With the fall in new commercial lending, consequent on the debt problem, and the inadequate and static levels of official aid, developing countries have no possibility to remedy their situation. Although it is still widely believed in industrialized countries that money is flowing from richer nations to the developing countries to assist in their struggle against poverty. This has not been true since 1979, at which time a net $40 billion flowed from the northern hemisphere to the nations of the south. In 1989, the southern nations are now transferring at least $20 billion a year to the north (taking into account loans, aid, repayments of interest and capital movements). If account were to be taken of the effective transfer of resources implied in the reduced prices paid by industrialized nations for the developing world's raw materials, then the annual flow from the poor to the rich might be as much as $60 billion per year.
Statistics fail to capture the psychological dimensions of what is happening. For several decades there had been forward movement in most countries. Even though poverty continued to be pervasive, more people were finding better jobs than ever before, and an increasing share of the population was gaining access to clean water, education, and medical care of some sort. Parents saw their children has having a better start than themselves. This has been brought to a halt. Indeed the physical deterioration in basic infrastructure, including schools and hospitals, and the mounting excess of unemployed and underemployed, will call for more than a weak increase in economic growth if hopes are to be rekindled. And these pent up needs continue to increase as investment remains depressed.