EUROCOMMUNISM-MYTH, HOPE, DELUSION?:THE POOR COUNTRIES AND THE RICH
Sauvant, Karl
Three years ago, at its Sixth Special Session, the United Nations General Assembly adopted by consensus two resolutions entitled "Declaration on the Establishment of a New International Economic...
...Toward the end of the 1960s, DCs began to realize that, if they wanted to break out from the reproduction process of international inequality, they would have to reduce their dependency on inputs from abroad and to mobilize increasingly their own resources...
...They would be particularly attractive if their distribution were not undertaken on the basis of IMF quotas but rather in relation to the DCs' special financial needs...
...The pursuit of this approach may lead to a certain "decoupling" of the Third World from the developed market world...
...In other words, the emphasis on transfer of technology tends to obscure the fact that only indigenous capacities can break the dependent position of the Third World and that, therefore, these should receive primary attention...
...in fact, it has dropped sharply as in terms of the percentage of the industrialized countries' GNP: from 0.52 percent in 19611962 to 0.33 percent in 1974...
...They are not mutually exclusive...
...there now has been some progress in fulfilling this mandate...
...Created in 1961...
...Since SDRs are created by the IMF and distributed to the member countries on the basis of their quotas, a greater role for SDRs means a greater share for the Third World in new international liquidity—even if the DCs do not control the decisions concerning the issuance of these reserve assets...
...What would happen if all the concrete measures of the NIEO program were implemented—including the entire integrated program for commodities, unrestricted access to the markets of the DMEs, higher financial flows, better access to IMF finance, the link between SDR distribution and development finance, a greater voice in the management of the IMF, a binding code for technology transfer and TNEs, and the redeployment of industries—what, indeed, would happen if all these measures were implemented...
...In order for host countries to directly influence allocative decisions affecting their economies, they would have to participate in the internal decision-making of these enterprises...
...In addition, and as far as the world economy as a whole is concerned, the integrated commodity program would allow a more rational management of the international supply of raw materials and thus remedy one of the most conspicuous areas of neglect in the present international economic system...
...Among these are various measures to provide preferential treatment to imports from other DCs...
...Virtually all R and D is conducted in developed countries and, as a consequence, nationals or institutions of these countries hold virtually all the world's patents...
...Increased cooperation among Third World countries demands, first of all, measures aimed at facilitating interactions among them...
...In doing this, it would facilitate the management of both the business cycles of the economies of the industrialized countries and the development process of Third World countries...
...Thus, a model had to be developed that reduces the role of foreign inputs and places greater emphasis on the use of resources that are in plentiful supply in the Third World...
...A New International Economic Order (NIEO) is required that would serve all its members more equitably...
...IMF: International Monetary Fund INDEXATION: Process whereby the value of the developing countries' commodity exports is linked to a change in the value of their imports of manufactured goods...
...The DCs contend that these actions require a reorganization of the mechanisms and structures of the international economic system, which now is primarily geared to the interests of the developed market economies...
...2 The program basically represents—not surprisingly, one may add, in view of the training that many Third World leaders and experts have received in the academic centers 210 quote Mahbub ul Haq, one of the intellectual parents of the NIEO: "The basic objective of the emerging trade union of the poor nations is to negotiate a new deal with the rich nations through the instrument of collective bargaining...
...Three years ago, at its Sixth Special Session, the United Nations General Assembly adopted by consensus two resolutions entitled "Declaration on the Establishment of a New International Economic Order" and "Programme of Action on the Establishment of a New International Economic Order...
...far from it...
...concrete actions...
...5DR: International reserve assets ("paper gold"), created by the IMF...
...This requires a reorientation in literally all major areas...
...In the last two decades, the DCs' share in world trade has substantially declined...
...3 The basis of such an approach would be the recognition that the creation of equal opportunities alone is not sufficient to help the Third World overcome its historically determined disadvantageous position, a position in 3The concept of affirmative action was developed in the U.S...
