Pergamon Titles of Related Interest Laszlo/Kurtzman/Bhattacharya RCDC (Regional Cooperation Among Developing Countries) Nicol/Echeverria/Peccei Regionalism and the New International Ecomonic Order UNITAR-CEESTEM Library on NIEO Agarwala The New International Economic Order: An Overview Laszlo & Kurtzman Eastern Europe and the New International Economic Order Laszlo & Kurtzman Western Europe and the New International Economic Order Laszlo & Kurtzman Political and Institutional Issues of the New International Economic Order Laszlo & Kurtzman The Structure of the World Economy and the New International Economic Order Laszlo & Kurtzman The United States, Canada and the New International Economic Order Laszlo et al. The Objectives of the New International Economic Order Laszlo et al. The Obstacles to the New International Economic Order Lozoya & Bhattacharya The Financial Issues of the New International Economic Order Lozoya & Quadra Africa, Middle East and the New International Economic Order Lozoya & Bhattacharya Asia and the New International Economic Order Lozoya & Green International Trade, Industrialization and the New International Economic Order Lozoya & Estevez Latin America and the New International Economic Order Lozoya & Birgln Social and Cultural Issues of the New International Economic Order Lozoya et al. Alternative Views of the New International Economic Order Mijan, Laszlo & Kurtzman Food and Agriculture in Global Perspective Related Journals* BULLETIN OF SCIENCE, TECHNOLOGY AND SOCIETY ECONOMIC BULLETIN FOR EUROPE HABITAT INTERNATIONAL SOCIO-ECONOMIC PLANNING SCIENCES WORLD DEVELOPMENT *Free specimen copies available upon request 1 PERGAMON POLICY ON THE NEW INTERNATIONAL STUDIES ECONOMIC ORDER The New International Economic Order An Overview P. N. Agarwala Findings and Conclusions of the New International Economic Order (NIEO) Library Published for UNITAR and the Center for Economic and Social Studies of the Third World Pergamon Press NEW YORK • OXFORD • TORONTO • SYDNEY • PARIS • FRANKFURT Copyright © 1983 UNITAR Library of Congress Cataloging in Publication Data Agarwala, P. N. (Prakash Narain), 1926- The new International economic order. (Pergamon policy studies on the new international economic order) Includes index. 1. International economic relations. I. Title II. Series. HF1411 .A286 1982 337" .09*048 81-19963 ISBN 0-08-028823-5 AACR2 All Rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, electrostatic, magnetic tape, mechanical, photocopying, recording or otherwise, without permission in writing from the publishers. Printed In the United States of America Foreword The present volume is one in a series of 16 books which make up the UNITAR-CEESTEM NIEO Library. While each volume covers a specific aspect of the issues that comprise the New International Economic Order and can be read independently of the others, it seems useful to provide a brief introduction to outline the scope of the entire under­ taking and put this volume in its proper context. In the winter of 1976-77 UNITAR (the United Nations Institute for Training and Research) initiated with CEESTEM (the Centro de Estudios Economicos y Sociales del Tercer Mundo, Mexico) a series of inquiries into problems and opportunities associated with the establishment of the New International Economic Order (NIEO). Both institutions agreed that the NIEO constituted one of the highest priority items on the international agenda, and that independent, objective, and scholarly investigation of its objectives, obstacles, opportunities, and indicated strategies may be of great value both to the decision makers directly concerned with the negotiation of the issues, and to the international community at large. The UNITAR-CEESTEM NIEO Library is a result of the research that was undertaken by the central professional staffs of the institutes, and by their central professional staffs of the institutes, and by their jointly formed international network of collaborators and consultants. What are some of the reasons behind this assessment of the importance of the NIEO in contemporary economic and world affairs? Although most people know that the world economy is encountering serious difficulties on both national and international levels, few people outside a small circle of experts realize the seriousness of the problems and the breadth of their scope. Contrary to some current perceptions, the NIEO is neither a passing pressure of the poor countries on the rich, nor merely a demand for more aid and assistance. It is a process which has deep historical precedents, and an undisputed historical sig­ nificance. vii viii PREFACE TO THE UNITAR-CEESTEM NIEO LIBRARY We need not go back further than the end of World War II to find an entire array of historical events which set the stage for the later emergence of the call for the NIEO. While these events arose from their own historical antecedents, they themselves produced the setting for the breakdown of the post-war economic system, and the widening gap between rich and poor nations. The first and perhaps most decisive event was the liberation of the oppressed peoples of Africa and Asia, in the great wave of decoloniza tion that swept the world in the years following World War II. The newly independent states were said to be sovereign and equal to all other states, old and new, large and small. Their admittance to the UN underscored this. However, the fresh political and juridical status of the new countries was far from matched by their actual economic condi tions. The majority felt that their de jure political colonization ended only to be replaced by a de facto economic colonization. The historical process which gave the majority of the world's population the status of citizens of sovereign and equal states, but left them at the same time in a situation of economic underdevelopment and dependence, triggered the "revolution of rising