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The Struggle for the Third World

The second danger is that special arrangements between particular developing countries, or groups of developing countries, and industrial countries, or groups of industrial countries, are bound to create tensions and divisions which may easily undermine Third World solidarity. The countries associated with the EEC through the Lomé Convention, for example, constitute only some 12 percent of the Third World population, or less than half the population of India, and the privileged access to EEC markets which they enjoy is, in effect, purchased at the expense of the other poor countries.81 A similar division, it is well known, affects the oil-rich and non-oil developing countries.82

In a world divided up in this way, it is therefore pretty obvious that some poor countries will be left out in the cold, or will finish up at best in a client status, if they happen to have a place in the political or strategic calculations of one or other of the great powers. In any case, it will be a very unequal world, with some developing countries pulling ahead and others lagging behind. Some, like South Korea, will pursue a systematic policy of industrialization; more in all probability will continue, willingly or unwillingly, to fulfill their traditional role of suppliers of raw materials and tropical products to the industrialized nations.

Here again, the dangers are evident. The Western nations and Japan have encouraged the industrialization of countries such as Brazil, South Korea, and Iran in order to secure markets for their own advanced technology and capital goods; but they are now finding that in doing so they have raised up competitors and rivals. According to a recent report from the Japanese Long-Term Credit Bank, South Korea’s booming economy will soon threaten Japan’s competitive power both at home and abroad, and other industrial countries are even worse situated.83 Faced with a surplus of steel and shipbuilding capacity, the Western nations are already, as we have seen, taking steps to curb Third World exports. If this is the thin end of a wedge which will get larger as the industrialization of the Third World progresses, prospects are not good.

Those with a taste for Greek tragedy may say that this is the nemesis the developing countries have brought upon themselves by choosing to follow the path of export-led growth, instead of concentrating on transforming their domestic economies. Perhaps they were right to suppose that this strategy offered them the best prospect of rapid development in the short run. In the longer term, its benefits are more problematical.

In an ideal world, no doubt, the steel mills, shipyards, and engineering and construction plants of countries such as South Korea or Brazil should be able to operate successfully by supplying the needs of the more backward underdeveloped countries, to say nothing of their own people. In the real world things are different. Because the basic reforms and structural changes necessary to enhance purchasing power and national income have been deferred, the poor countries are in no position to absorb capital goods on an adequate scale, and the result is that the newly industrialized Third World countries are forced to compete with Western industry in Western markets, with consequences that are easy to foresee. Either they will find themselves excluded by tariffs and quotas, or they will suffer severe unemployment, or more probably both. Japan and South Korea, it is already being said, are “on a collision course which could lead to an explosive trade war.”84 If that is the case, we may be sure it will not be the only one.

The one thing that is clear at the moment—perhaps the only thing that is clear—is that the liberal world economy, as it existed for a quarter of a century after 1945, is on the way out. The charge against it, the secretary general of the United Nations has said, used to be that “it worked well for the affluent against the poor. It cannot now even be said that it works well for the affluent.”85 What we have to expect in its place, if present trends are a reliable guide, is something approximating to a world of regional blocs or superblocs—that is to say, of exclusive trading areas, hedged in by protective tariffs, in which groups of developed and underdeveloped countries are linked together by mutual interests and stand opposed to other groups of developed and developing countries similarly linked.

There has been much speculation about the shape and composition of such regional groupings, and also about the consequences of a world organized in this way. This is too big a question to pursue in detail here and now. For people nurtured in the belief that a free open-market trading system is the best guarantee not only of prosperity but also of peace—and they are certainly still the large majority—the spread of protectionism and the formation of closed trading blocs is a recipe for trade rivalry, political rivalry, and ultimately for war. This, they assure us, with an eye on the 1930s, is the lesson of history. But the lesson of history, as so often, is less clear than those who invoke it like to think. In fact, the bloc system of the 1930s “worked relatively well,” and there is no reason why “an integrated plural system”—that is to say, a series of trading and monetary blocs linked together in a system of interlocking relationships—should not work as well today.86

It might be different if the so-called free-market system, as it operated between 1950 and 1970, were functioning effectively, but that is manifestly not the case. As Carlos Díaz-Alejandro caustically observes, it is “bunk” to assume that “international commodity markets are of such a nature that any tinkering will necessarily reduce their efficiency” or that the international monetary system in recent years has been “an example of economic rationality.”87 The last half-dozen years, if they have taught us anything, have taught us that the free-market economy is a good deal less than perfect, both in providing employment and as a means of distributing the world’s wealth. A regulated, regionally organized world economy may not be perfect either, but it has tangible advantages to offer, both to the developed and to the developing countries.