...Obviously, in a world in which 5 to 10 percent inflation is the rule, these price margins must be periodically adjusted in order to protect the real prices originally negotiated...
...AS SUGGESTED, a major function of trade is to generate the foreign-exchange earnings necessary to finance the import of capital goods that are required for industrialization...
...Through these Councils, host countries could gain immediate influence on the decision-making process of the main enterprises operating in their territories, thus supplementing policies aimed at setting up external control mechanisms...
...Earnings from this trade are, moreover, plagued by violent fluctuations...
...The concept of individual self50n the importance of sociocultural emancipation and the mechanisms of sociocultural domination, see Karl P. Sauvant, "The Potential of Multinational Enterprises as Vehicles for the Transmission of Business Culture," in Karl P. Sauvant and Farid G. Lavipour, eds., Controlling Multinational Enterprises: Problems, Strategies, Counterstrategies (Boulder: Westview Press, 1976...
...Self-reliance, thus, requires sociocultural emancipation...
...Increasingly important among them have been TNEs (whose investment package consists not only of capital and technology but also of such sociocultural investments as values and behavioral patterns) and advertising agencies (which directly manipulate a society's values, especially its consumption values...
...to enlarge the first (automatic) credit tranche and derestrict drawings under the other tranches...
...TNEs: Transnational enterprises...
...reliance, therefore, draws attention to the internal conditions in DCs, the need for change within these countries, and the importance of such change for the development process...
...This focus on the population as a whole is a function not only of the need to mobilize available domestic resources but also an expression of the fundamental aim of this approach, which is to satisfy the basic needs of all classes and not only the wants of the elites and small middle classes...
...The distribution of additional funds and the creation of international liquidity have remained solidly under the control of the industrialized states...
...On the contrary, through an international affirmative-action program, the international community could greatly facilitate and serve the task of selfreliance by decreasing the time required to implement it and thus creating the conditions for a reintegration of the DCs into a new international economic system...
...This change in the approach to development is also important because it represents an act of sociocultural emancipation, a dimension of development (and of self-reliance) that so far has received little attention...
...The result could be that the establishment of indigenous science-and-technology capacities and infrastructures and the diffusion (rather than transfer) of technology within the Third World would be neglected...
...Such assistance, however, has failed to increase in real terms since the middle of the 1960s...
...My objective here is threefold...
...Affirmative-action mechanisms, in this situation, include various quota systems (e.g., regarding employment) and "reverse discrimination"—discrimination to aid members of historically disadvantaged groups—for instance, when giving preference in admission (e.g., to professional schools) to members of an underprivileged group at the expense of established groups...
...These short-term earnings fluctuations frequently follow the DMEs' business cycles...
...The DCs, it is clear, now have achieved one of their major goals—to broaden the purposes of the international economic system so as to include the development of the Third World...
...Thus, for instance, international reserves grew by $102 billion between 1970 and 1974...
...other mechanisms are needed...
...In fact, a number of the key elements of the NIEO program have clear stabilizing effects on the existing international economic system and, in the long run, their implementation may possibly even give the kiss of death to the pursuit of vigorous restructuring...
...The current emphasis on transfer of technology and a code of conduct for it places emphasis on the wrong issue...
...Finally, some brief observations along the same lines regarding industrialization...
...Total annual debt-service payments (of about $12 billion in 1974) more than cancel the total annual flow of foreign aid and, for many countries, consume around 15 percent of their annual export earnings...
...51 The problem is that both these factors reflect the relative abundance of developed countries and not the absolute poverty of developing ones...
...The UN's General Assembly will take it up again when preparing a "third development decade," and various high-level international study groups are in the process of analyzing North-South problems with the purpose of recommending actions regarding development...
...See United Nations General Assembly resolutions 3201 (S-VI) and 3202 (S-VI...
...the wants of consumers in developed countries and not the needs of large proportions of the population in developing countries...
...In this context, special attention must be paid to TNEs, since the allocative decisions of these enterprises play a very important role in all major areas of economic interaction between developed and developing countries...
...it is aimed at improving the existing mechanisms, not at changing the existing structures...
