Waiting for the New Order

I

Three years ago, as Western statesmen were girding themselves to do battle at the Seventh Special Session of the United Nations under the banner of that intrepid knight in armor, Henry Kissinger, a sense of expectancy, even of excitement, filled the air. At last, it seemed, the poor, destitute, backward countries were beginning to make headway with the demand for a more equitable reordering of the world economy which they had been pressing since 1964. Some feared the prospect; others welcomed it. But everyone was alert and keyed up, awaiting the outcome.

Today, the mood is one of disillusion, boredom, almost uninterest. Even the West, although it has fonded off the “challenge” from the Third World, is not noticeably happier on that score, For the developing countries, it is generally agreed, the results have been “disappointing.”¹ The most that anyone can be found to say is that they have forced their way on to the political stage, and that henceforward, and “for the indefinite future,” “the policies and economies of relations between rich and poor countries” will “remain central issues on the international agenda.”²

But even that—and it is little enough—is a dublous and questionable assertion, notwithstanding the fact that it is backed by the authority of the Council on Foreign Relations. No doubt, it depends on what you-mean by “central”; but the evidence of the past three years is scarcely encouraging. Even “the most optimistic militant in Tanzanla.” Michael Harrington observes in his book The Vast Majority: A Journey to the World’s Poor, would not agree that “a perceptible shift is taking place in the global balance of power.”³ More probably, if you were foolish enough to suggest anything of the sort, he would reply with roars of laughter.

What we have seen, in reality, during the past three years, is a progressive deterioration in the position and bargaining power of the developing countries. In 1975 their demand for a New International Economic Order (NIEO), and the threat it was alleged to pose for the West, assured them a central place on the international stage, and a good deal of the limelight as well. In 1976 and 1977 they were still able to command attention—real but peripheral—but now only because of the fear that their mounting debts-might imperil the whole international banking system.⁴ By 1978, when the dreaded defaults had failed to materialize, even this residual interest faded and the poor countries were edged, for all practical purposes, off the stage and back into the wings.⁵

The position was summed up a couple of months ago by Ralf Dehrendorf, the prestigious director of the London School of Economics. “I did not say.” he is reported to have declared, “that the developing countries may be neglected, but that they are being neglected, and, much as I deplore it, I have no doubt they will go on being neglected.”⁶ If that is the case—and I think it is the case—we are back, not perhaps to square one, but certainly not far from it.

What, in any case, is indisputable—you have only to turn to the columns of The New York Times and compare them with the corresponding columns in 1975 and 1976 to confirm the observation—is that the poor countries, and their relations with the West, are nowhere near the center of the “international agenda” in 1978, in fact, they scarcely figure on it at all, unless you count the happenings in Zaire as part of the story. And that, in a peculiar way, is what nobody is willing to do, although Shaba and Mobutu and Zaire have probably more to tell us about the “relations between rich and poor countries” than the interminable discussions and wranglings in UNCTAD, the IMF, and all the other much-publicized international debating societies. That is, of course, if you are interested in the realities and not simply in the theory.

Nothing could be more obvious at the moment than the fact that the governments of the main industrial states and (so far as one can judge) their constituencies view the poor countries and their problems with an indifference bordering sometimes on cynicism. Among the ordinary newspaper-reading public the cry for a New International Economic Order has gone sour, and Nixon’s “silent majority” simply wants to hear no more about it. And when, exceptionally, a Western statesman does push for a major increase in development assistance, as the West German chancellor has recently done, it turns out that the countries he has in mind are Portugal, Greece, and Turkey (not, perhaps, surprisingly, as otherwise the cost will fall largely on the Federal Republic), which is scarcely going to help the poverty-stricken peoples of Asia, Africa, and Latin America.⁷

The paradox is that, at the very moment when public concern has faded almost to nothing, interest in the Third World and the New International Economic Order has welled up among the inteligentsia in American academic circles, and the result has been a vast outpouring of books, treatises, and learned papers dealing with every aspect of the subject.

About this literature—or the small part of it I have seen—I shall say little in detail. Much of it is abstruse, and technical, though naturally there are exceptions. As usual, Sir Arthur Lewis, the distinguished Princeton economist, is cool, wise, and judicious, in his book The Evolution of the International Economic Order, though also perhaps a little too inclined to stand aloof from the fray. For the most part, however as Ali Mazrui complained at the conclusion of a high-powered conference in 1976, the attitude to Third World proposals expressed in this literature is “skeptical.” when not downright hostile.⁸ No doubt, it has clarified some issues; but in other cases, in my view at least, its tendency has been to complicate and obfuscate.⁹

It is also a singularly diverse literature, ranging from abstruse calculations of econometricians, who apparently think the demands of the developing countries can be disposed of by algebra, to the heart-searching of harassed liberals like Michael Harrington, who pin their hopes, desperately, on the “decency of the American people” and agonize over their inability to offer the wretched of the earth more than a “miserable, inadequate increment of change.¹⁰ But between these extremes there is a central core, whose aim (if I understand it correctly) is to reconcile the demands of the poor with the imperatives of the rich.

