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Vijay Prashad/The Poorer Nations: A Possible History of the Global South/New International Economic Order


Vijay Prashad
The Poorer Nations: A Possible History of the Global South

London ; New York. Verso and LeftWord, 2012, 285 p.


New International Economic Order

In 1949, economist Raul Prebisch delivered a major paper to the Economic Commission on Latin America at its Havana meeting. Called “The Economic Development of Latin America and Its Principal Problems,” or the “Havana Manifesto,” the document contained a blistering critique of the world order fashioned in colonial times, and provided a coherent set of alternatives that would be more institutionally democratic and economically egalitarian. Most of the rules of the world order had been set when the majority of humanity struggled under colonial or semi-colonial domination. The representatives of the world’s peoples had had no real say at the Bretton Woods conference in 1944. The delegates that came to Bretton Woods, New Hampshire, from afar went into the Gold Room at the magisterial Mount Washington Hotel to put their impressions on the final communique. That was their role, and little else. It was no surprise, then, that the two major institutions that came out of Bretton Woods—the International Monetary Fund and the World Bank—had to be run by a European and an American, respectively. No one else would have a turn. John Maynard Keynes, who took the lead at the conference, did not want too many others. Those from the colonies and semi-colonies “clearly have nothing to contribute and will merely encumber the ground,” he wrote to the British Treasury.
To Keynes, Bretton Woods ended up being “the monstrous monkey-house assembled for years.” 29 It was hardly the attitude to seed a truly international solution to economic crisis.
Keynes’s disdain for those not like himself was shared by others, and it was this that moved them to disenfranchise the world from the governance of the lMF and the World Bank (the main votes on their boards of executive directors were held by Europe and the US). “One of the conspicuous deficiencies of the general economic theory, from the point of view of the periphery,” Prebisch wrote, “is its false sense of universality.” 30

Much the same kind of discrimination left most of the world without any control over the UN’s Security Council, which, against the spirit of the UN Charter, began to act like the executive of the General Assembly. The silence of the colonized and the semi-colonized meant that the new economic and political policies favored those who had already seized the world’s wealth, and these policies now set inequality in stone. Most of them lived in countries not yet independent, and so were discriminated against by their absence in the deliberations. When decolonization came, these countries would place the question of international democracy at the top of their agenda. It is what held together so many of the otherwise politically disparate states that joined hands in the Third World Project of the 1950s and 1960s.

Chastened by the economic warfare of the 1920s and 1930s, which not only brought on the hostilities of World War II but also contributed to the prolongation of the Depression, the Atlantic powers now created a currency regime that would be less volatile and a political regime that would be less confrontational. The World Bank was created to help manage the reconstruction of war-ravaged Europe and Japan (but not the rest of Asia, nor Africa, both also damaged by European ambitions).

The IMF emerged as an institution to tide over countries that had a balance-of-payments or short-term liquidity problem. There was only a limited or hesitant mandate for poverty reduction or the elimination of the vast global inequalities that marked the end of the colonial era.
The IMF and the World Bank were institutions for the maintenance of colonial domination by other means—or so it seemed from Santiago, Dar es-Salaam, Cairo, and New Delhi.