...And all three approaches can be expected to benefit from the politization of the development issue, the new assertiveness of the Third World, and the transformation of the nonaligned movement into a highly organized international pressure group for the reorganization of the international economic system...
...Beyond these improvements, the DCs would also like to change the actual creation of international liquidity...
...It is the characteristic of current control efforts— including the code of conduct elaborated under the auspices of the United Nations— that they all focus on possible external frameworks that could constrain TNEs...
...PRODI:CERS'ASSOCI.ATIONs: Groupings of rawmaterial producers: OPEC is its prototype...
...The program's centerpiece is an integrated approach to commodities intended to arrest the deterioration of the DCs' terms of trade (indeed, to improve them) and to contribute to a more orderly management of commodity supplies...
...The emphasis is on "put in position...
...to liberalize and enlarge the various existing balance of payments mechanisms...
...Third and finally, I shall explore international affirmative action and individual and collective self-reliance as possible approaches toward structural changes...
...If governments succumb to these temptations, commodity agreements would tend to perpetuate existing structures with their inherent inequities...
...on the one hand and Japan and the Soviet Union on the other, the management of the agricultural market, and the organization of the raw material market through transnational enterprises...
...Moreover, since one important reason for the decline of foreign aid has been its voluntary character, the DCs desire that an element of automaticity be introduced into concessional flows, in order to make them predictable, assured, and continuous...
...However, in playing the checkers game of immediate improvements, one should not forget that the chess game of structures is played on the same board...
...Consequently, the removal, or at least restriction, of tariff and nontariff barriers is an issue of great concern...
...But exceptions are by no means unfamiliar to liberal practices, as is demonstrated, for instance, by the negotiation of "voluntary" trade restriction agreements, the long-term purchasing agreements between the U.S...
...As such, they are mainly reactive and corrective in nature and influence the allocation process only indirectly...
...So far, this motor has not worked properly...
...the DCs play virtually no role in the creation of international liquidity, nor do they benefit directly from it...
...Thus, it is almost surprising that countries subscribing to liberal economic norms, and especially proponents of the existing structures, should have great difficulties in agreeing with the NIEO program...
...It is, first, to familiarize the reader with the major proposals advanced to achieve a restructuring of the world economy...
...Therefore, it might be necessary to bolster the liberal economic approach with a massive international program of affirmative action...
...All a code would do is to codify the technological dependency of the Third World...
...Opportunities would not only have to be provided, but every effort would have to be made to ensure that they are taken advantage of...
...One way of achieving this objective is to establish Host Country Councils at THE headquarters...
...The last measure involves direct collaboration efforts among developing nations and their institutions, including in the context of producers' associations...
...This would leave the foreign affiliate dependent on the parent enterprise for its R and D, transportation facilities, marketing and distribution channels, etc., and its local development, conversely, would be discouraged...
...The concrete mechanisms of an international affirmative action program for development would, of course, have to be elaborated with great care...
...In addition, the choice of production for foreign affiliates in DCs (and for local enterprises imitating them) is largely a combination of the production and R and D experiences of parent enterprises on the one hand and the foreign-induced wants of the small elites and middle classes in host countries on the other...
...Furthermore, where this redeployment is effected by TNEs (and, as indicated above, they can be expected to play the crucial role), it would be intracompany redeployment, i.e., certain production processes would be moved to the Third World within the framework of a given THE system...
...Like any monetary system, the international monetary system is biased against the poor: they have the greatest difficulties, and face the greatest restrictions, in obtaining credit from the institutions of the system...
...It is specifically urged that a legally binding code of conduct be adopted for the transfer of technology, to deal with such matters as relations among suppliers, restrictive business practices, access to technology, and pricing...
...Under these conditions, even the move into processing may be neglected...
...In no other area is the asymmetry of relations between North and South so pronounced as in science and technology...
...The program is a necessary step toward the immediate alleviation of the DCs' most pressing problems...
...During a recession, the reduction of export earnings affects the import ability of the Third World, i.e., demand in DMEs is further reduced...
