac .Africad .
'West Asiae .Southern and south-eastern Asiaf .
Per capita food prod~tction
Total developing countries .Latin Americac .Africad .
West Asiae .Southern and south-eastern Asiaf .
1960
9190938093
9997
10086
100
9289937994
100969987
101
1961
9595919297
1001009597
101
9492909197
99979497
101
1962
9697989795
9999
10110097
9796989895
9998
10010197
1963
100100100100100
100100100100100
100100100100100
100100100100100
1964
10299
103102103
10096
10099
101
103103102101103
101100
9998
101
1965
10311010310698
9910498
10093
10311010110597
98104
969992
1966
10210510310399
9496969591
10210810110397
9499939590
1967"
109109105113110
999796
10099
111114104113no
10110295
10199
Source: Centre for Development Planning, Projectionsand Policies of the United Nations Secretariat, based oncommunications from the Foreign Regional Analysis Division, United States Department of Agriculture.
a Calendar years; production is credited to the year inwhich the bulk of the crop is harvested.
b Preliminary.c Twenty-three countries.
52
d Continental Africa, excluding South Africa.e Iran, Iraq, Israel, Jordan, Lebanon, Syria.f Burma, Cambodia, Ceylon, China (Taiwan), India, Indo
nesia, Pakistan, Philippines, Republic of Korea, Republic ofViet-Nam, West Malaysia, Thailand.
g Cereals, pulses, root-crops, fruit, vegetables, sugar, oilseeds and cocoa (excluding coffee and tea).
Table 38. Developing countries: rate of growth III food production,1966 and 1967a
Annual rate of growth offood Production
Less than or equal to 2.9 per cent(per capita food productiondeclined or rose negligibly)
3.0 to 4.9 per cent (per capitafood production increased moderately)
5.0 to 7.9 per cent (per capitafood production increased significantly)
1966
JordanSyriaTunisiaMoroccoAlgeria
CubaSenegalUpper VoltaUruguayRepublic of Viet-Nam
LiberiaBrazilLebanonIsraelIraq
GuineaGuyanaPakistanPanamaParaguay
BurmaIndiaTrinidad and TobagoAngolaGhana
EthiopiaHondurasChileColombiaEcuador
Sierra LeoneSudanJamaicaUnited Arab RepublicUganda
Congo (DemocraticRepublic of)
MadagascarDominican RepublicPeruBoliviaRhodesia, Malawi and
Zambia
TogoHaitiCameroonBurundiCambodia
GuatemalaPhilippinesChina (Taiwan)VenezuelaRwandaMexico
IranNicaraguaIndonesiaNigeriaWest MalaysiaUnited Republic of
Tanzania
53
1967
ThailandUruguayJamaicaNigeriaBolivia
Republic of KoreaHaitiEI SalvadorGuatemalaCongo (Democratic
Republic of)
Ivory CoastNicaraguaSierra LeoneUgandaMali
IraqPeruColombiaMadagascarUnited Arab Republic
CambodiaIndonesiaDominican RepublicChina (Taiwan)Dahomey
United. Republic ofTanzania
TogoBurundiChileTrinidad and Tobago
NigerRhodesia, Malawi and
Zambia
PhilippinesPanamaLiberiaMexicoCameroon
Republic of Viet-NamAngolaWest MalaysiaBurmaRwanda
EcuadorHondurasGhanaVenezuelaCosta Rica
Table 38. Developing countries: rate of growth in food production,1966 and 1967a (continued)
Annual rate of growth offood production
5.0 to 7.9 per cent (per capitafood production increased significantly) (continued)
8.0 per cent or over (per capitafood production increased substantially)
1966
Republic of KoreaKenyaCeylonArgentinaEI Salvador
Costa RicaIvory CoastNigerMaliDahomeyThailand
1967
BrazilParaguayIranGuineaEthiopiaArgentina
SyriaPakistanKenyaCeylonUpper Volta
GuyanaMoroccoTunisiaSudanIsrael
CubaIndiaAlgeriaLebanonSenegalJordan
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on communications from theForeign Regional Analysis Division of the
United States Department of Agriculture.a Countries are arranged in ascending order of
increase in food production over the previousyear.
