Essay on the compulsions of New International Economic Order

In spite of the fact that war is a curse for mankind, World War II proved useful for the colonised countries in a way. It shattered the me-ins and will of the colonising powers such as Great Britain and France to the extent that it became impossible for them to continue with their old game of Colonialism.

Rather, they were rendered incapable of holding on their control over the already colonised countries. Consequently, the colonised countries in Asia and Africa began getting national independence after the end of of the Second World War.

This process of freedom which began in Asia in fifties, reached Africa by the sixties. Naturally, a large number of new nations were born in Asia and Africa. This was indeed political independence alone.

In the economic field, these countries still continue to be dependent on the Western World. It means these countries got only political but no economic independence.

The newly- born countries were faced with an international economic system that encouraged their dependence upon the highly developed countries of the world.

It is on account of this fact that in the field of trade, the present international system is governed by GA.TT (General Agreement of Trade and Tariff) which believes in free trade and has dollar and sterling pound as the international exchange currency.

For development, the new nations need capital and technology and in return provide raw-materials to the developed countries. This system has worked to to benefit of the developed countries in many ways.

Firstly, the terms of trade between the developed and developing countries are designed in such a way as to benefit the developed nations. The finished and consumable goods produced by the developed nations are priced at a very high rate.

In contrast, the prices of the raw-materials exported by the developing countries are very low that has resulted in creating high imbalance in trade relations.

The amount of exports of developed countries has grown over the years. Since 1949 to 1973, the exports of of the capitalist countries has grown from £ 57,000 million to £ 509,000 million, that is, an increase of more than 780 percent.

Secondly, many countries of the Third World launched ambitious plans and programmes for national development. For this purpose, they sought more and more development aid from the rich.

Even the amount of foreign aid given by the industrialised nations to the countries of the Third World is neutralised by this element of imbalance. In simple words, the aid given by the developed nations is swallowed back in the shape of trade deficits and the gap of balance of payments.

Consequently, the nations of the Northern hemisphere (developed nations) are becoming richer while those of the Southern hemisphere becoming poor. Even the International Monetary Fund has Served the interest of the rich countries as the rate of exchange cannot be changed without the permission of the I.M.F.

Thirdly, the only international institution to help development is the International Bank for Reconstruction and Development. But this has also worked to the advantage of the West which has a high rate of economic growth and a high level employment.

The aid received by the developing countries, instead of being of any help, becomes a burden upon-them due to a very low rate of growth in these countries. It becomes difficult for them to repay the loans. Not to say of loan, it becomes difficult even to pay the interest. Sometimes, loan is taken just to pay the interest due to be paid on the previous amounts of loan received.

Fourthly, the General Agreement on Trade and Tariff concluded mostly among the developed countries has displayed a tendency of pro­tectionism under which the trade interests of the member-nations are protected against the countries of the Third World.

Fifthly, certain preferential trade blocs such as European Econo­mic Community (EEC), COMECON etc. have been created by the deve­loped countries under which not only protection is granted to the member-nations but a large overseas market is also sheltered against competition from the Third World countries.

The discrimination against competition from the Third World countries is being done by the developed countries through the position of heavy tariff duties on the items expor­ted by the developing countries. The discrimination so made among nations is known as “most favored nation treatment.”

Consequently, the international economic system based on exchange depreciation, Protectionism, Preferential trade blocs and discriminatory restrictive devices have brought about virtual destruction of the economies of the developing (Third World) countries.

The problem of balance of payment of the Third World is getting difficult. Their industries are not in a posi­tion to hold in competition with the well-established industries of the developed countries.

Certain changes in the Articles of the GATT, the working practices of the I.M.F., and in the lending practices of the World Bank have been made from time to time to ease the problem. Still, the gap between the income of the Third World and the developed countries is becoming wider.

New International Order Explained. It is that programme of action which aims at providing food and meeting energy needs of the developing countries, transferring resources from the North to the South, reaching commodity agreements, reversing Protectionism and destroying the contemporary or the existing old colonial economic system and provide in its place a fair treatment to the deprived countries.

It believes in co­operation among the developing countries and in strengthening the role of the United Nations in the field of international co-operation. It believes in the creation of a democratic world order where every nation would enjoy equality of treatment and economic status that would ensure political stabi­lity in the world.

It is worth mentioning here that this concept has brought to the fore-front an intimate relationship between economic and political processes at the international level. Unless economic structure is not changed, it is difficult to build a just international order.