...The two approaches also do not exclude a vigorous implementation of the NIEO program in order to alleviate pressing immediate problems...
...tNCTAD: UN Conference on Trade and Development, established 1964...
...4 Self-Reliance WE WOULD IGNORE the experience of the past 25 years if we were to expect too much from international development efforts—be they in the form of the NIEO program or of an international affirmative-action program directed at the structures of the international economic system...
...GSP: The General System of Preferences was negotiated under UNCTAD's auspices and provides developing countries for certain products and under certain conditions with preferential access to the markets of participating industrialized countries...
...Elaborate measures have been proposed to deal with the symptoms of the problems—but the strategies aimed at their causes are still vague...
...Similar considerations apply to science and technology...
...The need for financial resources that are required for development also constitutes one of the reasons for a set of Third World proposals related to the international monetary system...
...Through' these resolutions, the developing countries (DCs) have succeeded in giving development a priority status on the international agenda...
...Special attention is paid to an improvement of the nonreciprocal, nondiscriminatory Generalized System of Preferences (GSP) and to the elimination of restrictive business practices that affect the DCs' trade adversely...
...Another such method to support the transformation of the DCs from primaryproducing suppliers to industrialized countries is to create incentives for the location of processing facilities in the raw-materialproducing countries, e.g., by virtually reversing the present tariff structure through a decrease of tariffs on manufactured, semimanufactured, and processed goods exported by DCs while possibly even leveling some tariffs on raw materials imported from them...
...The NIEO program recommends an international 48 division of labor in which DCs would concentrate on (usually) labor-intensive and low-technology industries, while the industrial structures of the developed countries would evolve in the direction of future-oriented, high-technology industries...
...Indexation could further support this tendency by assuring the maintenance of short- and long-term purchasing power and by further removing pressures for diversification...
...Thus the Group of 77 decided, during its 1976 Manila ministerial meeting, to establish an intergovernmental working group for the purpose of preparing the details of a comprehensive program for economic cooperation...
...And this has occurred in a period when the standard of living in the developed countries reached unprecedented heights...
...During a period of economic boom, the demand for primary commodities usually rises, and so do their prices...
...equal opportunities was not sufficient to give equal status to certain groups (e.g., blacks, women) in the society as a whole...
...These thoughts are captured in the concept of self-reliance, a concept enunciated at the 1970 Summit of the Non-Aligned Countries in Lusaka, and increasingly (even if slowly) gaining acceptance in the Third World...
...Recognizing that a transfer of technology is the only way through which DCs can obtain the technology required for their development, the NIEO program focuses on the regulation of the transfer process and its conditions...
...Since these changes are unlikely to be achieved under the IMF's present voting system, the DCs are pressing for a greater voice in the Fund and in the management of the international monetary system in general—a system, after all, that constitutes the framework for their trade transactions and development efforts...
...The answer is, I submit, that the structures of the international economic system would not be changed appreciably...
...and the encouragement and further strengthening of regional integration schemes and cooperation projects...
...The structural adaptations envisaged by the NIEO program amount essentially to a clearer international division of labor: the DMEs are asked to encourage the redeployment of their less competitive industries (i.e., usually labor-intensive, low-technology industries) to developing countries...
...In the area of finance and the international monetary system, the implementation of the NIEO program would lead to easier and more plentiful financing as well as to a greater sharing in the management of the IMF...
...The views expressed in this article do not necessarily reflect those of the institution with which he is affiliated...
...out of this total, the DCs received only $3.7 billion...
...By the same token, however, this stress on stop-gap measures and immediate relief gives the NIEO program the character of a holding action rather than of a restructuring operation...
...The danger is, however, that the developing nations might be satisfied with such improvements, while leaving the underlying financial structures unchanged...
...I do not mean to suggest that the NIEO program is misdirected or the measures suggested by it should not be taken...
...During the colonial period, the countries of the Third World were not only subjected to political and economic but also to sociocultural colonization...
