April 30, 1982

April 30, 1982 | Backgrounder on Economy

The Brandt Commission: Deluding the Third World

(Archived document, may contain errors)

182 April 30, 1982 THE BRANDT COMMISSION: DELUDING THE THIRD WORLD INTRODUCTION During his first year in office, President Reagan has focused his principal attention on reconstructing the American economy.

Although seldom articulated, the challenges confronting his domestic economic program have emerged in the international economic arena as well. For the past three decades, Third World countries have persistently called for a worldwide redistribution of income similar in structure to the programs adopted durin g this period by the federal government in the United States.

Although President Reagan has forcefully met and attempted to change the direction of domestic economic programs, his efforts to reorient the role of the U.S. have been only tentative in interna tional economic development programs participation in such international redistributive schemes, which are in direct contradiction not only of the policies and programs of the Reagan Administration, but of the very basis of our demo cratic process. Implic i t in such programs is a degree of coercion the abrogation of sovereignty, and the denial that man has a fundamental right to the fruits of his labor. The Reagan Admini stration must necessarily confront these adherents of redistribu tive wealth, expose th e ir fallacious reasoning, and reject forth rightly their illusionary schemes The United States is currently being dragooned into active A most important meeting for the U.S. in regard to these issues took place on October 22 and 23, 1981, at the Mexican be a ch resort of Cancun. This summit, known formally as the International Meeting on Cooperation and Development and more informally as the North-South Conference, brought together govern- ment leaders representing twentyitwo nations from both the "indus tria l ized" North and the lldevelopinglf. South to discuss global development issues. 2 The meeting was called by Mexican President Jose Lopez Portillo and Austrian Chancellor Bruno Kreisky not only to air the various disparate views of the participating nation s on the meaning of cooperation and development, but also to narrow the differences between the industrialized world and the developing nations. Though no formal agenda existed, the participants agreed beforehand to discuss l'food security and agricultural development; commodities, trade, and industrialization; energy and monetary and financial issues Itl The Cancun meeting was the latest step in a process that began several years before when an Independent Commission on 1nternational.Development Issues, he aded by former West German Chancellor Willy Brandt, published' a lengthy and shrill report entitled North-South: a proqramme for survival. The report is the most important of numerous attempts to force changes in U.S international economic policy.

The gist of the Commission's findings also known as the Brandt Report is that the world in the 1980s faces a crisis of such global dimensions that the very survival of the human race is in serious question. The Commission, however, did note that such developments were not necessarily inevitable and suggested that the nations of the world could and should band together in the Itcommon task of ensuring survival, to make the world more peaceful and less uncertain.Il* To achieve such an end, the Brandt Report offered a rather elaborate emergency program, which would fundamentally alter the existing relationship between North and South and bring about the creation of a Ifnew international economic order The Commission ended its report by calling for a summit of world le a ders from industrialized and developing countries to concentrate and act on this emergency pr~gram For more than a decade before publication of the Brandt Commission's report, leaders of the Third World had been trying to engage leaders of the industriali z ed nations in negotiations toward the establishment of this Ifnew international economic order This vague phrase refers not only to redressing the economic imbalance between developed and developing nations, but also to its elimination by a vast scheme of redistribution of the world's wealth. In short, the NIEO, as the "new international economic order" is known, seeks to take the produced wealth of developed states and parcel it out to the undeveloped.

Though an increasing number of commentators have questioned the validity and propriety of such redistributive schemes, the I The New York Times, October 21 1981.

Report of the Independent Commission on International Development Issues North-South: A programme for survival (Cambridge, Massachusetts: The MIT Press, 1980 p. 47 Ibid pp: 281-282: 3 pressure to implement them has not abated. Last December 15 Javier Perez de Cuellar of Peru, the new Secretary General of the United Nations, called the gap in wealth between rich nations and poor a "breach of the mos t fundamental human rights, It and declared that as Secretary General he intended to Itprovide impetustt for global negotiations on transferring wealth from developed to developing nation Contrary to much of the press coverage, both here and in Europe, whi c h unfairly caricaturized President Reagan at Cancun as IfScrooge preaching platitudes about self-reliance, Its the Administration fully committed itself to playing a constructive and positive role in the historic development process. The President clearly and forcefully expressed the belief that emphasis upon individual initiative in a free market system, rather than aid and government intervention, has been and remains the surest route to economic growth. Implicit herein was a rejection of worldwide redis tributive schemes, the proposed New International Economic Order, and the Brandt Commission rep0r.t.

Soon thereafter, the Administration followed up these words with a concerted program of action to show that its plan, and not that of the proponents of redistributive wealth, would best serve the needs of both the developed and developing worlds.

On February 24, 1982, in a major address to the Organization of American States (OAS), President Reagan unveiled such a broad economic program for the two dozen or so countries of Central America and the Caribbean Basin. He proposed a long-term U.S economic commitment to the area stressing free trade, aid primarily in support of the private sector, technical assistance, and I investment. If the program succeeds in creating those conditions under which Ilcreativity, private entrepreneurship and self-help can flourish,It6 then it may well serve as a model for other areas of the world.

U.S. FOREIGN ASSISTANCE SINCE WORLD WAR I1 How should the United States respond to demands for a NIEO?

This question has perplexed three American administrations, and rightly so, for this country has had a proud and pioneering record of aiding nations in need New York Times, December 16, 1981, p. A6.

