Iran’s Crisis of Legitimacy
An Embattled Regime Faces Mass Protests—and an Ailing Supreme Leader
In the early hours of June 3, 1977, the Conference on International Economic Cooperation (CIEC) came to a battered and confused end - more than a hectic day behind its scheduled final ministerial meeting. An 18-month "dialogue" between the rich North and the poor South, which had begun with much enthusiasm and great hope in Paris, finished on a faint and joyless note. A hastily drafted, and uncommonly bland, report was presented for adoption to a glum and exhausted audience at the Conference's last plenary meeting.
The report, approved but unapplauded by the delegates, made a nostalgic reference in its stark preamble to the Conference's earlier resolve to create an "equitable and comprehensive program" for international economic cooperation.1 It then proceeded to list, almost clinically, the issues and measures on which agreement had been reached as well as those which had failed to obtain a consensus. There were no ringing passages; no dramatic declarations; no grand design; not even much pious diplomatic platitude.
As could be expected, the reactions to the results of the Conference were mixed. While both sides made a feeble effort not to call their dialogue a failure, each insisted on having its own appraisal recorded separately in the final report. Thus, the "Group of 19" developing countries (which had come to Paris to implement the recommendations of the U.N. Seventh Special Session on Development and International Economic Cooperation) were visibly dejected; they found the CIEC's conclusions falling "short of the objectives envisaged for a comprehensive and equitable program of action" designed to create a new international economic order. They noted "with regret" that "most of the proposals for structural changes in the international economic system" and "certain proposals for urgent actions on pressing problems" had failed to receive the rich countries' support.
The "Group of Eight" developed countries, in turn, "regretted" that the Conference had not found it possible to reach agreement on "some important areas of the dialogue such as certain aspects of energy cooperation." But they "welcomed" the cooperative spirit in which the Conference had taken place, and expressed their determination to maintain that "spirit" in their continued future dialogues with the Third World.
The principal areas of accord in the North-South dialogue are by now fully publicized. The Paris Conference produced - or, better, recorded - three concrete "bread and butter" results: first, the West undertook to contribute, subject to necessary legislative approval, one billion dollars in a Special Action Program to help meet the urgent needs of individual low-income countries "facing general problems of transfer of resources." This special aid (in which the U.S. share is to be $375 million, and the European Economic Community's contribution $385 million) is expected to be quickly transferable on highly concessional terms. Other participants, as well as other donors not represented at the Conference, are invited to make parallel contributions.
Second, the industrial nations agreed in principle to underwrite a "Common Fund" to finance buffer stocks for certain raw materials exported by the less-developed countries (LDCs). The new entity (whose specific purposes, objectives and provisions were left to be further negotiated in the United Nations Conference on Trade and Development) is to serve one of the main objectives of UNCTAD's Integrated Program for Commodities, i.e., protection of the LDCs against wild and disruptive fluctuations in commodity prices.
Third, the industrial donor countries pledged to increase their volume of official development assistance (ODA) "effectively and substantially" in real terms. The governments that had not yet accepted the U.N. target of 0.7 percent of GNP, as their annual aid figure, committed themselves to work toward that goal. Japan pledged to more than double its ODA over the next five years; Canada, in addition to canceling repayment of some of its existing loans, announced its intention to raise its annual contribution toward the 0.7 target. The U.S. delegation privately hinted that, Congress permitting, a doubling of bilateral and multilateral assistance within five years was their goal. On the record, Secretary of State Cyrus Vance promised to seek from the Congress "a substantial increase" in bilateral and multilateral aid programs.
In effect, Western donors pledged to redouble their efforts to compensate for their past performance in relation to the ODA target. There was also general agreement that an increasing portion of official aid should be earmarked for the expansion of farm products in LDCs (with an annual growth target of four percent in food production); and that the minimum annual target for food aid of at least ten million tons of grain as recommended by the 1974 World Food Conference held in Rome (Resolution XVIII in U.N. Doc. E/Conf. 65/20) should be reached promptly.
In addition to these three concrete pledges (which the Group of 19 grudgingly accepted), CIEC also managed to reach a consensus on some other broad and less controversial issues in the agenda of each of the four commissions.
- In the Commission on Energy, the participants were able to agree on the importance of energy availability and supply "within a commercial sense" for world economic advancement; the depletable nature of oil and gas, and the urgency of transition from an oil-based energy mix to more permanent and renewable sources (whereby oil and gas would be reserved for non-energy uses); the need for conservation and increased efficiency of energy utilization; international cooperation in the energy field (e.g., improving access to energy-related technology, energy research and development, the diversification and development of energy resources in LDCs); and national action for the development of all forms of energy.
- On raw materials and trade, agreement was obtained on the principle of international cooperation in marketing and distribution of primary commodities; research and development and other measures to help natural products competing with synthetics; measures to assist LDCs to develop and diversify their indigenous natural resources; improving the Generalized System of Preferences system; and identifying areas for special and more favorable treatment for LDCs in the Multilateral Trade Negotiations, the so-called Tokyo Round still underway in Geneva.