...Foremost among them is an international conference of major donor, creditor, and debtor countries to arrange a renegotiation of debts and design multilateral measures to bring relief to debt repayments...
...This creates the real danger that the DCs will remain locked into the present international division of labor, whose division of benefits is highly unfavorable for them...
...50 direction as they turn to individual and collective self-reliance...
...The "link" of the distribution of SDRs to development assistance is, in fact, an important part of the NIEO program...
...All that a code of conduct for TNEs is therefore likely to accomplish and—similar to a code for the transfer of technology—it is to take some of the edges off the existing situation, thereby making dependence more tolerable...
...To achieve this objective, the DCs must gain greater access to the markets of the industrialized nations...
...Could a complete implementation of the NIEO program actually alter the structures of the system and the distribution of benefits between North and South...
...The developing countries now are moving in this 4 For a further discussion of this approach, see Karl P. Sauvant, "Controlling Transnational Enterprises: A Review and Some Further Thoughts," in Karl P. Sauvant and Hajo Hasenpflug, eds., The New International Economic Order: Conflict or Cooperation between North and South...
...Internally, the implementation of the concept of individual self-reliance requires that conditions are created for the mobilization of the population...
...Dcs: Developing countries DMES: Developed market economies GROUP of 77: The economic interest-group organization of the developing countries within the framework of UNCTAD...
...The special situation of these countries (in a variation of the infant-industry argument), of course, is taken into account by providing for a number of exceptions to the free play of international market forces—e.g., commodity agreements and preferential and nonreciprocal treatment for developing countries in a number of areas...
...I mean to suggest that the need for changes in the underlying structures of the system be not forgotten under the pressures of the present situation...
...Similarly, the Non-Aligned Countries decided at their 1972 Georgetown Foreign Ministers' Conference to designate a 52 number of coordinating countries to be responsible for implementing the four main areas of self-reliance covered in the Action Programme...
...In the NIEO program, therefore, trade and primary-product questions receive detailed attention...
...and to liberalize 45 drawings under the buffer-stock financing facility...
...TNEs are explicitly encouraged to participate in Third World investment projects...
...Let me 46 now turn to the program as a possible way of changing the structures of the international economic system...
...Only through the mobilization and organization of the masses can the reliance on foreign capital be decreased...
...In this traditional approach, the mass of people was essentially regarded as a liability, viewed mainly as consumers who needed to be fed and clothed, i.e., who absorbed already scarce capital...
...U NCTAD's main role is to promote international trade with a view to accelerating economic development...
...This realization requires a change in the basic development model because the traditional model is based on capital inputs—inputs that (in the quantities necessary) can only be obtained from abroad...
...Thus, the international economic system has failed to assure the DCs an equal share in increasing prosperity...
...Consequently, economic dependence on countries and institutions that can help to fulfill these foreign-oriented wants continues and is reinforced...
...Here the basic issues are the creation and distribution of international liquidity...
...Its main objective is to put the DCs—within the framework of the present system—in a better position to pursue their goals, especially to engage in trade and to participate in a "rational" international division of labor...
...See his "Negotiating a New Bargain with the Rich Countries," in The Developing World Speaks Out, Guy F. Erb and Valerina Kallab, eds...
...On the contrary, they might even be further solidified...
...5 The achievement of self-reliance, and through it of economic development, demands fundamental internal and external changes...
...It has its permanent secretariat in Geneva and is currently headed by Gamani Corea, a citizen of Sri Lanka...
...Subsequently, a series of international conferences were held on this topic, which will remain high on the agenda for some time to come...
...of the DMEs—a liberal economic approach to the solution of the developing countries' problems...
...thus the initially negotiated price could, for instance, be linked to a basket of prices of goods imported by DCs...
...If this emancipation does not take place, if industrialization continues to model itself on the demand-andsupply situation of the developed market economies, the economic development of the Third World will tend to remain a dependent development...
...Second, I shall examine whether the NIEO program can, in fact, be expected to create a new order or whether it is, rather, an attempt to make the status quo more tolerable for the Third World...