Robert Lubar Reaganizing the Third World," Fortune, November 16, 1981 p. 81.

Office of the Press Secretary, The White House, Text of Remarks by the President to the Organization of American States, Hall o.f the Americas Washington, D.C February 24, 1982, p. 3. 4 In the years immediately fol lowing the Second World War, the Marshall Plan was designed to promote the relief and recovery of war-ravaged Western Europe. With the onset of the Cold War, it was determined that American military as well as economic assist ance should be extended to na tions, threatened by Communist aggression or subversion, notably Greece, Turkey, Korea, and Taiwan.

Similarly, the United States began to provide technical and capital assistance to nearly all developing, independent nations.

The burden of international a ssistance fell heavily and solely on the United States; in the early fifties, the.United States was the only nation offering international economic assistance as a national policy As scores of nations gained independence during the early sixties, the U.S. government publicly announced that it was launching a "Decade of Developmentgt to help poor nations grow more rapidly and participate more fully in international political and economic systems. The establishment of the Agency for Inter national Developmen t (AID) within the Department of State, the Alliance for Progress in Latin America, and the Peace Corps, as well as the large developmental assistance programs in India and Pakistan and the multiyear aid commitments in Tunisia and Nigeria exemplified the d irection of American foreign aid with foreign aid, particularly as a tool of American foreign policy, was evident among Washington policymakers. Charles P.

Kindleberger an authority on American foreign aid, noted During the late sixties and early seventies, discouragement Economic development was stubbornly slow. Aid achieved little growth, less gratitude, few political objectives Such discouragement was ref lected in the sharp decline of official bilateral U.S. development assistance between 1964 and 19

72. As a proportion of the gross national product GNP official develop ment assistance fell to 0.29 percent in 1972, in contrast to the 1964-66 period when it was 0.49 percent.

The disenchantment continued throughout the seventies.

Dwight Phaup, Professor of Economics at Union College, observed real non-military assistance to foreign nations expanded by just 36 percent between EY 1972 and FY 1979."8 As a perc entage of total government expenditures, nonmilitary aid remained roughly at 1.5 percent E Charles P. Kindleberger U.S. Foreign Economic Policy, 1776-1976,"

Foreign Affairs Vol. 55 (January 1977 pp. 395-417.

E. Dwight Phaup International Affairs in Eugen e J. McAllister, ed Agenda for Progress: Examining Federal Spending (Washington, D.C.: The Heritage Foundation, 1981 p. 42. 5 The seventies did, however, witness a dramatic shift in the mechanism by which American foreign aid was disbursed. During that ti me, the proportion of aid provided through multilateral arrangements grew relative to bilateral aid (see Appendix 1).

Significant also was a change in emphasis on the nature of aid disbursed. During the 1960s, development assistance programs concentrated o n such major "infrastructure'l projects as dams roads, and power plants; after 1973, the major focus of bilateral assistance was to be the poorest nations and an attack on their most serious obstacles to economic growth and development population, food, a n d health More important, self-help became the underlying theme as well as the major criterion for additional aid distribution. Commenting on the shifts, Phaup noted This change is due in part to announced efforts by donor nations to "de-nationalizeIt aid, but is also reflective of the Nixon administration's emphasis on New Directions" where bilateral aid was to rely more heavily on self-help projects and private investment.

Perhaps even more importantly, the shift is in response to greater militancy on the part of recipient nations which view aid from the developed nations as an entitle ment involving no implicit or explict obligations to the donors.g PROPONENTS OF ECONOMIC REDISTRIBUTION Among the more dramatic changes that have occurred in the internatio nal environment since World War I1 has been the emer gence of more than a hundred new nations, most of them from the non-industrialized, less developed areas of Asia, Africa, and Latin America.

Nations General Assembly, about 120 consider themselves "Third World" or developing nations.

The term ttSouthtl is more a political than a geographic concept. Australia and New Zealand for example, are located in the southern hemi sphere but, in economic and social terms, clearly belong to the North. Conversely, muc h of the llSouthlt India, Pakistan Southeast Asia, large sections of Africa, and Latin America lies north of the equator. And the South is even less a uniform ly homogeneous economic entity than it is a geographic unit fact the "South't is an enormously d isparate group, ranging from populous, resource-rich countries like India and Brazil to less populous, island countries like the Seychelles and Grenada.

Similarly, the distribution of Per Capita GNP within the South is extremely varied (see Table I And cul turally, the South ranges Of the 157 nations now represented in the United This bloc is popularly known today as the llSouth.ll In Ibid. 6 from countries with millions of aborigines to those of more advanced, sophisticated civilizations.1 Country TABLE I D ISTRIBUTION OF' PER CAPITA GNP SELECTED LIST Bangladesh Laos Nepal Ethiopia Somalia Mozambique Upper Volta India Sri Lanka Guinea Pakistan Central African Republic Lesotho Guinea-Bissau Sudab Ghana Dominica Zambia Guyana Botswana El Salvador Peru Cuba Gua t emala Tunisia Malaysia Panama Taiwan Costa Rica Uruguay Argentina Suriname French Guiana Per Capita GNP in U.S. dollars 90 90 100 120 130 140 160 180 190 210 230 250 280 290 320 390 440 480 5 60 620 660 7 40 810 9 10 950 1090 1290 1400 1540 1610 19 10 211 0 2340 lo Cf. P. T. Bauer and B; S. Yamey, "East-,.cst/North South Prosperity Commentary, Vol. 70, No. 3 (September 1980 pp. 57-58 P. T. Bauer and B. S. Yamey, "Against the New Economic Order," Commentary Vol. 63, No. 4 (April 1977), pp. 25-26; and Susan P . Woodard The Third No. 114 (March 18, 1980 Peace and World: New Realities and Old Myths The Heritage Foundation Backgrounder Vene zue 1 a Singapore Martinique 7 2910 3290 3950 Source: 1980 World Bank The term ltSouth!l is a label given meaning, notes Prof e ssor Roger D. Hansen of the Johns Hopkins School of Advanced Interna tional Studies, by the decision of those countries to act as a diplomatic unit coordinating a large measure of their international activity M l For almost two decades, developing countri e s have urged particularly in international forums, dramatic changes in the post-World War I1 economic and financial system. During the sixties and early seventies, the developing countries began banding together to press not only for increased foreign aid and trade but, more important, for major economic concessions from the United States and other Western economic powers.