For that reason, the countries that had been shut out of the creation of the IMF and World Bank, and of the architecture of the UN, built their own project and their own institutions. Their Third World Project drew from the rich traditions of egalitarianism, took refuge in the promise of the UN and its Charter, and developed an intellectual tradition within which it articulated a set of coherent policies to take the planet out of the miserable present. A central organization for the Project was the UN Conference on Trade and Development (UNCTAD), created in 1964 with Prebisch as its founding secretary-general. At the various UNCTAD meetings, and in other forums, the countries of Africa, Asia, and Latin America, with allies from the Socialist bloc (occasionally the USSR), Yugoslavia (formerly outside the Socialist bloc, but programmatically in sympathy with it), and some European countries (notably the Scandinavian states), developed an alternative perspective that would sharpen by the early 1970s. The view from UNCTAD settled the agenda for the Non-Aligned Movement—the major bloc that adopted the Third World Project, with varying degrees of enthusiasm.
In the UN, the countries that belonged to the NAM or who had fealty to the Third World Project formed a negotiating bloc in 1964 called the G77 (there are now 132 members of the Group of 77, but the name remains) 31. The G77 took up the agenda devised by UNCTAD and other such UN agencies, where the NAM countries were able to use their demographic strength to their advantage. The power of human bodies had no such influence in the IMF, the World Bank, the UN Security Council, or other agencies where the former colonial powers held sway. The USSR and the Eastern bloc saw the NAM, and the G77, as allies, but since the East was wary of the UN and its bodies, its allegiance was in parallel to the NAM, rather than to it directly.
One of the most notable features of this era is that, despite its demographic majority, the states of the Third World Project petitioned the global bodies, whereas the North simply acted. There is no better illustration of the uneven geometry of imperialism than the mood of international deliberations. The North’s wishes are multiplied; the South’s pleas are sometimes added, mainly subtracted.
The oil embargo of 1967 whetted the appetites of OPEC and the NAM. It showed that the countries of the Third World Project had some political heft. At the third conference of the NAM in Lusaka, Zambia, in 1970, the main political leaders attempted to strengthen the group institutionally and to refine its ideological challenge to the Atlantic bloc. Once more they stressed the need to bring democracy to international relations, which meant reducing the power of the five permanent members of the UN Security Council and enhancing the authority of the UN General Assembly. The oil embargo had proved that producers’ cartels functioned effectively, and that they would be able to mitigate the asymmetrical power of transnational corporations and their countries. The NAM countries wanted to make sure that their efforts provided “an opportunity to bring about structural changes in the world economic system so as to meet the pressing needs of poor nations, to strengthen their independence, and to provide for a more rapid and better balanced expansion of the world economy.” Not only did the nations set out the goals and objectives (international cooperation and equitable development); it also put forward a raft of concrete policies to attain these goals. Here are some of the measures:

  1. Finance: to alleviate the problem of debt, to increase the net flow of financial transfers from developed to developing countries, to distinguish between investment for development and investment for commerce.
  2. Technology: to transfer technology to deficient countries, to expand research opportunities, and to improve educational systems.
  3. Production: to protect the prices of raw materials, to create systems to process raw materials and attain the advantages of value-added sales, to create systems of preference for products from developing countries, to diversify (including the promotion of an industrial sector) the economies of the developing countries.

Bits and pieces of the Lusaka declaration can be found in the various UNCTAD statements and documents, at earlier NAM meetings, in various UN forums, and at such diverse venues as meetings of development economists and revolutionary politicians. By 1970, these ideas had formed a coherent alternative to the dominant liberal order. This liberal order wreaked havoc with the dreams of the new states, whose struggles against colonialism and imperialism had pushed them to seek alternatives. As the Chilean economist Osvaldo Sunkel put it, the liberal order wanted the new states to integrate into the world economy and disintegrate national economies 32. At Lusaka the new ideas had germinated, but the language remained hesitant. The leaders made their requests tentatively still with the tone of impetuous inferiors, not sure if their entreaty, however correct, would have any bearing in the drawing rooms of seniority.
Then came the annus mirabilis, 1973. OPEC’s concerted action provided an object lesson for the NAM states that they were not as miserable as they sometimes felt. At Bandung, in 1955, the leaders comforted themselves with the view that, even if they were not militarily strong, they had moral power. Be that as it may, the oil episode showed that at least a section of the NAM states had economic power. Houari Boumediène, Algeria’s president who, with Libya’s Muammar al-Qaddafi, had done so much to move OPEC in a radical direction, took the floor of the UN’s 6th Special Session in April 1974 to make just this point. “The OPEC action,” he said,

is really the first illustration and at the same time the most concrete and most spectacular illustration, of the importance of raw material prices for our countries, the vital need for the producing countries to operate the levers of price control, and lastly, the great possibilities of a union of raw material producing countries. This action should be viewed by the developing countries as an example and a source of hope 33

OPEC’s “commodity power” reaffirmed several of the planks of the Third World Project, but now no longer just in theory; OPEC’s unilateral action showed the certainty and legitimacy of the entire project (from the nationalization of domestic industries to cartelization between states). OPEC’s actions made the idea of begging for foreign aid and acceding to the conditions laid down by the advanced states seem quaint. The Pearson Report (1969), which called for more aid from the developed to the developing countries and had a boundless enthusiasm for development through the benevolence of the Atlantic world, seemed musty 34. OPEC’s actions filled the Third World project with meaning.