These are the people of whom Richard Fugen writes in the symposium on Rich and Poor Nations in the World Economy, produced under the auspices of the “1980s Project” of the Council on Foreign Relations. In their view, it is essential that the wealthy countries should make some response to “the equity demands of the South,”¹¹ and their sincerity and good intentions are not in question. What is questionable is whether in politics good intentions are enough. Viewed coolly and from a distance, the search (as Fagen puts it) for ways “to give fairer shares to the South without upsetting the international applecart as currently constructed,”¹² looks suspiciously like still another heroic but hopeless attempt to square the circle.

In any case, such proposals as have been made to date have fallen on stony ground. At the beginning of 1977, when the new Carter administration was coming to office, the influential Overseas Development Council directed an open “Letter” to the new president, detailing the “major US options on North-South relations” and its “recommendations for US policy,”¹³ The response, to Judge by the administration’s subsequent actions, or failures to act, has been exactly nil.

That does not mean that the governments of the major Industrial powers are Immovable. “North-South relations” (as it is now fashionable to call them do not rank high on their list of priorities; in fact, they are probably entirely marginal, except when Southern agitation compels them to think about them. But, for all their indifference and lack of interest, Western governments expect some small modifications of the existing economic order, and are even prepared in moderation to pay for them; but they do not expect of intend them to make much difference. As the prominent American economist Albert Fishlow put it in his contribution to Rich and Poor Nations In the World Economy, there will be no “radically altered global distribution of income” and “capitalist institutions will survive,”¹⁴ That is the current Western wisdom—and it is only partially wrong.

Thus the dream of a New International Economic Order seems to have faded, and it is natural to ask: why? A favorite answer, at least among disappointed supporters of NIEO on the left, is to blame the Third World leadership and accuse it of radically faulty tactics.

There is certainly some truth in this, as we shall see, but by itself it is a superficial and inadequate explanation. What we have to recognize as well is that the situation in 1974 and 1975, when NIEO was formulated and laid on the bargaining counter, was unusually propitious for the Third World bloc, and that this favorable moment has passed. The evolution of the world economy since 1974 has at least as much to do with the selback to the poor countries’ aspirations as, the evolution of Third World policies.

Special circumstances favored the poor countries in 1975. The first factor, as everybody knows, was OPEC’s triumphant demonstration of commodity power. The second factor was OPEC support for the demands of the other developing countries. Roger Hansen, another contributor to Rich and Poor Nations in the World Economy, is certainly right when he says that they would have got nowhere at all in 1975 without “the OPEC connection.”¹⁵

But these factors, though they are the ones most talked about, are only part of the story. The third, and probably decisive, factor was the commodity boom, which sent the price of everything from copper to soybeans zooming upward. This was the factor which led the developing countries to believe that other producers’ cartels could emulate OPEC and use commodity power to put pressure on the West. It also explains Kissinger’s sudden awakening to the virtues of commodity agreements. As Sir Arthur Lewis points out in The Evolution of the International Economic Order, producers want agreements when prices are low, in order to raise them; when prices are high, consumers in the industrial world want agreements, buffer stocks, and increased production to hold them down.¹⁶

The trouble for the developing countries was that the commodity boom departed nearly as quickly as it arrived. Huge surpluses of raw materials, base metals, and agricultural produce piled up, and only lucky breaks, like civil war in Zaire and rumors of frost in Brazil, kept prices off the bottom. The effect on the developing countries was predictable. Their export earnings plummeted, while inflation in the United States and Europe pushed up the cost of their imports. In 1960 the revenues from twenty-five tons of natural rubber exports purchased six tractors; by 1975 they purchased only two.”¹⁷

The slump in commodity prices and export earnings also brought the debt problems of the developing countries to a head. Debt, as Lewis rightly emphasizes, is no problem, either for lender or for borrower, so long as it is used for productive investment, and loans raise income by more than they cost.¹⁸ But it is another thing when foreign exchange earnings are pared away and, instead of being used for development, debt is incurred simply to finance trade deficits. And it is still another thing when poor countries are driven, as they have been since 1975, to borrow short-term from private banks at high rates of interest.¹⁹ Then the result, as Albert Fishlow has pointed out, is to check—or even halt of reverse—the rate of industrial growth and expansion.²⁰

These facts are well enough known and need no elaboration. The point I am making is simply that, if recession is notoriously a bad time for trade unions to fight for wage increases, it is also a bad time for the less developed countries to fight for NIEO. For most of them, rather, the problem is to keep their heads above water in a not very sympathetic world. This does not mean that a favorable situation may not recur at some time in the future: It simply means that it is not there today.