Table 39. Developing countries: indices of industrial production, 1964-1967
Developing countrie~o. Southern and south-eastern Asiab
Item 1964 1965 1966 1967· 1967· 1964 1965 1966 1967· 1967'(Preceding year = 100) (1963 = 100) (Preceding year = 100) (1963 = 100)
Total industrial productiond 109 107 105 104 127 109 108 105 105 130Mining ................... . 109 107 106 105 130 110 109 105 113 143Manufacturing ............. 109 107 105 103 125 108 107 106 102 126
Lighte ................... 107 106 104 103 121 106 107 106 101 122Heavyf .................. 111 107 106 104 130 110 108 106 105 132Food, beverages and to-
bacco .................. 104 107 106 102 119 107 107 110 95 121Textiles ................. 110 102 100 105 117 108 103 99 105 116Paper and paper products 108 109 106 103 129 107 107 110 104 131Chemicals, petroleum and
coal products .......... 107 106 107 105 128 109 106 108 108 134Non-metallic mineral pro-
ducts .................. 109 107 106 105 130 107 112 103 109 135Basic metals ............. 108 103 108 103 124 100 104 106 100 110Metal products ... , ....... 117 109 103 102 135 116 113 103 103 139
Electricity and gas . . . . . . . . 113 111 109 107 146 114 112 109 114 159
Source: Centre for Development Planning, Projectionand Policies of the United Nations Secretariat, based ondata from the Statistical Office of the United Nations.
a Latin America, including Caribbean countries and territories; Africa, excluding South Africa; West Asia, excluding Israel; and southern and south-eastern Asia asdefined in foot-note b.
b Afghanistan, Brunei, Burma, Ceylon, China (Taiwan),Hong Kong, India, Indonesia, Iran, Malaysia (excluding
54
Sabah), Pakistan, Philippines, Republic of Korea, Republicof Viet-Nam, SIngapore, Thailand.
c Preliminary.d Mining, manufacturing, electricity and gas.e Food, bevfrrages and tobacco; textiles and clothing;
wood products; leather, rubber and related products; printing and publishing.
f Paper, chemicals, non-metallic mineral and metalproducts.
Table 40. Selected developing countries: indices of industrial production, 1964-1967R
Industrial Production Mining Manufacturing Electricity
Co"ntry 1964 1965 1966 1967 1967 1964 1965 1966 1967 1967 1964 1965 1966 1967 1967 1964 1965 1966 1967 1967(Preceding year = 100) (1963 (Preceding year = 100) (1963 (Preceding year = 100) (1963 (Preceding year = 100) (1963
= 100) = 100) = 100) = 100)
Algeriab .......... 115 112 103 98 102 106 109Chile .. , , ......... 106 98 108 102 114 105 105 107 100 117China (Taiwan) . " 127 114 113 117 192 108 106 105 105 127 131 115 113 118 201 118 108 114 115 168El Salvador ....... 130 122 102 117 189Ghana ............. 104 100 108 108 120 98 101 111 90 99 108 96 104 113 122 116 116 125 136 222Guatemala ......... 105 111 104 102 124 104 109 104 98 116 113 118 114 110 167India .............. 107 106 103 102 118 96 109 103 101 107 107 106 102 101 116 115 110 109 111 151
CJlCJl Israelc ............ 114 110 102 93 123 121 124 102 96 150 113 110 102 93 122
Mexico ........... 113 105 111 108 142 105 100 104 106 115 114 107 111 108 146 115 110 110 110 153Morocco .......... 113 101 97 97 107Philippines . ....... 101 109 109 113 136 108 103 109 104 130 :.....Republic of Korea .. 108 118 117 121 181 110 104 111 108 137 107 121 118 174 186 122 120 120 127 223Senegal ... - ... , ... 106 102 113 102 125 125 126 113 114 203 103 99 114 100 115 113 103 109 106 134Tunisia ........... 111 114 106 84 112Venezuela ......... 110 105 99 104 119 108 103 97 104 112 114 108 101 104 129 112 110 115 110 155Zambia ............ 111 109 90 99 114 111 107 86 99 107 117 130 116 116 207 95 93 92 95 83
Source: Centre for Development Planning, Projections and Policies of the R The coverage of industries varies widely from country to country. ForUnited Nations Secretariat, based on United Nations, Monthly Bulletin of 1967, based on data covering less than twelve months in some cases.
b Electricity includes manufactured gas.Statistics. C Industrial production excludes electricity and manufactured gas.