- In the area of development, the Conference had a meeting of minds on stressing assistance for infrastructural development in the Third World - particularly in Africa; several aspects of the industrialization of LDCs contained in the Lima Declaration (including an increased share of the developing countries in total world trade in manufactures); implementation of relevant UNCTAD resolutions on the transfer of technology; some broad food and agricultural issues such as full implementation of the 22 resolutions adopted by the 1974 World Food Conference; and the need for other financial flows (e.g., World Bank loans and its "third window" assistance, International Development Association replenishments, the funding of the International Fund for Agricultural Development, and contributions to the U.N. Development Program).
- In the field of money and finance, consensus was reached on a number of non-controversial aspects of private foreign investment; LDCs' access to capital markets; and cooperation among developing countries.
These easy and somewhat innocuous accords were, however, outweighed and overshadowed by clear disagreements on most of the main and substantial issues that were confronting the Conference.
- On energy, for example, the gut issue of the relationship between the price of oil and its supply by OPEC members remained totally unresolved. The major oil exporters insisted on basing oil prices on "replacement costs," which President Carter had alluded to in his energy program; but the Group of Eight was not willing to accept this principle. Nor was there agreement on the maintenance of the purchasing power of oil export earnings; protection of the accumulated revenues and foreign investments of the OPEC members; financial assistance to bridge the external payments problems of oil-importing nations; and, most significantly, a new mechanism for continued discussion of energy problems between major oil exporters and consumers.
- On raw materials and trade, UNCTAD's Integrated Program for Commodities - approved at Nairobi in the spring of 1976 - and the establishment of the six-billion-dollar Common Fund, which the LDCs considered an integral part of the "new international economic order," were largely sidestepped; the maintenance of the purchasing power of primary commodities exported by the LDCs (i.e., indexation) did not receive the necessary support of the industrial nations; measures relating to the LDCs' interests in world shipping rates and trade representation on commodity exchanges failed to obtain the rich countries' backing; some issues related to compensatory financing, local processing, and diversification were hopelessly deadlocked; the matter of control over the production of synthetics met a complete impasse; the LDCs failed to obtain "differential and more favorable" treatment for their exports to the North, and therefore refused to grant "unimpaired" access by the industrial countries to their raw materials.
- On development, the negotiations stalled over the demand by some "most seriously affected" countries for an immediate and generalized debt relief; procedures for initiating a dialogue on debt reorganization; access by LDCs to Western markets for manufactured and semi-manufactured products; assistance measures for the industrialization of the Third World; and a code of conduct for "transnational" corporations.
- On financial affairs, no agreed text could be produced on measures against inflation; no special treatment could be devised to protect the financial assets of oil-exporting developing countries; and disagreement continued on some crucial aspects of foreign direct investments (e.g., the criteria for compensation in case of nationalization; the transferability of income and capital from the host country; and the jurisdiction and standards for the settlement of investment disputes).
An objective evaluation of CIEC's final report and its annexes is not easy. The judgment would be different depending on one's time horizon and magnitude of expectations from such a "planetary bargain."
Given the complex and deeply rooted character of the problems faced by CIEC - problems which had been in the making for decades, if not centuries - the results were not perhaps totally unexpected. Compared to the pre-CIEC situation in 1974 and 1975 - where the international economic community was badly wracked by discord, and engulfed in mutual distrust, bitterness and frustrations - the Paris Conference was a relief, if not a breakthrough. Furthermore, the dialogue spotlighted the largely unrecognized, or cavalierly ignored, inequities and imbalances prevailing among nations since World War II and before.
The Conference helped focus world attention on the disparities of wealth and growing income gaps between the rich North and the poor South. The policymakers of the affluent nations received a thorough education in the mounting economic and educational needs of the Third World. The poor countries, in turn, began to realize that their legitimate hopes for catching up with their affluent neighbors could not materialize through simple formulae; nor could they be fulfilled by the sheer "political will" of the negotiators on the other side. The very fact also that neither side wished to call the Conference a failure, and that some modest advances could be identified in a number of limited but significant areas, clearly demonstrated that both sides saw a "modicum of progress" in their global bargain. From a long-term viewpoint, the salutary effects and conciliating implications of the Conference were thus wide-ranging and significant.
Yet, in the context of a "new world economic order," and measured against the Third World's aspirations, ambitions and needs, the CIEC's results were clearly minuscule. The issues on which agreement was reached by the long, slow-moving, and at times exasperating dialogue were indeed isolated, peripheral, and largely non-controversial. The few positive gestures shown by the Group of Eight were, in the assessment of the Group of 19, no match for the magnitude of the distressingly wide chasm existing between the rich and poor.2 The developing country delegates who had come to Paris with the expectation of finding in a short time some durable solutions to their long-standing problems of development aid, raw materials export, and debts were clearly disappointed. Baffled and discouraged also were the industrial country representatives who had worked hard, and offered certain modest last-minute concessions in the expectation of obtaining certain pledges from LDCs in the areas of energy prices and supply, private foreign investment security, access to raw materials, and inflation.