Finally, it is important to take note of the far-reaching changes in the pattern of international relations which have occurred during the past three years. Whatever the position may have been in 1975, the main axis of conflict in the world today is neither the “North-South cleavage” nor the long-standing East-West conflict, but the growing discord among the advanced capitalist nations. At the Nairohi meeting of UNCTAD in 1976, The Wall Street Journal pointed out, “squabbling among the rich” was more in evidence than confrontation between rich and poor.²¹ This was an unmistakable indication of the new pattern. As the expected recovery of the world economy failed to materialize, rivalries and conflicts between Western Europe, the United States, and Japan emerged as the dominant factor in international politics.

Already in 1974 Kissinger was complaining that “the biggest problem” for the United States was not its “enemies” but its “friends.”²² Since then we have seen a sharp deterioration of US-Soviet relations and a recrudescence of coldwar hysteria. But Kissinger’s assessment still stands. Whatever view one may take of the alleged Russian “master plan for dominating Africa”—and it would be hard to find any informed observer, in the State Department or elsewhere, who sincerely believes in its reality²³—Soviet and Cuban activity in Africa is a secondary issue at best. When set against the problems facing the Western industrial nations us a result of the troubled state of the world economy. Here, it is hardly necessary to add, the Soviet Union and the communist bloc, with their tightly controlled and relatively isolated economies, play a very small part. The Soviet Union may profit from Western disarray: but so long as “two-thirds or more of the world’s production, trade and currency reserves are controlled by…the United States. Japan, and the main Common Market nations of Europe,” and so long as “the longest, deepest recession and highest unemployment since the 1930s still persist in the industrial democracies,” relations between the Western powers are the critical factor.²⁴

As things stand today, no one could possibly say that relations are good. The most obvious feature of the past two years has been increasingly sharp recrimination and growing disarray in the Western camp, as one country after another has sought to lay the blame for worldwide recession at the others’ doors. Summit conferences of heads of government, such as the Bonn meeting last July, may paper over the differences temporarily: but mere declarations of good intent cannot hide the fact that there is now virtually no issue on which there is a common Western front. Even the cold war has ceased to be an effective rallying cry, as the frigid response in Europe to President Carter’s proposal last June for a common anti-Soviet stance by NATO in Africa made clear.²⁵ Elsewhere the disarray is visible in import restrictions and quotas, the deadlock in the international trade negotiations at Geneva, which have dragged on for five years without agreement, and, above all, in divergent national strategies on the key issues of inflation, growth targets, employment, and budget deficits. Characteristically, agreement was only attained at Bonn by excluding the fundamental questions of the depreciating dollar and currency stabilization.²⁶

The tensions and rivalries between the leading industrial nations also affect North-South relations. In the first place, the concerns of the developing countries inevitably get little attention. This was the case at Bonn, and led to a protest from the Third World that the summit meeting “did not deal directly with any of the issues which most concern the poorer countries.”²⁷ Secondly, the poor countries are inevitably drawn into the power struggles of the rich, as they maneuver for markets and leverage. Mary Kaldor even goes so Far as to envisage the possibility that Europe and America may be found one day on opposite sides, supporting rival nations “like Saudi Arabia versus Iran or Argentina and Peru versus Brazil.²⁸ This, of course, is speculation; but there is plenty of evidence that the growing conflict between Europe, Japan, and the United States is leading to an intensification of the “struggle for the Third World.” ²⁹

What we are witnessing today, in short, is an ongoing process of global readjustment, following the collapse of American hegemony in the wake of Vietnam. This process of readjustment, with all its problems, far overshadows other issues, such as the New International Economic Order or North-South relations, and explains why they have been pushed into the background.

It is also true, on the other hand, that the changed situation offers the developing countries new opportunities. W. Howard. Wriggins has provided ample evidence in the volume in the 1980s Project entitled Reducing Global Inequalities that “they are not as helpless as many of their leaders contend,” and that the divisions and rivalries of the industrial powers give them far more potential leverage than they possessed when their choice was effectively limited to cultivating the friendship of the Soviet Union or the United States, ³⁰ It they adjust their policies to the new realities; there is no reason why they should not make substantial progress.