...Indexation is also an example of the holdingoperation character of the NIEO program: fearing a further deterioration of their purchasing power, the DCs are willing to ratify the past deterioration of their terms of trade and to institutionalize the existing gap...
...Given the dependence of many DCs on raw material exports as their primary source of foreign exchange earnings, these price fluctuations translate themselves immediately into earnings fluctuations and thus into fluctuation of the availability of funds for the import (from DMEs) of capital goods for development purposes...
...At the same time, since the conditions under which foreign direct investment is made available is a critical matter for DCs, the elaboration of an effective code of conduct for TNEs is an important aspect of the NIEO program...
...Boulder, Colo.: Westview Press, 1977...
...Changes are also envisaged for the international patent system, and efforts are encouraged to formulate policies that aim at improvement of DCs' scientific and technological infrastructure...
...Changing Structures: Other Approaches BUT CAN SUCH STRATEGIES be formulated within the liberal economic framework that characterizes the NIEO program...
...The essence of this new deal lies in the objective of the developing countries to obtain greater equality of opportunity and to secure the right to sit as equals around the bargaining tables of the world...
...In order to improve their credit line with the International Monetary Fund (IMF)—the main credit institution of the international monetary system—the DCs have proposed to increase the IMF quota (which governs the availability of IMF finance...
...SDRs are also attractive for another reason: they introduce an element of automaticity into the supply of finance...
...International Affirmative Action IF THIS is the case, the achievement of fundamental structural changes would first of all require a change in philosophy...
...Governments of developed countries could agree to ensure that a minimum quota of certain manufactured, semimanufactured, or processed goods produced by developing countries would be sold in their countries...
...Given the all-encompassing dependence of the developing countries on the developed ones, such a decoupling may in fact be desirable—if not necessary—until the Third World is strong enough to reintegrate itself into a new international economic system...
...when it was recognized that the mere creation of 49 which it remains largely for the mere reason that it exists...
...Selfreliance is not an attempt to replace foreign capital by labor, but rather to change the balance between the two factors by a margin that would make development more independent from foreign aid and, consequently, more autonomous...
...Conclusions INTERNATIONAL AFFIRMATIVE ACTION AND SELF-RELIANCE aim both at restructuring the international economic system and at creating a system that serves the needs of all its members...
...At the same time, a capacity for autonomous goal-setting, decision-making and decisionimplementation would be built up...
...in a period of recession, demand for and prices of raw materials usually fall...
...The implementation of collective selfreliance necessitates less emphasis on relations between developing and developed countries and more emphasis on relations among developing countries...
...To give a few examples of the kind of action such an approach could include: • One should consider the introduction of reverse quotas...
...The managers of the stocks buy the commodities in question when the price falls below the lower intervention margin and sell out of the stocks when the price surpasses an upper intervention margin...
...Thus the DCs' external indebtedness (over 80 non-OPEC) has risen dramatically from $9 billion in 1956 to over $170 billion in 1976 (of which about $70 billion are owed to commercial banks...
...Therefore, severe fluctuations in commodity prices (fluctuations that could be largely stabilized through buffer stocks) complicate the management of the world economy— regardless of whether the aim is development or stabilization of the business cycle, and regardless of whether raw materials originate in developed or developing countries...
...they could decide to subsidize loans to DCs...
...TNEs are expected to play an important role in the industrialization process (especially under conditions of decreasing foreign aid) by mobilizing financial and technological resources and by providing the markets for the Third World's expanding economies...
...I shall therefore outline the major elements of the NIEO program in the key areas of North-South relations: trade and commodities, financial matters, science and technology, industrialization and transnational enterprises...
...The values and behavioral patterns of Third World societies had gradually been transformed to reflect those of the metropolitan countries...
...This deterioration was brought about largely by the structure of the DCs' exports—mostly primary products—and especially by the long-term worsening of their terms of trade and insufficient access to the markets of the industrialized countries...
...Commodity-price movements are therefore largely procyclical in nature...
