• TABLE OF CONTENTS
HIDE
 Front Cover
 Title Page
 Foreword
 Table of Contents
 Author biography
 The inequities of the old economic...
 The emerging trade union of the...
 Concrete proposals for a new international...
 Toward more automatic resource...
 The third world's choices after...
 Advertising
 Back Cover














Group Title: Development paper - Overseas Development Council
Title: The third world and the international economic order
CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00087311/00001
 Material Information
Title: The third world and the international economic order
Series Title: Development paper - Overseas Development Council
Physical Description: vi, 54 p. : ; 23 cm.
Language: English
Creator: Haq, Mahbub ul, 1934-1998
Overseas Development Council
Publisher: Overseas Development Council
Place of Publication: Washington
Publication Date: 1976
 Subjects
Subject: International economic relations   ( lcsh )
Développement économique   ( rvm )
Developing countries   ( lcsh )
Politique économique -- Pays en voie de développement   ( rvm )
Genre: non-fiction   ( marcgt )
 Notes
Statement of Responsibility: Mahbub ul Haq.
 Record Information
Bibliographic ID: UF00087311
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 02588731

Table of Contents
    Front Cover
        Front Cover 1
        Front Cover 2
    Title Page
        Page i
        Page ii
    Foreword
        Page iii
        Page iv
        Page v
        Page vi
    Table of Contents
        Page vii
    Author biography
        Page viii
    The inequities of the old economic order
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
    The emerging trade union of the third world
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
    Concrete proposals for a new international economic order
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
    Toward more automatic resource transfers
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
        Page 41
        Page 42
        Page 43
        Page 44
        Page 45
        Page 46
    The third world's choices after the U.N. special session
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
        Page 52
        Page 53
        Page 54
    Advertising
        Page 55
        Page 56
    Back Cover
        Page 57
        Page 58
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The Overseas Development Council is an inde-
pendent, non-profit, non-governmental organi-
zation seeking to increase American under-
standing of the problems faced by the
developing countries and the importance of
these countries to the United States. The Coun-
cil is funded by foundations, corporations, and
private individuals. ODC policies are deter-
mined by its Board of Directors. Theodore M.
Hesburgh, C.S.C., is Chairman of the Board,
and Davidson Sommers is Vice-Chairman. The
President is James P. Grant.



The Council's functions are:

- to keep the urgency of the challenges of
development before the American public
and responsible authorities;

- to serve as a forum for individuals directly
concerned with development to share ideas
through conferences, seminars, and discus-
sions;

- to conduct studies of its own on current and
emerging problems;

- to distribute information and knowledge
about development as widely as possible;

- to serve as a clearing house and coordinator
on the many activities related to overseas
development.






Overseas Development Council
1717 Massachusetts Avenue, N.W.
Washington, D.C. 20036
(202) 234-8701










the third world
and the international
economic order








Mahbub ul Haq



















development paper 22 september 1976





























































The views expressed in this pamphlet are those of the
author, and do not necessarily represent those of the
Overseas Development Council, its directors, officers,
or staff.







foreword


Mahbub ul Haq is a tireless and effective proponent
of greater equality of opportunity for the peoples of
the developing countries through a process of or-
derly change. He has a reputation for addressing
with equal vigor the need for greater equality of
opportunity within the developing countries as well
as the need for greater equality between these
states-frequently referred to as the "Third World"
or the "South"-and the more advanced "First
World" market economies and centrally planned or
"Second World" economies of the Northern Hemi-
sphere.
This development paper is based on five lectures
given by Mahbub ul Haq in November 1975 as the
second series of Turkeyen Third World Lectures to be
delivered in Georgetown, Guyana.' The first series
of lectures was given by the President of Tanzania,
Julius Nyerere, in 1974. In introducing Mr. Haq at
the start of the second series last year, the Prime Min-
ister of Guyana, L.F.S. Burnham, characterized the
Turkeyen lectures as follows:
The significance and the importance of these
lectures being held here in a Third World country
and named, as they have been, Third World
Lectures, lies in the fact that at last the Third
World is making a statement to the world-a
statement that we know what is best for us and
that we are a little tired of patronage and tutelage;
that we seek not only political independence,
which has been largely achieved, but economic
independence, which is still to be achieved in
most spheres and countries; and that we seek
psychological and intellectual independence and
are prepared to discuss our problems, our thrusts,
our hopes, and our aspirations in the Third World.

The ODC is making Mahbub ul Haq's contribution to
the Turkeyen series available to Americans as an
insight into what one leading Third World intellec-
tual and development practitioner is saying to his
Third World colleagues in the struggle for greater
equality about the kinds of changes required in the
world order, including their own societies, and about


'These lectures were initially printed and distributed
in Guyana by the Guyana Ministry of Foreign Affairs.







the strategies that will be necessary to achieve those
changes.
The striving for equality of opportunity is a famil-
iar phenomenon in American history. It has been a
central characteristic of the United States in its first
two centuries as a nation. This progression toward
greater equality of opportunity-both for America's
geographic regions and for different groups and
classes of people within its society-has been
steady, though frequently halting. For decades, cer-
tain regions, most notably the deep South and the
agricultural West, have sought greater equality in
terms of their economic relationships with the indus-
trially more advanced Northeast; only in recent years
has a reasonable balance been achieved. Among the
American people, there has been progress in this
century by those groups seeking greater equality of
opportunity to share in decision making and in the
benefits of progress. Among these groups has been
the industrial working class, which in the 1930s and
the late 1940s achieved the right to bargain collec-
tively and succeeded in securing legislation provid-
ing workers with a significant measure of security in
cases of unemployment, sickness, and old age. Ma-
jor progress was achieved by Blacks in the 1950s
and 1960s, and more recently by women, when they,
too, advanced their equality of opportunity. Disad-
vantaged Americans have always considered them-
selves to have a right to corrective action. Usually
there has been a substantial body of more advan-
taged Americans who have been prepared to assist
them in their cause-some on moral grounds alone
and others on both moral and enlightened self-
interest grounds. The United States has been en-
riched in the process. No matter how grudgingly
given, the widening of opportunities has been of
significant net benefit to American society-a society
which has progressed toward historically unparal-
leled prosperity and opportunity for all.
The concept of equality of opportunity also has
been applied among the industrially advanced de-
mocracies with respect to each other in recent years,
and it has contributed greatly to the unprecedented
economic and social progress of the post-World-
War-II era. It has been central to the evolution of
economic relationships among the industrial coun-
tries since World War II and, to an even greater
extent, among the countries of the European Com-
munity as they have moved toward more complete
integration of their economies. As in the United








States, greater equality of opportunity for all citizens
within their countries has been an important part of
the domestic development of other industrial nations
over the past twenty-five years, and the benefits of
progress have become increasingly available to the
great majority of their citizens.
The parallel striving of many in the developing
nations for greater equality of opportunity for their
states in the international order and for increasing
numbers of citizens within their societies is the
subject which Mahbub ul Haq addresses in this
paper. The author notes at the outset his conviction
that "fundamental reforms in the international order
will be meaningless, and almost impossible to
achieve, without corresponding reforms in the na-
tional orders." In the past decade, these have be-
come increasingly central themes for more than a
hundred developing countries, with nearly 2 billion
people, in Asia, Africa, and Latin America.
Major changes within the world economic and
social order are as inevitable in the twenty-five years
that lie ahead as were the changes in the interna-
tional political order that led to the political inde-
pendence of over eighty nations with more than a
billion people in the last twenty-five years. Possibly
the most crucial question is whether these inevitable
changes in the international and domestic orders
will be accompanied by chaos and collisions border-
ing on the catastrophic-as happened with the poli-
cies of the oil producing nations in this decade-or
with the same degree of orderliness that character-
ized vast changes in the industrial democracies over
the last quarter-century.
An economist from Pakistan who received ad-
vanced academic training in the United States, has
held high office in his own country, and is currently a
senior advisor to the President of the World Bank,
Mahbub ul Haq is a citizen and a spokesman of the
Third World as well as a citizen of the world com-
munity. He speaks frankly-and with skill-to the
peoples of Europe, North America, Japan, and the
developing countries of the changes that he sees as
necessary to the workings of world economic sys-
tems. He is equally forthright in speaking to develop-
ing countries on the imperative for greater equality
of opportunity within their countries. One need not
agree with all-or even the great majority-of the
conclusions and proposals he makes to his fellow
citizens of the Third World to recognize that his
thoughts can be of help to Americans in formulating







a response to the demands of the developing coun-
tries that is reasoned and that has the vision re-
quired so that all societies may ultimately benefit.


James P. Grant, President
September 1976 Overseas Development Council








contents


Page
Foreword, by James P. Grant................... iii

The Inequities of the Old Economic
Order ..................................... 1

Kinds of Inequality ......................... 3

Equality of Opportunity ...................... 8

A New World Order? ........................10

The Emerging Trade Union of the
Third W orld ...................................12

Third World Bargaining Power ...............13

Political versus Economic Leverage ..........18

Concrete Proposals for a New
International Economic Order ................. 22

World Development Authority ...............24

Short-term Credit.......................... 24

Long-term Finance .........................27

Expansion of Trade .........................29

Food Production .......................... 31

Toward More Automatic Resource Transfers.....34

New Basic Principles .......................36

Implications for International
Financial Institutions ..................... 40

The Third World's Choices after the
U.N. Special Session ........................ 47

Reforms within Third World Countries........49

Third World Unity and Tactics ................51






















































MAHBUB UL HAQ, who is presently Director of the
Policy Planning and Program Review Department of
the World Bank, was previously Chief Economist of
the Pakistan Planning Commission. Mr. Haq is co-
author, with Mrs. Khadija Haq, of Deficit Financing in
Pakistan (1961) and author of The Strategy of Eco-
nomic Planning: A Case Study of Pakistan (1963).
He has written and spoken extensively on the subject
of development planning.








the inequities of the old
economic order


The Third World is not merely a catchword today. It is
just becoming a political and economic force. A new
trade union of the poor nations is emerging. It is
united by its poverty-and by its heritage of common
suffering. In fact, a "poverty curtain" has descended
right across the face of our world, dividing it mate-
rially and philosophically into two different worlds,
two separate planets, two unequal humanities-one
embarrassingly rich and the other desperately poor.
The struggle to lift this curtain of poverty and un-
equal relationships is certainly the most formidable
challenge of our time. And it is likely to cover many
decades and consume many generations.
Most of the required changes lie right within the
control of the Third World-whether in the restruc-
turing of domestic political power, or in the fashion-
ing of new development styles and strategies, or in
the search for new areas of collective self-reliance.
But a part of this struggle is at the international
level-the need to change the past patterns of hope-
less dependency to new concepts of equality, part-
nership, and interdependence. These pages are ad-
dressed to this struggle at the international level,
though I must make quite clear my own conviction
that fundamental reforms in the international order
will be meaningless, and almost impossible to
achieve, without corresponding reforms in the na-
tional orders.
In the pages on the international economic order
that follow, I intend to 1) review the workings of the
existing world economic order and analyze the con-
crete basis of the accusation by the poor nations that
the present international institutions systematically
discriminate against their interests; 2) analyze
whether the poor nations have the necessary bar-
gaining power to bring about fundamental changes
in the international economic order; 3) present some
major proposals for the establishment of a new
international economic order; 4) elaborate on a
design for a new framework for resource transfers
from the rich to the poor nations; and 5) review the


The ideas expressed in these speeches are elaborated in
Mahbub ul Haq's new book, The Poverty Curtain: Choices
for the Third World (New York: Columbia University Press,
1976).







overall tactics and strategies that the Third World
must adopt in the crucial struggle ahead.
Let me also make clear that I am speaking not as
an official of the World Bank or as a Pakistani or as
an individual. I venture to speak as a citizen from the
Third World, in utter frankness and candor, sharing
the aspirations and the belief in the common cause
that unite all of us in the Third World. Let me turn
now to an analysis of the prevailing world economic
order from the vantage point of the Third World.
The vastly unequal relationship between the rich
and the poor nations is fast becoming the central
issue of our time. The poor nations are beginning to
question the basic premises of an international order
that leads to ever widening disparities between the
rich and the poor countries and to a persistent denial
of equality of opportunity to many poor nations. They
are, in fact, arguing that in the international order
-just as much as within national orders-all distri-
bution of benefits, credit, services, and decision
making gets warped in favor of a priviliged minority
and that this situation cannot be changed except
through fundamental institutional reforms.
When this is pointed out to the rich nations, they
dismiss it casually as empty rhetoric of the poor
nations. Their standard answer is that the interna-
tional market mechanism works, even though not
too perfectly, and that the poor nations are always
out to wring concessions from the rich nations in the
name of past exploitation. They believe that the poor
nations are demanding a massive redistribution of
income and wealth which is simply not in the cards.
Their general attitude seems to be that the poor
nations must earn their economic development,
much the same way as the rich nations had to over
the last two centuries, through patient hard work
and gradual capital formation, and that there are no
shortcuts to this process and no rhetorical substi-
tutes. The rich, however, are "generous" enough to
offer some help to the poor nations to accelerate
their economic development if the poor are only
willing to behave themselves.
In reviewing this controversy, we must face up to
the blunt question: Does the present world order
systematically discriminate against the interest of
the Third World, as the poor nations contend? Or is
the demand for a new order mere empty rhetoric
against imagined grievances, as the rich nations
allege?
There is sufficient concrete evidence to show that
the poor nations cannot get an equitable deal from

2







the present international economic structures-
much the same way as the poorest sections of the
society within a country and for much the same
reasons. Once there are major disparities in income
distribution within a country, the market mecha-
nism ceases to function either efficiently or equita-
bly, since it is weighted heavily in favor of the pur-
chasing power in the hands of the rich. Those who
have the money can make the market bend to their
own will. When we start from a position of gross
inequalities, the so-called market mechanism mocks
poverty, or simply ignores it, since the poor hardly
have any purchasing power to influence market
decisions. This is even more true at the international
level, since there is no world government and none
of the usual mechanisms existing within countries
that create pressures for redistribution of income
and wealth.
But this is not a time to make a general case all
over again. The Third World has done it many times
over. Rather, it is time for our universities and our
research institutions to do some serious work in
documenting specific instances of inequities in the
world order. In undertaking such a serious analysis, I
believe that two "staple diets" we have used so often
in the past should be played down. First, we cannot
keep the rich nations feeling either guilty or uncom-
fortable by simply pointing out that three quarters of
the world income, investment, and services are in
the hands of one quarter of its population. The rich
nations are increasingly turning around and saying:
"So what? We worked for it and so should you."
World income disparities, per se, are not an issue. We
also must demonstrate that the prevailing disparities
are creating major hurdles for the poor nations to
execute their own development and are denying
them equality of opportunity. Second, the Third
World has often used the argument of instability of
commodity prices and worsening terms of trade. This
has been overdone and is probably not the heart of
the problem. If low earnings are stabilized, they still
remain low. It may give our policymakers a little
peace of mind but it does not solve anything funda-
mental. Surely the argument must be that interna-
tional structures deny us a fair price.