Mahmud Mistier, Tunisian Ambassador to U.N. and the then President of the Group of 77 said, “The global economy today is increasingly like the human body. It cannot be healthy in part if an area or a leg, even a finger or toe, is infected, the body as a whole is in danger of infection and ill health”.

Demand for New International Economic Order. In order to highlight the growing economic disparity and degradation, the Third World countries tried to broaden their struggle for equality in internatio­nal economic order by forging a link between the countries of Asia, Africa and Latin America at the U.N.

Conference on Trade and Develop­ment held at Geneva in 1964. Accordingly, they formed a sort of an international trade union which later on came to be known as “the Group of 77”.

This group made similar demands at the subsequent session of the UNCTAD (United Nations Conference on Trade and Developmento held at New Delhi in 1968, and at Santiago (Chile) in 1972. Their demand included a greater share of world’s wealth, and a more equitable, just distribution and utilization of the resources of the world.

By this time. Non-aligned Movement had also gained good ground. Non-alignment is also pledged to the attainment of political, social and economic equality in the world. Non-aligned countries have been success­ful to a great extent in securing political freedom in their external sphere.

But they were still dependent upon world capitalist system which encoura­ged unequal exchange. In order to extricate (to get rid of) themselves from such a situation, they had to create a system of economic equality, Many of the countries producing raw-materials decided to act in unison at the Fourth Summit of the Non-aligned countries that met at Algiers in 1973. to increase the prices of their commodities with a view to gaining equality in trade relations with the developed nations.

The formation of the OPEC and its success also prompted demand for NIEO. But fearful of dividing the Third World solidarity through the newly acquired wealth by a few countries, Algeria and Mexico, among others, took the lead in asking for structural reforms in the international economic system.

The initiative resulted in the adoption of such major UN resolutions as those of the Sixth and Seventh special sessions and- the charter of Economic Rights and Duties of States.

Through a declara­tion of Action Programme on 1st May, 1974, the developing countries vigorously demanded that they finally be given the practical opportunity to exercise sovereignty over their own natural resources, determine the extent and methods of exploitation of their resources, limit the scope of the penetration of foreign capital, and nationalise foreign enterprises at their own discretion.

This is, indeed, what may be said to have started a conflict or a confrontation between the rich North (the developed) and the poor South (the developing world) on the other hand.

Efforts at the Establishment of N.I.E.O. Consequently, the demand for the establishment of New International Economic Order grew and this demand began to be made both by the developing (Third World) countries and the non-aligned countries.

In an effort to find out an agreed basis for co-operation in the economic field, a conference of the developing and the developed countries began in 1975 at Paris. This Con­ference on International Economic Co-operation was attended by a group of 19 developing and 9 developed countries. The Conference continued for 18 months but could reach no agreement.

We should, however, distinguish the Third World countries from the non-aligned countries before we proceed further. Non-aligned countries are those countries which kept aloof from military blocs after getting independence from the colonial powers after the Second World War.

The Third World (developing) countries include all those countries which got independence from the colonial powers after the Second World War and made efforts to moder­nise themselves on the models of the Western or developed countries.

It is immaterial whether they joined any bloc or not. It is worth-mentioning here that the non-aligned countries also began making efforts at moder­nising themselves after gaining independence.

In this way, almost all the non-aligned countries fall in the category of developing countries but not all the developing countries are non-aligned. Some of them were aligned such as Pakistan etc.

So, voice for the establishment of a New International Economic Order from the non-aligned nations came to be made at the various non- aligned summits while the developing (including non-aligned) countries voiced this demand at the UNCTAD’s (United Nations Conference on Trade and Development) and the UNIDO’s (United Nations Internatio­nal Development Organisation).

However, this is not a one-way process- If the developing countries are in need of aid and technology from the developed countries, the latter are in need of raw-materials form the former.

In this way, there is interdependence of developing and developed countries. This has become especially apparent after the formation of OPEC (Organisation of the Petroleum Exporting Countries). The Arab countries’ oil embargo of 1972-73 and the subsequent manifold increase in the prices of crude resulted in a world-wide energy crises.

It brought into focus the depen­dence of the developed countries on the developing ones for major natural resources and proved the ability of the Third World to wield economic and political power effectively. The developed countries were also beset by economic problems of their own such as inflation, unemploy­ment and industrial recession.

So, it is now being increasingly realised that the prevailing internatio­nal economic system has failed to keep up with political and economic realities. Many aspects of the system now run counter to the interests of all countries, rich and poor as well as planned and free market economies.