...While ordinarily this approach is only adopted for selected industries, it would, in this context, be extended to the entire economy and to the whole society of Third World countries...
...Washington: Overseas Development Council, 1975), p. 158...
...This is not to say that one should abandon these efforts...
...It is therefore important for the developing countries to gain some influence over the allocative decisions of TNEs...
...Since the two games are played simultaneously (and, in the real world, interact), one has to ensure that the moves in checkers do not divert attention from the moves in chess—or even prejudice the outcome of the chess game...
...THE PURPOSE OF RESTRUCTURING the international mechanisms in trade and finance, science and technology is to serve industrialization— the basic objective of most DCs...
...At present, the manufacturing output of the entire Third World is about as high as that of West Germany—approximately $108 billion...
...Trade is seen as "the motor of development," needed to generate the foreign-exchange earnings required to finance the import of capital goods and to stimulate industrialization...
...A "system of consultations" is urged to facilitate this process...
...43 The NIEO Program Glossary BUFFER STOCK: Stocks created for selected commodities, intended to smooth supply-anddemand fluctuations...
...However, questions begun to be asked whether one could not regard the mass of people as an asset whose creative potential, when released and combined with other local resources and with appropriate technology, could be the basis of autonomous development, aimed at the satisfaction of the minimum needs of the entire population...
...Going beyond the basic orientation of the NIEO program, the essence of such an approach would therefore be for the developed countries to take affirmative steps to break down the structures created in the past in order to terminate the underprivileged status of the DCs and to build, together with them, a new world economic system...
...The main function of these buffer stocks is to absorb market fluctuations, to balance the supply and demand, by stabilizing the prices of the products covered between negotiated lower- and upper-price margins...
...It represents, rather, a more general application of the infantindustry approach...
...SIXTH SPECIAL SESSION: First special session of the UN General Assembly held (April-May 1974) exclusively on development questions...
...After independence, these patterns were maintained (or even reinforced) through a variety of mechanisms...
...DMEs could also resolve to obtain a certain percentage of their goods and services from the Third World...
...At least for the time being, therefore, these wants can only be satisfied through continued inputs from abroad...
...The integrated commodity program would not, for example, change a situation in which the South is a supplier of raw materials to the North...
...In market economies, the primary agents of any redeployment of industries are, of course, private business firms, especially transnational enterprises (TNEs...
...None of the present efforts at controlling TNEs can be expected to change very much in this situation since none of them aim at the internal decision-making mechanisms of TNEs—i.e., at the actual locus of control over decisions relevant to redeployment and, more generally, at the allocation of private resources to DCs...
...The DCs' goal is to increase this output more than tenfold before the end of this century— an objective that will require substantial mobilization of resources and major adaptations of the world's industrial structures...
...During a boom they add to inflation—directly (through higher commodity prices) as well as indirectly (through increased purchases by developing countries in industrialized ones...
...This deemphasizing of international transactions should not be confused with an effort to achieve autarchy...
...Partly, this attention follows from the realization that whatever benefits had been reaped in the traditional model (and probably including those to be secured by the NIEO program), they rarely trickled down to the masses but rather tended to be absorbed by the elites...
...The key result of that session was the concept of the New International Economic Order...
...The decrease of foreign aid forced the Third World to turn to private-capital markets and their less favorable conditions...
...for only such changes can bring permanent relief...
...Clearly, the implementation of the program would in many ways smooth the functioning of the present system, create better opportunities for DCs, and lead to improvements in their economic situation...
...The key measures proposed to achieve these objectives involve the establishment of international buffer stocks for a number of commodities and the creation of a common fund for the financing of these stocks...
...The NIEO Program: A Liberal Holding Operation THIS SO FAR, in broad brush strokes, are the main aspects of the NIEO program...
...Hence a key plank in the NIEO program is a proposal to reduce the role of gold and national reserve currencies and, instead, to strengthen the role of special drawing rights (SDRs) as the central reserve asset of the international monetary system...