So far, however, Third World policy appears to be stuck in the old grooves. That, at least, is what developments since the Seventh Special Session of the United Nations suggest. There have been modification, mostly of dubious benefit, and tactical changes, but it is hard to see any sign of new initiatives or a new approach.

The most obvious feature of the Third World policy since 1975 is the way it has drawn back from the head-on collision with the West which appeared to be looming up at the Seventh Special Session.³¹ The turning point, clearly enough, was the decision of the developing countries, at the close of the Seventh Special Session, to accept Kissinger’s formula of “negotiation without confrontation,” and to set up still another negotiating body, the Conference on International Economic Cooperation (CIEC). as a forum for “North-South dialogue.” Since that time the path, at least as viewed from the standpoint of the developing countries, has been steadily downhill.

The landslide began almost immediately at the meeting of the interim committee of the IMF in Jamaica in January 1976. Here the poor countries were persuaded—unfriendly critics might even say they were bribed—to shelve fundamental reforms in the international monetary system in return for the promise of a subsidy estimated by pessimist at $1.5 billion and by optimists at something over $3 billion.³² It was not a happy precedent, not least because the odds (as The Wall Street Journal caustically observed) were that they would “win up getting peanuts.”³³

Nevertheless the precedent set at Kingston, Jamaica, was followed at the UNCTAD meeting at Nairobi in May, at the Colombo Summit of the Non Aligned Nations in August, and at the IMF meeting at Manila in October.A Nairobi the poor countries tacitly with drew their demand for “indexation” i.e., for tying the prices they get for their commodity exports to the price they pay for imports. They also retreated from their request for a debt moratorium, agreeing instead that the question should be placed on the agency of the CIEC negotiations in Paris, when predictably it moldered.³⁴

But the key issue at Nairobi was the stabilization of commodity prices. Here also the developing countries backpedaled, abandoning the plan adopted at the Dakar Conference in February 1975 for an independent “solidarity fund” to underwrite producers’ associations on the OPEC model, in favor of $6 billion producer-consumer Comma Fund. Once again, pretty clearly, the calculations behind this change of from were financial, i.e., the hope that the rich countries would foot most of the bill, and the Common Fund, reaffirmed at Colombo, now became a central plan of the Third World program, even after had become clear that the hoped-for contributions from the rich were not forth coming, at least for the present.³⁵

In the meantime the Conference of International Economic Cooperation was meeting in Paris. It was obviously from the beginning that it lend itself; too readily to Kissinger’s much publicized strategy of “talking them death.”³⁶ In addition, by agreeing discuss energy, raw materials, development, and finance in separate packets. the developing countries fragmented the integrated program, which hitherlo had been their main tactical asset. The result was predictable. Within months the talks were hopelessly bogged down, and as 1976 drew to a close, the outlook was an pessimistic that what was supposed to be the decisive CIEC meeting in December was canceled altogether.³⁷

Finally, the whole charade was ignominiously wound up in June 1977, at the cost of S1 billion to the industrial nations.³⁸ This, us one commentator remarked at the time, was the highest “price” the West was “prepared to pay to counter demands for a generalized solution.” ³⁹ But it was a cheap bargain at the price, and once again the developing countries grumblingly swallowed the balt.

They were induced to do so, in part at least, by a promise of further talks on the Common Fund, but when these talks, which had stalled in March, were duly held last November, they once again ground to a halt. One reason was that President Carter, who had shown vague sympathy earlier. quickly decided. Once he was in office, that he was “less than enthusiastic about the Common Fund.⁴⁰ There is, it seems, still an outside chance that the talks may be resumed; but the possibility is viewed with “skepticism” and scarcely veiled reluctance in the West.⁴¹

That, for practical purposes, is about as far as we have reached at present, and no one could say that it is very far. Nor could anyone truthfully say that it was unforeseeable. Once the developing countries surrendered their few effective bargaining counters.

II

If in retrospect it is clear that the decision of the developing countries to participate in the Conference on International Economic Cooperation marked an important turning point. It is also true that it was neither accidental nor simply a gross miscalculation of what was likely to be gained by negotiation. On the contrary. It signified a shift within the Third World leadership from the so-called “radicals,” led by Algeria, to the “moderates,” led by Brazil and Saudi Arabia.⁴²

The main result of this shift in leadership was a deliberate watering down of the program of “collective self-reliance” which the developing countries had formulated at a series of conferences in 1974 and 1975, and a reversion to a traditional “trade-aid-and-development” strategy.⁴³ This change was registered in the Manila Declaration of February 1976, which became “the basic reference text for Third World claims” at the UNCTAD conference in Nairobi and elsewhere.⁴⁴

For those who believe with the wellknown Third World economist Samir Amin that “any development policy that accepts the framework of integration into the world market must fail,”⁴⁵ the return to a policy of aid-and-trade was a momentous decision. As Michael Harrington has observed, “the program put forward by UNCTAD at the Nairobi meeting” could have been “accepted in toto by the United States, because it would certainly not make any significant change in the global maldistribution of wealth.”⁴⁶ In that case the interesting question—perhaps the only question that matters on a practical level—is why it was not accepted.