expectations." Desires for rapid economic growth led Third World governments into ambitious plans and programs of national development. Most of the plans envisaged a quick repetition of the industrial growth processes of the developed world, following a path already long trodden by the countries of Latin America. When the unintended side-effects of traditional patterns of industrialization became evident - uncontrolled growth of cities, relative neglect of rural areas and agriculture, threats to the environment, and the increasing stratification of people in modern and traditional sectors, often with serious damage to social structure and cohesion - many of the original development strategies underwent modification. However, the goal of rapid economic growth was not surrendered. Quantitative growth targets were formally included in the official development strategies of the First and Second UN Development Decades (for the 1960s and the 1970s, respectively). However, the mid-term review of the achievement of the Second Development Decade's goals showed mixed results. The greatest disap pointment came in the area of agricultural production and official development aid. On the average, the UN official development aid targets have not even been half achieved. At the same time, service charges on past loans began to put enormous pressures on developing countries' balance of payments, and world poverty showed no signs of diminishing. There was insufficient progress in commodity trade, inadequate access to the markets of developed countries, particularly for agricultural products; tariffs had escalated, especially for semi- processed and processed products, and new tariff and nontariff restric tions were introduced by many developed countries on a number of items, including textiles and leather goods. The plight of the least developed, island and land-locked developing countries, gave rise to additional concern. While some progress was achieved, for example, through the introduction of a generalized system of preferences by the PREFACE TO THE UNITAR-CEESTEM NIEO LIBRARY ix developed countries, and the proposals of the Tokyo Declaration concerning multilateral trade negotiations, the negative developments weighed more heavily in the balance and created widespread dissatis­ faction in the developing world. Another set of factors come into play as well. This was the sudden and unexpected rise of Third World economic and political power. The Middle East oil embargo of 1973-1974, and the subsequent four-fold increase in the price of oil created a world energy crisis. It affected all oil importing nations, developed as well as developing. It also exhibited the dependence of the developed countries on the developing world for several major natural resources, and proved the ability of the Third World to wield economic and political power effectively. The conse­ quences included rises in the price of food, due to the increased cost of chemical fertilizers, and further tensions between producers and consumers of raw materials. But the OPEC-type exercise of Third World economic and political power proved unable to improve the condition of the developing countries as a whole. Despite significantly higher gross resource flows from the oil-exporting to the oil-importing developing countries, the economic plight of the latter worsened due to the higher cost of energy. Developed countries found themselves beset by economic problems of their own, including not only higher oil prices but inflation, unemployment, and unused industrial capacity. Economic rates of growth slowed, while in most countries balance of payment deficits grew. Even where surpluses could still be generated, concerns focused on the domestic economy, and political will to increase levels of aid and assistance to the Third World faltered. Compounding the economic difficulties of the developed nations were signs of breakdown in the international monetary system which affected all countries, developed as well as developing. Amidst growing tensions between the United States, Japan and the European Com­ munity over matters of trade, the Bretton Woods system collapsed and gave rise to a system of floating exchange rates. The value of the U.S. dollar began to erode, creating serious difficulties for those countries which, like most of the Third World, held their reserves in dollars. The creation of Special Drawing Rights provided some access to foreign exchange independently of dollar holdings, but such access favored the countries already developed, and the rest remained seriously dissatis­ fied with the workings of the international monetary system. It became evident that some of the fundamental tenets of the post-war economy were being called into question, and indeed that some had already collapsed. The NIEO made its appearance as an international political issue in the context of this series of events. Encouraged by the success of OPEC but fearful of splintering Third World solidarity through the newly won wealth of a few of its countries, Presidents Boumedienne of Algeria and Echeverria of Mexico, among others, called for structural reforms in the international economic system. Their governments' initiative resulted in the adoption of such major UN resolutions as those of the Sixth and Seventh Special Sessions, and the Charter of Economic Rights x PREFACE TO THE UNITAR-CEESTEM NIEO LIBRARY and Duties of States. These in turn provided the impetus for a long series of declarations, resolutions, position papers and studies on various NIEO issues by the United Nations system and the international community at large. The coming together of these historical factors was not purely coincidental. The wave of decolonization was the culmination of a long-term historical process of democratization, and the rise of the concept of universal rights for individuals and societies. It led, in turn, to a mounting