Kinds of Inequality

Ultimately, the reasons for unequal relationships
must be sought in international structures and
mechanisms which put the Third World at a consid-








erable disadvantage and which cry out for thorough-
going institutional reforms. Let me explore some of
these areas.
There is a tremendous imbalance today in the
distribution of international reserves. The poor na-
tions, with 70 per cent of the world population,
received less than 4 per cent of the international
reserves of $131 billion during 1970-1974, simply
because the rich nations controlled the creation and
distribution of international reserves through the
expansion of their own national reserve currencies
(mainly dollars and sterling) and through their deci-
sive control over the International Monetary Fund
(IMF). For all practical purposes, the United States
has been the central banker of the world in the post-
Second World War period, and it could easily fi-
nance its balance-of-payments deficits by the simple
device of expanding its own currency. In other
words, the richest nation in the world has had an
unlimited access to international credit facilities,
since it could create such credit through its own
decisions. This has been less true of other developed
countries, though Britain and Germany have enjoyed
some of this privilege at various times. This certainly
has not been true of the developing countries, which
could neither create international credit through
their own deficit-financing operations nor obtain an
easy access to this credit because of the absence of
any genuine international currency and because of
their limited quotas in the International Monetary
Fund. The heart of any economic system is its credit
structure. This is controlled entirely by the rich
nations at the international level. The poor nations
merely stand at the periphery of monetary decisions.
This is nothing unusual. As in any normal national
banking system, the poor get very little credit unless
a concerned government chooses to intervene on
their behalf.
The distribution of value added to the products
traded between the developing and the developed
countries is heavily weighted in favor of the latter.
The developing countries, unlike the developed, re-
ceive only a small fraction of the final price that the
consumers in the international market are paying for
their produce, simply because many of them are too
poor or too weak to exercise any meaningful control
over the processing, shipping, and marketing of their
primary exports. A rough estimate indicates that
final consumers pay over $200 billion (excluding
taxes) for the major primary exports (excluding oil) of







the developing countries (in a more processed, pack-
aged, and advertised form), but these countries
receive only $30 billion, with the middle men and the
international service sector-mostly in the hands of
the rich nations-enjoying the difference. On the
other hand, the rich nations have the resources and
the necessary bargaining power to control the var-
ious phases of their production, export, and distribu-
tion-often including their own subsidiaries to han-
dle even internal distribution within importing
countries. In fact, if the poor nations were able to
exercise the same degree of control over the pro-
cessing and distribution of their exports as the rich
nations presently do and if they were to get back a
similar proportion of the final consumer price, their
export earnings from their primary commodities
would be closer to $150 billion. Again, there is a
parallel here between national and international
orders: within national orders as well, the poor
receive only a fraction of the rewards for their labor
and lose out to the organized, entrenched middle
men unless the national governments intervene.
The protective wall erected by the developed
countries prevents the developing world from receiv-
ing its due share of the global wealth. The rich
nations are making it increasingly impossible for the
"free" international market mechanism to work. In
the classical framework of Adam Smith, the corner-
stone of the free market mechanism is the free
movement of labor and capital as well as of goods
and services so that rewards to factors of production
are equalized all over the world. Yet immigration
laws in almost all rich nations make any large-scale
movement of unskilled labor in a worldwide search
for economic opportunities impossible (except for a
limited "brain drain" of skilled labor). Not much
capital has crossed international boundaries, both
because of poor nations' sensitivities and because of
the rich nations' own needs. And additional barriers
have gone up against the free movement of goods
and services-e.g., over $20 billion in farm subsidies
alone in the rich nations to protect their agriculture
and progressively higher tariffs and quotas against
the simple consumer-goods exports of the develop-
ing countries, such as textiles and leather goods. The
rich, in other words, are drawing a protective wall
around their lifestyles, telling the poor nations that
they can compete neither with their labor nor with
their goods but paying handsome tributes at the
same time to the "free" workings of the international







market mechanism. Unfortunately, while the rich
can show such discrimination, the poor cannot-by
the very fact of their poverty. They need their current
foreign exchange earnings desperately, just in order
to survive and to carry on a minimum development
effort, and they can hardly afford to put up discrimina-
tory restrictions against the capital-goods imports
and technology of the Western world. There is again a
parallel here between national and international
orders. Within national orders as well, the poor
generally have very little choice but to sell their
services to the rich at considerable disadvantage just
in order to earn the means of their survival.
Another area in which the unequal bargaining
power of the poor and the rich nations shows up
quite dramatically is the relationship between multi-
national corporations and the developing countries.
Most of the contracts, leases, and concessions that
the multinational corporations have negotiated in
the past with the developing countries reflect a fairly
inequitable sharing of benefits. In many cases, the
host government is getting only a fraction of the
benefits from the exploitation of its own natural
resources by the multinational corporations. For
instance, Mauritania gets about 15 per cent of the
profits that the multinational corporations make from
extracting and exporting the iron ore deposits in the
country. Similarly, in Liberia, the foreign investors
export an amount equivalent to nearly one fourth of
the total GNP of the country in profit remittances.
Such examples are numerous. In fact, it would be
useful to tabulate all the concessions, contracts, and
leases which have been negotiated between the
multinational corporations and the developing coun-
tries and to present to the world an idea of what is
the present sharing of benefits between host govern-
ments and multinational corporations in case after
case. Such a factual background not only would
illustrate the concrete and specific fashion in which
the poor nations get discriminated against in the
present world order but also could be a very useful
prelude to the necessary reforms.
The poor nations have only a pro forma participa-
tion in the economic decision making of the world.
Their advice is hardly solicited when the big ten
industrialized nations get together to take key deci-
sions on the world's economic future; their voting
strength in the Bretton Woods institutions (the World
Bank and International Monetary Fund) is less than
one third of the total; and their numerical majority in







the U.N. General Assembly has provided no real
influence so far on international economic decisions.
In fact, it may well be an indicator of the sense of
accommodation that the rich nations are willing to
show that they have started protesting against the
"tyranny of the majority" at a time when the majority
resolutions of the poor nations carry no effective
force and when the Third World countries are not
even being allowed to sit as equals around the
bargaining tables of the world.
To take an example from the world of ideas, these
unequal relationships pervade the intellectual world
and the mass media as well. The developing coun-
tries have often been subjected to concepts of de-
velopment and value systems that were largely fash-
ioned abroad. While economic development is the
primary concern of the developing countries, so far it
has been written about and discussed largely by
outsiders. The mass media, which greatly shape
world opinion, are primarily under the control of the
rich nations. The Nobel Prize, which is presumably
given for excellence of thought, is given to very few
in the Third World, even in non-technical fields such
as literature. Is it because our societies are not only
poor in income but also poor in thought? Or is it
because our thought is being judged by standards
totally alien to our spirit and we have no organized
forums for either the projection or the dissemination
of our thinking? The answer is quite obvious. There is
no international structure, including intellectual en-
deavor, which is not influenced by the inequality
between rich and poor nations.
There is much other evidence of instances in
which unequal economic relationships have led to a
denial of economic opportunities to the poorer na-
tions, but the basic point already has been made: in
the international order, just as much as within
national orders, initial poverty itself becomes the
most formidable handicap in the way of redressal of
such poverty unless there is a fundamental change
in the existing power structures.
In this context, a net bilateral transfer of about $8
billion of official development assistance to the poor
nations every year is neither adequate nor to the
point: the quantitative "loss" implicit in the just-
quoted examples of maldistribution of international
credit, inadequate sharing of benefits from the ex-
port of their natural resources, and artificial restric-
tions on the movement of their goods and services
(not to speak of labor) would easily amount to







$50-$100 billion a year. More pertinent, the poor
nations are seeking greater equality of opportunity,
not charity from the uncertain generosity of the rich.

Equality of Opportunity

The demand for a new international economic order
must be seen in its proper historical perspective. On
one level of reasoning, it is a natural evolution of the
philosophy already accepted at the national level:
governments must actively intervene on behalf of
the poorest segments of their populations ("the
bottom 40 per cent"), which will otherwise be by-
passed by economic development. In a fast-shrinking
planet, it was inevitable that this "new" philosophy
would not stop at national borders; and, since there
is no world government, the poor nations are bring-
ing this concern to its closest substitute, the United
Nations.
On yet another level, the search for a new eco-
nomic order is a natural second stage in the libera-
tion of the developing countries. The first stage was
marked by movements of political liberation from the
1940s to the 1960s; the second stage constitutes a
struggle for not only political but also economic
equality, since the former is unattainable and mean-
ingless without the latter. The demand for a new
international economic order must be seen, there-
fore, as part of an historical process, which neither
can be achieved by the poor nations in one single
negotiation nor will go away quietly by the simple
indifference of the rich nations (or by their misinter-
preting it as the faint rumblings of "British social-
ism", as Mr. Moynihan, former U.S. Ambassador to
the United Nations, has argued). In fact, the move-
ment for greater equality of economic opportunity is
likely to dominate the next few decades-as much
within nations as among them.
At the same time, the developing countries must
recognize the intimate link between the reform of the
national and international orders. If national eco-
nomic orders in the poor nations remain unrespon-
sive to the needs of their own poor and if their
development strategies continue to benefit only a
privileged few, much of the argument for a funda-
mental reform in the international order will dis-
appear because any benefits flowing from such a
reform would go only to a privileged minority in these
countries. Moreover, when the international and
national orders are dominated by privileged minori-
ties, the possibilities of a tacit collusion between

8







their natural interests are quite unlimited. The devel-
oping countries have to learn, therefore, that reforms
in their own national orders are often the critical
bargaining chip they need in pressing for similar
reforms at the international level.
The reforms in the national orders of the poor
nations, however, are not in themselves a suffi-
cient condition for a major improvement in the
economic condition of their masses. According to a
recent World Bank study, if present national and
international policies continue unchanged, the poor-
est developing countries (those with per capital in-
comes below $200) face the prospect of virtually no
increase in their low levels of income between 1975-
1980. The increase for other developing countries
also will be fairly small. A major change will be
required in their internal policies (in saving and invest-
ment policies and in the distribution of rewards of
economic growth) if such a grim prospect is to be
averted. But a good part of this effort will be frus-
trated if these countries cannot import the needed
machinery and technology and if critical foreign
exchange shortages persist because of their limited
access to the international market either through
trade or through international resource transfers.
The solution for this is not piecemeal international
reforms-via selective trade "concessions" or some-
what larger foreign assistance-since these achieve
exactly the same purpose and provide as temporary a
relief as limited social security payments to the poor
within a national system. The long-term solution isto
change the institutional system in such a way as to
improve the access of the poor to economic opportuni-
ties and to increase their long-term productivity, not
their temporary income.
The basic principles for such a change can be
easily established and follow logically from the above
analysis of institutional imbalances. For instance,
any long-term negotiating package should make
provision for:

(a) Revamping of the present international credit
system by phasing out national reserve curren-
cies and replacing them with an international
currency;
(b) Gradual dismantling of restrictions in the rich
nations on the movement of goods and services
as well as labor from the poor nations;
(c) Enabling the developing countries to obtain
more benefit from the exploitation of their own
natural resources through greater control over

9






various stages of primary production, processing,
and distribution of their commodities;
(d) Introduction of an element of automaticity in
international resource transfers by linking them
to some form of international taxation or royalties
or reserve creation;
(e) Negotiation of agreed principles between the
principal creditors and debtors for an orderly
settlement of past external debts;
(f) Renegotiation of all past leases and contracts
given by the developing countries to the multina-
tional corporations under a new code of ethics to
be established and enforced within the United
Nations framework; and
(g) Restructuring of the United Nations to give it
greater operational powers for economic deci-
sions and a significant increase in the voting
strength of the poor nations within the World
Bank and the International Monetary Fund.

These ideas will be further developed in my specific
proposals for the establishment of a new interna-
tional economic order.


A New World Order?