The cardinal disadvantage of a liberal open-market economy, with a free flow of goods and capital, is that it deprives governments of the power to manage their domestic economies in such a way as to maintain growth and employment. This is true even of such a country as Great Britain;88 it is even more manifestly true of the poor and underdeveloped countries of Asia, Africa, and Latin America. That is why Díaz, cautiously and with many reservations, recommends a policy of “selective delinking” via import controls, tariffs, exchange controls, and the regulation of foreign investment, as “a realistic and desirable program” for most, if not perhaps for all, developing countries.89

So far as it goes, historical experience seems to bear him out. In the 1930s countries such as Argentina, Brazil, and Colombia which “delinked” their monetary policies weathered the depression better than those that did not,90 while, contrary to common opinion, the still largely underdeveloped countries of Eastern Europe undoubtedly benefited very considerably from participation in the German economic bloc.91 Of course, there are always losers, in the present instance the multinational corporations and international banks, whose interest it is “to keep the Third World integrated within a world system.” 92 But, all in all, the poor countries have more to gain than to lose from the new order which is visibly emerging in place of the defunct “Bretton Woods system.”

What a regulated, regionally organized world economy offers the developing countries, now as then, is greater stability, less exposure to the vagaries of the market place, and more assured markets for their products. It gives them an opportunity for greater autonomy in their monetary policies, more protection from disruptive forces coming from outside, and increased ability to manage their economic affairs in accordance with their own national policies and goals. These are all substantial advantages, and we may expect the poor countries to profit from them; but it is also important to add that they leave the real problems of poverty and backwardness untouched. They offer at best a more favorable environment; but in the end success or failure will depend on the efforts of the developing countries themselves. No doubt it always has; but this was never more true than today, now that it has become abundantly clear that the rich countries have no intention of tackling the question of world poverty on a systematic and concerted basis.

At the end of the account one is left with an uncomfortable feeling of frustration, of opportunities missed and challenges avoided. To begin with, it seems only too evident that polemicists such as Senator Moynihan and Professor P.T. Bauer, with their denial of Western responsibility for the plight of the poor, have won the day.93 Their arguments may be specious, but they provide the sort of alibi Western governments want. As for the rest of the literature, it has unfortunately to be said that too much of it takes the form of the notorious trahison des clercs—or what, more vulgarly, is sometimes called nit-picking. That is to say, it proceeds by taking the problem of development apart, examining it piecemeal, analyzing each element separately and proving that it is misconceived or impracticable, and finally succeeds—which was the object from the beginning—in losing the real issues in a quagmire of technical argument and counterargument. That, no doubt, was what Eric Lundberg had in mind when he told an assembly of economists at MIT that they had been “too pure and simple” and had spent their time on “marginal issues.”94 But the question of underdevelopment cannot be banished in that way. It is there staring us in the face, day in and day out, week in and week out; and it is certainly not marginal.

Like most others who have thought about the question seriously, I have no doubt that the most insistent development problems of the poor countries are internal, and it is not a bad thing that some at least of the Third World leaders are at last being forced to realize this. As Díaz rightly says, they have taken refuge too long behind the argument that “nothing can be done domestically unless the external framework is changed.”95 But that is no reason for the West to shrug off its own responsibilities by lambasting the corruption and selfishness of oil-rich Arab sheiks and Latin American multimillionaires. Two blacks do not make a white, and the recent World Development Report of the World Bank leaves no reasonable doubt that, whatever the poor countries may achieve by their own efforts—and in any case they will have to shoulder more than 80 percent of their financial needs—only substantial aid from the rich countries can prevent the problems of poverty, starvation, unemployment, and destitution, already indescribably bad, from getting progressively worse.96

Without a determined and whole-hearted effort by the rich countries to tackle the problem, the only conclusion we can draw from World Bank calculations is that the number of people living in “absolute poverty”—that is, without sufficient food to keep body and soul together—will rise by the end of the century from the present figure of 800 million to something between 1.3 billion and 1.7 billion.97 People living comfortably, or even not so comfortably, in the West would do well to ponder those figures. If people are starving, “the prospect for intercontinental peace in the twenty-first century,” as Arthur Lewis mildly puts it, “is not good,”98 and it would be foolish to suppose that the West would necessarily emerge as victor in an intercontinental war. One has only to look at recent events in Iran to see that lavish investment in sophisticated American military hardware is no guarantee against a population goaded by poverty and oppression.

And so, in the end, we come back to the question which has been assiduously swept under the carpet, ever since the plea for a New International Economic Order was raised in 1974, and that—put briefly, for we all know the facts—is the way the West, luxuriating in the enjoyment of 70 percent or so of the world’s income, has engrossed the good things of this world. That, according to the Moynihans and Bauers, if I understand them correctly, is our due, the just reward for our endeavors and achievements. Whether that is so or not, it certainly reflects a maldistribution of the world’s wealth which precludes any serious approach to the questions of underdevelopment and poverty. But my final word is that it is also a recipe for disaster—for the rich as well as for the poor. If we in the West are going to insist that we must have regular increases in our standard of living, no matter who foots the bill, if we continue to rely, as we have relied in the last thirty years, on endless growth and endless consumption as a way out of our self-induced economic problems, disaster will strike us all, rich and poor alike.