Table 41. Developing countries: distribution of changes in exports and imports, 1964·1967
(Billions of dollars; exports, f.o.b.: imports, c.i.f.)
IndexExports Imports
(preceding Number of countries Export receipts NHmber of countries Import expendituresyear = 100)
1964 1965 1966 1967" 1964 1965 1966 1967" 1964 1965 1966 1967" 1964 1965 1966 1967"
Less than
90 6 6 9 12 3.7 0.6 1.2 3.0 4 6 5 13 2.8 2.3 2.3 4.395 ............. 9 12 13 23 4.0 1.4 1.9 8.6 8 12 13 18 4.2 3.0 6.2 6.3
Coil 100 ............. 13 27 22 36 4.8 7.3 8.5 13.4 12 19 18 26 5.9 6.4 10.4 11.80\
100 or more 60 46 51 37 26.2 23.0 23.4 19.2 61 54 55 47 24.0 25.2 23.4 25.1
More than
105 ............. 49 33 42 25 17.2 14.4 18.1 12.1 51 44 45 38 20.8 15.1 18.9 21.3110 · . . . . . . . . . . . . 35 25 30 16 9.4 8.9 10.7 7.2 43 34 28 24 18.9 11.5 13.2 13.4120 · . . . . . . . . . . . . 21 7 11 5 6.2 1.4 2.9 3.0 24 13 16 11 9.8 4.1 7.3 8.5130 · . .. . . . . . . . . . 12 4 5 3 3.5 0.4 0.6 2.3 10 5 9 6 2.8 1.0 5.6 3.8
Total ......... 73 73 73 73 31.0 30.3 31.9 32.6 73 73 73 73 29.9 31.6 33.8 36.9
Source: Centre for Development Planning, Projections and Policies of the a Preliminary; for some countries based on less than twelve months' returns.United Nations Secretariat, based 011 International Monetary Fund, InternationalFinancial Statistics.
Table 42. Developing countries: indicated change between 1966 and 1967in gross domestic product, volume of imports and total suppliesa
Countryb
IndiaRepublic of KoreaChina (Taiwan) .Iran .Panama .
Costa RicaThailandMexico .EcuadorPakistan .
Venezuela .Bolivia .Philippines .United Republic of Tanzania .Paraguay .
Peru '"Kenya ..Brazil ..MalaysiaEthiopia
Ceylon .Morocco .ColombiaTrinidad and Tobago .Uganda .
NicaraguaGuyanaHondurasEl SalvadorGuatemala .
Ghana .Jamaica .Dominican Republic .Chile .Argentina .
Israel .Barbados .Kuwait .Tunisia .H~ .Uruguay .
All developing countries (percentagechange) .
Smtrce: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on United Nations, l.{onthlyBulletin of Statistics, Yearbook of NationalA ccounts Statistics and The Latin AmericanEconomy in 1967 (Sales No.: 68.ILG.12);International Monetary Fund, InternationalFinancial Statistics; United States, Agency farInternational Development, AID Economic DataBook (Washington, D.C.), various issues;replies of Governments to the United Nationsquestionnai're on economic trends, problems andpolicies, and national sources.
a Based on preliminary estimates of thenational accounts of "indicators" derived fromofficial or semi-official statistics of production,trade and transport. The indicated changes
Gross lotaldomestic Imports' supplies'product
D -B DD G DC F DC ~C CC C C
C C CC G DC C CC D CC F C
C C CC C CC F CC C CC E C
C -c BC B CC D CC -B BC -D B
B -E AB D CB -F AB -D AB B B
B D CB E CB E CB B BB D C
B -F -BB C CB B BB C BB -B B
B -E -BA C BA F CA B AA A A
-c B -B
5-6 4 5
are necessarily tentative, being based in somecases on less than a full yea'r's figures for someof the components of the gross domesticproduct. The symbols indicate the percentagerange of increase or decrease (-): A = -1to 1; B = 2 to 4; C = 5 to 9; D = 10 to 14;E = 15 to 19; F = 20 to 29; G = 30 or over.
b Countries are arranged in descending orderof change in gross domestic product between1966 and 1967.
C Quantum index of imported goods; in somecases it refers to goods and services.
d Weighted aggregate of gross domesticproduct and imports; the weight attached toimports was derived from national accountsfor 1964.