The debate on the establishment of a new interna-
tional economic order has only recently begun. The
battle lines are still being drawn; the battle plans of
the rich and the poor nations are hardly clear at
present. Our world may well be poised uneasily
between a grand new global partnership or a disor-
derly confrontation. Unfortunately, there are very
few examples in history of the rich surrendering
their power willingly or peacefully. Whenever and
wherever the rich have made any accommodation,
they have done so because it had become inevitable,
since the poor had gotten organized and would have
taken away power in any case. The basic question
today, therefore, is not whether the poor nations are
in a grossly unfavorable position in the present world
order. They are, and they will continue to be, unless
they can negotiate a new world order. The basic ques-
tion really is whether they have the necessary bar-
gaining power to arrange any fundamental changes
in the present political, economic, and social balance
of power in the world.
Let me conclude with three main observations.
1. Tremendous responsibility rests on our univer-
sities, our research institutions, our intellectual fo-
rums in the Third World. It is for them to work out
10







carefully concrete instances of systematic discrimi-
nation built into the existing economic order-
whether the inadequate return from raw material
exports, or inequitable sharing of gains from multi-
nationals, or unequal distribution of world liquidity.
This should be done in a spirit of serious, objective
analysis so that there is concrete documentation
available to our negotiators to press this point in
international forums. There is no excuse for our not
producing sufficient studies on this subject. If we do
not attempt these exercises, the rich nations have no
built-in incentive to carry them out. And, in the last
analysis, facts are far more powerful ammunition
than words can ever be.
2. We must keep stressing, as often as we can,
that the basic struggle is for equality of opportunity,
not equality of income. We are not chasing the income
levels of the rich nations. We do not wish to imitate
their lifestyles. We are only suggesting that our so-
cieties must have a decent chance to develop, on an
equal basis, without systematic discrimination
against us, according to our own value systems, and
in line with our own cultural traditions. We are not
asking for a few more crumbs from the table of the
rich. We are asking for a fair chance to make it on our
own.
3. Let us make quite clear in our future negotia-
tions that what is at stake here is not a few marginal
adjustments in the international system: it is its
complete overhaul. We are not foolish enough to
think that this can happen overnight. We are willing
to wait. And we are willing to proceed step by step.
But we are not willing to settle for some inadequate,
piecemeal concessions in the name of a step-by-step
approach. The advice of Prime Minister Burnham of
Guyana at the time of the Commonwealth Heads of
Government meeting in May 1975 is pertinent:
There is another danger that needs to be guarded
against if we are all serious in our commitment to
programmes of positive action which will give life
to a new international economic order. It is the
danger of deceiving ourselves that we can some-
how achieve fundamental change by marginal
adjustments and devices of a piecemeal and
reformist nature. This is not to say that there is no
value in particular approaches. It is to emphasize
that we will not make real progress unless we
evolve an integrated programme designed to ful-
fill not merely the aspirations of the developing
world but the necessities for survival of the global
community.








the emerging trade union
of the third world


In concluding that malaise runs fairly deep in the
structures, institutions, and mechanisms of the in-
ternational order, and that nothing short of funda-
mental institutional reforms is going to establish the
new international economic order that the Third
World is seeking, we also need to face the facts.
Fundamental institutional reforms are not offered on
a silver platter, whether they are in the economic or
in the political sphere. They have to be earned. The
question really is whether the Third World has the
necessary political and economic bargaining power
to make such fundamental changes in the world
order. I personally believe that the Third World does
have that power.
One of the most common fallacies of the rich is
that the poor have little bargaining power and can be
conveniently ignored. This is a mistake that the rich
no longer make within national orders since they
have witnessed too often in history the violent over-
throw of the privileged minority whenever the poor
masses got desperate and organized. Moreover,
national governments, however much they may
depend on their alliance with vested interest groups,
always keep looking over their shoulders to appease
the poor majority lest their economic and social
conditions become intolerable. With the gradual
evolution of national orders, the poor have organized
themselves in many countries into a formidable
countervailing power to the entrenched interests of
the rich, mainly through the formation of trade
unions. Yet, at the international level, we see the
same skepticism and questioning about the real
bargaining power of the poor exactly at the time
when we are witnessing the emergence of a trade
union of the poor nations.
The reasons for this skepticism are obvious.
Firstly, the rich nations are analyzing mainly the
economic bargaining power of the poor nations
although their real power is political. Most of the
analysis proceeds in terms of the control that the
poor nations presently exercise over natural resour-
ces or their current importance in international trade
and commerce; and it is concluded, quite wrongly,
that, unlike the members of the Organization of
Petroleum Exporting Countries (OPEC), other poor
nations are in no position to challenge the over-
12







whelming control of the rich nations over the present
world economic order. Secondly, such analysis is
often conceived in a short-term perspective, mistak-
ing the current poverty of a majority of mankind for
permanent impotence. As soon as we take a broader,
longer-term perspective, it becomes obvious that the
Third World is the future international order and that
the developed countries have to start thinking today
in terms of fashioning policies to come to some
reasonable accommodation with this future order.

Third World Bargaining Power

The need for developed-country accommodation is
not merely wishful thinking: it follows automatically
if we view the entire issue in its proper historical
perspective. It is true that the Third World is not
important enough today-financially, economically,
or politically-to figure in the calculations of the
developed countries. But, in the longer-run, there is
likely to be a dramatic shift in the balance of power
between the rich nations and the Third World. Let us
analyze briefly how such a dramatic shift might take
place.
If we look at the demographic trends, we find that
the rich nations are a shrinking minority of the world.
Today they are about 30 per cent of the total popula-
tion of the word; by the turn of this century, they will
have dwindled to 20 per cent, and by the middle of
the next century to about 10 per cent. There is a real
question about whethersucha shrinking minority
will be able to control the economic, financial, and
political destiny of the world-and about what
means it may have to employ to do that. It is inevita-
ble that the dependence of the rich nations on the
poor nations will greatly increase over time-for
their natural resources, the use of their space and
oceans, and even their labor and effective demand.
This is likely to create a "reverse dependency,"
where the lifestyles of the rich will come to depend
on the continued goodwill of the poor.
There is no way that this shrinking minority could
continue to draw a protective wall around its life-
styles or withdraw behind a fortress and keep com-
manding the world's resources on its own terms.
There is likely to be another development during the
next few decades which is going to reduce greatly
the room for maneuver of this privileged minori-
ty-viz., the spread of nuclear weapons. It looks
inevitable now that the nuclear monopoly will not
remain in the hands of a few nations; by the turn of
13







this century a number of poor nations-particularly
the more populous ones like China, India, Pakistan,
Brazil, and Egypt, with a combined population of over
three billion by then-will also command nuclear
weapons and their delivery systems. However re-
grettable such a development may be from a world
point of view-and there are many chances of its
becoming quite catastrophic in a world as unjust as
ours-an important implication of this development
for the international balance of power would be that
the sheer size of numbers would begin to tell as the
threat of nuclear terror is neutralized. Throughout
history, the only way a small minority has continued
to exercise a dominant control over human affairs is
through its monopoly over some form of human
destruction: once this'advantage is neutralized, the
minority begins to realize how dependent it is on the
goodwill of the majority for its continued existence.
We do not have to indulge in such morbid specu-
lation to recognize that even the balance of economic
power is likely to change fairly decisively in the next
few decades. The control over natural resources
provides an example. Most agricultural and mineral
resources are produced or controlled by the Third
World. The developed countries, particularly outside
the United States, are going to be increasingly de-
pendent on the natural resources imported from
outside. Initially, these resources were obtained by
many developed countries on the basis of a colonial
pattern of exploitation of the developing world. Later
the availability of cheap oil enabled the developed
countries to replace many of the natural fibers by
synthetics and to create new resources for continued
industrialization. But this created a major and in-
creasing dependence on oil, which made the devel-
oped countries more vulnerable to the inevitable
increase in its price. It is already apparent that the
price of oil in the future will be determined by the
availability of viable substitutes rather than by the
previous unequal bargaining power of the producers
and the consumers. It is true that there is hardly any
other raw material where the producers can exercise
such decisive control, where the consumers' de-
mand is so inelastic, where the substitutes will take
so long to develop at so high a cost, and where the
natural resource is a wasting asset over time. But
while other raw material exports of the developing
countries do not have these features, comparison
with the oil situation misses two basic points. 1) The
dependence of the rich consumers on natural re-
sources is bound to increase manifold in the future

14







as per capital incomes increase further in the indus-
trialized world. There is no way the developed coun-
tries can meet this demand from within without
either becoming even more dependent on energy
resources or incurring a much higher cost because of
the alternative uses of their capital and labor. 2) It is
true that most raw material exports of the developing
countries (such as tea, coffee, cocoa, rubber, etc.) are
not priority items for the developed world; but the
rich nations are getting a substantial value added
through their processing, shipping, advertising, and
distribution of these commodities (over $150 billion),
and it is not going to be a painless process to
substitute for them.
The developed countries are likely to need the
Third World in the future even to sustain effective
demand for their expanding production. While the
poor nations are not really important today in the
economic calculations of the rich nations, a realiza-
tion may come over the next few decades that the
prosperity of the developed world cannot be sus-
tained with the continued impoverishment of the
Third World. The Western societies learned a useful
lesson through the depression of the 1930s-that
every extra dollar going to labor was not a dollar
taken away from profits but would come back twice
over through effective demand and really grease the
wheels of prosperity. This led to the birth of enlight-
ened capitalism-the "New Deal" at the national
level-where as much attention was paid to sustain-
ing the purchasing power of the workers as to
worrying about the profits of the capitalists. Today
we have a situation where the capital of the world is
concentrated in a handful of nations but its labor is
mainly crowded in the Third World. Taking a fairly
long-term view, it is just not possible to keep this
capital and labor apart through immigration laws or
through restrictions on capital transfers and yet have
the basis of continued world prosperity. The evolution
of a New Deal at the international level is, therefore,
only a question of time. In fact, this also shows how
intimately interlinked and mutually compatible the
concerns of the rich and the poor nations may prove
to be if they are prepared to look sufficiently ahead in
the spirit of enlightened self-interest.
We must also recognize that, in an interdepen-
dent world, the common property resources of man-
kind-such as the ocean beds and space-are going
to acquire ever greater importance in a crowded
planet. Only the rich nations today have the capital,
technology, and political power to exploit these

15







resources, but it is impossible to colonize the pattern
of their exploitation in the same fashion as happened
to the resources on land. And as the majority of
mankind acquires greater political and nuclear
power in the next few decades, it is inevitable that it
will demand a greater control over these interna-
tional commons which belong to all humanity. The
rich nations cannot, therefore, extend their techno-
logical options by turning to these common resour-
ces, except by international agreement; otherwise
they may well be risking territorial battles for the
right to the future use of these international com-
mons.
One of the most important elements that must be
analyzed in any discussions of the relative economic
power and options of the rich and the poor nations in
the future is the prospect of an economic collabora-
tion between OPEC and other countries of the Third
World. The OPEC member countries have been able
to arrange a fairly substantial increase in their total
financial earnings, about 90 per cent of it from the
industrialized world (about $100 billion a year in
1975, projected to increase to nearly $200 billion by
1980 in current prices). Though the future projec-
tions vary a good deal, it is reasonable to assume
that the accumulated foreign exchange reserves of
the OPEC countries will account for a major propor-
tion of the total world reserves in another decade.
The economic clout that the OPEC members will be
able to wield over time would, therefore, be consid-
erable. The acquisition of such vast financial resour-
ces by these countries is too recent a phenomenon
for them to have realized its full potential; but money
is a great teacher and it is evident that the OPEC
members will soon discover the power that in-
evitably goes with money.
How will this newly acquired economic power
be exercised in the last analysis? Will the new rich
join the old rich, as history has often told us, in
preserving the old economic order, or will they join
forces with the poor nations in changing this order
both to their own liking and to that of the poor
nations? This is the key question.
There are a number of reasons why the new rich
may defy history and refuse to join the old rich. To
begin with, the new rich are receiving a considerable
proportion (about 90 per cent) of their higher income
from the old rich, unlike the historical pattern where
the rich mainly receive their surplus from the labor of
the poor. It is, therefore, not very easy or convenient
for the new rich to join forces with the old rich,
16







without losing a good part of their new income and
economic power. Furthermore, the OPEC member
countries are a small part of the world population (7
per cent), and many of them have underdeveloped
economies. They may well realize that their best
protection is the continued political support of the
Third World, for which they will be willing to pay a
substantial price. Also, many of the OPEC member
nations are more aligned with the Third World coun-
tries-racially, religiously, linguistically, culturally
-than with the developed world. Finally, the OPEC
members can play the role of leaders in the councils
of the Third World; in the councils of the industrial-
ized nations, they are still regarded as second-class
powers.
If one must speculate, there is considerable
weight of evidence that the OPEC countries will view
their future world role in close collaboration with the
Third World. Concrete evidence of this emerged
when the OPEC members, in April 1975, refused to
negotiate with the industrialized countries on the
question of energy unless other raw materials of the
developing countries were also added to the agenda,
and when they asked for a special session of the U.N.
General Assembly in April 1974, and again in Sep-
tember 1975, to discuss the establishment of a new
international economic order. Their concern for the
support of the Third World is also evident from the
pace of their assistance to the developing countries.
The OPEC members are already committing over 5
per cent of their combined GNP in official develop-
ment assistance (ODA), or about 15 times as much
proportionately as the industrialized countries, even
though they are under no compulsion to do so, since
their average per capital income is still only $800, or
about one fifth of that in the developed world.
If the OPEC members choose to strengthen the
bargaining position of the poor nations, a number of
options immediately open up. The international
monetary system can be restructured simply through
the device of OPEC members insisting on payments
for their oil exports in Special Drawing Rights (SDRs)
rather than in national reserve currencies of the rich
nations. This can give them a decisive leverage in the
creation and distribution of international liquidity,
particularly as they use their new financial strength
to change the present control over the International
Monetary Fund. And in the trade field, the current
bargaining position of the poor nations in the primary
commodity markets can be greatly transformed if the
OPEC countries finance commodity buffer stocks, or







even a commodity bank along the lines suggested by
John Maynard Keynes in the 1940s. Moreover, new
trade channels can open up in many fields between
the OPEC and the Third World countries, particularly
in food, where the oil countries can provide fertilizer
and finance to some promising food producers in the
Third World in exchange for future repayments in
food. Another field where the OPEC members can
pass on greater bargaining strength to the poor
nations is the renegotiation of past external debt and
past contracts and leases given to the multination-
als: the disruption this might cause in the flow of
resources to the poor nations can be smoothed over
by the OPEC countries standing ready to provide
alternative financial flows. As another illustration:
the new financial strength of the OPEC countries is
likely to lead to a major change in their voting power
within the international financial institutions, which
is a lever they can use to get a greater voice in the
economic decision-making councils of the world, not
only for themselves but for other members of the
Third World.
It is not my intention to sketch out various possi-
ble scenarios that the OPEC members can choose in
collaboration with the Third World. The main point is
that the growing financial strength of the OPEC
nations introduces an important element in the
world balance of power which not only will increase
uncertainty on the part of the old rich but also could
directly and materially contribute to strengthening
the bargaining position of the poor nations.