Shortly after 1973 another political opening gave a fillip to the NIEO dynamic. A series of national liberation movements won independence against implacable colonial powers (notably the Portuguese) and the proxy agents of imperialism. In southwestern Europe, the Portuguese dictatorship of António de Oliveira Salazar collapsed in 1974, after which its empire lost its hold over Guinea-Bissau, Mozambique, Cape Verde, and Angola. The next year, Cambodia and Laos went to various branches of Communism, and the National Liberation Front removed the United States and its allies from Saigon.
A brutal general stole Chile from history’s positive column, but the defeat of Salvador Allende’s government only strengthened the sense that imperialism had to resort to violence to have its way. Hegemony’s velvet glove had become tattered, and the iron hand of domination showed itself plainly. Matters seemed settled from the point of view of the world’s poor.

A buoyant NAM called for a special session of the UN General Assembly to consider what would become of the NIEO. Two months after it made the call, the General Assembly gathered in April 1974, in its 6th Special Session. The NAM submitted a draft Declaration on the Establishment of a New International Economic Order. Boumediene hastily called for the Special Session as a way to outflank a diplomatic maneuver by US Secretary of State Henry Kissinger. Cleverly, Kissinger resorted to an old colonial trick: divide and conquer. When oil prices rose, Kissinger sought out the non-oil-producing states among the NAM who had begun to feel the pinch as oil importers.
Calling these states “Less Developed Countries” (LDCs), Kissinger sought to peel them away from their unity with OPEC. He also called in favors from OPEC members such as Saudi Arabia, whose role in OPEC was central. To undercut Kissinger, Boumediene called for the UN Session, to force the entire NAM bloc to go on the record in favor of the NIEO.
The New York meeting did not go by without incident. The Chinese sent their deputy premier, Deng Xiaoping, who attacked the Soviets for being an “imperialist state.” The Soviet foreign minister, Andrei Gromyko, dismissed the “empty talk” of the Chinese. The UN secretary-general, Kurt Waldheim, tried to stand above the fray, worrying about the “global emergency,” calling on the member nations “to secure the optimum use of the world’s natural resources with the basic objective of securing better conditions of social justice throughout the world.” His attempt at mediation did not bring together the two sides. Speaking for the NAM, Boumediene saw the struggle as one in which the “raw material production countries insist on being masters in their own houses.” The Atlantic world, on the other hand, wished to make the dispute about the need for stability, rather than equity. “Trade relations, currency conditions, the development of countries have been seriously upset,” said West Germany’s foreign minister, Walter Scheel. “All this together has had the effect of an earthquake leaving nothing unscathed.” Kissinger concurred: “The great issue of development can no longer be realistically perceived in terms of confrontation between the haves and have nots.” But this was precisely how the NAM states saw the issue.
The NIEO came before the General Assembly, where it was passed without dissent 35. The United States went along with the NIEO, largely because it was both outflanked and unwilling to engage with the NAM countries in the General Assembly. The tide had seemed to move in the NAM’s favor, and several European countries (mainly the Scandinavian states), New Zealand, Australia, and Canada favored much of the NAM agenda. The US sought other avenues to squash the NIEO, particularly when the Declaration went towards implementation in the back rooms of the various agencies. The process is byzantine; the details on how it works are often only clear to old UN hands. The upshot was that the NAM countries had a majority in most of the UN agencies.
It tried to slip parts of the NIEO agenda through the various sub-agencies of the UN. But the real show of strength was in the General Assembly. It became clear that the US and its immediate allies were not able to move the General Assembly. It had become an embarrassment. The first test for the US and its allies was when the General Assembly took up the Charter of Economic Rights and Duties of States (a document framed within UNCTAD since 1972) in the autumn of 1974. The document came before the Assembly seventy-nine times before it passed with 120 votes in favor and six against, with ten abstentions. The six who voted against the Charter were Belgium, Denmark, Luxembourg, the United Kingdom, the United States, and West Germany. They had put their feet down. France joined the abstainers and sought a compromise.