57
Tahle 43. Developing countries: changes in cost of living,a 1966-1967
Item
Percentage of countries in which the rise in the cost of liv£ngindo; was
1 per cent or less .
2 to 5 per cent .
6 to 9 per cent __ _ .
10 to 20 per cent _ _. _ .
21 per cent or over __ .
Total _ _. __ .
Percentage of cO~t1Itries in which, in relation to the precedingyear, the upward movement
Continued _ _ _ .
Acceleratedb _ _ _ .
Deceleratede .
Was negligibled .
Total .
1966
23
39
16
14
8
100
32
31
32
5100
1967
29
4810
2
11
100
21
26
476
100
Source: Centre for Development Planning,Projections and Policies of the United NationsSecretariat, based on United Nations, MonthlyBulletin of Statistics.
a Based on sixty-two countries; changes aremeasured from December to December.
b Including countries in which the movement
of the index changed from downward to upward.
e Including countries in which the movementof the index changed from upward to downward.
d Including countries in which the indexdeclined at a faster or a slower pace.
Tahle 44. Developing countries: changes in the supply of money,a 1966·1967
Item
Percentage of countries in which the rise in the money supplyindex was
3 per cent or less .
4 to 10 per cent .
11 to 17 per cent .
18 per cent or over , .
Total " , , .
Percentage of countries in which, in relation to the precedingyear, expansion of money s1tpply
Continued .
Acceleratedb .
Deceleratede .
Was negligibled .
Total .
1966
2335
20
22
100
1540
42
3
100
1967
30
28
17
25100
10
40
43
7
100
Source: Centre for Development Planning,Projection5 and Policies of the United NationsSecretariat, based on International MonetaryFund, International Financial Statistics.
a Based on sixty countries; changes aremeasured from December to Dec~mber.
b Including countries in which the movement
58
of the index changed from downward to upward.
e Including countries in which the movementof the index changed from upward to downward.
d Including countries in which the indexdeclined at a faster or a slower pace.
Table 45. Developing countries: changes in government budgetaryposition,a 1966-1967
Item
Percentage of countries In which the change in governmentindebtedness during the indicated year, as percentage ofgovernment expenditure in the preceding year, was
5 per cent or less .6 to 10 per cent .
11 to 15 per cent .16 per 'cent or over .
Total .
Percentage of cmmtries in which, in relation to the precedingyear, the rise in government indebtedness
Continued .Acceleratedb ...•.....•.••....••...••..........•....•...•.
Decelerated" .Was negligibled .
Total , .
1966
617
1715
100
13314115
100
1967
44309
17100
1339417
100
Source: Centre for Developme1'1t Planning,Projections and Policies of the United NationsSecretariat, based on United Nations, StatisticalYearbook; International Monetary Fund,International Financial Statistics, and nationalsources.
a As measured by net change-claims minusdeposits-in government dealings with the bank-
ing system; based on forty-six countries.b Including countries in which the movement
changed f'rom fall to rise."Including countries in which the movement
changed from rise to falL
d Including countries in which the movementwas downward in the two successive years.
Table 46. Developing countries: balance of trade 'and changes m liquidity,1961-1967
(Millions of dollars)
Group and Item
Developing countriesb
Balance of trade" .Change in total reservesd .
Net change in other balance of payments items
Selected petroleum-exporting developing countries"
Balance of trade" .Change in total reservesd .
Net change in other balance of payments items .
Developing countries excluding selected petroleum-e.rportingcountries
Balance of trade" .Change in total reservesd .
Net change in other balance of payments items
1961
-3,337-5862,751
2,787-18
-2,805
-6,124-5685,556
1962
-2,429-2152,214
3,515-7
-3,522
-5,944-2085,736
1963
-626981
1,607
4,114465
-3,649
-4,740516
5,256
1964
-1,049175
1,224
4,342129
-4,213
-5,39146
5,437
1965
-1,3231,2322,555
4,370261
-4,109
-5,693971
6,664
1966
-1,724611
2,335
4,758178
-4,580
-6,482433
6,915
1967-
-2,116779
2,895
5,176236
-4,940
-7,292543
7,835
Source: Centre for Development Planning, Proj ectionsand Policies of the United Nations Secretariat, based onInternational Monetary Fund, International Financial Statistics.
a Preliminary, including estimates based on less thantwelve months' returns for some countries.
b Latin America (excluding Cuba), Africa (excluding
59
South Africa) and Asia (excluding Japan, mainland China,Mongolia, North Korea and North Viet-Nam).