Political versus Economic Leverage

In the last analysis, the real bargaining power of the
poor nations is political, not economic. The Third
World contains the overwhelming majority of man-
kind. It increasingly enjoys a decisive control over the
U.N. General Assembly. Its vast population can be
disregarded at present; its U.N. resolutions can be
ignored; its demands can be brushed away as mere
rhetoric. This is nothing unusual in the initial phases
of a trade union movement. But if the new trade
union of the poor nations holds together-and its
unattended grievances are likely to keep uniting
it-it is only a matter of time before the management
is forced to enter into serious negotiations and the
public posturing on both sides ceases as they send
their chosen representatives into the back rooms to
hammer out hard, tough compromises.







Whether it is within national orders, or in the
international order, the real bargaining power of the
poor lies in their ability and their willingness to
disrupt the lifestyles of the rich. In any such con-
frontation the rich have far more to lose and are
generally far more willing to come to a workable
compromise.
As the rhetoric cools down on both sides, the rich
nations are likely to weigh carefully the costs of
disruption against the costs of accommodation and
to consider the fact that any conceivable cost of a
New Deal will be a very small proportion of their
future growth in an orderly, cooperative framework.
In fact, any such new international order would
ultimately promote the self-interest of both sides-
much the same way as the New Deal did within
the United States in the 1930s-by leading to a more
harmonious world with expanding markets and a
booming international economy. The short-run cost
of a New Deal at the international level (probably
$50-$100 billion a year), while heavy, would still be
quite manageable, as it would constitute only 1-2
per cent of the rich countries' GNP and could easily
come out of the consequent higher growth possibili-
ties. Moreover, even the costs of a temporary disrup-
tion in growth can be very high. For instance, it is
estimated that, during 1973-74, the countries of the
Organization for Economic Cooperation and Devel-
opment (OECD) "lost" $300 billion in unachieved
growth and employment.
In summarizing the bargaining power of the poor
nations, three important points should be stressed:
1. A major part of our bargaining strength in the
Third World lies in our political unity. This is going to
be even more important in the struggle ahead. If we
let our ranks be divided by the lure of short-term
gains, a fundamental restructuring of the world
economic order will remain a distant dream. And we
would deserve the perpetration of economic inequi-
ties, as we would have shown that we are not yet
ready to challenge the existing balance of power.
Deliberate disruptions in the ranks of the trade union
of the poor are nothing new, they are a time-
honored tactic. It is for us in the Third World to
demonstrate that our political maturity is a perfect
foil to such tactics.
2. A new order is needed not only by the Third
World; it is needed by other blocs that wish to see a
readjustment in world economic power-Europe,
which has fully recovered from its battering in the







Second World War; the socialist bloc, whose eco-
nomic and financial isolation is bound to end; and
OPEC members, which have just acquired a good
deal of financial power. Moreover, a new order is
needed for global economic and political survival.
The Third World can count on-and deliberately
encourage-the vested interests of the other blocs in
the emergence of a new international economic
order.
3. Serious analysis must be done in our own
institutes of learning on the major components of
political and economic power in the world today; how
they have developed historically and how they are
likely to change over time; and how the Third World
can adopt a coherent and purposeful strategy for
engineering a change in power relationships. While
our politicians fight in the vanguard of this struggle,
let our academicians supply them with relevant anal-
ysis.
While I do hope that a cooperative framework for
negotiations will emerge, it is good to remember that,
in history, vast changes in the existing power struc-
tures have rarely taken place voluntarily, as acts of
vision and foresight. Unfortunately, the rich often
make their accommodation only when it becomes
inevitable, either through an actual conflict or in
anticipation of it by shrewdly calculating the costs of
accommodation against the costs of disruption.
Whether or not there is an actual confrontation, it is
obvious that the increasing despair of the majority of
mankind can become one of the most disruptive
forces in the smooth workings of the present world
order. A quotation from Barbara Ward is appropriate
here:

From history we know that such vast changes of
purpose have sometimes been achieved by coop-
eration and dialogue, sometimes by direct and
even bloody confrontation, perhaps most often by
a confused and uncertain mixture of both con-
frontation and cooperation. The reason for the
uncertainty is obvious. Those who profit by a
system can become obsessed by their determina-
tion to change nothing... Those who suffer can,
on the contrary, come to believe that nothing
short of total disruption will genuinely affect
anything. At this level of polarization, dialogue
is impossible and violence inevitable. The task
is, therefore, to discover the... basic common
interests for the whole human species and the







workable mixture of dialogue and confrontation
that will permit the nations, both the weak and
the strong, to discover those interests together
and do so in time.1


















































'Statement made at the international symposium on
"Patterns of Resource Use, Environment, and Development
Strategies," organized by the U.N. Environment Program
and the U.N. Conference on Trade and Development; held
in Cocoyoc, Mexico, October 8-12, 1974.







concrete proposals for
a new international
economic order


Having discussed the major inequities of the present
world economic order and prospects for the develop-
ing nations of organizing the necessary bargaining
power to change this order, I now wish to take up the
question of what new institutional structures should
be put in place of the old ones if the international
community were to agree on a major restructuring of
the world economic order. The proposals discussed
below assume that both rich and poor nations are
serious about exploring these areas through a pro-
cess of negotiation. If they are not, then a confronta-
tion is inevitable and no rational proposals are possi-
ble.
Let me assume for a moment that the rich and the
poor nations agree to sit around a negotiating table
and think about a new international economic order
in a constructive, cooperative mood. What should be
the key elements in such a dialogue? What new
structures and mechanisms should be placed on the
negotiating table? What grand design can the Third
World present to equalize economic opportunities
among nations?
The last time a grand design for world order was
conceived was in the mid-1940s when World War II
was ending and when a new world structure of
political and economic power had to be constructed.
The result was the establishment of the United
Nations and the Bretton Woods institutions of the
International Monetary Fund and the World Bank.
The shape of these structures was necessarily influ-
enced by the balance of power existing at that
time-a weak Europe, an isolationist communist
bloc, a colonized Third World, a dominant United
States. Against this backdrop, the British representa-
tive, John Maynard Keynes, and the American repre-
sentative, Harry White, debated the economic future
of the world and the actual structure of the Bretton
Woods institutions. Keynes tried valiantly to replace
gold and national reserve currencies with an inter-
national currency ("bancor"); to place the temporary
liquidity of the balance-of-payments surplus coun-
tries automatically at the disposal of the deficit
countries; to set up a commodity bank for the stabili-
zation of primary commodity prices; and to suggest a
structure of control of international financial institu-
22







tions which was less dominated by the United
States. But Keynes did not succeed in carrying
through his ideas. He was far ahead of his time and
the prevailing balance of power was against him.
Mr. White prevailed on every issue, not because his
vision was greater than that of Lord Keynes but
because he had the backing of the only superpower
that counted at that time.
Another grand design must be constructed today
in line with the changes which have taken place in
the last thirty years and the shifts in the balance of
power which are likely to take place in the next few
decades. The Third World countries have already
achieved their political independence-with a few
remaining colonies ready to be liberated. These coun-
tries naturally seek a relationship of greater equality
and self-respect with the Western world, in both
their political and their economic dealings. They are
also impatient to eliminate mass poverty and to
accelerate their economic development, and they
expect the international structures to help in this
process. At the same time, the socialist bloc-con-
taining one third of the world's population-is gradu-
ally coming out of its isolation and seeking greater
integration with the world trade and payments sys-
tem. The world financial balance of power has also
been changed drastically by the collective action of
the OPEC members. And within the Western al-
liance, Europe and Japan have arisen from their
helpless condition of the 1940s and are posing a
strong challenge to the predominance of U.S. power.
A new grand design is needed, therefore, not only by
the poor nations; it is required by a world that has
changed and that is likely to change even more
drastically in the coming decades.
The search for such a grand design must begin at
several levels. For instance, at the political level,
there is a real question of how new political alliances
must be created to preserve a structure of peace.
What should be the role of the United Nations in
this? Should the veto system in the Security Council,
which reflects the old balance of power, be changed
in favor of a more democratic system of arriving at
international political consensus? How should the
voice of the Third World be reflected in these deci-
sions, without either being regarded as the "tyranny
of the majority" or being brushed aside as irrelevant
and unnecessarary? These questions should engage
the attention of those who are interested in a lasting
peace, which can only be achieved if there is a
structure of justice in the world.







My objective here is a more limited one: to review
briefly the international economic structures that are
necessary in order to provide the equality of oppor-
tunity among nations that is at the heart of the
issue of international economic justice.

World Development Authority

There is a need to establish a single World Devel-
opment Authority (WDA) where decisions on inter-
national economic issues can be coordinated. This
should be under the aegis of the United Nations and
have complete jurisdiction over all international
economic institutions, old and new. The WDA should
be run by a board elected periodically by the U.N.
General Assembly, representing the interests of
various regional and ideological blocs. Its major tasks
should be to:

(a) Regulate short-term international credit;
(b) Provide long-term development finance;
(c) Create a framework for expansion of world
trade;
(d) Strike a balance between world population
increase and food production; and
(e) In general, act as a global economic planning
commission in an advisory role.

Each of these functions would require either the
creation of new institutions or the restructuring of
the old. The specific auxiliary institutions that would
be required are discussed below.

Short-term Credit

At the national level, we are now used to the estab-
lishment of central banks, which regulate the total
supply of currency and, with varying success, the
distribution of national credit to various sectors of
the economy. At the international level, we still lack
such a mechanism. As indicated above, international
liquidity is created at present largely by the national
decisions of the United States. An attempt was made
in the early 1970s by the International Monetary
Fund to make Special Drawing Rights an interna-
tional currency, but so far, this has been a one-time-
only effort. Its value was linked to a basket of reserve
currencies of the rich nations. Its volume ($11 bil-
lion) was decided by the needs and convenience of
the rich nations; and its distribution, not surprisingly,
was in favor of the developed world, which received
as much as three fourths of the SDRs.
24








In order to provide adequate short-term credit to
meet the genuine needs of all parts of the world, rich
and poor alike, it is absolutely necessary to agree on
the concept of an International Central Bank. Such a
Central Bank should have exclusive jurisdiction over
the creation and regulation of international reserves.
Thus national reserve currencies (dollars, sterling,
etc.) should be gradually phased out of international
payments 1) because they subject vital international
concerns on inflationary or deflationary policies to ad
hoc national decisions, and 2) because they put a
few countries (exclusively the richest nations at
present) whose national currency is accepted as an
international reserve in a more privileged position
and place a vast majority of nations (Third World,
OPEC, socialist bloc, and many industrialized coun-
tries) in a more unfavorable position, since they
cannot create their own credit. This leads to major
international distortions. Equality of opportunity is
clearly impossible in such a situation. The richest
countries enjoy an unlimited access to international
credit; the poorest countries keep nursing their
"foreign exchange bottlenecks." Even the interna-
tional capital market is open only to those nations
which are already creditworthy, despite a plethora of
fresh proposals on how to increase the access
of the poor developing countries to this capital
market.
The strength of the tie of the present international
credit system to a few rich nations became even
more clear during 1974-75. While OPEC members
theoretically arranged a significant resource transfer
from the industrialized countries through a quadru-
pling of oil prices, they could not accomplish such a
transfer in actual practice. Since they did not have a
reserve currency of their own, they had to put their
financial surpluses in dollars, sterling, etc., and, as
such, lost real control over their disposal. The indus-
trialized nations came to an understanding among
themselves on a safety net of $25 billion to protect
each other from the impact of short-term fluctua-
tions in reserves. The control over the recycling of
financial funds was exercised by the industrialized
nations, not OPEC. The poor nations, which had
fewer options to turn to, could not negotiate any
safety nets of their own and had to fall back on a few
limited credit facilities established by the IMF. The
net result was that, due to the working of the
international credit system, the poor countries had to
carry out many painful adjustments in their low
consumption and development levels while the rich
25







nations could postpone such adjustments since they
could live off international credit.
Thus if an equitable system is to be established,
an International Central Bank must be set up with
the power to create an international currency. This
currency need not be backed by either gold or a
basket of reserve currencies or even by a stock of
commodities. Just as in a national system, the real
backing for the international currency is the produc-
tion system of the world. Care should be taken that it
is expanded in line with the growth needs of the
world for production and exports. In estimating these
needs, the Central Bank should allow for a much
higher growth rate in the developing countries than
the past trend. At least the necessary working capital
to achieve a high growth rate in the poor nations
should be available: the rest is up to these countries
themselves. This also means that the distribution of
international credit between rich and poor nations
should not be in relation to creditworthiness assess-
ment or quotas based on their past wealth. The
distribution must be in relation to future growth
needs and potential. The access to the facilities of
the Central Bank should be de-linked from past
affluence (unlike the present quotas established in
the IMF) if the poor nations are to be afforded an
equal opportunity to compete.
The affairs of the International Central Bank can
be run in the larger interests of the world only if the
same principles are accepted for its management
as have already been implemented at the national
level. The central banks within countries are usually
managed by the state, since provision of credit is too
essential a service to be entrusted to the market
system or to a handful of private interests. At the
international level, this implies that the control over
the Central Bank should be exercised by the entire
international community through an acceptable for-
mula which balances the interests of the poor and
the rich nations. The important point is that capital
subscriptions should not be the basis of either the
control of this institution or the distribution of its
credit. Since the International Monetary Fund was
structured on exactly the opposite principles, it was
inevitable that it should become a docile instrument
of the will of the rich nations. If the IMF has to be
restructured now to become a genuine international
central bank, the transformation in its basic con-
cepts and operations will be truly profound. In order
to evolve an operational proposal, it would be best to
proceed from certain agreed principles on the basis
26







of which international credit should be created,
distributed, and managed over time and then to
explore whether such a system could be put in place
through the reform of the International Monetary
Fund or whether it would require an entirely fresh
start. I am glad that Johannes H. Witteveen, the
Managing Director of the IMF, has recently lent his
support to the idea of restructuring the IMF into an
international central bank.
Within national systems, deliberate efforts must
be made to redirect investment flows if the produc-
tivity of the poorest sections of the society is to be
increased. The situation is no different at the inter-
national level. The rich nations have by now built up
a considerable stock of capital and technology. Even
though the investment rates in rich and poor nations
are roughly comparable at present, the absolute
increase in the total income of the rich nations every
year is about 20 times that in the poor nations
because of initial disparities. If the disparities are to
be reduced, the rate of growth in developing coun-
tries must be stepped up considerably-for which
they need a sizeable supplement of longer-term
development capital, at least over the next two de-
cades.


