The shining knight for poor lands?

Can free enterprise, like a knight of King Arthur's court, ride to the economic rescue of the world's poor nations? President Reagan seems to think so. In his address to the joint annual meeting of the International Monetary Fund and the World Bank this week, he held high the virtues of capitalism, like a knight brandishing his sword.

"We who live in free-market societies," he said, "believe that growth, prosperity, and ultimately human fulfillment are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create , only when individuals are given a personal stake in deciding economic policies and benefiting from their success -- only then can societies remain economically alive, dynamic, prosperous, progressive, and free."

That is not the sort of rhetoric the assembled finance ministers, economic ministers, central bankers, and other top financial officials are accustomed to hearing at these yearly gatherings. But it was not entirely unexpected. The Reagan administration, soon after taking office, launched something of a campaign to encourage the greater development of free enterprise within developing nations and to further harness the abilities of multinational corporations to speed economic development. It even set up a Bureau of Private Enterprise within the Agency for International Development.

There's less antagonism to the free-enterprise idea today than there would have been a decade or so ago. Then, socialism of one kind or another was riding high in many of the world's former colonies. Multinational corporations were regarded with distrust, if not fear.

But experience has modified those views. For most developing countries, the international companies have proved to be useful, working elephants, not rogues. They have been relatively easily tamed, and do a lot of work.

Further, the fastest-growing developing nations have been the market-oriented ones -- Taiwan, Singapore, Brazil, Kenya, South Korea, and Mexico. Socialist Tanzania or semisocialist India have done poorly by comparison.

Said Mr. Reagan: "The societies with have achieved the most spectacular, broad-based economic progress in the shortest period of time are not the most tightly controlled, nor necessarily the biggest in size, or the wealthiest in natural resources. No, what unites them all is their willingness to believe in the magic of the marketplace."

Development economists would not quarrel too much with that thesis, though they would perhaps indicate that the key to development success is not quite so simple as free markets alone.

One necessity for growth, they say, is adequate foreign assistance. Here they are concerned.

"The chances of additional development financing are not so good," Munir Benjenk, a World Bank official, said at a press briefing. "Yet the needs are so great."

The United States, faced with a budget squeeze, is unlikely to increase foreign aid soon. If anything, Congress seems likely to cut aid. Nor are hopes high that West Germany and the United Kingdom, also major donors, will step up development assistance.

In 1980, official development assistance from the industrial countries rose 19 percent, before adjusting the contributions for the effect of inflation. This level of giving represented only 0.37 percent of these countries' gross national product. The year before, these nations contributed 0.35 percent of their GNPs.

But officials like Mr. Benjenk don't expect growth of foreign aid in the future. "We may not like it, but it is a fact of life," he said.

So the hope is that foreign private investment can help more than before in slaying the dragon of poverty nd despair.

Ibrahim Shihata, director general of the OPEC Special Fund, a development fund created and financed by the oil-exporting countries, has some doubts. "If [private investment] continues to grow as slow as it has, it will not fill any gap," he says.

He cited World Bank statistics indicating that in 1980 the combined international payments deficit of the developing countries was $75.3 billion. Only $8.6 billion of this was covered by foreign investment in plants, equipment , and offices. Some $36.9 billion more was covered by short-term commercial bank loans; $21.7 billion was official development assistance; and the remaining grew only slowly in the 1970s.

"Rather than wringing its hands," as Benjenk put it, the World Bank will continue to encourage foreign investment.

In his maiden addresses to the assembled governors, A. W. Clausen, the bank's new president, revived an old proposal for the creation of a "multilateral investment insurance mechanism" to overcome the reluctance of private companies to invest in some developing countries. It should provide some "reasonable security against certain kinds of political risk . . .," he said.

The former president of the Bank of America, some 90 days into his new job, also spoke of increasing cofinancing -- that is, the World Bank inviting commercial banks or other financial institutions to join it in financing development projects. He praised the International Finance Corporation (IFC), the arm of the bank that helps finance private business projects in poor nations. He spoke of the bank's role in stimulating investment in energy projects.

"The private sector particularly represents an immense potential source of investment capital," he said, "and I believe that there is much the bank can and should do to help it expand its lending to the developing countries."

Some development economists fear that too much emphasis on private enterprise could benefit mostly the well-to-do in the developing countries, enlarging an already large gap between the rich and poor in many of these nations. They also wonder if foreign capital will go mostly to the already better-off developing countries as it has in the past.

Whatever, the word has come from the World Bank's most important shareholder. "We believe," said President Reagan, "all facts of the bank can play a more active role in generating private resources and stimulating individual initiative in the development effort."