The World Economy in 1983: Marking Time

The performance of the world economy in 1983 is difficult to characterize. For the industrialized market economies-members of the Organization for Economic Cooperation and Development-it was the year of the long-awaited recovery after the second oil shock of 1979-80. World trade began to revive after two years of stagnation and decline. There was continuing good news about inflation in the OECD area. Business and especially consumer confidence improved. A major rupture in the world financial system was averted through effective, concerted crisis management led by the International Monetary Fund, whose role was further enhanced by an infusion of new resources. The heavily-indebted developing countries demonstrated considerable progress in external adjustment: indeed the largest Latin American debtors accomplished an amazing turnaround in trade performance.

It was also a year when the seemingly inexorable rise in unemployment continued in Europe. The state of global indebtedness was (as usual) hard to assess statistically, but by year-end the sharp slowdown in international bank lending looked ominous in the light of the estimated needs of the major debtor countries, already showing signs of the political and social strain of adjustment. It was a year of new and renewed protectionism. In 1983 (like 1981 and 1982) the debate about deficits in the United States raged on and was unresolved. Interest rates, which had stopped falling by the spring, were gingerly nudged up, and wobbled irresolutely thereafter.