Statement by the managing director of the International Monetary Fund

Following the 1986 meeting of the SON in Tokyo, the Managing Director of the International Monetary Fund, Mr. Jacques de Larosière, addressed the Economic and Social Council of the United Nations in Geneva on 4 July 1986. A selection of his remarks on that occasion attest to his recognition of the substance of the Tokyo discussions.

"Some of the most pernicious human costs never even appear in standard economic statistics. Malnutrition, particularly among young children, is a leading case in point. Malnutrition handicaps the ability to learn, to work, and to grow. It cheats children of their future."

"Programmes of adjustment cannot be effective unless they command the support of governments and of public opinion. Yet this support will be progressively harder to maintain the longer adjustment continues without some payoff in terms of growth and while human conditions are deteriorating. Likewise, it is hard to visualize how a viable external position can be achieved if large segments of the work force lack the vocational skills - or even worse, the basic nutritional and health standards- to produce goods that are competitive in world markets. Human capital is after all the most important factor of production in developing and industrial countries alike."

"Adjustment that pays attention to the health, nutritional, and educational requirements of the most vulnerable groups is going to protect the human condition better than adjustment that ignores them. This means, in turn, that the authorities will have to be concerned not only with whether they close the fiscal deficit but also with how they do so. For example, safeguarding human needs may simply imply that employment in overstaffed and loss-making public enterprises or defence spending be reduced in preference to cutting an accelerated immunization and health-care progamme for children.''

"The forms of adjustment that are most conducive to growth and to protection of human needs will not emerge by accident. They have to be encouraged by an appropriate set of incentives and policies. They will also require political courage."

"The basic argument - that adjustment is unavoidable but that the consequences for growth and protection of human needs depend in good measure on how governments manage macroeconomic and structural policies during the adjustment process - is more and more being accepted. "

"The Fund has neither the mandate, nor the staff, nor the technical capacity to design health, nutrition, or educational programes in developing countries. That important responsibility falls instead to other UN-related agencies that specialize in these areas. This does not mean that the Fund cannot do its part to help developing countries protect basic human needs. Over the past two years, we have, in fact, expanded our contacts with some of these agencies in order to advance our mutual understanding of how the most vulnerable groups might best be protected during the adjustment process. In addition, when requested by a member country, Fund missions may consider with the authorities the implications of alternative approaches to adjustment for the distribution of income. But let there be no doubt: The final decision about adjustment strategies and spending priorities - and they are tough decisions - must rest with the member country itself. The Fund cannot make those decisions."