Worlds in Collision

...The militant ideology of the South had been merely a nuisance: There was no substance to the South's perception of its negotiating power...

...They wanted more voice: Thus the preference for economic action at the UN, rather than at the IMF or the World Bank where contribution-weighted voting favored the North...

...Already, the second Reagan Administration has been marked by constructive pragmatism...

...Now the OPEC experience suggested the exact opposite...

...In retrospect, it is difficult to imagine that serious people could fall prey to this short-lived fantasy...

...When the world deflation engineered by the Reagan Administration lowered oil demand, OPEC itself ceased to be immune to these harsh realities, losing what little power it had been able to exert on behalf of the South...

...Economists distinguish between demand and need...

...In fact, the current scene is one of a fragmented South, with developing countries afflicted by very different economic concerns...

...It suggests, too, that the Administration will eventually surrender to the necessity of scaling down the debts many have forecast and favored from the beginning...

...They wanted more of the world pie: Thus the emphasis on redistribution and on new rules of trade, finance and technology guided by distributive, rather than efficiency, criteria...

...Why then the discontent and discord...

...The developing countries, not to mention the more liberal among the European countries, have had to fight simply to prevent regress...

...Under the auspices of the General Agreement on Tariffs and Trade (OATT), successive tariff-cutting rounds were held, slashing the duties of the developed countries virtually to shreds and giving the world economy its highest levels of sustained growth in trade and income to date...

...Nothing better illustrates the tension that follows than the insistence of the radical Heidelberg students that their classes be taught by professors who knew nothing of the subject matter, since this would place students and faculty in the position of seeking knowledge under conditions of equal ignorance and hence necessary equality...

...Bernard Nossiter, a distinguished former journalist who was close at hand for the New York Times when the battles raged at the United Nations, has the reporter's ear for the noise that attended the unfolding events...

...politics stresses power and the distribution of the gains...

...The developing countries were unhappy with the old order...

...To take a telling case, the debts of the South American developing countries and the Philippines, Treasury Secretary James Baker has reversed the ideological insistence on deflation as a cure and instead emphasized adjustment with growth...

...Egypt, Israel, Pakistan, Turkey), has resisted contributions to soft-loan agencies such as the IDA, and has pushed actively for tough free market-oriented conditionality on multilateral lending...

...Reviewed by Jagdish Bhagwati Arthur Lehman Professor of Economics and Political Science, Columbia University In the midst of Third World militancy over the New International Economic Order (NIEO) in 1974, one exasperated British civil servant is supposed to have remarked to another: "When we were young, we had this world and the next to worry about...

...Specialization by the South on commodity production and exports had traditionally been considered a sign of appalling weakness...

...Commodity power," both economic and political, would be the sacrament of the new order...

...From this kaleidoscope, the pattern that emerges is one of alliances among smaller groups of developing countries, as they seek accommodation and assistance on economic problems of concern to them but not to others...

...The Far Eastern and Pacific region economies, having profited greatly from trade, fear the outbreak of protection and want little beyond the opportunity to continue to trade in the North's markets...

...The master of realpolitik, Henry Kissinger, was so taken with the Riyadh ekonomik of oil and commodity power that he sought to unify Northern responses to Southern demands and rushed to the Nairobi UNCTAD meeting in 1974 clutching special deals...

...doomed to failure as members break ranks, new suppliers emerge and demand shifts to substitutes...

...The U.S...

...The World Bank and other aid and technical assistance programs were visible symbols of the haves' concern for the have-nots: They provided the cement of altruism for a liberal international regime long on the market and short on sentiment...

...On the contrary, the developing countries of the South grew on the whole at rates dramatically in excess of the experts' optimistic forecasts in the 1950s...

...After the South shifted to moderationin the early 1980s, though, ideological posturing did not vanish from the scene...

...has shifted increasingly to allocating substantial shares of its nonmilitary bilateral aid to strategically important countries (e.g...

...Moreover, the South could use OPEC and other key-commodity cartels to exercise effective political power and extract other international economic changes from a commodity-dependent North...

...The Reagan Administration, in the first flush of the conservative triumph, captured the militancy for the North...

...This is especially evident in aid flows: The U.S...

...Ironically, it crossed the aisle to the United States...

...It is difficult to contemplate a future scenario which could resurrect the remarkable constellation of economic and political events that led from OPEC to the NIEO...

...Nossiter's faithful account of the Law of the Sea negotiations and the Administration's ultimate unwillingness to sign the treaty is an anguished portrayal of only one of many examples of the gung-ho, devil-takethe-hindmost, Third-World-baiting, UN-bashing, and antimultilateralist philosophy that Washington embraced...

...Economics emphasizes efficiency and mutual gains...

...Cartelization is a risky business...

...In a sense the story can be written in oil, since the success of OPEC in 1973 shattered the fragile consensus that the Liberal International Economic Order (LIEO), constructed at the end of World War II, was both just and adequate to the needs of the developing countries...

...India and China are giants strugglingto reach out to the outside world, while dismantling their crippling internal regulations and stifling controls...

...For the developing countries, the prospects of a return to the heady days of the NIEO are dim...

...Increasing domestic saving, foreign help, access to the expanding world markets, and their ability as latecomers to absorb a backlog of technology appear to have combined to prime the engine of growth in the successful developing countries, enabling them to outperform even the feats of the unbound Prometheus during the Industrial Revolution...

...Indeed, they did substantially better than the developed countries on average...

...Nossiter further records with concealed irony Fred Bergsten's gargantuan gaffe in announcing that the era of commodity power had arrived...

...The game ended virtually the way it started...

...As it happens, the superstructure of institutions devised in the 1940s, principally by John Maynard Keynes and Harry Dexter White at Bretton Woods, had worked well...

...But it was OPEC'S success that offered them the opportunity to negotiate for a new order...

...now there is the Third World as well...

...You could not do with bauxite and bananas what had been done with oil...

...alone, for instance, refused to sign the code for marketing baby formula adopted at the UN in reaction to the tragic consequences of transplanting the selling techniques of the developed countries to the very different conditions in the developing countries...

...The United States is a force majeure, even if a diminished giant...

...Whereas it is true that the invisible hand ought to be seen more in several developing countries, the notion that the state functions best when it self-destructs is rank nonsense, yet not distant from the doctrines the Administration's enthusiasts have sought to impose on the developing countries...

...The reasons reflected political perceptions and realities...

...But he manages also to catch the nuances of the rise and fall of the demands for the NIEO...

...The Baker plan is unlikely to work...

...Dollars convert need into demand...

...That of the U.S., however, has been destructive...

...Much of Africa has problems with its infrastructure and absorptive capacity, requiring external finance for sure but, more important, technical assistance at various levels...

...The International Monetary Fund (IMF) supplied thediscipline to maintain stability inexternal payments, without which the trade liberalization would simply have been impossible, as our fears of protectionism signify today...

...nevertheless, it is at least a vital sign of life in an Administration previously afflicted by a self-induced rigor mortis...

...For the proponents of greater Third World solidarity on economic questions, this situation represents an impossible challenge...

...If only the commodity producers in the South formed cartels, they could unilaterally exact higher prices from the North and secure a larger share of world income...

...The oil cartel became a role model...

...The gains from the LIEO were not manifestly confined to the developed nations of the North...

...South America's focus is on its debts...

...But this too shall pass...

...The liberal order of the postwar years failed to satisfy the politically conscious and the articulate in the South, who saw it as distributing the gains unevenly and felt its key institutions were stacked against an effective role for them...