New International Economic Order (NIEO): Demand of Third World

• Establishment of 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 based on “equity, sovereign equality, common interest and co-operation 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 generations.” 
• When did the idea of NIEO originated? – 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 GA itself long back in 1952. 
  • Again, similar demands were raised from 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”. 
• Aim of NIEO– The NIEO aims at a development of the global economy as a whole, with the setup of interrelated policies and performance targets of the international community at large. 

Origin of New International Economic Order (NIEO)

• Failure of existing bodies- 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 fulfillment of their vowed objectives. 
• What’s wrong with present economic order? – The present international economic order is found to be asymmetrical in its working. It is biased. It is favoring 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. 
• U.N. Resolution 1971– 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 Co-operation” with various reforms in the area of 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 program for economic and social development.” 
• Global interdependence– It emphasizes 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 been further supported by the non-aligned nations which vehemently criticized the politicalisation of development and trade issues by the developed nations. 

Developing countries calling for New International Economic Order

• To participate in decision-making in larger bodies- 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. 
• Afro-Asian Conference– 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. 
• Algiers Conference– However, the formal idea of the NIEO was put forward in the Algiers Conference of non-aligned countries in 1973. 
• UNCTAD 6th session– In 1975, a declaration for the establishment of NIEO was adopted along with a program of action in the Sixth Special Session of the UNCTAD. 

Factors for demand of NIEO

• The big gap between the Developed and Developing countries– A big economic gap exists between the developed and the lowly developed countries. The former with about 20% of world population, control more than 80% of world income and wealth. 
  • More population- less resources- The latter has to satisfy the needs of about 80% of world population with the help of less than 20% of resources. 
  • Restricted economic relations- This wide gap between the North and the South seriously limits the scope of economic relations and trade between them. 
  • The affluence of the developed compared with the poverty, scarcity and under-development of the developing world makes the existing international system unequal and imbalanced. 
• Continuously Increasing Gap– The existing big economic and development gap between the North and the South has been increasing at an alarming rate. The developed are becoming richer and the developing are becoming poorer. 
  • By virtue of being technologically advanced and industrially developed, the countries of the North are strengthening their control over international trade and income. 
  • Both UNCTAD and WTO have virtually failed to prevent this widening gap between the rich and the poor. 
• Global Interdependence but continued low role of the Developing Countries– Despite the big gap that exists between the developed and the developing countries, the global interdependence has increased in our times. Both the developed and the developing countries today find themselves increasingly dependent upon each other. 
  • However, this global interdependence continues to be exploited by the former for strengthening their economic positions. 
  • The hope that the developed countries would come forth with international actions augmenting the transfer of resources and liberalization of trade, has proved to be wrong. 
  • In actual practice the developed countries have failed to appreciate properly the global interdependence and have continued to pursue their desired objectives in international trade and economy without much regard to the perceptions and needs of the developing countries. 
  • This has been a source of grave dissatisfaction for the developing countries. 
• Economic Neo-Colonialism– Despite the sovereign equality of all the members of international community, the developing countries find themselves living in an era of neocolonialism in which the developed countries continue to control their economies and policies. 
  • The dawn of independence and the resulting sovereign status has made them free only politically, economically and in actual practice they continue to be dependent upon the developed countries. 
  • Being poor and under-developed they find themselves helplessly dependent upon the developed states for securing foreign aid. 
• Excessive Exploitation of World Income and Resources by the Developed Countries– The continued heavy exploitation of world resources and income by the developed countries has given strength to the demand for NIEO. 
  • Under multifarious disguises, the rich countries have been successful in maintaining the appropriation of world resources to the detriment of poor and weak countries. 
  • Being technologically and industrially advanced and economically affluent, the developed countries continue to have a virtual control over the raw material markets, what practically amounts to a monopoly over manufactured products and capital equipment. 
• The inadequacy of WTO- Even the new GATT—the WTO has failed to satisfy the aspirations and needs of the developing countries. The attempts on the part of the developed countries to incorporate a ‘social clause’ have further been a source of concern for the developing countries. 
  • Such attempts are viewed by the Third World as attempts of the developed world at strengthening its neo-colonial control over it. 
  • The failure of the WTO to take note of the need for a North-South dialogue over NIEO has again been a source of strain on the relations between the developed and the developing countries. 
• The Need to protect the Rights and Interests of the Third World countries in the era of Globalization and WTO– The dawn of the era of globalization and WTO regime has given rise to the new need for securing the rights and interests of the developing countries against the attempts of the developed countries to hijack WTO and to establish their hegemony in the grab of globalization. 
• Note- All these factors mentioned above have combined to make the Third World countries rally around the demand for NIEO. 