During the first United Nations Conference on Trade and Development (UNCTAD in 1964, some 77 developing countries organ ized themselves into a negotiating bloc, more commonly known as the !'Group of 77.Itl2 This group, whose membership today exceeds 120 nations, stqessed throughout the sixties strong trade pre ference.s, compensatory financing, and special drawing rights SDR) allocations , particularly in U.N. cjrcles.

In 1973, at the fourth conference of the Non-Aligned Countries in Algiers, the developing nations as a whole turned their attention specifically to the economic goals that had been set by previous UNCTAD meetings for the !'n ew international economic order and the recommendation that a special session of the General Assembly be convened to consider the U.N. role in fostering such a development The Algiers meeting ended with a clarion call In April 1974, the Sixth Special Sess i on of the General Assembly formally adopted without a vote a resolution which stressed, inter alia, the need to work urgently for the establishment of a new interna tional economic order based on equity, sovereign equali ty, common interest and cooperatio n among all states irrespective of their economic and social systems which shall correct inequalities and redress existing injustices, make it possible to eliminate the widening gap between the developed and developing countries and l1 Roger D. Hansen, "No r th-South Policy What is the Problem?" Foreign Affairs, Vol. 58, No. 5 (Summer 1980), p. 1105 l2 Cf. Jon McLin, "The Group of 77," West Europe Series, Vol. XI, No. 3 American Universities Field Staff, Inc., April 1976 pp. 1-8. 8 ensure steadily acceleratin g economic and social develop ment and peace and justice for present and future generations.

The Special Session similarly agreed again without a vote to a "program of action that called for changes in existing North-South relations TRADE more I!equitable commodity agreements; greater access to industrialized markets; and a common fund to guarant ee stable prices for raw material exports.

FOREIGN AID large scale debt cancellations; and in creased assistance primarily through multilateral charnels.

FOREIGN INVESTMENT recognition of full permanent sovereignty over resources; restitution and full compensa tion for exploited resources.

TECHNOLOGY greater access to "developed technology restraints on multinational companies.

FINANCIAL INSTITUTIONS significant changes in the distributive systems, particularly the World Bank and the International Monetary Fund.

Though the'New International Economic Order was presented as a simple kind of recompense for the West's alleged exploitation of the developing world's resources, the real thrust of the document, according to Peter Bauer, professor at the London S chool of Economics, and John O'Sullivan, editor of Policy Review is the implication that '!everyone everywhere. should be entitled to a substqntial income by virtue of being alive, regardless of economic performance I! I'Correcting inequalities and redres sing existing injustices translates into a massive worldwide redistri bution of wealth.

During a November 1975 visit to Great Britain, Tanzanian President Julius Nyerere gave an address, entitled "The Economic Challenge Dialogue or Confrontation in which h e succinctly put f.orward the argument for redistribution I am saying it is not right that the vast majority of the world's population should be forced into the posi tion of beggars, without dignity. In one world, as in one state, when I am rich because y o u are poor, and I am poor because you are rich, the transfer of wealth from rich to poor is a matter of right; it is not an appropriate matter for charity. l3 "Foreign Aid for What Commentary, Vol. 66, No. 5 (December 1978 pp 41-48. 9 The objective must b e the eradication of poverty and the establishment of a minimum standard of living for all people. This will involve its converse 0- a ceiling on wealth for individuals and nations, as well as deliberate action to transfer resources from the rich to the po o r within and across national b0~ndaries.l Demands for the establishment of a New International Economic Order continued to be uttered throughout the seventies in the United Nations, its specialized agencies and conferences, various meetings of the non-ali g ned, and in non-governmental groups. Two groups have been especially significant: The Club of Rome (a group of prominent and influential businessmen, economists, and academicians formed in 1968); and the Brandt Commission THE CLUB OF ROME Early in 1974, D r . Aurelio Peccei, President of the Club of Rome, suggested the formation of a group of specialists who would be able to address the following question what new international order should be recommended to the world's statesmen and social groups so as to m e et to the extent practically and realistically possible the urgent needs of todayls population and the probable needs of future generations?15 The project was entitled "Reshaping the International Order" and was supervised by Nobel Laureate Jan Tinbergen. The staff 0- 21 in all was drawn from a variety of countries, social systems and specializations.

Netherlands Minister for Development Cooperation.