In October 1974, France’s president, Valery Giscard d’Estaing, proposed an international conference on energy to deal with the OPEC price war and to seek some common ground on the issue of commodities. Before Giscard’s conference could get underway, the NAM states organized a Conference of Developing Countries on Raw Materials in Dakar, Senegal (February 4-8, 1975). Their unity was strengthened by the addition of 110 states. The US bloc sought to divide the OPEC states from the others, dealing with the former over the oil price and the latter through the mechanism of foreign aid (following the suggestions of the Pearson Report of 1969). The Raw Materials Conference was to avert such a split in the ranks. Senegal’s president, Leopold Senghor, told the gathered heads of government, “We in the Third World have to use our natural resources to break traditional patterns of world trade.” 36
The resolution from Dakar underlined that the Paris process had to deal with all raw materials, not just oil. Dakar’s demand was joined when the OPEC countries met in Algiers in March 1975 and released a “Solemn Declaration” to keep discussion of all commodities on the table (and find ways to help the non-oil-exporting developing countries to manage the rise in oil prices) 37
Giscard welcomed several key countries to Paris in April 1975 to begin the Paris process. From the NAM and OPEC came Algeria, Brazil, India, Iran, Saudi Arabia, Venezuela, and Zaire. They were led by Venezuela, which was a member of both OPEC and NAM. The United States, the European Economic Community, Canada, and Japan sat at the other end of the table. Canada joined Venezuela as a co-chair of the meeting and of the process. The divide opened up. The US wanted an exclusive emphasis on oil prices. The NAM-OPEC states wanted to combine discussion of oil prices with those of other commodities.
The gap between these two camps seemed unbridgeable. The French and a few other states tried to bring the two camps together, but it seemed a wasted effort. The Paris conference—though it lasted for two years, until mid 1977— was going nowhere.
Henry Kissinger, US secretary of state, came to the UNCTAD IV meeting in Nairobi in May 1976 with hints of conciliation. The G77 states had pushed UNCTAD to a policy innovation, an Integrated Programme for Commodities. Fluctuating commodity prices hurt the producer countries, who could not plan their budgets when their exports either soared or flattened. What they sought was a program that would enable producers to get a better deal in their negotiations with the transnational corporations and Atlantic countries. They also sought a mechanism to ensure that their sales of raw materials would not be subject to the oscillations of market demand. The G77 proposal attempted to shift the power asymmetry in the market for commodities—which is why the G77 wanted to found a Producers’ Cartel for at least seventeen core commodities (amounting, minus oil, to three-quarters of the exports from the G77 states). Kissinger’s speech overshadowed the work of the UNCTAD Secretariat and the G7. He spoke in generalities of a “new cooperative international arrangement.” Some of the language of the UNCTAD Secretariat entered his speech, such as that relating to buffer stocks and funds to avert price fluctuations. But Kissinger avoided the political question. Rather than address the question of power in economic relations, he proposed the creation of a modest International Resources Bank to create a bond market as advances and insurance for commodity sales. The British, the French, and the Canadians welcomed Kissinger’s contribution; but the G77 was furious. The NGO paper “Cosmos” provided the best analysis of Kissinger’s Machiavellian tactics: ““Dr. Kissinger [had] retreated into the ever-tightening laager of free trade, piled up his ammunition, and defied those who thought differently to do their worst.” 38
The language of apartheid South Africa was probably used deliberately.
Kissinger’s real reason for coming to Africa was to play the role of emissary for the recalcitrant apartheid regime in South Africa, at the time embroiled in its wars in Angola and Namibia, and on the fringes of Mozambique 39. The final communique from UNCTAD IV was tepid.