Long-term Finance

The traditional basis for the provision of long-term
development finance to the developing countries has
been the voluntary decisions of the rich nations to
set aside some funds for foreign assistance to be
channeled bilaterally or through multilateral institu-
tions. Besides the fact that such an arrangement is
subject to shifting political winds in the rich nations,
it introduces considerable uncertainty in the calcula-
tions of the developing countries about the level of
development assistance. Nor can the developing
countries acquire significant control over the gener-
ation of such finance themselves since, as indicated
above, there is no international central bank which
could provide both short-term credit and long-term
finance.
The need for evolving an entirely different frame-
work for the provision of development finance has
increased as a result of recent political and economic
developments in the rich nations. On the political
level, there has been a great weakening of their wills
to provide additional long-term capital since their
own economies are under considerable short-term
pressure. On the economic front, their own need for
27







long-term capital has also increased sharply, partic-
ularly in order to find viable substitutes for petro-
leum-based energy. In a stiff competition for scarce
investment funds, it is natural that the developing
countries should lose both in official development
assistance and in international capital markets.
If the developing countries are to rely upon the
international system for the provision of development
finance, there must be some way of more assured
and automatic access to these funds in light of
the growth needs of the developing countries and a
greater control over the size and distribution of these
funds. This principle seems to have been agreed
upon at the Seventh Special Session of the U.N.
General Assembly-even though very reluctantly by
the rich nations-since the final resolution affirms
that concessionall financial resources to developing
countries need to be increased substantially and
their flow made predictable, continuous, and
increasingly assured so as to facilitate the imple-
mentation by developing countries of long-term pro-
grammes for economic and social development."
The real question is how to give a practical shape to
this principle.
One of the primary means to accomplish this
objective would be to link the creation of interna-
tional liquidity with provision of development fi-
nance. There is no logical reason why the Interna-
tional Central Bank should not provide both
short-term liquidity and long-term capital. The dis-
tinction between short- and long-term capital that
has been observed within national orders is both
false and dangerous. They are freely substitutable
and often treated as such by the developing coun-
tries. The real implications of such a proposal would
be to set up an automatic system of international
taxation since the poor nations will obtain the
greater part of these funds from the International
Central Bank and will normally use them to acquire
capital goods from the rich nations.
Another way of arranging automatic resource
transfers is to devise a specific system of interna-
tional taxation. The more practicable forms may be
those where resources are new and additional (such
as exploitation of continental shelfs and ocean beds)
or where international taxation can be linked to
activities which are coming under public criticism
(such as international pollutants and armament
spending). Since progressive taxation structures took
several decades to develop even at the national level,







we can appreciate the problems involved in develop-
ing a system of international taxation which raises
delicate issues of national sovereignty. Yet such a
system is an essential part of the new economic
order that the Third World is pressing for. And it can
be established if the World Development Authority is
empowered to prepare feasible proposals for inter-
national taxation, to be administered through an
International Development Fund.
Since changes in the framework of international
resource transfers are such an important issue and
since a number of interim solutions may have to be
accepted before a fully automatic system can be
evolved, this issue will be discussed more fully in the
following chapter.


Expansion of Trade

In the field of trade, it appears that a good deal of
energy is being wasted by the Third World on the
wrong issues. Proposals for stabilization of primary
commodity prices or of export earnings have often
dominated the field. Yet stabilization of prices or
earnings does not confer an additional benefit in the
long run. If this is the only aim, it can be managed
even by national action. Extra earnings in boom
periods can be conserved to cover lean years through
good economic management. If national action is not
forthcoming in this field, why should we expect that
it is easier to arrange such action at the international
level? In fact, the developing countries are often
working for higher prices, not more stable prices,
even though the discussion of price instability has
often dominated international forums. But if the real
aim is to get higher prices-as it should be-then the
main action lies in additional processing of commodi-
ties, diversification out of a few unstable commodi-
ties, and greater control over the distribution chan-
nels for these commodities.
Again, far too much attention has been focused
on trade in primary raw materials rather than in
processed goods, which may well be the more prom-
ising area in the future. This emphasis is evident in
the confusion over the present debate on "indexing."
Some of the developing countries have started mak-
ing the argument that the prices of their primary
exports should be indexed in terms of their manufac-
tured imports. This is clearly the wrong issue for
non-oil exporters. There is no logic in their freezing
the present price relationships, both because these







are already unfavorable to them and because they
should have an interest in opting out of raw material
exports rather than in perpetuating the present
patterns of international division of labor. The com-
parative advantage in the production of many pro-
cessed goods is changing fast. In any case, it would
be a folly to index a bad deal before it has been
changed decisively. Indexing in the context of the
raw material prices and earnings of today makes just
as much sense for the Third World as this slogan
would have made for the OPEC countries back in
1960 when the price of oil was still less than $2 per
barrel.
The real issues for the Third World in the field of
international trade are twofold. The primary empha-
sis should be on market access. The developing
countries should seek a gradual but complete remov-
al of all tariff and non-tariff barriers imposed by the
industrialized nations by a specified date, perhaps by
1985. This is likely to yield the most substantial
gains from the export of primary as well as of
manufactured goods. And the case of the Third
World countries is a strong one here. They are not
seeking selective concessions but only asserting that
the market mechanism should be allowed to work
freely. They can also argue, with implacable logic,
that if neither their labor (because of immigration
laws) nor the goods that their labor produces (be-
cause of current tariff and non-tariff restrictions) can
move across international frontiers, then there will
be no recourse left but to raise the slogan of interna-
tional land reforms. Within national orders, land
reforms often become a political as well as an
economic imperative. At the international level, one
cannot see their feasibility at this stage, but long-
term agitation for such a solution can arise if other
avenues of market access are not increasingly
thrown open to the Third World.
A second emphasis of the Third World in the area
of trade should be to acquire greater control over the
trading infrastructure of shipping, credit, distribution
channels, etc., since the margins in international
services are substantial. This control cannot be
organized except through concerted action by the
developing countries-for instance, by establishing
their own joint international shipping lines and other
related services. One of the primary aims of the U.N.
Conference on Trade and Development (UNCTAD)
should be to work for a greater control of the interna-
tional trading infrastructure by the Third World.
It is necessary, therefore, that a third arm of the







World Development Authority should be an Interna-
tional Trade Organization (which was also proposed
in the 1940s as part of the restructuring that was
taking place at that time). This organization should
be given supreme responsibility for fixing specific
targets for market access and for ensuring a greater
role for the Third World in controlling and managing
the international trading infrastructure. It could play
a role in organizing international buffer stocks, par-
ticularly for those commodities which are extremely
vulnerable to abrupt shifts in the world demand. It
could also hold an umbrella over producers' associa-
tions in selected commodities. Its financing could be
derived mainly from the International Central Bank,
since it is often unrealistic to expect consumers of
raw materials to provide the major part of the financ-
ing for such schemes.

Food Production

One of the essential features of any new economic
order should be, in the short run, that no one should
starve in a world which currently has the means to
feed all of its population and, in the long run, that the
Third World countries should increasingly develop
the capacity to grow their own food. This issue was
highlighted at the U.N. World Food Conference in
November 1974. The proposals made at that time,
and generally accepted by the international com-
munity, were soundly conceived and need to be
implemented.
In particular, there are two important proposals
which need urgent attention in the context of a new
international economic order. In the short run, there
must be a mechanism to provide immediate, short-
term relief whenever crops fail in a poor country for
unforeseen reasons and famine threatens. At such a
time, the poor nations cannot compete in a ruthless
market mechanism. They must be provided with
either the grains from an international emergency
reserve or the financial means to buy the grains at
the market price. An international emergency fund
must be set up for this purpose. There must be a
built-in automaticity in such a fund so that the worst
kind of human suffering can be avoided in times of
crises.
In the long run, however, there is no other solu-
tion than to produce more food in the food-deficit
developing countries, particular in the poorest
countries of South Asia and Sahelian Africa, and
also to control their population growth. The last two
31







decades have witnessed an almost criminal neglect
of the food production sector in these countries. It is
true that the economics of food grain production
looked fairly good when the P.L.480 surpluses of the
United States were plentiful but, with the advantage
of hindsight, one can see that the poor food-deficit
countries mistook short-term generosity for long-
term supply. This mistake must be avoided, espe-
cially if short-term international rescue operations
materialize in times of emergencies. One of the
important conclusions to come out of the World Food
Conference was that international trade was too
unpredictable and fragile a mechanism for meeting
such an essential need as food at reasonable, stable
prices and that increased domestic production in the
food-deficit countries was the only viable, long-term
solution.
The proposed World Development Authority
should, therefore, have a fourth arm-a World Food
Authority-both to arrange short-term relief and to
provide long-term finance, research, and technical
assistance for increased food production in food-
deficit countries, such as through the proposed
International Fund for Agricultural Development.

There are a number of detailed proposals which
can be added to the above list-particularly in regard
to international coordination of policies in the field of
energy, industrialization, transfer of technology, etc.
However, the most essential features in my view are
the establishment of a World Development Author-
ity, supported by an International Central Bank, an
International Development Fund, an International
Trade Organization, and a World Food Authority. The
establishment of an International Central Bank is the
centerpiece of these proposals: it can provide inter-
national financing for most of the other initiatives.
The proposed changes can be ushered in both by
the reform and amalgamation of existing institutions
and by the setting up of new institutions. If this is
done along the lines proposed in this discussion and
if the rich nations are willing to back up such a re-
structuring of international institutions and power,
we shall indeed be entering a new era of greater
equality of opportunity among nations. If not, the
struggle for some such restructuring is likelyto go on
for several decades and the edifice may emerge only
piecemeal and only after several confrontations at
each stage.
The Third World has to choose its tactics carefully







at this stage. If individual countries choose to go for
certain short-term advantages, this can easily de-
stroy their fragile unity. If, on the other hand, they
keep their eyes fixed on the longer-term goals and
the fundamental institutional reforms, they all stand
to gain substantially and the chances of making
some real progress on the new international eco-
nomic order will be immeasurably increased. The
choice is theirs to make.
This analysis is based on the assumption-which
may well prove to be too idealistic-that it would be
possible to restructure the existing international
institutions and to set up new ones through a peace-
ful, orderly dialogue. There are few examples in
history where this did happen and if it came to pass
in our age and in this era, it would be a rare tribute to
the wisdom and foresight of the present generation
of mankind and to the great distance it has already
traveled down the tortuous road of history.







