The Emergence Of The Nieo Ideology

Craig Murphy

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9780367307158
• eBook ISBN: 9781000300932
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Political History & Theory
• Index: Politics & International Relations

This study traces the political history of the ideas underlying Third World calls for a New International Economic Order. Filling a significant gap in the literature, the book shows that NIEO ideology has a direct, unbroken line of development extending back to World War II, when a "new international economic order, " the Bretton Woods system, was created. Dr. Murphy maintains that NIEO ideology is not rooted only in Third World acceptance of Prebisch's views on trade; rather, it evolved from Third World attempts to cope with problems and opportunities that emerged as the Bretton Woods system was created, operated, and began to break down. By the 1970s, the ideology had become a complex and coherent analysis of the economic position of Third World states, including a political analysis of how Third World views could be made dominant. Many of Dr. Murphy's conclusions challenge the conventional wisdom about the Third World position of the NIEO. In addition, his study offers insight into the relatively unexplored area of how changes in political and social consciousness affect international systems, and provides grounds on which officials from both the South and the North can see the others' views as less alien.

1
The Alternative to Bretton Woods Before 1960

Bretton Woods:

. . . typified by the dollar sign, gold at Fort Knox, international cartelism, and a spider-web of Shylocks squeezing out the heart of hungry multitudes.

— Diego Luis Molinari of Argentina, 1948

And the alternative:

The undeveloped countries seek industrialization by some simple and quick route. By obtaining large loans with no strings attached and by offering enterprisers a monopoly of local markets they hope to build factories overnight. They do not believe that they must creep before they can walk.

— Clair Wilcox of the United States, 1949(1)

Molinari and Wilcox represented their respective governments at meetings called to create a world trade organization following the second world war. Their comments foreshadow the ideas and emotions expressed in the north-south conflict now, in the eighties. Moreover, they reflect the actual roots of that conflict, the issues that first divided north and south over thirty years ago.

Throughout the decade and a half following the second world war governments worked to establish a new, postwar economic order. The war ended with little consensus on the nature of the new order aside from agreement that there should be some sort of intergovernmental management to facilitate expansion of global production. The American government wanted regimes that would eliminate national regulation of trade. In contrast, most other governments wanted international regimes to approve and coordinate national trade regulations. Eastern European governments wanted provisions encouraging bilateral trade agreements. Western European governments and Commonwealth members felt that proposals mooted by the United States during the war failed to respect worthwhile regulations that could be used to reduce unemployment. Many leaders of what we now call the third world were convinced, like Molinari, that American plans would enhance the economy of the United States at the expense of Latin American, Asian, and African plans for industrialization, plans belittled by Wilcox and other advocates of the American proposals.

In 1959, when the IMF and GATT both celebrated their first year of normal operation, the system had become something less than most of its founders had envisioned. Most east European governments had rejected the new economic system. Western European governments and those of developed Commonwealth countries had ceased to raise the issue of creating an international employment regime. Yet African, Asian, and Latin American governments had neither muted their doubts about the Bretton Woods institutions nor withdrawn from the system. They expressed their doubts through proposals that granting aid to other nations be considered a duty of statehood and through an economic analysis which said that industrialization was desirable and viable everywhere. By 1959 governments in the south had adopted a core of concepts around which proposals for reforming the postwar economic order could be organized and through which those governments would come to recognize one another as potential allies.

The history of the New International Economic Order ideology of the 1980s begins, then, in the 1940s when the issue of creating regimes to help manage world economic relations first appeared on the international agenda. It begins with the worldwide acceptance of the conception that advocates of the NIEO still share with the framers of Bretton Woods, the belief that some degree of intergovernmental economic management is desirable. Only after the first Bretton Woods agreements did the south articulate a new ethic of international economic relations. This notion of economic rights and duties of states that morally grounded the specific global policies desired by the poorer states outside of Europe during and immediately after the war -- technical assistance, commodity pricing agreements, and multilateral aid.

With this ethic the founders of the new order movement presented a policy analysis justifying the reforms they proposed in terms of goals they shared with leaders of both the developed nations and the nations that had once been developed, before they were impoverished by the war. The new analysis said that a historically determined structure of the world economy impeded optimal economic growth. This analysis began and remained controversial and distinct from the analysis that came to guide day to day policy making within postwar regimes. Yet the analysis was always politically significant. Through the new analysis, African, Asian, and Latin American governments could see each other as sharing economic problems distinct from those of industrial nations. The analysis explained the division of the world into rich north and poor south; it pointed to a concrete reality behind the symbol of the "third world."

This chapter relates the history of the first period in the emergence of the new order ideology, emphasizing that it developed around southern grievances with the emerging Bretton Woods regimes. Those grievances explain the focus of the new order ideology on global management and the south's state-centered ethic of rights and duties as well as the structural policy analysis accepted by many Asian, African, and Latin American governments. They adopted the ethic and analysis to frame specific grievances which precluded the adoption of other contemporary theories about international economic relations, including the slightly modified laissez faire theory underlying the Bretton Woods institutions. Throughout this chapter I compare that dominant ideology, which emerged as part of the Bretton Woods system in the forties and fifties, to those concepts that came to form the base of the new order ideology.

Consensus on Global Management, Disagreement Over National Regulation of Trade

The intergovernmental institutions involved in the management of economic relations after the second world war came about through negotiation. Admittedly, Americans set the agendas for international conferences and used threats and promises backed by American economic power to preclude some options championed by other states. Nonetheless, ultimately postwar institutions were not created by dictatorial fiat of a single power but by agreement of all the nations that signed their charters. Given that the founders had to resolve disputes among people with fundamentally different visions of what the world economic order should be, it is remarkable that the postwar system developed at all. Consensus was reached only because the Americans raised the least controversial issues about postwar regimes first and then helped resolve them by pointing to ways that institutions proposed by the U.S. would expand production throughout the world, a paramount concern for most governments.