"Exports, f.o.b. minus imports, c.i.f.d Gold, convertible foreign exchange and reserve position
in the International Monetary Fund.e Iran, Iraq, Kuwait, Libya, Nigeria. Saudi ATabia.
Venezuela.
TallIe 47. Regional economic groupings: objectives, status and main features
Trade (exports), 1966c
Name of grouping andmember C01t1ttries
Principal objecti'vesand status Principal action
Area(thousands POPttlatiou,of square 1966'
kilo- (millions)met,-es)
Populationdensity1966'
(persons persquare kilo·
metre)
Gross domesticproduct, 1965b
Total Per capita(millions ( dollars)
of dollars)
Total(millions
of dollars)
Intra-trade(percentage
of total)
0\o
Council for MutualEconomic Assistance(CME.A)
BulgariaCzechoslovakiaEastern GermanyHungaryMongoliaPolandRomaniaUSSR
ObjectivesExpansion of trade and economic
co-operation through co-ordination of economic plans, specialization and standardization ofproducts
Co-operation in production and inscientific and technological research
StatusEconomic co-operation
Machinery for co-ordinating eco- 24,957nomic plans of member countriesset up. Medium-term plans ofmember countries co-ordinatedin 1960 and 1966
Agreements signed on multilateralsettlements in transferable roubles, and the creation of an International Bank for EconomicCo-operation (1963)
Discussions on long-range questions of co-operation during1971-1975 already started (19671968)
332.6 13.6 390,000 1,173 20,910.0 60.1
Enropea.n EconomicCommunity (EEC)d
BelgiumFederal Republic of
GermanyFranceItalyLuxembourgNetherlands
ObjectivesImmediate: common marketUltimate: common market of Eu-
rope
StatusFinal stage of implementation
Treaty creating European Coal andSteel Community (ECSC) signed1951. Rome treaties creating European Economic Communityand the European Atomic Energy Community (Euratom)signed 1957, Came into force inJanuary 1958
The EEC Council agreed (1966)to complete the Customs Unionby 1 July 1968, when all tariffson trade between the memberStates would be removed, acommon external tariff wouldcome into effect, and a common farm policy would be completed
The executive branches of ECSC,EEC and Euratom were mergedinto a single Council of Ministers(T1'f!~~ 10h:7\
1,163 181.2 155.8 259,000 1,430 50,627.4 45.9
Area (EFTA)
AustriaDenmarkFinlandeNorwayPortugalSwedenSwitzerlandUnited Kingdom
Central AmericanCommon Market(CACM)
Costa RicaEl SalvadorGuatemalaHondurasNicaragua
Immediate: free trade areaUltimate: common market of Eu
rope
StatltsFinal stage towards achievement
of free trade
ObjectivesInitial: free trade area with com
mon external customs tariffsUltimate: the possibility of a mer
ger between CACM and LAFTAinto a Latin American commonmarket by 1985
StatusFinal stage in achievement of free
trade area
brought EFTA into existence
Removal of tariffs and quotasachieved on 31 December 1966(except for Finland)
EFTA members informed by EECCouncil that agreement could notbe reached on their applicationsto join (December 1967)
Kennedy Round: Austria andSwitzerland put into effect inJanuary 1968 one-fifth of theta,riff reductions they had agreedto make over the next five years.The other EFTA members willmake two-fifths' reduction on 1July 1968
Talks on a Central American Common Market began (1951) andseveral agreements were made ontrade, roads and industrial integration (1956-1959)
Common Market came into existence in 1960. In December 1960the General Treaty of CentralAmerican integration was signed.The main treaties were in operation in all five countries in 1964
By the end of 1967, 95 per centof internal tariffs were removed.Complete uniformity of externaltariffs is expected to be achievedby 1970
A co-ordination committee hasbeen set up to examine the possibilities of closer relations between CACM and LAFTA
432 13.6 31.4 3,619 284 843.4 20.3
Latin American FreeTrade Area(LAFTA)
ArgentinaBoliviaBrazil
ObjectivesImmediate: free trade areaUltimate: merger of LAFTA and
CACM and Latin Americancountries not belonging to anysystem into a Latin Americancommon market by 1985
Montevideo Treaty of 1960 estab- 19,301lished LAFTA
Declaration adopted by LatinAmerican Presidents at Puntadel Este (April 1967) agreed on
212.2 11.0 79,595 386 10,032.5 8.7
Table 47. Regional economIC groupings: objectives, status and mam features (continued)
Name of grouping andmember countries
Latin American FreeTrade Area(LAFTA)(continued)