desire for rapid industrialization by the newly indepen­ dent countries. This met with major frustrations. But as economic interdependence intensified, as trade and markets expanded, and access to energy and raw materials became crucial to the developed world's giant economic machinery, the concentration of economic power itself was modified. It was no longer wielded by a few powerful governments but also fell into the hands of oil exporting nations and transnational corporations. The historical process which gave birth to a host of independent nation-states placed into sharp relief the inequities of the previous economic system, and provided some of the developing countries with fresh degrees of economic leverage. Since they not only control the supply of a number of important fuels and raw materials but also absorb about 25 percent of the developed world's exports, their demands can no longer be ignored. And they insist that a healthy growth in the world economy cannot be brought about within the framework of the existing economic system. When the General Assembly, in December 1977, called for another Special Session in 1980 to assess progress in the establishment of the NIEO, it took a decisive step in bringing the North-South debate to the Organization, where it belongs. It created an ongoing forum for discussions and negotiation in the interim through the Committee of the Whole, which during 1978 managed to define its role and function despite earlier disagreements. Together with the work of the bodies charged with the preparation of the International Development Strategy for the Third United Nations Development Decade, the Organization created the fora for substantive progress in the area of restructuring the economic relations of developed and developing countries. Faced with mounting pressures on national economics in all parts of the world, the international community now finds itself facing a watershed decision: to make use of these fora, or to continue to use mainly bilateral and sectoral corrective measures to mitigate tensions while entrusting the resolution of problems to the mechanisms of the free market. This decision is intimately linked to an entire array of basic questions. Among them: The question of cost and benefit. Who will have to bear the burden of instituting NIEO and will the results be worth the sacrifice? Will benefits really accrue to the poor people to help fulfill their basic needs and will developing countries be made truly more self-reliant - or will the main beneficiaries be the already rich elites? Will the developed PREFACE TO THE UNITAR-CEESTEM NIEO LIBRARY xi countries also benefit from NIEO (a positive-sum game) or will it mainly mean the redistribution of the current stock of wealth from them to the developing countries (a zero-sum game)? The question of legitimacy. Is the free market the basic mechanism of world trade and the best vehicle of development, or is it merely a convenient fiction to cover up the current unjust manipulations of the major economic groups? The question of morality. Do the rich countries have a moral obligation to help the poor, and especially the poorest? Does this responsibility extend to those countries who had no historical part in the creation of poverty in the Third World? The question of political feasibility. How strongly will different organized groups in society support or oppose governmental policies aimed at the achievement of the NIEO - and how much solidarity exists in these domains internationally, among the developing and the developed countries themselves? It is unrealistic to expect that real progress will be made on specific NIEO issues (such as official development aid, technical assistance, debt renegotiation, removal of tariff barriers, technical cooperation among developing countries, the link between SDRs and development, voting power in the World Bank and IMF, transfers of technology, regulation of transnational corporations, a system of consultations on industrialization, and restructuring the economic and social sectors of the United Nations) so long as the basic issues are not resolved and a consensus does not emerge concerning them. NIEO can be achieved if, and only if, it is perceived that its benefits are universal and can reach all segments of the world!s population (especially the neediest); if it is held that its costs do not exceed its benefits; if its regulatory mechanisms are seen to be legitimate; if some real sense of moral responsibility exists among members of the human community, and if sufficient political support is available nationally as well as inter­ nationally for the indicated measures. If one or more of these preconditions are not met, the NIEO will not be achieved; Member States will continue to practice the existing, predominantly piecemeal, ad hoc and mainly bilateral modes of adjusting the stresses and reaching compromises. The basic purpose of the UNITAR-CEESTEM NIEO Library is to provide an independent and objective assessment of these issues, and to report its findings in time for the historic events of 1980: the Special Session of the General Assembly devoted to the assessment of progress toward the NIEO, and the immediately following regular session, during which the International Development Strategy for the 1980s and beyond (the UN's Third Development Decade) is to be debated and adopted. It would be clearly an enormous waste of time and effort to enter into these negotiations without forming a clear idea of the issues that bear on their success. But reporting on them is not a simple matter of using insight and intuition; it requires painstaking and organized empirical research. The requirement is to identify the forces that operate for or against the NIEO in all parts of the world. Intuitive answers concerning xii PREFACE TO THE UNITAR-CEESTEM NIEO LIBRARY its costs and benefits, legitimacy, morality, and political