Funding was made possible by Jan Pronk The final 325-page report, published in 1976, consists of four main parts o "The Need for a New International Order and the Main Problem Areas i o "The Architecture of the New International Order; Initiat ing and Steering the Process of Planned Change o "Proposals for Action o Technical Reports. If l4 Quoted in Peter Bau er and John O'Sullivan Ordering the World About The International Economic Order Policy Review Vol. 1 (Summer 1977 p. 56.

Jan Tinbergen et al Reshaping the International Order the Club of Rome New York: E. P. Dutton Company, Inc 1976 p. i l5 A Report to 10 In the first part of the report, stress is placed upon the tremendous inequities in the international system. These inequi ties have given rise to essentially two worlds and the disparities between them are growing. One is the world of the rich, the othe r the world of the poor, united by its heritage of common suffering A poverty curtain divides the worlds materially and philosophically is literate, the other largely illiterate; one industrial and urban, the other predominantly agrarian and rural one cons u mption oriented, the other striving for survival In the rich world, there is concern about the quality of life in the poor world about life itself In the rich world there is concern about the conservation of non-renewable resources In the poor world there is anxiety, not about the depletion of resources, but about their exploitation and distribution for the benefit of all mankind rather than a few privileged nations.16 One world From the report's perspective, unless the world comes to terms with these diff erences and develops a Itnew understanding and awareness, based upon interdependence," then it will have to face the "harsh fact" that it has "no future at all."

Part One concludes with a short review of some of the major problem areas relevant to the crea tion of a new international order. After setting the framework of discussion in somewhat apocalyptic terms, the Report suggests fundamental structural changes in the international system. Among the various proposals suggested to "redress imbalances in the international power structure and to democratize world economic decision processes1 are o Third World dependency must be reduced through new-style self-reliant development, greater self-sufficiency in basic foodstuffs, a new framework for resource transfe r s which is automatic and a more equitable functioning of international markets and financial mechanisms o Third World countries should exercise full sovereignty over exploited resources, play a larger role in the processing thereof, and contracts with inv e stors and transnational enterprises should be reviewed o Third World countries should pursue collective bargaining in international negotiations o Public international enterprises should be developed to assist Third World countries to develop their own re s ources l6 Ibid p. 19. 11 thus providing an alternative to private transnational enterprises o International financial institutions, particularly the Bretton Woods institutions, should be democratized to give adequate voting strength to the Third World o T h e rich nations of the world should target 0.7 percent of their GNP to development assistance o The external debt of Third World countries should be rescheduled to permit an increased net flow of resources o A system of international taxation, handled by a World Treasury, should be introduced, to meet the current as well as the development needs of the poor nations o Political and moral pressure should be exerted on the superpowers to redirect military expenditures toward development.

Though the Club's report was widely acclaimed within the Third World it did not receive either the acclaim or attention accorded the subsequent Brandt Report by the Western media.

THE BRANDT COMMISSION In January 1977, Robert McNamara, former Secretary of Defense and then Pres ident of the World Bank, proposed that a commission of distinguished private citizens from both rich and poor nations be established in an effort to resolve the impasse in meaningful worldwide economic negotiations. In a speech delivered before the World Affairs Council in Boston, McNamara suggested.that former Chancellor of West Germany and Nobel Peace Prize winner Willy Brandt serve as its chairman.

On September 28, 1977, at a press c onference in New York Brandt announced the formation of an "Independent Commission on International Development Issues,Il which he would chair. Though Brandt called the group a ticommission," it was not commissioned by any existing body. Eighteen full mem b ers were selected, ten of whom represented developing nations; three other individuals were considered ex-officio members (see Table 11 TABLE I1 Commissioners Willy Brandt (West Germany), Chairman Abdlatif Y. Al-Hamad (Kuwait Rodrigo Botero Montoya (Colom b ia Antoine Kipsa Dakoure (Upper Volta) 12 Eduardo Frei Montalva (Chile Katherine Graham (USA Edward Heath (Great Britain Amir H. Jamal (Tanzania Lakshmi Kant Jha (India Khatijah Ahmad (Malaysia Adam Malik (Indonesia Haruki Mori (Japan Joe Morris (Canada O l of Palme (Sweden Peter G. Peterson (USA Edgar Pisani (France) replaced Pierre Mendes (France Shirdath Ramphal (Guyana Layachi Yaker (Algeria Ex-officio members Jan Pronk (Netherlands Goran Ohlin (Sweden Dragoslav Avramovic (Yugoslavia The task of the Comm i ssion, as contained in the Terms of Reference adopted at its first closed session, was: to study the grave global issues arising from the economic and social disparities of the world community and to suggest ways,of promoting adequate solutions to the pro b lems involved in development and in attacking absolute p0verty.l After nearly two years, a final report was issued, titled North-South A programme for survival. What is particularly striking about the final report is its unanimity; there are no reservatio ns, disclaimers, or even minority points of view.

The report takes its title from the belief that unless major international initiatives are undertaken, the survival of the human race is in question In the very first sentence of the report, the Commission states The crisis through which international relations and the world economy are now passing presents great dangers and they appear to be growing more serious. We believe that the gap which separates rich and poor countries a gap so wide that at the extr e mes people seem to live in different worlds has not been sufficiently recog nized as a major factor in this crisis.l8 l7 North-South: A programme for survival, p. 296 Ibid .Y P- 30 13 Similarly, in the final chapter of the report, the Commission concludes It is clear that the world economy is now functioning so badly that it damages both the immediate and the longer-run interests of all nations The industrial capacity of the North is under-used, causing unemployment unprecedented in recent years, while the South is in urgent need of goods that the North could produce.lg What is needed, concluded the Brandt group with apparent unanimity, is Ira fundamental change in relations between North and South as well as between East and West."