toward more automatic
resource transfers


Among the requirements for the new international
economic order suggested earlier was the urgent
need for a new basis for transferring resources from
the rich to the poor nations. I indicated that we must
get away from a voluntary basis of resource transfers
to a mandatory basis, where the transfers from the
rich to the poor do not depend on the uncertain
generosity of the rich, but are based on some inter-
nationally accepted needs of the poor. This is the
main theme that I would like to explore now. Before
searching for such a new basis for international
resource transfers, however, it would be useful to
sketch out some of the implicit assumptions of the
present order and what is wrong with them.
The present resource transfers from the rich to
the poor nations are totally voluntary, dependent
only on the fluctuating political will of the rich
nations. The volume and terms of most assistance
are dictated by short-term decisions, with no longer-
term perspective or assurances. As such, there is no
agreed basis for resource transfers. "Aid" is given
for a variety of reasons, including cold war consider-
ations, international leadership, political impact,
special relationships with former colonies, domestic
and international economic interest, moral consider-
ations-the relative weight of these factors changing
greatly over time with each country. As an illustra-
tion, about 25 per cent of total resource transfers at
present are still governed by "special relationships"
with a few former colonies (constituting only 3 per
cent of the total population of the developing world),
rather than by the relative poverty or growth needs of
the developing countries.
The only international deal which presently exists
on resource transfers is enshrined in the acceptance
by the rich nations of a target of 1 per cent of GNP,
with 0.7 per cent as official development assistance
on fairly concessional terms. However, the accep-
tance of this target by the rich nations was grudg-
ingly slow (with many nations still not officially
subscribing to this target or, as with the United
States, not having agreed to a date by which this
target should be met). The actual performance has
been most disappointing. Official development as-
sistance from the seventeen countries which are







members of the Development Assistance Committee
(DAC) of the OECD actually declined from 0.52 per
cent in 1960 to 0.32 per cent in 1975 and, according
to some recent World Bank projections, is expected
to decline further to 0.28 per cent by 1980, given the
present trends.
So far, international resource transfers have been
regarded primarily as the responsibility of the West-
ern industrialized nations. Centrally planned econo-
mies have given little aid bilaterally and have not
participated in any major multilateral channels of
assistance. The OPEC member countries are recent
arrivals on the scene and have already started
transferring significant amounts-an estimated $11
billion of total commitments in 1974 or over 5 per
cent of their combined GNP, though the disburse-
ments are naturally slower and were about 2 per
cent of their GNP in 1974. They are, however, not
yet systematically integrated into the overall frame-
work of international resource transfers.
Sufficient attention has not been paid in the past
to the terms of international assistance or to the
concept of net transfer of resources. As a result, the
developing countries have accumulated by now a
total financial debt of over $120 billion, so that
annual debt servicing is already taking away about
one half of the new assistance that the Third World
receives.
While foreign assistance has played an important
role in the development of some countries at certain
times, the overall contribution of this kind of re-
source transfer to the level and character of eco-
nomic development remains shrouded in contro-
versy. There have been repeated accusations by the
developing countries that foreign assistance has at
times been given in such a way as to undermine
national resolve; create conflicts with national priori-
ties; transfer irrelevant technologies, education sys-
tems, and development concepts; tie the recipient
down to the source of assistance at a prohibitive
cost; promote the interests of a privileged minority in
the recipient country rather than those of the vast
majority. The critics of aid in the developed countries
allege that aid is largely wasted, that it goes to
support repressive governments or (even worse in
their judgment) experiments in socialism, and that it
discourages indigenous efforts to save and invest.
The controversies are not an invariable guide to the
truth in each case, but they generally illustrate how
unhappy the recipients are with the present pattern







of assistance, how thankless the donors regard their
current task to be, and how urgent it is to get a new
start.
There must, therefore, be a search for a new
framework for international resource transfers as an
essential part of the effort to establish a new interna-
tional economic order. Such a framework can only be
negotiated over time, after carefully balancing the
interests and sensitivities of both donors and recip-
ients.

New Basic Principles

The most important principle underlying a new
framework must be a clear recognition by the inter-
national community that the resource transfers from
the rich to the poor nations cannot continue to
remain as totally voluntary acts of periodic generos-
ity: an element of automaticity must be built into
such resource transfers. Unless this is done, the
evolution of the international economic order will
continue to lag behind the evolution of progressive
national orders by at least half a century and the
pressure for the acceptance of the principle of auto-
maticity will continue in one form or another. This
does not mean, of course, that the world is yet ready
for, or need embrace, the concept of international
taxation in its entirety, but at least a serious effort
must begin to introduce some of the elements of
automaticity into resource transfer through a variety
of devices:

(1) A larger share of the liquidity created by the
International Monetary Fund (whether through
the Special Drawing Rights or through gold sales)
can be made available for development either
through the international financial institutions or
directly to the developing countries.
(2) Certain sources of international financing can
be developed, such as a tax on nonrenewable
resources; a tax on international pollutants; a tax
on multinational corporation activities; rebates to
the country of origin of taxes collected on the
earnings of trained immigrants from the develop-
ing countries; taxes on, or royalties from, com-
mercial activities arising out of international com-
mons (e.g., ocean beds, outer space, the Antarctic
region); or taxation of international civil servants,
consumer durables, and armament spending.
(3) If the rich, industrialized nations are unwilling
to tax themselves, others can collect and distrib-







ute these tax proceeds on the basis of what the
rich nations consume-e.g., even a one-dollar per
barrel "development levy" by the OPEC countries
can create a development pool of over $10 billion
a year.

The devices can be many; the more difficult aspect is
to convince the rich nations that a more automatic
system of international resource transfers will be in
their own interest in the longer run, because it will
reduce the present conflicts and endless controver-
sies over the quantum and form of "aid" between
the rich and the poor nations.
The focus of international assistance must shift to
the poorest countries and, within them, to the poor-
est segments of the population. These are generally
the countries with per capital incomes of less than
$200, mostly in South Asia and Sahelian Africa,
containing over one billion of the poorest people in
the world. For higher-income developing countries,
what is important is their access to international
capital markets and expanding trade opportunities,
not concessional assistance. If international assis-
tance is so redirected, it is also essential that it be in
the form of grants, without creating a reverse obliga-
tion of mounting debt-service liability at a low level of
poverty. Even the thought of the poorest sections of
society repaying huge debts to the richest sections
under the eyes of a benign government would be
found abhorrent at the national level, but it is still
tolerated at the international level because of the
lamentably slow growth of our perceptions as an
international community.
It would also be logical to link international assis-
tance to national programs aimed at satisfying basic
human needs, however treacherous the concept
may prove to be in actual practice. This would give
both a focus and a direction to the international assis-
tance effort and make it a limited-period affair until
some of the worst manifestations of poverty-mal-
nutrition, illiteracy, and squalid living conditions
-are overcome, both through the international ef-
fort and the expanding ability of the national gov-
ernments to launch a direct attack on mass poverty.
These programs, however, should not be based on
the concept of a simple income transfer to the
poor-which would create permanent dependence
-but on increasing the productivity of the poor and
integrating them into the economic system.
It is difficult to estimate how much investment it
may take to bring the majority of mankind to the level

37







of minimum human needs: much conceptual and
empirical work still needs to be done. But a very
rough estimate shows that the target of providing
basic minimum needs to all mankind over the next
ten years may require a total investment of about
$125 billion in 1974 prices (e.g., food and nutrition,
$42 billion; education, $25 billion; rural and urban
water supply, $28 billion; urban housing, $16 billion;
urban transport, $8 billion; population and health
programs, $6 billion). Of course, these estimates will
vary considerably depending on the style of develop-
ment pursued by various countries. However, the
merits of articulating such a target for removal of the
worst manifestations of poverty are that it can be
easily understood by the public (and, hopefully, by
the politicians) in the rich nations; it can be the basis
of a shared effort between the national governments
and the international community; it provides an al-
locative formula for concessional assistance; and it
establishes a specific time period over which the task
should be accomplished.
International assistance, on a more automatic and
purely grant basis, should be accepted by the inter-
national community as a transitional arrangement
only, to be terminated as soon as some of the worst
manifestations of poverty are removed and institu-
tional reforms are carried out to establish the main
elements of the new international economic order as
discussed in the previous chapter. This is necessary
because the most essential element in the new
international economic order is not so much the
redistribution of past incomes and wealth as the
distribution of future growth opportunities and be-
cause the main responsibility for developing their
societies must be assumed by the Third World na-
tions themselves. If each developing country is to
shape its own pattern of development and its own
lifestyle, international assistance can be regarded
only as a temporary supplement to domestic efforts,
not a permanent crutch.
One of the key questions is who should provide
this assistance and how the burdens should be
shared. Obviously, the major part of the resource
transfers should come from the richest nations, as
measured by their per capital incomes. The problem
for the next few years, however, is going to be that
the rich, industrialized nations-with an average per
capital income of about $4,700 in 1975 for DAC
members-may experience balance-of-payments dif-
ficulties, while most of the liquid OPEC countries
(other than Saudi Arabia, Kuwait, Libya, Qatar, and
38







the United Arab Emirates, with an average per capital
income of about $4,000) are hardly rich enough to
provide large subsidy funds, since their average per
capital income is still less than $500. An obvious
solution would be to combine the volume of lending
from the OPEC countries with the availability of
subsidy funds from the industrialized countries and
from the richest OPEC nations. But such a formula is
likely to provide resources at intermediate terms,
with about a 50 to 60 per cent grant element, rather
than the pure grants recommended above. However,
this "second best" solution may be the only course
available for the next few years unless some of the
automatic mechanisms suggested earlier come into
play. (An interim "Third Window" facility in the
World Bank was established in July 1975 on some-
what similar principles. The World Bank uses the
guarantee backing mainly of the industrialized na-
tions to raise funds in the international capital
market at 8 to 8.5 per cent interest rates and subsi-
dize them down to 4.5 per cent-with 7-year grace
and 30-year repayment periods-by raising subsidy
funds from some of the OPEC members and the
industrialized countries.)
If the framework of international resource trans-
fers is to be changed along the lines indicated above,
it is a logical corollary that multilateral channels
should be used increasingly for directing this assis-
tance in preference to bilateral channels. This will be
consistent with greater automaticity in resource
transfers, allocations based on poverty and need
rather than on special relationships, and a more
orderly system of burden-sharing for international
resource transfers. Greater reliance on multilateral
channels will also place a major responsibility on
international financial institutions to accept such
reforms as are essential to their efficient and equita-
ble working.
In order to evolve a new framework of interna-
tional assistance, it is also important to wipe the
slate clean in at least two directions. First, arrange-
ments must be made to provide a negotiating forum
for an orderly settlement of past debts. This can be
done by organizing a conference of principal credi-
tors and debtors to discuss and agree on the princi-
ples for a major settlement to ease past burdens,
particularly for the poorest countries. Second, since
the concessions, leases, and contracts negotiated by
the developing countries with the multinational cor-
porations in the past often reflect their unequal
bargaining strength, and since there is an environ-
39







ment of constant agitation and uncertainty sur-
rounding foreign private investment at present, a
mechanism should be provided to permit an orderly
renegotiation of past contracts within a specified
period of time under some international supervision.
A United Nations report commissioned in 1974 pro-
vides a sensible framework within which a new code
of conduct for both the multinationals and the devel-
oping countries should be negotiated and arrange-
ments provided for international monitoring of
agreements.2
Let us be realistic. It is not going to be easy to
negotiate all the above principles simultaneously or
to implement them immediately. Moreover, a
concrete blueprint for the reform of the present sys-
tem can only emerge out of hard, tough bargaining
which seeks to balance various conflicting interests.
An "idealized" framework should include most of the
principles mentioned above; a more practical frame-
work will naturally have to settle for many compro-
mises and "second best" solutions, at least in the
short run.

Implications for International
Financial Institutions

Any new framework for international resource
transfers that is negotiated will have major implica-
tions for the future of the international financial
institutions-particularly for the International Bank
for Reconstruction and Development (World Bank),
since it is the premier institution at present for the
channeling of assistance to the developing coun-
tries. In fact, the primacy of the role of the IBRD in
coming decades will depend largely on how well and
how quickly it can adjust to the fast-changing situa-
tion and needs of the developing countries.
Before outlining the nature of the changes that
the World Bank will have to accept, it would be
useful to review briefly the underlying philosophy of
this institution since its inception in 1946. The Bank
started out primarily as a U.S.-sponsored effort for
the reconstruction of Europe and Japan, not as an
international effort to channel assistance to the
developing countries. As late as 1964, about one


2Report of a Group of Eminent Persons to the Secretary
General of the United Nations, in The Impact of Multina-
tional Corporations on Development and on International
Relations, U.N. Publication Sales No. E.74.11.A.5 (New York:
United Nations, 1974).
40







third of its disbursements were still to those devel-
oped countries which now are no longer included in
its lending program (the so-called "past borrowers").
Over the last three decades, it has shown consider-
able dynamism and brilliant improvisation in the
light of changing situations. At first, it became an in-
termediary (through the lending instrument) between
the capital markets of the world and the more credit-
worthy among the developing countries, which were
still unable to raise a sufficient amount of capital on
reasonable terms under their own guarantee. As
debt burdens increased in the poorest countries, the
World Bank established a "soft" window (Interna-
tional Development Assistance or IDA) in 1960 to
provide long-term concessional resources to this
group of countries (at 0.75 per cent commitment
charge for repayment periods of 50 years, with 10-
year grace periods). The Bank's sectoral priorities
also changed with the changing requirements of its
recipients. While it had provided mainly equipment
and consultants for infrastructure projects in the
earlier phase, it has been promoting a direct attack
on mass poverty in the last five years. For instance,
about two thirds of its total lending went to transport,
power, and communications in 1964-1968, but a
similar proportion now goes into rural development,
industry, education, water supply, nutrition, and
population projects. It has increasingly phased out
higher-income developing countries (those with
more than a $1,000 per capital income) and focused
its attention on the very poorest countries (with per
capital incomes below $200), subject only to the
limitations of the total availability of concessional
resources. Over 90 per cent of the IDA resources are
now directed to countries with less than $200 per
capital income. Thus the essential vitality of the
World Bank has been reflected in its ability to adapt
and improvise as the situation demanded.
In the future, the need to adapt will be even
greater. The general direction of change is already
clear from the foregoing discussion and can be
indicated rather briefly.
1. In order to become a truly international institu-
tion and to shed its image of a cozy Western club, the
World Bank must aim at universality of membership,
both among its potential contributors and among its
recipients. Some of the original rules of the game
which make it difficult for new members to join the
club may therefore have to be changed. For instance,
if the World Bank capital base is expanded at pre-
sent, the existing members have the first right to
41