So far as the poor nations are concerned, what is obvious is that they have turned back to the policy of “patching up the old system” which they rejected as inadequate in 1975. Whether they have done so reluctantly or out of conviction is of small importance. What is important is that Third World officials and diplomats seem to have decided that the free market economy is an unalterable fact of life, and have managed to convince themselves that they can achieve their goals within it. As interpreted at and after Nairobi, the New International Economic Order has become, in Harrington’s words. “impeccably capitalist”.⁴⁷

Perhaps in this way the current generation of Third World leaders hopes to make it acceptable to the West. Certainly. If you ask them, they will tell you that the realization of NIEO in its present form, us set out in the Munila Declaration, presents no real problems.

“The mechanisms for a new order,” some of them told Michael Harrington, as they have often told me, “already exist”; all that is necessary is to “make the transfer of resources from rich to poor automatic, industrialize the South by transferring technology to it, and integrate all these demands in a single comprehensive plan.”⁴⁸ What they omit to tell you is how these objectives are to be realized. If pressed, they fall back on the assertion that, in the long run. “there are global common interests,”⁴⁹ No doubt: but unfortunately, as Lord Keynes observed, in the long run we are all dead.

The gradualist approach currently favored by Third World officials is shared, perhaps not surprisingly, by a considerable number of the more liberal publicists and economists in the West. They also place their faith in “a global accommodation,” hinging (in Albert Fishlow’s words) on “the mutuality of benefits from trade and foreign investment.”⁵⁰ And, like their Third World brethren, they believe that the necessary mechanisms for accommodation already exist. Fishlow’s unlikely candidate being the Conference on International Economic Cooperation—a choice which, in view of the record of CIEC as sketched above, sounds suspiciously like a bad joke.⁵¹

The arguments of Western liberal economists rest on two basic propositions. The first is that the poorer countries—though admittedly suffering temporarily from the recession in world trade—are not doing too badly under the present dispensation, and are unlikely to do better under any other. The second is that a few specific reforms within the existing system can remove most of the imperfections of which the poor countries complain, without hurting the West. Unfortunately, both arguments are questionable.

The basis of the first contention is the fact that the overall rate of growth in the developing countries in the 1950s and 1960s was higher than that of the industrial nations. This has been pointed out many times before and is by now a platitude. Industrial production in the former increased annually by an average of 6 1/2 percent, in the latter by 6 1/2 percent. Their exports of manufactured goods grew by 10 percent a year, faster than manufactures exported by the developed countries.⁵² As the British economist I.M.D. Little has said: “For the aggregate of LDCs [less developed countries]. the past quarter of a century has shown remarkable development.⁵³

The implication, it is hardly necessary to add, is that the less developed countries have only to keep going along the chosen path and all will be well. But the trouble with percentages and aggregate figures is that they are apt to hide more than they reveal. Closer examination shows, for example, that in 1971 ten countries accounted for 55 percent of all LDC’s manufactured exports and that the share of the forty poorest countries amounted to only I percent.⁵⁴ Furthermore, in spite of the developing countries’ remarkable increase in the export of manufactures, they still account for less than 8 percent of total world output.

It would also be relevant to ask how much of this growth actually accrued to the developing countries and how far it has improved the living standards of the population as a whole, and not simply of a small Western-orientated enclave Although Albert Fishlow, among others, disputes the evidence, it is usually maintained not merely that the relative share of the national income and the standards of living of the poorest 40 percent in countries such as Brazil and Mexico actually declined during the period of accelerated growth, but also that the incomes of the bottom 10-20 percent decreased absolutely.⁵⁵

These controversial questions apart, two conclusions seem to stand out. First, for all the spurt of the last twenty-five years, the developing countries are going not very quickly not very far. Here the projections of the Nobel Prize-winning economist Wassily Leontief, in his study of The Future of the World Economy, make sobering reading. According to Leontief, the share of the developing market regions in world manufacturing will increase, “under the most favorable seenario.” to 17.5 percent at best by the year 2000, but without any improvement of existing trends the figure will be no more than 11-12 percent.⁵⁶

On the other hand, there is a good chance that a handful of developing countries—examples usually given include Brazil, Iran, Saudi Arabia, and Mexico—may graduate to the rich man’s club. But here we come to the baffling paradox. On the one hand, this is a development which the rich countries can only welcome. In so far as they hope that, with a larger share of the world’s wealth, the so-called “middle countries” will have a growing stake in the current system and lose interest in a new international order.⁵⁷ On the other hand, the emergence of new rich countries evokes the specter of a new Japan, of even two or three new Japans, and that, as Michael Harrington observes, is an experience no one in Europe or the United States wants to repeat.⁵⁸ It could too easily be the straw that broke the camel’s back.