Between May and June 1977, the NAM-OPEC bloc faced off in Paris against what appeared to be the fragile unity of the Atlantic states. The US had cemented its position. It wanted to break OPEC’s position of primacy over the NAM states. The Carter administration saw the UNCTAD proposals as “extreme” and complained that it left them “practically no negotiating flexibility.” 40
The French were less obdurate.
Giscard wanted the Paris round to produce a breakthrough, and so was willing to push for some concessions. The North-South disagreement became entangled in an ongoing fracas between France and the United States around NATO, the role of the dollar, and now energy policy 41. A confidential UK assessment from 1975 noted that the French thought of the dollar policy “in much the same way as they think of the integrated structure of NATO under supreme American command: the prejudice against both is the same.” 42 Giscard was galled by what he felt was US domination 43. He wanted an open dialogue with the NAM states not only on oil, but also on other commodities.
The US was furious about this concession. At a November 1975 summit of the Atlantic states in Rambouillet, Kissinger openly declared the US view: “We agree on the need for cooperation with producers. With cooperation we can separate the moderates from the radicals within OPEC, the LDCs from the OPEC countries, and prevent a lot of other ‘PECs’ [OPEC-like commodity cartels]” 44
He put Giscard into a sulk.
A fragile unity behind UNCTAD’s idea of a commodity program held the various elements of the G77 together. The Latin American states did not want confrontation to disrupt their own hard-won agreements on coffee and other commodities. OPEC’s core strength was whittled away. The Saudis and their Gulf Arab satellites were not willing to go along with the Algerians and the Libyans 45. Furthermore, the oil firms still controlled the upstream of River Oil, from drilling to the pump, and their cartel put pressure on the oil states. The more conservative oil states stood down 46
Paris ended in tatters. The NAM-OPEC states bemoaned its collapse, as the Conference “fell short of the objectives envisaged for a comprehensive and equitable program of action” for a NIEO. “With regret,” they pointed out in a joint statement, “most of the proposals for structural changes in the international economic system” and “certain proposals for urgent actions on pressing problems” had been nixed by the Atlantic powers, who in turn were disappointed that “some important areas of the dialogue such as certain aspects of energy cooperation” could not be pursued 47
The Paris proceedings were lacklustre. As the Iranian ambassador, Jahangir Amuzegar, put it, “There were no ringing passages; no dramatic declarations; no grand design; not even much pious diplomatic platitude,” 48. The conference was not bold enough; the parties had simply strengthened their corners. Commodity Power, the slogan of NAM-OPEC, could not be planted on Parisian soil, and so it fell by the wayside. Whatever “concessions” came to the NAM states had already been announced before the meeting (aid in the Pearson style, and a modest fund and special action program). The special action program was to have an “urgent” $1 billion disbursement, but only a fifth of that was forthcoming 49. The commodities program was also a façade. The initial proposal for a fund of $6 billion collapsed to $470 million.
The failure of Commodity Power had been forecast before the Paris process by a group of economists from the United States, Japan, and Europe. In October 1974, they wrote, “The crucial point … is that the number of commodities on which collusion would be feasible or effective is small, the economic impact is likely to be limited and isolated rather than pervasive as with oil, and the prospects for sustained success over the medium-term, to say nothing of the long-term, are dim.” 50 Paris proved them right. The United States, too, felt vindicated.
In March 1975, Daniel Patrick Moynihan had made it clear that “the world’s economy is not nearly bad enough to justify the measures proposed by [the NIEO], and yet it is much worse than it would otherwise be in consequence of measures the [NAM-UNCTAD-OPEC] has already taken.” 51 Better to roll back the OPEC thrust and disallow NIEO.
In 1976, at the close of the Seventh Special Session of the UN General Assembly, the US representative bluntly said that his country “cannot and does not accept any implication that the world is now embarked on the establishment of something called the ‘new international economic order’” 52. That was the US position—and it became reality.