...Trade with other DCs, for instance, accounts for only one-fifth of total trade of the Third World—and this share has been declining...
...Rather, the main effect would be to make this situation more tolerable, especially by preventing a further deterioration of the Third World's purchasing power and by reducing fluctuations in export earnings...
...While commodity agreements deal with the basic supply of raw materials, as well as with the receipts for them, the NIEO program also promotes their increased processing by the DCs that produce them and the expansion 44 and diversification of these countries' exports...
...REAL PRICES: (Nominal) prices adjusted for inflation...
...Improvements in the terms of international economic transactions remain, of course, desirable and must be pursued, but these transactions themselves are seen from a new perspective: the motor of development is no longer trade and transfers from abroad, but rather the mobilization of indigenous resources for primarily indigenous needs...
...the expansion and strengthening of existing clearing arrangements and the creation of a broad multilateral payments scheme (including clearing arrangements as well as arrangements for the settling of balances...
...This requires a substantial raising of mass-consciousness through greater participation that, in turn, is not very likely to occur without drastic changes in the class structure of the individual countries...
...For many of these schemes, concrete proposals have now been elaborated and some activities are under way to implement them...
...Both approaches, if adopted, will take some time to evolve since they require a complete reorientation of existing structures...
...THE DEVELOPMENT STRATEGIES of most Third World countries are largely based on trade with the developed countries...
...The debt issue has therefore become a priority problem for the DCs, and a number of measures have been suggested to alleviate it...
...There is also a danger that the relief gained from commodity agreements may tempt DCs to relax their efforts to change the product mix of their exports in order to ease their dependence on primary-product exports...
...One of these is official development assistance—i.e., official bilateral and multilateral foreign aid, a minimum of which should be free grants...
...Partly because of the conditions outlined above, exports alone are not able to do this...
...As already mentioned, a key element here is the redeployment of industries to DCs...
...Some progress has been made as regards better access to IMF credit...
...47 At the present time, the prices of most raw materials are characterized by heavy fluctuations...
...They also succeeded in initiating a debate aimed at translating this new purpose into Karl P. Sauvant is Transnational Corporations Affairs Officer, Centre on Transnational Corporations, United Nations, New York...
...The imbalances between developed and developing countries (as well as the imbalances among the latter themselves) are so great, the structural institutionalization of dependence is so strong—encompassing virtually all areas of interaction between North and South—that a mere provision of equal opportunities may simply not be sufficient to bring about the fundamental changes required to establish a more equitable order...
...and since most international reserves result from the international acceptance of a few national reserve currencies—thus giving privileged credit to a few countries (and especially the U.S...
...or they could require that a certain percentage of bank credits are made available to Third World countries...
...It is to say, rather, that Third World countries must also search for alternatives that are independent of the international community as a whole...
...The aim, of course, would be to make this system more responsive to the DCs' interests, needs, and special conditions...
...The Third World's efforts to implement individual and collective selfreliance are still in a very embryonic state...
...Improvement of the foreign-aid performance is therefore a key plank in the NIEO program, and the developed countries are reminded that their foreign aid should reach, at the latest by 1980, the target of 0.7 percent of their GNP, a target they had accepted earlier (however, without a time limit...
...NONALIGNED MOVEMENT: Group of some 80 countries, nearly all of them from the Third World, trying to exercise some influence that is independent of East and West...
...Therefore, the redeployment of industries may not only further solidify the existing international divison of labor but may also, where it is effected through TNEs, further consolidate the dependence of the developing on the developed countries...
...For the underlying philosophy of the NIEO program is essentially reformist...
...the facilitation and encouragement of flows of financial resources (especially from OPEC countries...
...Even worse: if the DMEs actually implement the proposals of the program—that is, encourage, for instance, more Third World-oriented R and D and adaptation of technology in their countries, provide more information about the availability of alternative technologies, ease access to them, and improve the conditions under which they are made available—technological dependence may well become easier to live with for many DCs...
...The adjustment mechanism preferred by the DCs is indexation...
Vol. 25 • January 1978 • No. 1