This is the unhappy dilemma that faces-the West as it struggles desperately to fight off Japanese competition, and it leads directly to the second of the arguments put forward by liberal Western economists. That, briefly, hinges upon the willingness of the advanced industrial nations to reach a “global accommodation.” Professor Fishlow is almost certainly right, as things stand at present, in stating that the developing countries are prepared “to respond to a comprehensive program offered by the North.”⁵⁹ The trouble is that—in spite of much preaching by organizations such as the Trilateral Commission or the Overseas Development Council—there is no worthwhile evidence that such a program is being offered.

Take, for example, one of the “simple principles” Fishlow proposes as a “basis for the restructuring of North-South economic relations.” This is a “commitment to extending and making markets more effective.”⁶⁰ But what do we see when we look around today? Far from extending markets, United States policy, the director of the Japanese Ministry of International Trade recently pointed out, is directed at combating the “invasion of the world’s industrial markets” by the products of “such semi-industrialized nations as Brazil, the Republic of Korea, Singapore and Mexico.”⁶¹ Nor is Western Europe more recommodating. Only a few weeks ago Etienne Davignon, the EEC trade commissioner, issued a blunt warning to developing countries “to stop getting into manufacturing facilities, primarily steel, that provide competition for the rich world.”⁶²

A second example is the proposal for carmarking revenues accruing from exploitation of ocean resources to an international authority for the benefit of the poor countries.⁶³ This is admirable in principle, and would meet at least in part the Third World demand for “automatic transfers” of wealth. But anyone who has followed the course of events since 1973 knows only too well that the reality has been a greedy rush, by rich and poor countries alike, to extend jurisdiction over the seas to 200 miles, or if possible more, thus bringing 90 percent of known ocean resources under exclusive national control.⁶⁴

It would be easy to take other proposals for reform—for example, an expansion of IMF credit⁶⁵—and contrast them in the same way with what is actually happening; but this is not necessary. The point, quite simply, is that the issues are “fundamentally political, not economic,” and will not be solved by economists’ blueprints, however plausible.⁶⁶ This is the reality of the current international situation, little as we may like it.

But there is a second and perhaps more fundamental point. That is, that the alleged “long-run mutuality of interests” and the consequent possibility of “global bargains”—assumptions upon which both Fishlow’s arguments and those of like-minded Third World economists implicitly rest—if not entirely “utopian,” are certainly hypothetical.⁶⁷ If, as appears to be the case, this is the sort of package on which Third World officials and negotiators are relying. they are duping themselves and their constituents. Unfortunately, as Howard Wriggins has written, “the world of the 1980s is not likely to fit the convenient, tidy, and rather nostalgic model of global bargains or niecly balanced quid pro quos.”⁶⁸

III

Back in 1975, at the end of the Seventh Special Session. The Wall Street Journal commended the Third World negotiators for behaving “like serious labour leaders out to bargain a better deal for their people.”⁶⁹ I doubt whether the analogy with a trude union, frequently though it is made, has much validity. But in any case—as George Meany could have told them—the important thing, if you do set out to make a deal, is to make sure you come away with your fair share of the bargain. The immediate case against the Third World negotiators is that, on the evidence of the past three years, they haven’t; the longer-term case is that, so long as they stick to their present lactics, they never will.

The alternatives were set out plainly enough by Mahbub ul Haq, the able director of policy planning at the International Bank for Reconstruction and Development. The developing countries, he said, had simply not made up their minds what they were really seeking, “short-term concessions” or “long-term structural changes.”⁷⁰ The probability. until they do so, is that they will get neither. In any case, short-term compromises, even if attainable, are likely to prove unstable and unenforceable.

This, no doubt, is the reason why Professor Dahrendorf, in the statement already cited, concludes that “the policy of the developing countries, whatever their declared intentions may be, is following a course which simply does not allow them to make progress.” Harrington is even blunter. “The Third World leaders,” he says, “for all their insistence upon a new International economic order, have no precise program” for realizing it.⁷¹

Not, of course, that any reasonable person would underestimate the predicaments of leaders in the developing countries who see themselves torn between the imperatives of day-by-day politics, where decisions cannot be indefinitely postponed, and the pursuit of long-term objectives. There is no particular virtue in doctrinal purity, and it is not surprising that they seek in practice to combine pressure on the West for immediate short-term concessions with a long-term policy of self-reliance. The question, needless to say, is whether the two strategies are compatible.

