Comprehensive Essay on New International Economic Order (NIEO)


At the Sixth Special Session of the United Nations General Assembly in 1975, a declaration was made for the establishment of a New International Economic Order (NIEO). It is regarded as “a turning-point in the evolution of the international community.”

NIEO is to be based on “equity, sovereign equality, common interest and cooperation among all States, irrespective of their social and economic systems, which shall correct inequalities and redress existing injustices, make it possible to eliminate the widening gap between the developed and the developing countries and ensure steadily accelerating economic and social development and peace and justice for present and future generation.”

Though, the declaration on the NIEO by the General Assembly (GA) is of recent origin, the idea is not altogether a new one. In fact, a similar resolution was adopted by the G. A. itself long back in 1952. Again, similar demands were raised time to time by the UNCTAD since its inception in 1964. A.K. Das Gupta, however, says that what is spectacular about the NIEO Declaration is its timing.


The NIEO aims at a development of the global economy as a whole, with the set up of inter­related policies and peiformance targets of the international community at large.

Origin of NIEO :

The movement for the establishment of the NIEO is caused by the existing deficiencies in the current international economic order and the gross failures of the GATT and the UNCTAD in fulfilment of their avowed objectives.

The present integrational economic order is found to be a asymmetrical in its working. It is biased. It is favouring the rich-advanced countries. There has been over dependence of the South on the North. Rich countries tend to have major control over vital decision-making in the matter of. international trade, terms of trade, international finance, aids, and technological flows.


As a matter of fact, the basis for the NIEO is constituted by the U.N. Resolution in 1971, in the seventh special session on “Development and International Economic Cooperation” with various reforms in the area of international trade, aid, international monetary system, transfer of technology and foreign investment, world agriculture and cooperation among the “Third World Countries.”

The Resolution categorically mentions that “Concessional financial resources to developing countries need to be increased substantially and their flow made predictable, continuous and increasingly assured so as to facilitate the implementation by developing countries of long-term programmes for economic and social development.” It emphasises global interdependence. It seeks radical changes in allied social, economic, political and institutional aspects of international relations.

New developing sovereign countries of the South have insisted on the NIEO. It has bee further supported by the non-aligned nations which vehemently criticised the politicalisation of development and trade issues by the developed nations. The developing nations are now asserting their right to participate in the decision-making processes of the international institutions like the IMF, World Bank, GATT, UNCTAD, etc.

The origin of North-South dialogue for a new economic order may be traced back to over 30 years ago, at the Afro-Asian Conference at Bandung held in 1955.


However the formal idea of the NIEO was put forward in the Algiers Conference of non- aligned countries in 1973. In 1975, a declaration for the establishment of NIEO was adopted along with, a programme of action in the Sixth Special Session of the UNCTAD.

The North-South Dialogue:

In 1977, there was a negotiation between the North and South at the Paris talks. The developed countries agreed to provide of an additional U.S.I billion towards the Aid Fund for the development of the poor nations.

In December 1977 the Willy Brandt Commission was set up with view to review the issues of international economic development. The WB Commission’s Report (1980) stresses the need for North-South co-operation. Besides establishment of a common development fund, its
recommendations include strengthening the structure of development lending a code of conduct for the multinational corporations as well as the need for inter-governmental cooperation in monetary and fiscal areas along with, the trade policies. It also proposed for the increasing participation of developing nations in the decision-making processes at international level.


As Mehboob-ul-Haque observes, the demand for NIEO is to be viewed as a part of historical process rather than a set of specific proposals. Its important facets are the emergence of non- aligned movement, the politicisation of the development issue and the increased assertiveness of the Third World countries.

The NIEO led a serious thinking on the part of the developed countries (DC) to solve the problems of trade of LDCs. There has been a move towards a programmed action in two directions: (i) Commodity Agreements, with a view to stabilise prices of exportables of LDCs; and (ii) Compensatory Financing through IMF’s liberal loans to LDCs having deficits due to fluctuations in prices.

Objectives of the NIEO :

In essence, the NIEO aims at social justice among the trading countries of the world. It seeks restructuring of existing institutions and forming new organisations to regulate the flow of trade, technology, capital funds in the common interest of the world’s global economy and due benefits in favour of the LDCs. It has the spirit of a “world without borders.”


It suggests more equitable allocation of world’s resources through increased flow of aid from the rich nations to the poor countries.

It seeks to overcome world mass misery and alarming disparities between the living conditions of the rich and poor in the world at large.

Its aim is to provide poor nations increased participation and have their say in the decision­making processes in international affairs.

Among the other objectives, the NIEO envisages the establishment of a new international currency, the implementation of SDR aid linkage, the increased stabilisation of international floating exchange system and the use of IMF funds as interest subsidy on loans to the poorest developing countries.

The crusial aim of the NIEO is to promote economic development among the poor countries through self-help and South-South cooperation.

The NIEO intends to deal with the major problems of the South, such as balance of payihents disequilibrium, debt crisis, exchange scarcity, etc.

Programme of Action for the NIEO :

In essence, the UNCTAD resolutions provide a source of programme of action to international economic order.

The NIEO is not in favour of the existing system of free market orientation. It is biased in the less-developed countries through interventionist approach.

Its action programme narrates the need for a more rapid economic development of the poor countries and their increasing share in the world’s trade at favourable terms of trade.

Its line of action is to adopt discriminatory approach in trade favouring the LDCs.

It also insists on depoliticalisation in the flow of official as well as private direct investment from the rich to the poor countries.

It contains that aid has to be in multilateral form with a view to facilitate structural adjustments in the less-developed countries.

It also stresses the need for restructuring the international monetary system.

There has been always a great opposition from the rich countries. They have vested interests which do not allow for the healthy outcomes and actions in various negotiations and their implementation. Again, the poor countries have weak bargaining power in negotiations. Further, there is very weak trade-link between LDCs and the socialist blocs.

The era of 1990s is characterised by liberalisation and globalisation. WTO is giving a new mode to form a newer global economic order. New challenges and new problems have been emerging. With market-orientation, growing speculation is taking its toll. With unchecked speculations currency trading, a kind of Rober Capitalism has also cropped up. It is posing a new danger to developing countries.

A heavier speculation can ruin the economy in a global set up despite its good economic fundamentals – as has been the case with Malaysia recently. The UNCTAD has to play a positive role in safeguarding the basic interest of the developing countries at all levels. Negotiating with UN, WTO and IMF the developing countries trade and finance have to be insulated from speculators’ attack from outside. Check through transparency and other devices have to be asked for.

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