Five broad themes underl ie the Commission's report 1) It is mutually advantageous for governments both in the North and South to act cooperatively and affirmatively to accelerate development 2 While principal responsibility for fostering development rests with individual develop i ng states, the North South, and Communist bloc share a responsibility for promoting development and managing change in the interna tional economic system 3) A massive transfer of resources is needed to accelerate global economic development; and official d evelopment financing should be provided both more automatically and from a wider range of donors 4) Developing countries should exercise a greater voice in the management of the international economic system; I 5) While far-reaching policy and institution al reforms should be pursued in the long run, the dangers of serious economic crises in the next five years require quick agreement on a set of emergency measures.

Accordingly, the Brandt Commission proposed a four-part Emergency Programme for 1980-1985 co nsisting of Transfer of Resources to Developing Countries The most urgent objectives of resource transfer would be to assist the poorest countries and regions most seriously threatened by the current economic crisis (e.g., poverty belts of Asia and Africa ) and to provide financing of the debts and deficits of middle-income countries. To accomplish these objectives would require a massive infusion of aid. Rich countries would have to 19 Ibid -9 P. 267. 14 commit themselves to assigning 0.7 percent of their G NP by 1985 Eastern Europe and the Ilbetter-offll developing nations should make an early start on increasing their contributions. Similarly increased lending by commercial institutions on a co-financing or guaranteed basis, expanded lending by the World B ank and the Regional Development Banks, use of IMF gold, and other transfer mechanisms should be undertaken. Such additional flows would amount to approximately $50-60 billion annually by 1985.

International Energy Stratecry The aim of the energy strategy would be: assurance of regular supplies of oil; rigorous conservation; more predictable and gradual price increases in real terms; and development of alternative and renewable energy sources. To accomplish such would require a global agreement between ene r gy-producing states rather than reliance on the marketplace Global Food Proqram The food program would aim at increasing food production particularly in the Third World), assuring regular supplies of food, and establishing a system of long-term internatio nal food security. Such an effort would require approximately 8 billion annually in aid.

International Economic Reforms The Commission suggested that, between 1980' and 1985, steps be taken to reform the international economic system. The interna tional mo netary and financial system should be revamped, while efforts were made to improve developing countries' conditions of trade in commodities and manufacturing. In particular, the Commission called for a study of the following o The creation of a World Deve l opment Fund o Tax on international trade, military expenditures, arms exports, and 'Iglobal commonsv1 such as seabeds o Broader sharing of power and decision making in the World Bank and IMF o Increased lending by the World Bank and Regional Develop ment Banks 0 Liberalization of the international trading system o Sale of IMF gold to subsidize the cost of borrowing by developing nations.

The Commission then suggested the convening of a summit meeting of leaders from both the industrialized and developing n ations to consider and act upon the IIEmergency Programme." 15 THE PROBLEMS WITH THE NEW ORDER Arguments advocating an NIEO, such as the Brandt Report share a particular analysis of current world events and a set of assumptions upon which the new economic order should be construct ed. They note that the principal dangers to society today arise in three interconnected ways: 1) from war and violence; 2) from environmental dangers; and 3) from the present malfunctioning of the world economic system. Each of t h ese in turn, is associated with and exacerbated by the existence of poverty in the developing The suggested remedy is a major restructuring of the world economic order that includes, among other things, a massive resource transfer from the rich North to t h e poor South alone it is argued, would alleviate the crisis and establish global order and peace world and the growing division/gap between rich and poor nations 20 This remedy Such an analysis is hard to reconcile with reality, both past and present; mor eover, it'is based ultimately on a series of false assumptions o The South and the North should be considered homogeneous units.

The South is no more a uniformly homogeneous economic political, and cultural entity than is the North To consider it such not only belies reality, but confounds logic. In terms of overall wealth, for example it is misleading to consider Afghanistan and Bangladesh, two of the least developed nations (sometimes referred to as the Fourth World), Colombia and the Ivory Coast (Less d eveloped nations), Argentina and Chile (middle-income developing countries), and the OPEC countries within the same econo mic category their own economic- advantage, there can be no doubt.

There is also no doubt that the colonies benefitted from such ltexp loitation.lt History shows that the areas that experienced the longest and/or most direct colonial control tend to be among the most developed, such as Malaysia, Nigeria, Singapore, and the Philippines. Other areas, under less direct colonial control, suc h as Laos or Bolivia, have proved more backward in economic develop ment. Then, of course, those nations that have had little or no colonial involvement, as in the case of Afghanistan and Ethiopia, are found to be the poorest of all 2o P. D. Henderson Surv ival, Development and the Report of the Brandt Commission World Economy, No. 3 (October 1980), pp. 91ff. 16 o Worldwide poverty has been caused by the West.

Phrased in another way this accusation reads: the West was made rich at the expense of the poor. Ac tually, much of the developing world that has had contact with the West owes its economic development to such contact, which provided access to Western markets, Western enterprise capital, and ideas. Today's poverty in the South is much more the result of domestic mismanagement and unsound domestic policies than of Western interference and domina tion. For example, the widespread collectivization programs in Kampuchea and Vietnam have caused far more severe economic and social dislocation than the war ther e ever did o The gap between North and South is widening.