Mahbub ul Haq thinks not, and his arguments are not easy to refute. One of the most insistent demands of the developing countries at the present time, for example, is for greater access to Western markets for their manufactures.But, as Arthur Lewis points out. “when the LDCs switch from exporting primary products to exporting manufactures to the rich countries,” the result is to “exchange one dependence for another.”⁷² If their real aim is self-reliance, then (in ul Haq’s words) “the whole agenda changes.”

There are, of course, other reasons why the developing countries today are pursuing a less aggressive policy than in 1975. One is the sharp deterioration in their economic situation which has already been discussed. Another is the searching critical analysis of the New International Economic Order which has been carried out by Western economists. And the third is the radical shift in the attitude of the industrial powers, particularly of the United States since the accession to power of the Carter administration at the beginning of 1977.

The effects of the economic crisis are obvious enough. If a developing country such as Peru needs to pay $1 billion by the end of the year just to service its foreign debt of $5.5 billion, there are obvious constraints on its liberty of action;⁷³ and the problems Peru faces are in no way exceptional.⁷⁴ At the same time further analysis has scotched any idea that the implementation of NIEO, even if it were full, prompt, and automatic, would produce dramatic changes in the position of the poor countries. In some cases it is even possible that the proposed measures are not in the interests of the developing countries themselves.⁷⁵ This is the upshot of the intense debate about the Third World program which has been going on in the West, and even if some of the Western criticism is one-sided and hostile, there is little doubt that it has played a part in tempering the initial enthusiasm of the advocates of NIEO.

The third factor which has put the Third World leadership on the defensive is the extraordinary success of the West in seizing the initiative. It has done so by taking up the questions of basic human needs, absolute poverty, and the “forgotten 40 percent,” and placing them at the top of the “North-South agenda.” It is a remarkable reversal, in 1975 the rich countries were in the dock, accused of exploiting and defrauding the poor countries; in 1978 the poor countries are in the dock, accused of callous indifference to the plight of the poorest, most deprived, and most disadvantaged sections of their own people.

I am not going to discuss this Western counterattacks in detail. It rests on the well-established fact that income disparities and other key disparities, such as education, health care, and welfare, are much greater in the poor countries than in the rich countries, and that the first object of any aid program should be to remedy them.⁷⁶ When we see that hundreds of millions of people in Asia, Africa, and Latin America are living below a level of absolute poverty, and often in conditions of indescribable squalor, it is hard to take issue with this argument without appearing impervious to human misery. Nevertheless, the very fact that it is so persuasive makes it necessary to subject it to scrutiny.

The initiative in raising the question of “absolute poverty”—“n condition of life so degrading as to be an insult to human dignity”—was taken by Robert McNamara and the World Bank when it became evident, in the early 1970s, that aid and growth were simply not percolating through to the poor.”⁷⁷ But it was the action of the International Labour Office in 1976 in convoking a World Employment Conference, which came out in favor of a “basic needs” policy to provide food, shelter, medicine, and work for all the people of the world by the end of the century, that finally put the issue at the top of the international agenda.⁷⁸ Here was a clarion call from a respected international organization which the Third World countries could not shrug off—as otherwise they were inclined to do—as an unpardonable intervention by the better off in their internal affairs.

No one would question the sincerity and deep commitment either of McNamara or of the ILO. But that does not mean that basic needs cannot be used both as a stick with which to beat corrupt and greedy Third World elltes and as an excuse for the West to drag its feet. Already in 1975 we were hearing the familiar question: Why should the workers of Detroit be taxed in order to subsidize the ruling elite of Zaire? “The people of the United States.” Professor Richard Gardner rather sententiously announced, “are not interested in transferring wealth from the poor people in rich countries to the rich people in poor countries.”⁷⁹

The implied threat, of course, was that aid would be withheld, or channeled only, as Hansen puts it, “to those developing countries attempting to eliminate the most debilitating aspects of poverty,” ⁸⁰ in any case, what was the justification for aiding the developing countries, if whatever sums were provided were milked off into the pockets of the affluent minority?

But it was Richard N, Cooper, later to become Under Secretary of State for Economic Affairs in the Carter administration, who turned the question of basic rights into a moral issue, asserting that “no completely general transfer of resources from country to country can be supported on ethical grounds,” and that all such transfers “must be based on some kind of performance critorion.”⁸¹ If we are to judge by results, it looks as though Cooper’s arguments have governed the approach of the Carter administration.