pre-empt the additional capital subscriptions, so that
new members can be inducted or relative quotas
changed only with the tacit permission of existing
members. Similarly, the voting rights in the IDA are
based on cumulative contributions since its incep-
tion in 1960; thus if the OPEC members, for in-
stance, are willing to contribute even 50 per cent to
the next replenishment of IDA, they will collectively
obtain only about 10 per cent of the total voting
rights, which is not likely to encourage their partici-
pation unless the formula is revised. Again, a stum-
bling block in the way of the socialist countries in
seeking membership in the World Bank has been the
requirement that they must become members of the
International Monetary Fund beforehand, which they
have been rather reluctant to do and which is totally
unnecessary for them to play their role in interna-
tional resource transfers. The main point isthatwhile
it was inescapable that the World Bank should be
conceived primarily as a Western club at the time of
the Bretton Woods conference, it must now find
ways of becoming truly international and must ac-
tively negotiate the participation of richer OPEC and
socialist countries in its affairs. In the emerging
climate, universality of membership becomes one of
the most important principles to pursue in the future
evolution of the World Bank Group.
2. New formulas must be found for the restructur-
ing of voting rights in the World Bank (including
IDA). While voting rights have been revised over
time, they still essentially represent the balance of
economic, financial, and political power which pre-
vailed in the 1940s. For instance, the United King-
dom continues to have twice the voting power of
Germany and nearly three times that of Japan;
Belgium and Netherlands together have more voting
strength than the OPEC member countries com-
bined; Iran has a lower voting power than India, and
Pakistan nearly twice as much as Saudi Arabia,
despite the fact that both India and Pakistan are by
now aid recipients from Iran and Saudi Arabia.
Overall, the developing countries (excluding OPEC)
have only 31 per cent of the total voting power. It is
important, therefore, to carry out a general and
thoroughgoing revision of the voting power structure
which replaces the historical past with current reali-
ties, so that the OPEC members can be persuaded to
play a larger role through existing financial institu-
tions; the developing countries get an increased
voice in international financial and development
decisions; and the established lenders continue to







have an important, though necessarily reduced, role
in the running of the institution. It is not necessary to
start out with preconceived formulas; what is really
needed is to set out with a clear recognition of the
need for change and to provide appropriate negotia-
ting forums where acceptable formulas can be ham-
mered out.
In this context, it is also important that the devel-
oping countries adjust their own thinking about their
future role in the running of international financial
institutions. There has been, at times, a demand for
the U.N.-type pattern (one state, one vote) to prevail
in the Bretton Woods institutions as well. This is
totally unrealistic. No lender is ever likely to put his
money into an institution over whose lending poli-
cies he cannot exercise a reasonable control. If
complete democratization of the financial institu-
tions is regarded as an absolute objective, the insti-
tutions are hardly likely to attract significant finan-
cial contributions from potential donors. This has, in
fact, been the fate of some U.N.-sponsored financial
institutions. Moreover, an insistence on this kind of
pattern of control is inconsistent with the developing
countries' own policies on the domestic front. When-
ever public development finance companies are set
up within the developing countries, the normal pat-
tern is for governments to assume at least 51 per
cent of the control on the board of directors. And this is
the case when the governments generally enjoy
tremendous power to influence the running of these
companies without even requiring a formal presence
on their boards. The developing countries cannot
show less responsibility just because it is somebody
else's money and they are the recipients of, not the
contributors to, international financial institutions.
An ideal pattern for the control of these interna-
tional financial institutions would imply that the
donor members should have the strong possibility of
influencing the disposal of their funds (which
would specifically mean a voting right somewhat
higher than 50 per cent) and the recipient countries
should have at least the probability, if not the cer-
tainty, of influencing the decisions of these institu-
tions (which would argue for voting rights somewhat
lower than 50 per cent). The area of negotiation,
therefore, lies somewhere between 40 and 50 per
cent of the voting rights for the recipient developing
countries compared with the current proportion of
about 30 per cent in the World Bank. The real effort
must be to evolve a new pattern somewhere
between the United Nations' existing pattern of







democracy without finance and the Bretton Woods
system's existing pattern of finance without
democracy.
There is one further consideration which could
completely change the perspective on what has been
said above. If the sources of funding of the World
Bank Group change significantly and become more
automatic, as discussed below, the pattern of inter-
national control over this institution has to be thor-
oughly re-examined. For instance, if the resources
are derived from international taxation or royalties of
one kind or another, there will be a powerful argu-
ment for a more broad-based control of the World
Bank by the entire international community.
3. There is a strong case for imparting more
automaticity to the fund-raising efforts of the multi-
lateral institutions like the World Bank. This is needed
in order to free the World Bank increasingly from
bilateral pressures and to enable it to play a truly
multilateral role in the new international economic
order. Thus efforts must be made to link at least a
part of the future IDA replenishments with the
creation of an international currency (e.g., Special
Drawing Rights) or with gold sales or with some
other sources of international taxation, as mentioned
previously. For the IBRD, it would be logical that,
instead of seeking the concerned government's per-
mission before floating its bonds, it should have an
automatic right to borrow in any capital market
where the country has been enjoying an overall
balance-of-payments surplus for a certain period.
Such an automatic access to the international capital
markets will enhance the role of the World Bank as
an intermediary between the surplus markets and
the developing countries and will, in fact, make Bank
borrowings a part of the corrective mechanism for
redressing persistent balance-of-payments sur-
pluses.
4. While the World Bank has shown considerable
vitality and imagination in deepening and enlarging
its activities in regard to its lending program (for
instance, by turning its attention to productive pro-
grams for the poorest 40 per cent of the population),
it has not shown the same vitality in widening the
range of its services, for example, buffer stock fi-
nancing, export credit financing, use of its guarantee
powers, etc. The latter aspects are likely to become
even more crucial in the 1970s as trade expansion
comes to be recognized as an increasingly important
supplement to resource transfers to provide the








needed foreign exchange for the accelerated devel-
opment of the developing countries.
5. Though the IBRD and the IDA have served
admirably as mechanisms for channeling assistance
to the developing countries, it is becoming increas-
ingly necessary to evolve a new mechanism for
obtaining and directing assistance at terms interme-
diate between the IBRD and the IDA. The introduc-
tion of a "Third Window" in July 1975 was, there-
fore, a pragmatic and inevitable response to the
changing circumstances. While the Third Window
facility has been introduced essentially as an interim
measure for fiscal year 1976, there can hardly be
any doubt about the longer-term need for this type of
assistance and about the considerable room for ma-
neuver that it provides to the World Bank Group in
blending its assistance to a wide variety of develop-
ing countries which have vastly different capital
needs and degrees of creditworthiness.
6. Consideration must also be given to a general
review of the Articles of the World Bank, which were
conceived and drafted in the environment of the
1940s. This is becoming necessary as the basic
economic situation of the developing countries is
undergoing a fairly rapid change, calling for a much
greater measure of flexibility in the World Bank
operations. For instance, the original Articles ex-
pected, quite rightly at that time, that the bulk of the
World Bank assistance would be in the form of
projects and in foreign exchange, so that restrictions
were built into the rules of the game against program
lending and local cost financing. The World Bank has
improvised pragmatically in its actual operations to
get around these restrictions as the need arose: yet
the long shadow of the Articles is always there and
the needed flexibility is often missing. Program
lending and local cost financing still have to be justi-
fied, on a case-by-case basis, as deviations from a
normal trend; this is bound to influence the form
and character of lending. One can find other instan-
ces of such restrictions in the original conception of
the role of the World Bank: for example, procure-
ment of goods and services restricted only to bank
members; extremely limited preference margins to
developing countries for procurement within their
own country; a strict financial rate-of-return cri-
terion; etc. The Bank practice has moved considerably,
though not sufficiently, away from some of these
restrictive aspects of its Articles and its past tradi-
tion. But the Articles themselves may have to be







reviewed, not only to bring them into conformity with
the actual practice but to build into them enough
flexibility to accommodate the needs of the 1970s
and the fast changing role of the World Bank in the
future. It should be recognized at the same time that
a general review of the Articles is likely to be a very
difficult and treacherous process and can only be
undertaken if the necessary political consensus for
such a step is available. In the meantime, there may
be no alternative to pragmatic improvisations.

This discussion has focused on some of the major
considerations which should guide the resource
transfers from the rich to the poor nations and the
designing of new institutional structures. This is a
field in which the imagination can often run wild.
The idealists would argue that there should be
establishment of a world treasury, along the lines of
a national treasury. The pessimists would think that
even the present resource transfers from the rich to
the poor nations are not going to continue because
there is a weakening of the will in the rich nations as
they face up to their own domestic problems.
It would be the heart of realism to steer a middle
course between such extremes and to build up brick
by brick a new edifice for international cooperation.
The proposals outlined here offer only some of these
bricks. The outcome of the present dialogue on the
nature and form of resource transfers from the rich
to the poor nations will obviously depend, in the last
analysis, on the political vision and enlightened self-
interest of the entire international community. But
let us face it. Political vision is one of the most scarce
commodities in the world today. We can only hope
that it still exists.







the third world's choices after
the u.n. special session


Having discussed the need for a new global order
and the requirements for implementing such an
order, I now wish to examine the results achieved at
the Seventh Special Session of the U.N. General
Assembly in New York in September 1975 and to
discuss the tactics and the strategy that the Third
World may have to adopt in the months and the years
ahead.
It should be noted that it was remarkable that this
Session was held at all. After all, the struggle for
economic justice at the international level is not just
two years old; it has been going on for the last ten or
twenty years. But the fact that the Sixth Special
Session of the United Nations on this subject was
held in April 1974, and that another was held in
1975, is an indication of the way that we are travel-
ing-not only the direction, but also the distance
that we have come in our search for a new econom-
ic order.
There was quite a contrast, in fact, between the
Seventh Special Session and the Sixth, where there
had been much shouting between the developing
and the developed world, but very little communica-
tion, very little dialogue. The attitude of the rich
nations at that time had been that there was nothing
much to discuss, that the new international eco-
nomic order was merely a rhetorical slogan, that the
international market mechanism functioned fairly
well, and that the developed countries were not
prepared to consider major interventions in the free
functioning of the market mechanism. In the 1975
Session, the mood on both sides was remarkable. I
regard it almost as the second stage of a trade union
movement, when the initial shouting has been done
and both sides are willing at least to sit around the
table and to start discussing what the major issues
are. The final resolution that emerged out of the
Seventh Special Session provides a fairly broad
negotiating umbrella for a number of initiatives
which can be taken subsequently.
This resolution includes an agreement to provide
adequate financing for buffer stocks to stabilize com-
modity prices; it provides for reduction or removal of
non-tariff barriers and continuation of a preferential
system for manufactured exports; it provides for
some language which suggests that concessional
47







assistance should be increased substantially and
that it should be made predictable, continuous, and
increasingly assured, although it does not quite say
that it should be made automatic.
It also recommits the developed countries to the
0.7 per cent target of foreign assistance and lays
down a concrete timetable for this target to be met by
1980. It endorses the establishment of a link be-
tween international liquidity and development as-
sistance; it also endorses the role of a revamped
international monetary system and gradual phasing
out of the national reserve currencies. It stops shy of
suggesting the setting up of an International Central
Bank, but the language does come fairly close to it. It
endorses an international fund for agricultural devel-
opment, with capital of $1 billion to provide addi-
tional financial sources for increased food produc-
tion. And it accepts, in principle, a minimum food-aid
target of 10 million tons for 1975/76 and the con-
cept of providing emergency assistance whenever
there is a shortage of food grains because of crop
failures.
The resolution has language to suit practically
every possible constituency-the developing coun-
tries, the developed countries, the socialist bloc, the
OPEC countries. It is probably the fate of most U.N.
resolutions that they tend to become a catch-all for
everything because of the inevitable process of com-
promise. But what is remarkable is that both the
developing and the developed countries were willing
to come to terms on specific language in the resolu-
tion rather than to risk a breakdown in communica-
tions. Both sides regarded this as an opening of the
dialogue, rather than an occasion where firm agree-
ments could be reached or final decisions hammered
out. Both sides felt that it was better to have some-
thing at least to start with, however vague or indefi-
nite it might sound, and to seek negotiations rather
than confrontation at this stage.
I do not think that any major breakthroughs were
reached in this Special Session, nor do I think that
any major breakthroughs were possible. There was
no additional financing in most of the proposals
presented to the Special Session. But it was at least
the beginning of a dialogue and it did provide an
umbrella under which it may be possible to organize
specific follow-up in a number of areas.
The basic question now is how we should move
from the U.N. Special Session to the next stage of
the dialogue. Here we must distinguish between
short-term and long-term strategy. In the short term,
48







we should try to seek agreement on certain propos-
als and use various forums to do so. The most
important forum for this would be the UNCTAD IV
Conference in May 1976 in Nairobi. That offers a
major opportunity to the developing countries to
present concrete proposals of the kind suggested
earlier in this paper. It would not be possible to reach
final decisions in such a conference. But it can at
least lay down the groundwork for future negotia-
tions and agreements in a number of specific areas.