Sych an assumption is misleading for several reasons.21 First, as noted above, the world is not conveniently divided .into two sharply distinct homogeneous units North and South. The 120 or so devel oping nations of the South, for example, constitute a huge and diverse aggregate that includes wide differences in income, growth rates living standards, and the like. To lump them together is to imply a static situation within each unit certainly is not the case in the developing world.

Consider the rapid growth rates in South Korea, Taiwan Hong Kong, Malaysia, the Ivory Coast, Kenya, Brazil,.

Venezuela, Mexico, and the oil rich states of the Middle East, as opposed to the negative growth rates in Burma Tanzania, Bangladesh, and Zaire. In actuality, the spectrum of growth has been continuous, not only among the developing nations but even within the industrialized countries That Second, adherents of the NIEO claim that the gap between North and South is large and widening. Such a judgment is arbitrary with little evidence to support it. The statistics used are often misleading, in that they often neglect differentiations in living standards, rates of growth, and per-capita incomes within the Third World.

Actually, some statistics indicate a narrowing rather than a widening of the gap between the North and South. A comparison of life expectancy in 1950 and 1970 is a case in point. In 1950, life expectancy in the developing world was estimated as between 35 and 40 years; by 1970 it had climbed to 52 years. Among the developed nations life expectancy in 1950 was between 62 and 65 years; in 1970, it was

71. These statistics indicate a decline in absolute difference from about 26 to 19 years. If a gap exists, it is within the South itself between the least developed and the less developed 21 Cf. Bauer and Yamey Against the New Economic Order pp. 25-26. 17 0 0 0 0 The major threat to peace today comes from the wideninq en were one to accept the proposition of a widening gap between North and South, history fails to justify such a gap as a major threat to peace. There is little histor ical evidence that poverty and international economic inequality were the dominant or even substantive elements in past internatio n al conflicts. Extreme economic inequal ity between states, moreover, has only recently been perceived as an international concern, and to suggest it as the "dominant1' factor in future frictions between nations is highly speculative. Most of the frictions that exist today have been caused by other factors ethnic animosities, territorial disputes, ideological or religious differences to name but a few. Economic differences of course, can affect the prospects for peace or for war, but to speculate that such differences are the major threat today is without foundation ap between the North and South.

The North depends on the South for its survival and pro sperity.

Actually, the converse is true. The major producing countries of the world are today more depende nt for their survival on the markets in industrialized countries than on those in the developing nations. Overall trade figures show that the strongest countries economically are among each other's best customers.

Aid is indispensable for development No c lear correlation can be made between aid and develop ment. In the early stages of Western development, for example, not only was aid an insignificant determinant it was almost never available. Economic achievement or development depend principally on atti t udes, motivations mores, and government policies. The possession of money is, as P. T. Bauer and B. S. Yamey note the result of economic achievement, not its precondition Ir2 Another version of the above argument states that external subsi dies are necess a ry lest the developing states run into balance of payment difficulties supposedly inherent in early stages of development. This notion is similarly without historical foundation. Hong Kong, Singapore Malaysia and the developed Western states are notable e xamples that this need not occur.

Aid necessarily increases per capita income.

The historical record shows that some nations that received massive amounts of aid have pursued policies that have actually reduced per-capita incomes, aggravated the lot of th e poor, and caused the collapse of large sectors of their economies. Bauer and Yamey note 22 Bauer and Yamey East-West/North-South p. 61 18 Many aid recipient Third World governments perhaps most, have pursued economic policies ranging from the wasteful t o the inhuman, and damaging to the well-being and material progress of their people. Such policies include the enforced collectivization of farming; the expulsion of productive minorities or the imposition of economic restrictions on them the establishment of state export monopolies which pay farmers a small fraction of the market value of their produce and deny them access to other marketing opportunities and to Western economic contacts; the proliferation of costly state trading, transport, banking, and i n dustrial enterprises and monopolies; the suppression of private commercial activities in favor of state enterprises, including officially sponsored 'Icooperativesll the widespread restric tive licensing of economic activity; the prohibi tion or restrictio n of private foreign capital when shortage of capital is adduced in pleas for official aid); and wasteful policies of import substitution and exchange controls which usually raise the prices of consumer goods These policies have often brought about reverse s in the economy of the recipient countries would include Tanzania, Zaire, Ethiopia, Somalia, Burma and Mozambique. Aid, in these instances, actually produced economically dysfunctional policies Recent examples o Aid is a form of restitution for past.colon ia1 wrongs.

This arqument collapses in the face of the fact that some of the poorest nations in the world today were never colonies. The poorest nations, moreover, have had the fewest contacts with the West. Conversely, some of the richest states in the We st --for example, Sweden and Switzerland have had little contact, political or otherwise, with the Third World o Redistribution and reduction of poverty are interchange able terms.

The argument simply put is: by making the rich poore'r the poor become ric her sequitur it ignores certain essential facts. First wealth is created; it is not a People's attitudes and motivations are the critical components in the creation of wealth. Second, the economic process is essentially a dynamic, not a static, phenomenon . Though massive trans Not only is such reasoning a non I 23 Bauer and Yamey Against the New Economic Order p. 29. 19 fers might result in some form of international equality the effect would be only temporary, at best. Income differentiation would soon re a ppear given the attitudes and motivations of people. Third, standardization on a global scale would require a significant amount of coer cion and an international authority with near-totalitarian powers. Given the large numbers of democratic governments t h roughout the world, such is unlikely to occur. Finally such reasoning diverts attention from the real causes of poverty: mismanagement of the economy (e.g., Tanzania and Zaire); social institutions, cultural values, and customs (e.g., India's caste system and Hindu/Buddhistic beliefs); etc.