The fundamental failure of the debate about rich and poor, as it has been conducted to date by developed and developing countries alike, is that it rests upon the assumption of continuing, unlimited growth. The reality both sides have to come to terms with now is that the era of continuous growth is at an end. We may, if we wish, debate when the limit will be reached; but the span of time left to us—thirty, forty, fifty years—is less important than the ineluctable fact that we are depleting the world’s finite, nonrenewable resources at an unsupportable speed; and this is as true of the socialist as of the capitalist countries.

If Leontief is right in his calculation that before the end of the present century, at the present rate of consumption, we shall use up from three to four times the volume of mineral resources that humankind consumed during the whole previous history of civilization, our progress can only be compared with that of the Gadarene swine.99 But if we in the West pin our hope of escaping from our economic predicaments, and they in the poorer countries pin their hope of development, on accelerated growth, every problem will be compounded, and the chances are that disaster, like a galloping consumption, will hit us sooner rather than later, and, like a galloping consumption, will strike us down with no hope of recovery.

That is why, contrary to appearances, the quest for a New International Economic Order is not dead. By that I do not mean to say that it will or should be the New International Economic Order proposed by the poor countries, for they are as committed as the governments of the West—perhaps even more committed than the governments of the West—to the idol of growth. Nevertheless the choice facing us today is a choice between a New International Economic Order and chaos indescribably worse than the world has ever experienced in the past. Whatever happens, the world of the 1980s, as Howard Wriggins so correctly predicts, is going to be “disorderly” and “messy,”100 but we still have a slender chance of ensuring that it will not culminate in irretrievable disaster. That is the central issue of our generation, as we march toward the limits of growth; and it transcends the question of rich and poor, for what is at stake is the survival of us all. That may sound dramatic; unfortunately, it is a great deal closer to reality than the maneuverings for rank, position, and economic advantage which are the substance—or should I say the shadow?—of international politics today.

(This is the second part of a two-part article.)

Letters

From the Drawing Board February 22, 1979

The Congo Desk December 7, 1978

  1. 81

    Cf. Evans, Politics of Trade, pp. 81-82.

  2. 82

    See the interesting article by J.P. Smith, “Third World Divided in Two—by Oil,” The Washington Post, September 18, 1978.

  3. 83

    The Times (London), July 31, 1978, Supplement, p. ii.

  4. 84

    Ibid.

  5. 85

    His statement is cited in Jan Tinbergen, Reshaping the International Order (Dutton, 1976), p. 9.

  6. 86

    This, at least, is the conclusion to be drawn from two stimulating studies sponsored by the Lehrman Institute: Balance of Power or Hegemony: The Interwar Monetary System, edited by Benjamin M. Rowland (New York University Press, 1976), particularly pp. xii-xiv and 227-260; and Money and the Coming World Order, edited by David P. Calleo (New York University Press, 1976), particularly pp. 41-67.

  7. 87

    Rich and Poor Nations in the World Economy, pp. 138, 148.

  8. 88

    As is well known, this is the reason why the so-called Cambridge group of economists, led by Wynne Godley, advocates a policy of import controls and protectionism; see Victor Keegan, “Pros and Cons of Protectionism,” Manchester Guardian Weekly, June 11, 1978.

  9. 89

    In Rich and Poor Nations in the World Economy, particularly pp. 88-89, 122, 129, 155.

  10. 90

    A World Divided: The Less Developed Countries in the International Economy, edited by G.K. Helleiner (Cambridge University Press, 1976), p. 187.

  11. 91

    Cf. Balance of Power or Hegemony, pp. 253-254.

  12. 92

    Cf. Money and the Coming World Order, pp. 60-61, 67.

  13. 93

    I am referring, of course, to the notorious articles in Commentary: Daniel P. Moynihan, “The United States in Opposition,” Commentary, March 1975, pp. 31-44; P.T. Bauer, “Western Guilt and Third World Poverty,” Commentary, January 1976, pp. 31-38; P.T. Bauer and B.G. Yamey, “Against the New Economic Order,” Commentary, April 1977, pp. 25-31.

  14. 94

    In The New International Economic Order: The North-South Debate, edited by Jagdish N. Bhagwati (MIT Press, 1977), p. 368.

  15. 95

    Rich and Poor Nations in the World Economy, p. 156.

  16. 96

    World Development Report, 1978 (Oxford University Press). Unfortunately this important publication only came to hand after the present articles were written, and I cannot do justice to it here.

  17. 97

    Cf. Melvyn Westlake, “The Growing Legions of the World’s Poor,” The Times (London), August 17, 1978.

  18. 98

    The Evolution of the International Economic Order, p. 72.

  19. 99

    The Future of the World Economy, p. 5.

  20. 100

    Wriggins, Reducing Global Inequalities, p. 116.

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