ChileColombiaEcuadorMexicoParaguayPeruUruguayVenezuela
Principal objectivesand status
StatusPreliminary stages of implemen
tation. About 50 per cent ofregional tariffs have beenlowered
Prindpal action
establishment of a Latin American common market beginningin 1970 and becoming substantially operative within fi,fteenyears. This trade grouping wouldinclude LAFTA, CACM andLatin American States belonging to neither system
Area(t lwl£sa-adsof square
kilotnetres)
Population,
1966a
(millions)
Population Gross domesticdensity, 1966a__p_r_o_d_u_ct_,_1_96_5_°__(persons per Total Per capitasquare kilo- (millions (dollars)
metre) of dollars)
Trade (exports), 1966"
Total Intra-trade(millions (percentage
of dollars) of total)
Andean Group
BoliviaChileColombiaEcuadorPeruVenezuela
Caribbean Free TradeArea(CARIFTA)f, g
AntiguaBarbadosGuyanaTrinidad and
T~I,~~~
ObjectivesImmediate: financing of projects
of industrial complementarity,and integration within region
StatusPreliminary stage of implementa
tion of joint proj ects
ObjectivesImmediate: free trade areaUltimate: economIC integration of
CARIFTA area
StatusInitial stage of negotiation
This group originated in a "Declaration of Five" subscribed toat a Bogota Presidential Meeting (1966)
Andean Development Corporationcreated (February 1968) withheadquarters in Caracas
The Andean Group's achievementsinclude a complementary treatyfor the automobile industries ofChile, Colombia, Peru and Venezuela; also cellulose, wheat,sugar and meat trade agreements between Chile and Colombia
The Caribbean Free Trade Areaagreement was formally signedin Antigua on 30 April 1968
Agreement on the establishmentof Caribbean Development Banksigned in March 1968
5,452
220
57.4
2.0
10.5
8.6
22,152
92.7
398
471
5,239.2
575.3
2.5
4.9
KenyaUgandaUnited Republi~ of
Tanzania
East Africannomzc andCommunity
EcoSocial
ObjectivesInitial: common market within
East AfricaUltimate: common market of a
wider economic grouping in eastern Africa
StatusPreliminary stage of implementa
tion
The i'reary or 1<.ast f\.tncan Looperation became opNative 1 December 1967. It incorporated theEast African Common Marketand the Common Services Organization. Headquarters to be inArusha
1,1 J~ LY.;) .io.u £i,l'tV
Central African Economic and CustomsUnion (UDEAC)h
CameroonCentral African Re-
publicChadCongo (Brazzaville)Gabon
West African Eco-nomzc Community(WAEC)
DahomeyGambiaGhanaGuineaIvory CoastLiberiaMaliMauritaniaNigerNigeriaSenegalSierra LeoneTogoUpper Volta
West African Economic and CustomsUnion (UDEAO)
DahomeyIvory CoastMaliMauritaniaNigerSenegalUpper Volta
Objecf.ivesInitial: harmonization of industrial
development policies and economic co-operation
Long-term: commOn market member countries
Statush
ObjectivesUltimate : common marketGeneral: encouragement of maxi-
mum exchange of goods andservices; elimination of trade andcustoms barriers and promotionof co-ordinated development ofindustry, agriculture, transportation, manpower, energy and otherresources
StatusPreliminary-stage draft treaty
being drawn up
Objecf1~ve
Common external t3!riff and harmonization of customs legislation
StatusAgreement reached on rates of
duty on various products exchanged among some countries
Treaty of UDEAC came into forceat the beginning of 1966. Headsof State Meeting, which tookplace in Bangui in December1967, discussed harmonization ofindustrial plans
Idea of economic integration accepted in 1966
Articles of agreement establishingthe Community signed by twelveof the fourteen States, and preliminary draft treaty considered(1967)
Meeting of Heads of Governmentof member countries approvedthe principle of a West Africaneconomic union and the choiceof Bamako (Mali) as the seatof the secretariat (April 1968)
Customs union formed to replacearrangement of free trade andcommon tariff maintenance whilecountries were colonies (1959)
Agreement on new rates of dutyon goods exchanged betweenSenegal and Ivory Coast reachedin 1966 and came into effect in1967
2,985
6,064
4,405
11.5
95.5
22.8
3,8
15.7
5.2
1,164
10,110
3,862
101
107
169
317.7
2,075.0
615.1
5.9
2.7i
Table 47. Regional economic groupings: ohjectives, sta111s and mam features (continued)
Total Per capita(millions (dollars)
of dollars)
Trade (e.rports), 1966'Name of g?'ottping and
mem.ber countries
West African Economic and CustomsUnion (UDEAO)(continued)
Pn"ndpalobjectivesand status Principal action,