Underlying many of the specific proposals offered by propo nents of the NIEO is a set of questionable presuppositions about the working of the existing and Ilfuturell political and economic order. These presuppositions include faith in administrative worldwide regulations, mistrust of the market system, and the belief that Ilkn~wn solutions exist to the complex problems of today o Faith in regulations.

Throughout much of the literature favoring the NIEO runs a strain of belief in the desirabilty and efficacy of administrative regulations and the enforcement of such by governments acting in concert or by international agencies which they control. One example of this faith in regula tions is the Brandt Commission's call f o r a Ilglobal energy" program, which would guarantee supplies of oil set targets for its use, fix price levels, and guarantee investments never addressed targets and guarantees defined? How could individual states be held accountable if internal or externa l factors altered the circumstances How that program would be established is How would pr,ice levels be determined or o Mistrust of the markets. A corollary to "faith in regulationsll is a basic mistrust of the prevailing market system. Proponents of the N I EO hold to the theory that if economic forces are left to themselves they produce growing inequalities. Hence, the need for administrative regulations. Proponents of the NIEO as for example, Nyerere, Castro, and Michael Manley (Jamaica make such assertion s, but offer little evidence to prove them o Wn~wn solutions exist.

Throughout the literature espousing the NIEO is a current of thought which views the complex-problems of the present 24 Cf. Henderson, op. cit pp. 101-107 20 economic order in rather simpl istic ways. For example the problems of the present order are attributed to the failure of the Bretton Woods system; it does not work therefore it must be abandoned. Similarly, the market system does not function properly and adequately; hence it must be a bandoned and replaced by administrative worldwide regulations. Transnational corporations have exploited or so proponents of the NIEO would have us believe the developing world: hence they must be severely restricted. Adopting such measures would automa t ically result in better growth rates for the developing world.

The general message of these adherents of the New Internation al Economic Order is not credible, because their conception of the world today and the presuppositions on which the new order rests are misleading, illogical, and, at times, false.

UNITED STATES POLICY AND THE DEVELOPING COUNTRIES Criticism of the New International Economic Order should not be construed as, in any way, denigrating either the serious ness and magnitude of the problems facing the developing world or the importance of the interrelationship and interdependence between developing nations and the United States. What is at issue is the scope and method, not the fact and desirability of developmental assistance.

The development process is now, and will continue to be, a critical element in America's foreign and economic policy. Our present and future prosperity is tied inextricably with the economic growth in the developing world.

States is exchanged with the non-oil producing, developing nations.

In fact, we currently expo rt more to the developing world than we do to Western Europe and Japan combined. During the 1970s, U.S sales to these countries grew almost 50 percent faster than sales to industrialized countries. The twelve fastest growing markets for U.S. exports are a l l developing countries. In 1978 alone 50.2 billion of U.S. goods and services (34 percent of our total exports) were sold to countries where, in most cases, per capita income was less than 1,000 a year, more often less than half of that. These commodities came from every state of the Union. It is further estimated that over 1.2 million American workers depend for their livelihood on exports to the developing world related to agriculture; in fact, the harvest of one out of every four acres is shipped to the Third World. Two-thirds of our cotton exports and nearly a third of our tobacco crop are shipped to the developing nations. These countries are also a rapidly expanding market for soybeans, with exports jumping from 359 At present, one-quarter of the tota l trade of the United Most of the commodities sold to the developing world are 21 million in 1973 to over $1 billion in 19

79. It is estimated that in the absence of these markets there would be a 20 to 25 percent loss of gross farm income and possible dis aster for the American farmer sands of interest that may Taiwan in 1980 In addition, farm sales abroad create hundreds of thou jobs in related industries. These sales at favorable rates are hastening the development of poor countries someday be our best c ustomers.

In 1950, Taiwan's per capita income was less than $100 it amounted to $1,750 A significant example is In addition to the benefits of our export trade with the developing world, the manufacturing base in the United States depends upon critical imp orts from these nations. In 1978, U.S purchases from developing nations amounted to $74.4 billion 42 percent of our total imports Non-OPEC nations alone accounted for 23 percent of total U.S. imports. Many of these imports were in the form of industrial r a w materials vital to American indus tries. For example, the U.S. imports 93 percent of the tin needed for the electronic industry; 85 percent of the bauxite vital to aircraft production; and 73 percent of the cobalt essen tial for the steel and nuclear in dustries.

Ties between the United States and the developing world are strong in other ways. U.S. private firms, for example, have invested over $50 billion in the developing world, of which only 7 billion is related to petroleum. In turn, the United States receives a large share of the funds that the developing nations pay back eech year to developed countries as service on their public and private debt.

Despite these impressive statistics, much of the developing world faces serious obstacles to growth. In creasing energy costs, rising external debts, extensive unemployment, inadequate political and social institutions, overpopulation, and widespread poverty are but a few of the obstacles facing many of the develop ing nations today.

Aware of the magnitude of the above problems and of the interdependency between this country's economy and that of the developing world, the Reagan Administration has begun, particular ly over the past six months, to articulate a comprehensive develop ment policy to deal with s uch issues.