feasibility occur to all persons knowledgeable in these areas, but such answers tend to vary and are thus not sufficiently reliable. Expert research on the current obstacles and opportunities associated with the NIEO in the different regions of the world, and with respect to the diverse sectors of the world economy, needs to be conducted. The results of such research may shed some much needed light on the chances of success in establishing a new international economic order generally, and on the types of objectives and modes of negotiations that, in the positive case, could lead to it specifically. For although it is unlikely that a dominant consensus already exists in the world concerning the costs and benefits, legitimacy, morality, and political feasibility of the NIEO (if it did exist, the international community would probably not be experiencing the sense of frustration it has today), the precise estimation of costs versus benefits, legitimacy versus illegitimacy, morality versus indifference, and political feasibility versus futility by different societal groups could reveal highly differentiated potentials for achieving a dominant consensus in the future. Today's chaotic welter of opinions and pressures concerning the NIEO need not remain such, but could crystallize into a decisive mood favoring or opposing it. To those who object to such analysis on the grounds that economic theory, rather than wide-ranging socio-political considerations, must serve to decide the fate of NIEO, we may reply that economic theory, while relevant, is in itself over generous: it can often prove both sides of conflicting positions. Since both sides in a dispute can marshal some variety of economic theory in their defense, and no common criteria exist for assessing the relative merits of all theories, economic rationality as conveyed by economic theories becomes marginal in the negotiating process. We need to go one step deeper, inquiring into the reasons particular theories are summoned to defend particular points of view, as well as measuring the intensity of commitment to these viewpoints and the negotiating power of the parties subscribing to them. Thus, the focus of the UNITAR-CEESTEM Library is not a given economic theory, but the perceptions and opinions underlying the positions taken by the diverse actors. The configuration and strength of these perceptions and opinions will ultimately determine whether negotiations in the area of the NIEO can be successful, and if so, which strategies will have optimum chances of success. The Library contains volumes arranged in three different series. First, there is a series of overview studies. These provide background, context, and basic reference data. They include a volume defining and classifying the principal objectives of the NIEO as agreed or debated in the United Nations and other major international fora; a volume giving an overview and assessment of alternative viewpoints on the NIEO espoused by various nongovernmental groups and researchers in different parts of the world; a third defining the most critical obstacles confronting the establishment of the NIEO; a fourth dealing with the specific problems of food and agriculture as they are debated in the framework of the United Nations. A fifth volume suggests the basic PREFACE TO THE UNITAR-CEESTEM NIEO LIBRARY xiii strategies which appear indicated and appropriate to accelerate progress toward the NIEO; and a final volume communicates the results of the associated UNITAR-CEESTEM International Opinion Survey of Decision Makers and Experts on the crucial questions of the NIEO. The second series contains geographic studies. Volumes in this series review the positions and postures of national governments and the attitudes of business, labor, the public media, and the opinion of the population at large in various nations and regions of the world. Individual volumes focus on the United States and Canada, on Western Europe, on Eastern Europe including the Soviet Union, on Asia including Australia, on Latin America, and on Africa and the Middle East. The third series of the NIEO Library is devoted to functional studies. Here experts give their views and assessments of such issues as the possible and the desirable structure of the world economy; of the patterns and problems of international trade and industrial develop ment; of international financial matters, and of the associated political and institutional, as well as social and cultural problems and oppor tunities. Among them, the seventeen volumes of the Library cover practically all the principal issues encountered in efforts to establish a New International Economic Order, through in-depth discussion by independent investigators, coming from different societies in different parts of the world. The UNITAR-CEESTEM NIEO Library offers wide-ranging analyses, and sometimes divergent viewpoints, on a broad range of topics. It does not offer simplistic solutions, nor advocate one viewpoint indis criminately over others. It seeks to illuminate the range and complexity of the issues, provide clarification of individual items, and to lend a sense of the vastness and significance of the NIEO as a whole. It is the hope of all of us, researchers and consultants of the UNITAR-CEESTEM project on the NIEO, that our results, published as the NIEO Library, may render some service to the decision maker and negotiator who must cope with the problems of the international economic order, as well as to the student of international economic and world affairs, interested in further research on these topics. It is our view that the NIEO is a historically necessary, and humanly and politically appropriate attempt to create a world order that is sus tainable for generations, equitable for all, and capable of meeting the most urgent needs and demands of the peoples and nations of the world community. Ervin Laszlo Project Director