Agreement on co-ordination offiscal legislation concluded between Senegal and Mauritania(1967)
Area(thousandsof square
kilometres)
Pop"la.·tion,
1966"(millicns)
PopulaNon Gross domesticdensity, 1966' pr_o_d_u_ct_,_1_9_65_b__
(persons persquare kilo
metre)
Total( m.£llions
of dollars)
I ntra-t1"ade(percentage
of total)
Organization of Senegal River States(OERS)
GuineaMaliMauritaniaSenegal
Permanent Consultative Committee ofthe Maghreb C01t11tries
AlgeriaLibyaMoroccoTunisia
Arab Economic Unity
IraqTordanKuwaitMoroccoSyria
ObjectivesImmediate: economic integration
and joint developmentUltimate: formation of a wider
West African economic community
StatusImplementation of joint plans
ObjectivesImmediate: economic co-operation
based on special Maghreb tradearrangements, unification of tariffpolicies, co-ordination of policiesconcerning exports to third countries, and the co-ordination andunification of industrial development and infrastructure policies
Ultimate: common market
StatusPreliminary stage of co-ordination
of industrialization
ObjectivesUltimate: common marketGeneral: economIc co-operation-
unification of tariffs, customsprocedures, trade policies andeconomic legislation and co-ordination of monetary, fiscal and
OERS replaces Inter-State Committee for the Development ofthe Senegal River Basin set upin 1965 with $5.8 million fromUnited Nations Special Fund tostudy agricultural and irrigationproj ects in the river basin
In 1967 member Governmentsagreed on five joint proj ects costing $16 million
Permanent Consultative Committeeconsisting of President and Minister for Economic Affairs ofeach country established to studyproblems of economic co-operation III the area and proposemeasures (1964)
Plan for a trade relations committee drawn up; draft multilateralagreement relating to trade exchanges prepared and Tunis chosen as seat of secretariat (1966)
Maghreb Ministers for EconomicAffai'rs agreed to general economic co-ordination (1967)
Trade and payments conventionssigned in 1953
Final agreement setting up theUnity adopted in 1957 and signedin 1963; ratified by SIX of theseven States in 1963 and 1965
1,729
3,102
2,380
12.9
31.2
60.6
7.4
10.1
25,5
1,243
6,782
9,961
97
217
164
305.4
2,322.4
2,358
UnIted Arab Republic
Yemen
Regional Co-operationfor Development(RCD)
IranPakistanTurkey
Association of SouthEast Asian Nations(ASE.AN)
IndonesiaMalaysiaPhilippinesSingaporeThailand
economic policies among signatory States
StatusCustoms tariffs among members
,reduced on certain products
ObjectiveCultural and economic co-opera
tion, especially in the field of industrial development
StatusMinisterial Council set up to con
sider and decide upon measuresfor cultural and economic cooperation
ObjectivesEconomic and cultural co-operation
to promote peace and prosperityin the region
Collaboration for the utilization ofthe agriculture and industries ofthe member countries and thestudy of the problems of international commodity trade
StatusPreliminary stage. Grouping
created in 1967
Arab Economic Unity Councilcomposed of full-time representatives of signatories establishedin 1963
Summit meeting of leaders ofState of the three countries established grouping and set upMinisterial Council composed ofForeign Ministers (1964)
Regional Planning Council, composed of leaders of planningagencies in the three countries,set up to study developmentplans and production potentialities of the region and make recommendations on joint projectsand long-term purchase agreements (1964)
Teheran (Iran) chosen as seat ofscretariat
Joint enterprises for producingaluminium, ca:rbon black andbank-note paper approved forimplementation on joint equityparticipation and productionsharing basis. Others, such as foriron and steel, electronics andmachine tools being studied
Organization meeting held in 1967
3,375
2,639
158.6
178.9
425
67.7
22,465
22,836
142
128
2,398.2
3,493.6
1.5
(So1trce and foot-notes to table on fol/owing page)
Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on United Nations, Statistical Yearbook, 1966(Sales No.: 67.XVII.1), Monthly Bulletin of Statistics, October 1967 and May1968, "Economic co-operation in West Africa" (EjAC.54jL.26jAdd.2); International Monetary Fund, International Financial Statistics, May 1968, and International Monetary Fund and International Bank for Reconstruction and Development, Direction of Trade, annual issues for the years 1962-1966.