When the Americans finally raised the issue of creating an international organization to coordinate national regulation of trade and, ultimately, left it unresolved because consensus could not be reached, most nations had already agreed upon some institutions that had the ability to restrict such national regulation. An American desire for free trade thus became a principle of actual postwar regimes as if by default, and the governments that remained unconvinced that a free trade system would allow them to achieve their economic goals, yet accepted the new regimes, found themselves arguing against a status quo assumption that global management should be constrained by free trade principles. In addition, by accepting the new regime's rules for amendment, those governments opposing free trade made it impossible for themselves to effectively express their grievances within the system. Under the rules of the IMF, World Bank, and GATT, the governments opposing free trade had little voice. Their grievances with the new system were left to be expressed within the United Nations General Assembly and the short-lived conference on creating an international trade and employment regime, arenas in which all governments were granted equal power.

The early consensus on the postwar institutions that were created reflected general agreement among scholars and policy makers throughout the world that it was folly to allow the global economy to be ungoverned by some notion of the common good. They considered this a lesson of the two world wars.

By the early 1940s the intellectual sources of that lesson were myriad. Some democratic socialists in the early part of the century had predicted and supported a universal alliance among empires in which the inevitable conflicts of their expanding economies would be resolved. (2) Studies of business cycles pointed to the interdependence of national economies and the desirability of coordinating anticyclical policies.(3) Scholars joined policy makers in blaming restrictive trade practices for setting the conditions for the second world war, such as the dependence of east European economies on Germany.(4) And Keynes's polemic, The Economic Consequences of the Peace, written in 1919, with its forecast of vindictive trade and monetary policies and the ultimate collapse of the European economy, read like prophecy. Policy makers even accorded Keynes's solution -- for governments to agree to jointly undertake the benign international management functions performed by City of London bankers in the nineteenth century -- the respect a prophet's vision deserves.(5)

In countries with market economies, where government intervention was usually questioned, mobilization for the war brought officials practical experience in using economic controls. Mobilization also brought economists into government in greater numbers than ever before. An explosion of innovative exchange and production policies resulted, some with international implications. They ranged from the marketing boards for primary commodities in the British colonies to lend-lease arrangements for financing expanded American production and Allied war needs.(6)

Governments throughout the world helped manage economies during the war; increased intervention occurred even outside the combatant states. If anything, the British government more strictly managed the economies of its colonies and dependencies for the war effort than it did the economy of the home country. Native administrators, who would later become leaders of independent nations, learned the tools of economic planning during the war. (7) Throughout the war, Latin American nations even received U.S. support for internal policies of economic diversification and industrialization in exchange for both their political and economic support of the Allies. Latin American governments attempted to negotiate international agreements that would help assure stable terms of trade for the goods they exported. They also demanded to be allowed to protect infant industries with tariffs and to receive global support for their import substitution policies. Throughout the war the United States supported such suggestions despite ideological objection to them by the highest policy makers. As the State Department put it in 1941, American free trade principles were "moderated in practice" to support the international agreements desired by Latin America.(8)

Nonetheless, when most American policy makers thought about postwar institutions they rarely moderated their advocacy of liberal principles. The State Department under Cordell Hull consistently maintained that "free trade" and "free enterprise" should define moral boundaries circumscribing the role of any postwar intergovernmental economic organization. The department's notion of "free enterprise" involved both support for market-oriented internal policies and strong opposition to "monopolistic practices," partially of firms but more especially of national governments. This included opposition to most tariffs, quantitative restrictions upon amounts of goods imported or exported, multilateral interference in the market to support the price of certain goods (commodity agreements), and special bilateral trade agreements -- all of which American policy makers considered means of giving monopoly-like advantages to national firms.(9) The State Department supported global regimes that would create conditions under which unrestricted trade was possible, a system whose goals would include abolition of just the sort of international economic arrangements toward which the Americans had agreed to negotiate with Latin American states during the war. While Latin American policy makers were more typical of others throughout the world in envisioning postwar institutions as regulating the way national governments regulated trade, the State Department envisioned a world federal government dedicated to removing all barriers to trade erected by national governments.

Commercial Affairs Division Chief Herman Geist accurately reflected this vision and the feelings of those who held it when he said:

Let me warn against the futile speculations of theorists who would have us deviate from sound principles in international trade and espouse methods of dealing repugnant to our way of life. If in the international sphere we reject political and social systems harmful to mankind, we must also repudiate the economic practices upon which they are based. If we hold fast to our destiny we shall create an indivisible and advancing civilization upon the foundation of our prosperity and rear a new edifice where enlightenment based on material, moral, and spiritual progress will finally decide the future of mankind.(10)

From this point of view, international trade deviating from the ideal of free enterprise domestically and internationally — the ideal Roosevelt was to call a basic economic right in 1943(11) — was anathema. Rejection of fascism implied rejection of the restrictive trade practices employed...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Acknowledgments
• List of Abbreviations
• 1 THE ALTERNATIVE TO BRETTON WOODS BEFORE 1960
• 2 THE "NEW" IDEOLOGY IN THE 1960S
• 3 1970-1974: CRACKS IN THE OLD ORDER AND CALLS FOR THE NEW
• 4 THE DEBATE SINCE 1974
• 5 THE NIEO IDEOLOGY AS IDEOLOGY
• Index