The North-South Dialogue 

• Funding for developing nations– In 1977, there was a negotiation between the North and South at the Paris talks. The developed countries agreed to provide an additional U.S. 1 billion towards the Aid Fund for the development of the poor nations. 
• Willy Brandt Commission– In December 1977 the Willy Brandt Commission was set up with a view to review the issues of international economic development. The WB Commission’s Report (1980) stresses the need for North-South co-operation. 
• Recommendations of the commission– Beside establishment of a common development fund, its recommendations include strengthening the structure of development lending a  code of conduct for the multinational co-operation as well as the need for intergovernmental co-operation in monetary and fiscal areas along with the trade policies. 
• Increasing participation of developing nations- 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 politicization of the development issue and the increased assertiveness of the Third World countries.

• What has NIEO done to solve problems of developing countries- The NIEO led to 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 programmed actions in two directions– 
  1. Commodity Agreements– with a view to stabilize prices of exportable of LDCs 
  2. Compensatory Financing– through IMF’s liberal loans to LDCs having deficits due to fluctuations in prices. 

Objectives of the NIEO 

• Social justice between developed and developing economies– In essence, the NIEO aims at social justice among the trading countries of the world. It seeks restructuring of existing institutions and forming new organizations 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.’ 
• Better allocation of resources– It suggests more equitable allocation of world’s resources through increased flow of aid from the rich nations to the poor countries. 
• Reducing disparities– It seeks to overcome world mass misery and alarming disparities between the living conditions of the rich and poor in the world as large. 
• To give chance to developing nations to have their say– Its aim is to provide poor nations increased participation and have their say in the decision-making processes in international affairs. 
• Proposal to form new international currency– NIEO also envisages the establishment of a new international currency the implementation of SDR aid linkage, the increased stabilization of international floating exchange system and the use of IMF funds as interest subsidy on loans to the poorest developing countries. 
• Promote economic development– The crucial aim of the NIEO is to promote economic development among the poor countries through self- help and South-South co-operation. 
• Specific problems of south– The NIEO intends to deal with the major problems of the South, such as balance of payments disequilibrium, debt crisis, exchange scarcity etc. 

What has been the program of Action for the NIEO? 

• Source of Program of action– In essence, the UNCTAD resolutions provide a source of programme of action for the international economic order. 
• Regarding free market– 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. 
• Regarding economic development– 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. 
• Regarding discrimination with developing countries- Its line of action is to adopt discriminatory approach in trade favouring the LDCs. 
• Regarding politicalisation– It also insists on de-politicalisation in the flow of official as well as private direct investment from the rich to the poor countries. 
• Regarding financial aid– It contains that aid has to be of multi-lateral form with a view to facilitate structural adjustments in the less developed countries. 
• Regarding International monetary system– It also stresses the need for restructuring the international monetary system. 
  • Conclusion– So far, however, no result-oriented action programme has been undertaken. Nevertheless, the zeal for an NIEO should be continued in the interest of the global welfare. 
• Response of developed nations– There has been always a great opposition from the rich countries. They have vested interests which do not allow for the healthy outcome 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. 

What can the developing countries do to secure NIEO? 

• Expand and strengthen South-South cooperation 
• Use the platform of NAM to keep their unity and solidarity as well as for forcefully advocating the need for NIEO 
• Work for securing an expansion of UN Security Council as well as for ending western control over international economic institutions like IMF, WB, and others 
• Adopt coordinated policies and collective approach towards all international issues and problem, particularly economic and developmental issues and problem under WTO. 
• Work for the promotion of regional cooperation for development among the developing countries. It can be a very effective means for rapid socio-economic development which can strengthen the bargaining power of the South vis-a-vis the North. 

Conclusion 

• The Third World regards the securing of NIEO as a vital necessity of contemporary international relations. It feels that this is the only alternative for halting the fast deterioration of their economies in the present state of international economic order.
• The concerted opposition and protectionist policies of the developed countries are further destined to keep South’s path towards development difficult and problematic. As such NIEO alone appears to be the best solution for ending the existing discriminatory, partial and unjust international economic order. The developed countries, however, are not prepared to accept it as a priority.