Reforms within Third World Countries

The Third World must, however, start thinking about
fashioning its long-run strategy. Our struggle is not
for the next year or two; it is for the next few decades
and the next few generations. Let me take up some
of the major steps that the Third World must con-
sider in order to prepare itself for this prolonged
struggle.
The Third World must consider seriously reforms
in its own internal orders. This is vital in order to
pass on whatever gains are achieved internationally
to the masses rather than to a handful of privileged
groups. It is also vital in order to gain credibility for
the demand for a new international economic order.
We cannot very well ask for equality of opportunity
internationally if we in the Third World deny the
same equality of opportunity to our own people. That
is why it is vital that we undertake, in the next phase,
major reforms in the internal orders.
It is important that new development strategies
and new development styles be adopted at the
national level in our countries. We learned a lot in
the last decade of development from the challenge to
the traditional concepts of economic growth. We all
chased for a long time the goddess of gross national
product. We believed that with high rates of growth
in the GNP, we would be able to eliminate poverty.
We found to our distress in country after country that
high rates of growth by themselves were no guaran-
tee against worsening poverty. Many countries had
high rates of growth and production, yet growth did
not filter down to the masses.
We have learned through our own bitter expe-
rience a number of lessons. We have learned that
economic growth does not automatically filter down
to the masses unless there is a development strategy
geared to the poorest sections of society. We have
also learned that development must be built around
human beings and not human beings around devel-
49







opment. I hope that we have learned that develop-
ment means essentially the development of man and
not just the production of things, that it is a compre-
hensive concept and not a technocratic proposition.
We have learned, I hope, that income distribution
and employment plans are an integral part of produc-
tion plans and cannot be divorced from them. We
have discovered that it is false and dangerous to
contend that we must grow first and distribute later,
because if we try that strategy, the very institutions
which manage growth are the ones which later
resist distribution. If we grow by producing luxury
goods, it is not possible later to redistribute them,
because growth is not only a financial concept but
also a physical concept.
I think we have also learned that the consumption
patterns of most of our societies in the Third World
must be adjusted to our own value systems and
should not be a pale imitation of somebody else's
culture or somebody else's lifestyle. We have
learned that the basic aim of development should be
to cater to the basic human needs for food, shelter,
education, health, and other essential services
before anything else.
While we have learned all this at an intellectual
level, there are very few societies today in the Third
World which are practicing in a wholehearted
fashion the new development strategies. We pay a
lot of lip service to new development styles, but the
rhetoric in this field has been far ahead of our ac-
tions. Today we have to think seriously in terms of
restructuring our national orders, because that is
where the real battle will be fought and either lost or
won.
There are three things which are absolutely es-
sential for such a restructuring of internal orders.
First, in most parts of the Third World, there is a need
today for fashioning new political and economic
alliances which will accept and implement the new
development strategies. It is naive to hope that new
development styles and strategies can be imple-
mented if in the Third World countries alliances are
built up with landlords, industrialists, bureaucracies,
the military, and other vested interests. It is impor-
tant for the Third World to consider tough political
and economic decisions. There are no soft options
available in this field.
Second, there is an urgent need in our societies to
formulate and implement need-oriented develop-
ment strategies. But if we want to do that, if the real
aim of development is to cater to basic human needs








before any other goal, then several actions are
needed. We must be very clear about the target groups
that we want to reach. Who are the people who
are malnourished, illiterate, unemployed; where are
they concentrated; how can we reach them; what
are the delivery systems? I find in most societies of
the Third World a lack of even the essential data that
can provide answers to these questions. Often our
societies have data on monetary systems; on prices,
exports, and imports; on GNP. But they do not have
data on poverty, on unemployment, on social indica-
tors. We must obtain this data. We must carry out
this analysis in our research institutes. Without such
a serious effort, it is going to be impossible to
formulate need-oriented development strategies,
and a lot of the talk on this subject may become a
matter of political rhetoric.
Third, it is essential to embrace and to implement
a concept of creative self-reliance. Not self-reliance in
the sense of cutting our links completely from the
world, but self-reliance in the sense of being so self-
confident as a nation as to base our development on
our own cultural values. Self-reliance is a very
comprehensive concept which cuts across all walks
of life. It implies not only relying on our own industry
or agriculture, or on our own domestic resources or
technology. It is relying on our own thinking and our
own value systems, without being defensive or apol-
ogetic. And in that sense, the Third World has a long
way to go, because-whatever we may say-there
are still major patterns of dependency in our eco-
nomic, political, and cultural life throughout the
Third World.
This restructuring of our own national orders is a
major part of the task we must address-a task with
which nobody else can help us because it is essen-
tially our own job.



Third World Unity and Tactics

Another major part of the strategy ahead is to forge
unity within the Third World-political as well as
economic unity. This is extremely important, particu-
larly in the next few years, because there will be
many attempts made to split the Third World. There
will be many temptations along the way, many lures
to settle for short-term gains while losing the long-
term objective. There is a major need today to estab-
lish our own forums for coordination of our thinking
at a political and economic level.







We have a number of forums in the Third World at
present-the Group of 77, the Group of 24, the Non-
Aligned Conference, etc. There is a major need today
to develop some substantive secretariats for these
groups. It is indeed surprising that, after such a long
time, we still do not have a secretariat for the Group
of 77 or the Group of 24 or the Non-Aligned Confer-
ence. Unless we have our own secretariats, manned
by some of our best people, we are not going to be
able to do concrete thinking and come up with
specific proposals for our political negotiators to take
forward. It is up to the secretariats within these
groups to produce well-researched, well-docu-
mented proposals which can become the nego-
tiating agenda for the Third World.
At the same time, the Third World can help its
cause a good deal by taking certain actions which are
well within its own reach. My own favorite proposal
is that the Third World countries should get together
and, by a single stroke, create a preferential area for
trade among themselves. This can be done by a
uniform devaluation of their currencies by, let us say,
50 per cent vis-a-vis the developed world. This
should be done only for manufactured-goods ex-
ports, where such an action will immediately create
a built-in incentive to trade with each other rather
than to perpetuate the traditional patterns of de-
pendency on the developed world. So instead of
complaining about some of these issues, we should
take the initiatives which are well within our reach.
Let me now say a few things on the tactics and
strategies that I regard as vital in the struggle ahead.
If we are going to opt for negotiations in our search
for a new international economic order, it is essen-
tial that whatever proposals we formulate balance
the interests of both rich and poor nations. It is easy
to formulate partisan positions. But we live in an
interdependent world. If we are to live without major
confrontations, we should think of proposals which,
while benefiting the Third World, do not hurt the
interests of the world as a whole and which can
obtain more willing cooperation from the rich na-
tions. We need higher prices for our raw materials.
The rich countries need an assurance of stable
supplies of raw materials. There can be an interna-
tional bargain where the higher prices of raw mate-
rials can be negotiated in return for assurances on
longer-term supplies. Similarly, we want from the
multinational corporations renegotiation of our con-
tracts and far more favorable sharing of benefits







than we received in the past. The multinationals at
the same time are looking for an environment of
greater certainty within which they can operate on a
longer-term basis. It should be possible to evolve
arrangements which balance the interests of both
sides. And, taking the question of voting rights in
international financial organizations, the Third World
needs a major representation in these institutions.
But, at the same time, it should not press this to the
point where the rich nations lose interest in these
institutions or withdraw their financing, because
that merely will be counterproductive.
I know that these suggestions will not satisfy
many radicals. I realize that some of these solutions
are too rational. But in the long run this is the only
practical course. This world of ours always has to
balance various interests to reach practical com-
promises, irrespective of the initial positions the
contending sides start from. The struggle for a new
economic order should be conceived of as a move-
ment that will span several decades and several
generations. We are merely at the threshold of this
struggle. Our role is that of torchbearers: to illumi-
nate the ground for those who must follow.
This cannot be done without a major intellectual
revolution in the Third World. We must develop the
capacity to think for ourselves and to think rationally,
not emotionally. If we are to win our arguments
against the rich nations around the negotiating
tables of this world, we must learn to do our home-
work thoroughly, to research all the facts carefully, to
develop the intellectual integrity to see things in
their true perspective rather than in black and white,
to have the magnanimity to concede an argument if
we are wrong and yet the tenacity to fight our case if
we are right. This requires the ability to think afresh,
but it also imposes great responsibility on us. Mere
radicalism is not enough. If we are not careful, it can
become an easy escape. We can shout for a sudden
collapse of the existing order. We can keeping saying
that a new order will not be born unless the present
one dies. But such wild rhetoric evades responsibil-
ity. It is too easy. It requires little thought. And it is
also cowardly.
In the last analysis, we must carry our case by the
eloquence of our ideas, not the eloquence of our
words. Brave words are soon forgotten. But ideas
have a life of their own. I strongly believe that our
world can neither fight nor long resist an idea whose
time has come. Our supreme challenge is to fashion







those ideas. This should be the task of all our intellec-
tual institutes. All I have tried to do here is to present
a few ideas-which are neither adequate, nor par-
ticularly breathtaking. They are merely an invitation
to further thinking. You must all produce your own
ideas. This is the main message I hope to convey.


THE POVERTY CURTAIN
by Mahbub ul Haq

The ideas expressed in this ODC Development
Paper are elaborated in the author's new book,
The Poverty Curtain: Choices for the Third World
(Columbia University Press, September 1976,
paper: $5.95, hardback: $12.50). The study pre-
sents a graphic and disturbing picture of two
economic worlds-one embarrassingly rich and
the other desperately poor-separated by what
Mr. Haq terms "the poverty curtain." According to
the author, equality of opportunity has become
the central issue of our time. The book details
concrete proposals to achieve such equality. The
Poverty Curtain is available in selected book-
stores or by direct order (accompanied by pay-
ment by check) addressed to: Columbia University
Press, 136 South Broadway, Irvington, New York,
10533.







selected
publications


A complete publications catalog is available from the
ODC upon request.




* books
Beyond Dependency: The Developing World Speaks
Out, edited by Guy F. Erb and Valeriana Kallab, with
essays by Mahbub ul Haq, Ali A. Mazrui, Samuel L.
Parmar, Felix Peha, Krishna Roy, Soedjatmoko, Sou-
mana Traore, Constantine V. Vaitsos, and Bension
Varon (251 pp., $3.95).
The ten essays in this volume offer the private views
of developing-country experts on a number of sub-
jects of longer-term North-South contention. Among
the issues discussed from a "southern" perspective
are multinational corporations, foreign investment
and technology transfer, oceans use, population
policy, and the effectiveness of different develop-
ment strategies. Other chapters discuss the costs of
continued confrontation and suggest global "bar-
gains" whereby all could gain. The appendices
include the major nongovernmental statements and
official declarations documenting the current debate.

The U.S. and World Development. Agenda for Action,
1976, by Roger D. Hansen and the staff of the
Overseas Development Council. Published for the
Council by Praeger Publishers, Inc. (March 1976,
222 pp.). Paperback, $4.25; hardback, $15.00.
The ODC's fourth annual assessment of U.S. policies
toward the Third World provides useful analytical
perspectives and statistical information pertinent to
the evolution of North-South negotiations and the
formulation of U.S. policy over the next year and
beyond. Individual chapters discuss: the major
issues debated at the Seventh Special Session of the
U.N. General Assembly and due to be negotiated in
1976-77; an analysis of the 1974-75 "crisis of
interdependence" and the shaping of U.S. foreign
policy; an evaluation of the world food situation and
the U.S. role beyond the 1974 World Food Confer-
ence; and the need for an international approach to







the worldwide energy problem. The five annexes
provide over 90 pages of statistical data.

Women and World Development, edited by Irene
Tinker and Michele Bo Bramsen (May 1976, 228 pp.,
$3.50) and Women and World Development. An
Annotated Bibliography, prepared by Mayra Buvinic
(May 1976, 162 pp., $2.50). When ordered at the
same time, these two publications are available as a
set for $5.00. (A hardback edition combining the two
volumes is forthcoming from Praeger Publishers,
Inc.). Prepared under the auspices of the American
Association for the Advancement of Science and
published by the ODC, this two-volume set is the
result of the international experts' seminar on
"Women in Development" cosponsored by AAAS,
UNDP, UNITAR, and the Mexican National Council of
Science and Technology and held in Mexico City in
June 1975-just prior to the U.N.-sponsored World
Conference of the International Women's Year.
The first volume of this set includes essays on
selected issues in this field by Margaret Mead, Rae
Lesser Blumberg, Irene Tinker, Fatima Mernissi,
Teresa Orrego de Figueroa, Hanna Papanek, Nadia
H. Youssef, Kenneth Little, Mary Elmendorf, Mallica
Vajrathon, Ulla Olin, and Erskine Childers. Also
included are summaries of the proceedings and
recommendations of the Seminar's workshops on
food production and small technology; education and
communication; health, nutrition, and family plan-
ning; urban affairs; and women's associations. A
useful annex is the "World Plan of Action" adopted
by the U.N.-sponsored 1975 World Conference.
The second volume of the set consists of an
introductory overview and annotations of over 400
published and unpublished studies in this field,
arranged according to subject categories and geo-
graphic focus.


* subscription plan

Individuals and institutions can obtain the ODC's
entire publications output in any given year for a
special discount price ($15 in 1976).










&M^ board of director. rs

Chairman: Theodore M. Hesburgh
Vice-Chairman: Davidson Sommers


Robert O. Anderson
William Attwood
C. Fred Bergslen
Eugene R Black
Robert R. Bowie
Harrisan Brown
Lester R. Brown
John F E
John T Cadwell
Anne Carnpbel
Wallace ,
Thomas P Carney
Robert A Charpie
Mrs. William M. Chrsi
Frank M. Cofin
Owen (ooper
-Richat N Cooper
Richard H Demuit
Charles S Dennson
John Diebold
*Thomas L. Farmer
Luther H Foster
*J Wayne Fredericks
"Orvile L. Freeman
*William S Gaud
Phtiip L Geyei;n
Slephen Gi ard
Arthur J. G .
'Lester E. Gordon
'Lincoln Gordon
aJames P Grant (e iiu
"Edward K Hamilton
J George Harrar
Samue P. Hnyes
Ulric aynes, Jr.
'Theodore M Hesbhr
Williairi R. Hewlet
"Ruth J Hmerfeld
Donald Honi
Verrion E ,J.oriciar
Niciho as duB K;tle,.!


Edward M Ko ry
P(-;tr F Krog
AnneO Krecjr
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Willaiam Lawlest


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