a Mid-year estimates. For the following groupings the years are different:West African Economic and Customs Union and West African Economic Community, 1964; Arab Economic Unity, 1963; Regional Co-operation for Development, Association of South-East Asian Nations, and Maghreb countries, 1965.
b At factor cost. For CMEA, rough estimate by the United Nations Secretariat, based on the official exchange rates. For West African Economic Community, at market prices for 1964. For Arab Economic Unity, 1963 except 1958for United Arab Republic and Yemen. For Association of South-East AsianNations, 1965 except 1963 for Indonesia. For Maghreb grouping, 1964 for Algeria.For Regional Co-operation for Development and West African Economic andCustoms Union, 1964.
e Exports, f.o.b. For Arab Economic Unity, excluding petroleum andd~t<l; for Kuwai.t (including r:etr.o1eum and data for Kuwait, expor!s are $3,504mIllIOn and the mtra-trade raho IS 2.0 per cent). For CMEA excludmg Mongoliabut including Albania. '
d The following countries are Associated States: Burundi Cameroon CentralAfrican Republic, Chad, Congo (Brazzaville), Democratic Republic of th~ Congo,Dahomey, Gabo.n, Ivory Coast, Madagascar, Mali, Mauritania, Niger, Rwanda,Senegal, Somaha, Togo and Upper Volta. Greece and Turkey are AssociatedEuropean States.
e Finland is an associate member enjoying all the privileges of full membership.
f Statistical indicators exclude Antigua.g Jamaica's application to join CARIFTA was accepted unanimously by a
meeting of the CARIFTA Council in June 1968. Jamaica, along with theLeeward and Windward Islands, was admitted on the same terms and conditi@nsas if it had been a member when the agreement was signed. With the admissionof Jamaica to membership of CARIFTA, the socio-economic indicators assumethe following magnitude: area, 232,000 square kilometres; population, 3.8 million;persons per square kilometre, 16.4; gross domestic product, total, $1,737 million;gross domestic product per capita, $463; trade, total, $800.4 million; intra-trade(as a percentage of total trade), excluding trade between Barbados and Jamaica,4.3. (There are no relevant data for the Leeward and Windward Islands).
The West Indian associate States announced that they would sign theagreement on 1 July 1968.
h The Central African Republic and Chad, two of the original members ofUDEAC, withdrew from the organization in April 1968. With their withdrawalfrom the organization, the socio-economic indicators assume the followingmagnitude: area, 1,085,000 square kilometres; population, 6.7 million; personsper square kilometre, 6.2; gross domestic product, total, $846 million; grossdomestic product per capita, $127; trade, total, $263.1 million.
The Central African Republic, Chad and the Democratic Republic of theCongo have formed a new economic grouping, Central African Economic Union(UEAC) , with almost the same aims as UDEAC-regiona1 co-operation and aneventual common market and an investment policy to favour the landlockedmember States (Central African Republic and Chad). The socia-economicm~g.nitudes of UEAC are: a.rea, 4,252,000 square kilometres; population, 20.8m~l1~on; persons per ~quare kIlometre, 5;0; gross domestic product, total, $1,477ml1hon; gross domestic product pet' cap~ta, $71; trade, total, $568.8 million.
i Share of intra-subregional imports in total imports.
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COMO CONSEGUIR PUBLICACIONES DE LAS NACIONES UNIDAS
Las publicaciones de !as Naciones Unidas estan en venta en librerfas y casas distribuidoras en todas partes del mundo. Consults a su llbrero o dirljase a: Naciones Unidas, Secci6n de Ventas, Nueva York o Ginebra.
Printed in U.S.A. 17520--0ctober 1968---3,000
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