In a speech to the General Assembly on Septeinber 21, 1981 Secretary of State Alexander M. Haig, Jr. noted five broad princi ples that guide America's approach to a "new stsategy of (interna tional economic) growth o Development is best facilit ated by an open international trading system o Foreign assistance coupled with sound domestic policy and self-help can facilitate the development process; 22 o Regional cooperation and bilateral consultations can be effective o Growth for development is b e st achieved through reliance on incentives for individual economic performance; and 0. Development requires a certain measure of security and political stability In speeches to the annual meeting of the Board of Governors of the World Bank and the Interna t ional Monetary Fund in September and the World Affairs Council of Philadelphia in mid-October President Reagan further elaborated on America's "strategy for global growth.Il In acknowledging the overriding importance of restoring the growth and vitality o f the world economy and of assuring that all countries, especially the poorest, participate fully in the process of growth and development, the President reiterated America's commitment to o policies of free trade o unrestricted investment o open capital m arkets o continued concessional assistance o support of the World Bank and the IMF;25 and o fostering development of self-sustaining productive activities (particularly food and energy).

While the emphasis in all three speeches was on America's positive contribution to the development process, there were however, explicit criticisms of some proposals of the NIEO.

Secretary Haig termed the transfer of massive resources as llsimply unrealisticf1; President Reagan, speaking of the meaning of develop ment, sai d "others mistake compassion for development, and claim massive transfers of wealth somehow, miraculously, will produce new 'well-being this] miss[es] the real essence of development At Cancun, the President stressed again the same important themes and th e commitment of the United States to work with the other participating nations in development efforts. In a statement delivered at Andrews Air Force Base following his return from Cancun, President Reagan again criticized implicitly some of the proposals o f the NIEO. The President said 25 For a detailed official assessment of Multilateral Development Banks, cf U.S. Department of the Treasury, United States Participation in the Multi lateral Development Banks in the 1980's Washington, D.C Government Printing Office 1982). 23 We did not waste. time on unrealistic rhetoric or un attainable objectives to the problems of growth, efforts to improve food security and agricultural development.

Four months after Cancun, the President, in a speech to the Organization of American States, proposed putting the principles of development, which both he and Secretary Haig previously enunciated, into practice. In an attempt to help countries of the Caribbean Basin Itrealize their economic potential," he proposed the followin g specific actions o free trade for Caribbean Basin products exported to the United States We dealt with pragmatic solutions I o significant tax incentives for investment in the Caribbean Basin o supplemental FY 1982 appropriations of $350 million to o tec h nical assistance and training to assist the private assist those countries particularly hard hit economically; sector in the Caribbean Basin o close cooperation with Mexico, Canada, and Venezuela to insure international development efforts in the'area; an d o special measures to deal with Puerto Rico and the U.S Virgin Islands so that they will benefit and prosper from this program.

Unlike the Brandt Commission and other proponents of the NIEO who propose vast, untried economic programs, the Reagan Administration is offering a limited, explicit,. and practical program based on a demonstrated record of achievement no timeframe. Develo p ment is something that takes time it differs from region to region, from state'to state. To recognize such is not to be complacent or unsympathetic to the needs of the poor. To raise the hopes of the poor with grandiose schemes for redistributing the worl d 's wealth and power, as NIEO proponents have done, is to practice cruel delusion. Though the Reagan Administration has recently been under increasing pressure to agree to global talks on redistributive programs (Cancun, the January 1982 meeting of the Bra n dt Commission in Kuwait, the Club of Rome symposium held in Washington in March of this year and a resolution by Mohammed Bedjaoui of Algeria, chairman of the Third World group, to convene a U.N. conference for global negotiations on May 3, 198226 it shou l d resolutely oppose such utopian and destructive plans and programs There is William L. Scully Policy Analyst 26 The New York Times, April 2, 1982. APPENDIX I U.S. FOREIGN ASSISTANCE IN THE 1970s U.S. Bilateral Economic U.S. Contributions to FY Assistance IFIs 1973 $1,664,200,000 IDA 320,000,000 IDB 25,000,000 pd.-in 225,000,000 FSO 1974 $1,632,600,000 IDA 320,000,000 IDB 25,000,000 pd.-in 225,000,000 FSO ADB 50,000,000 CSF 1975 1976 1977 1978 1979 2,049,800,000 3,168,900,000 3,156,600,000 3,750,000,000 3, 7 18,200,000 IDA 320,000,000 IDB 225,000,000 FSO ADB 50,000,000 CSF 24,127,000 pd.-in IDA 320,000,000 IDB 225,000,000 ADB 25,000,000 ADF 24,127,000 pd.-in AfDF 5,000,000 IDA 375,000,000 IDB 50,000,000 FSO 55,000,000 supp 20,000,000 inter-reg. pd 36,000,000 i nter-reg. pd 25,000,000 supp 160,000,000 supp. FSO ADB 24,127,000 pd.-in AfDF 10,000,000 IDA 800,000,000 IDB 36,711,000 inter-reg. pd.-in ADB 16,799,000 pd.-in 114,723,000 FSO 59,512,000 ADF AfDF 10,000,000 IBRD 38,000,000 pd.-in IDA 800,000,000 458,000,0 00 IDB 27,296,000 inter-reg. pd.-in 175,000,000 FSO ADB 19,451,000 pd.-in 70,488,000 ADF AfDF 25,000,000 IRBD 16,308,000 pd.-in

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