Notes
29. Prashad, Darker Nations, p. 68.
30. Edgar J. Dosman, The Life and Times of Raul Prebisch, 1901-1986, Montreal: McGill-Queens University Press, 2008, pp. 248-9.
31. Marc Williams, Third World Cooperation: The Group of 77 in UNCTAD, London: St. Martin’s Press, 1991.
32. Osvaldo Sunkel, “National Development Policy and External Dependence in Latin America,” Journal of Development Studies 6: 1 (October 1969); and “Transnational Capitalism and National Disintegration in Latin America,” Social and Economic Studies 22: 1 (1973).
33. Tony Smith, “Configurations of Power in North-South Relations since 1945,” Industrial Organization 31: 1 (Winter 1977), p. 4.
34. Lester Pearson, Partners in Development: Report of the Commission on International Development, New York: Praeger, 1969. See also Hans Singer, “The One Per Cent Aid Target (Some Reflections on the Arithmetic of International Targetry),” IDS Bulletin 2: 2 (1969) for an engaging history of the Pearson commission and for a critique.
35. Even the US, which opposed the NIEO, did not vote against it, because its representative saw the NIEO as “a significant political development.” General Assembly Official Records, 2,229th Plenary Meeting, May 1, 1974, p. 7.
36. Smith, “Configurations of Power,” p. 5.
37 . Alfons Lemper, “A New Economic Order?” Intereconomics 10: 2 (February 1975); and Richard Senti, “A Proposal for a New Order for the Commodity Markets,” Intereconomics 12: 1-2 (January 1977).
38. John Toye and Richard Toye, The UN and Global Political Economy, Bloomington: Indiana University Press, 2004, pp. 246-7.
39. Piero Gleijeses, Conflicting Missions: Havana, Washington and Africa, 1959-1976, Chapel Hill: University of North Carolina Press, 2002, Chapter 13.
40. Toye and Toye, The UN and Global Political Economy, p. 250.
41. Aurelie Elisa Gfeller, “Imagining European Identity: French Elites and the American Challenge in the Pompidou-Nixon Era,” Contemporary European History 19: 2 (2010).
42. “Rambouillet: The French View,” UK Embassy Paris to Foreign Office, PREM 16/838, November 25, 1975, p. 4.
43. Branislav Gosovic and John Gerard Ruggie, “On the Creation of a New International Economic Order: Issue Linkage and the Seventh Special Session of the UN General Assembly,” Industrial Organization 30: 2 (Spring 1976), p. 317.
44. Henry Kissinger, Years of Renewal, New York: Simon & Schuster, 1999, p. 677.
45. Saudi Arabia’s reasons for conciliation are well laid out in Ian Skeet, OPEC: Twenty-Five Years of Price and Politics, Cambridge: Cambridge University Press, 1988, p. 141. Bear in mind that, in 1976-77, Saudi Arabia and Iran accounted for 48 percent of OPEC oil output. Despite this, it is remarkable that Algeria and Libya were able to push the NAM policy through whenever they could.
46. At the August 1981 OPEC meeting, the Saudis would not allow the price of oil to rise above $32 per barrel, earning the ire of the Libyans, who announced that they would “rather cut production down to zero than reduce prices.” The Saudis were joined by the other Gulf states, and stood opposed by the Libyans and the Iranians. The Algerians, reliant upon the oil money, wobbled. It was in such tenuous negotiations that OPEC’s own resolve would be worn down. Iran’s oil minister, Mohammed Gharazi, complained that failure to agree was the responsibility of “those who really support the interests of the West.” That might have been so. Saudi Arabia was also eager to increase its military capacity, and had been eager to buy US arms. Paul Lewis, “OPEC Nations Fail to Heal their Rift Over Price of Oil,” New York Times, August 22, 1981, p. A1.
47. Jahangir Amuzegar, “A Requiem for the North-South Conference,“ Foreign Affairs 56: 1 (October 1977), p. 136.
48. Ibid., p. 136.
49. Jahangir Amuzegar, “Not Much Aid and Not Enough Trade: Cloudy Prospects for North-South Relations,” Third World Quarterly 1: 1 (January 1979), p. 51.
50. Brookings Institution, Nihon Keizai Kenkyu Senta, Kenzo Henmi, and Universitat Kiel, Trade in Primary Commodities, Conflict or Cooperation: A Tripartite Report, Washington, DC: Brookings Institution, 1974, p. 2.
51. Daniel Patrick Moynihan. “The United States in Opposition,” Commentary, March 1975.
52. Gosovic and Ruggie, “On the Creation of a New International Economic Order,“ p. 343.

 

 


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