What is certain, In any case, is that, within a few days of the inauguration. C. Fred Bergsten, Assistant Secretary of the Treasury for International Affairs, announced on behalf of the new administration that it “had found ‘many merits’ in the direct assistance approach.”⁸² This statement is significant. Direct assistance implies that the donor retains control over the use to which assistance is put. It also implies that he retains the right to decide who shall, and who shall not, receive it, Whatever the merits or demerits of this approach, it evidently, and no doubt deliberately, controverts the Third World demand for automatic transfer of resources, with no strings attached.

As the months have passed, the initial approach of the Carter administration has, if anything, stiffened. Last April the Deputy Secretary of the Treasury, Robert Carswell, stated pointblank that US policy was to allocate development funds to governments “with commitments to protecting and promoting the rights of their people.” ⁸³ Then, in June, it was announced that President Carter was planning to concentrate his efforts on fighting world hunger.⁸⁴ This may make sense politically, and will almost certainly be popular: but it is another question whether it makes economic sense, if the object is to promote more rapid economic development, which is what the poor countries need and want.

The attack on world hunger, the president said, was “one of his Administration’s most significant initiatives.” With official development assistance (ODA) languishing at a paltry 0.26 percent of gross national product, and with another tug of war looming up over the Foreign Aid Appropriation Bill—with every chance that the allocation will be cut back⁸⁵—it might also be said that it is the administration’s great alibi. An attack on hunger is an attack on the symptoms, not on the causes, of backwardness.

No reasonable person would question the desirability of direct aid as an emergency measure when people are actually starving as a result of drought and famine. But an attack on world hunger as a policy for normal times is a more questionable proposition, and so is a program, such as that adopted by the World Bank, of channeling resources into projects specifically designed to alleviate the lot of “the poorest segments” of the population of the poor countries.⁸⁶ Stephen McCarthy, who writes from firsthand experience of development planning in Botswana between 1971 and 1976, is frankly skeptical about the efficacy of such programs.⁸⁷ The only way to eradicate rural poverty, he maintains, is to build up the infrastructure of roads, transport, schools, cooperatives, and this can only be effectively accomplished in the framework of an overall development plan covering the whole economy.

McCarthy’s criticism rests on the contention that it is illusory to suppose that hunger can be singled out and attacked out of context as a separate problem. Such a policy may act as a palliative, like the charity handed out to a beggar on the street corner today, which may tide him over until tomorrow but does nothing to prevent him coming back for more the next morning; but it leaves the fundamental problems of poverty, unemployment, and intolerable living conditions unresolved. It is in this sense that it is fair to characterize the Carter administration’s concern with poverty and, “basic rights” as an alibi, enabling it to sidestep such issues us the replenishment of IDA resources or increasing ODA to the agreed level of 0.7 percent of GNP.—“There is.” Carlos Diaz-Alejandro has written, “a touch of hypocrisy in the upsurge of Northern elite concern about the indifference of LDC elites to poverty and democracy.”⁸⁸ Some people would say more than a touch. Certainly it provides an excuse for ignoring the real problems of the Third World.

This does not mean that we should simply turn our backs on the questions of poverty and the oppressed and under-privileged millions. But it does mean, as Richard Fagen suggests, that in any well-conceived development strategy—callous though the suggestion may sound—their needs must be “relegated to a secondary place,” and that long-term measures to stimulate overall economic growth, and thus to provide productive employment for the poverty-stricken millions, must have first priority.⁸⁹ Without such measures, as Fagen says, it is virtually impossible for even the most sympathetic and democratic governments in the Third World—not that there are many of them—to deliver goods and services to the poorest sections of their population on a scale and in a way that would eradicate, or even markedly reduce, poverty. Their available resources are simply too small.

This, of course, is one reason why impassioned supporters of a “basic needs” program look to the West to take a lead. In their view, such a program would not impose, an intolerabic burden. Roger Hansen, for example, argues that “absolute poverty could be virtually ended within ten to fifteen years” at an annual cost of $10-13 billion a year.⁹⁰ Not everyone will accept his analysis, nor, I suspect; will everyone agree that the sum involved is “not very large,” least of all those tough-minded workers in Detroit. The more relevant question is what the attitude of Western governments is likely to be; and here one can only agree with Diaz that “it strains the imagination” to believe that they will “place such concerns at the center of their policies” in any foreseenble future.⁹¹ That does not mean that they have no interest in the Third World or its future; it simply means, as we shall see in a subsequent article, that their interest in cruder and more down to earth.

(This is the first of two articles.)