Against the backdrop of these expectations on both sides, no historical watershed was certainly reached in Paris. No breakthroughs were achieved on the deadlocked issues. The "old" international economic order remained virtually as it was - with no radical changes yet in the relationships between the developing and the developed nations.
The most obvious, and at the same time intriguing, questions that immediately emerge are: Why did CIEC not reach its principal objectives through its long and arduous negotiations? What went wrong? Who was to blame? How could the dialogue possibly have been conducted better to produce more concrete results?
It would be easy (and fundamentally correct) to side with the Group of 19 developing countries in attributing the Conference's unsuccessful negotiations to the lack of a meaningful "spirit of cooperation" and the absence of the necessary "political will" on the part of industrialized countries.3 It would also be convenient (and not much wide of the mark) to sympathize with the Group of Eight's contention that the conferees needed "realism as well as good will" to cope with the scourges of world poverty, disease and hunger; and that a "just and equitable" international economic system could not be created in a short time, nor "without many painful adjustments, accommodations and sacrifices" by both the rich and the poor.4
Yet, in retrospect, any full evaluation of the dialogue's inability to come forth with more meaningful, more enduring, and more acceptable solutions must go beyond these general observations. To be sure, stronger "political will" and a more positive attitude on the part of the North, coupled with a keener sense of realism and a sharper accommodating spirit by the South, could have taken CIEC beyond the point it reached on June 3. But the Conference's lackluster performance could not be blamed totally on these unfavorable factors.
On closer examination, CIEC's paltry results can be traced to several critical flaws. First, there were some seemingly unbridgeable gaps in fundamental concepts, assumptions and interests between the two sides. Second, there were widely different and altogether too many expectations. Third, there were miscalculations of bargaining power and errors of strategy by both groups. Fourth, there was inadequate administrative direction and support given to the Conference's process of negotiations. And, finally, there was poor timing and bad luck. Much of what follows will concentrate on these shortcomings. But first a word about the Conference's chronological chain of events.
The North-South dialogue began as a response to a proposal made in October 1974 by the French President, Valéry Giscard d'Estaing, to convene an international conference on energy among the members of the Organization of the Petroleum Exporting Countries, the industrial countries and the non-oil developing nations. To prepare the agenda for the Conference, a tripartite meeting was held in Paris in April 1975 among a small but representative group of countries.5 However, this meeting failed to produce any agreement because the industrialized countries, led by the United States, wanted the dialogue to concentrate exclusively on energy problems while the Third World representatives, at OPEC's insistence, asked for a much broader agenda. The OPEC summit meeting in Algiers in March 1975 had welcomed Giscard's invitation on the condition that the Conference's agenda include the overall issues of raw materials and development rather than energy alone.
In the crucial months that followed, growing clamor by the LDCs within the United Nations led to the adoption by the Seventh Special Session in September 1975 of the Resolution on Development and International Economic Cooperation (Res. 3362-S-VII). By then the United States especially had moved to a more forthcoming position, expressed in Secretary Kissinger's address to the Special Session (delivered by Ambassador Moynihan - who then participated fully and usefully in framing the resolution).
Spurred by this resolution, the preparatory group reassembled in October 1975. The delegates from the industrial countries (with notable exceptions on some issues) were still mainly interested in the matters relating to energy supply and availability; they reluctantly and at best halfheartedly approached the discussion of raw materials and development; and they showed strong resistance to debating monetary and financial questions (on the ground that these issues fell within the jurisdiction of the World Bank and the International Monetary Fund). The interests of the OPEC participants and those of the other LDCs were, by contrast, in favor of negotiating on a comprehensive package of agreements.
The preparatory participants finally proposed certain guidelines for the convening of a 27-member conference, 19 from LDCs and eight from the developed countries.6 They recommended that the Conference should have two co-chairmen, one from the industrial and another from the developing countries. Four commissions were set up on energy, raw materials, development and financial affairs - each with 15 members (ten representing the South and five from the North) and two co-chairmen. An agenda for each commission was proposed in very broad and flexible terms so as to leave sufficient room for maneuvering. Since agreements on specifics remained unattainable, the conflicts between the motives and interests of the delegates in the objectives of each commission - real and substantial though they were - were artfully dodged, or diplomatically papered over. In the name of cooperation, and under the convenient guise of not "prejudging" any relevant issue, it was finally agreed that "any delegation may raise any subject relevant to the themes of the dialogue for discussion in the commission."7
On the basis of this tenuous and ambivalent compromise, the first ministerial meeting of the Conference was held in Paris in December 1975. The final communiqué of the 27 member-participants announced the ministers' decision to initiate an "intensified international dialogue" through the four commissions within the framework of the guidelines proposed by the final preparatory meeting. However, the ministerial meeting of December 1975 and further meetings of the two co-chairmen of the Conference and eight co-chairmen of the commissions in January 1976 failed to reach agreement on the specific areas of discussion in each commission, or on integrating the two lists of topics submitted, one by the United States and the other by the Group of 19, into a single document.8
Between the ministerial meeting of December 1975 and July 1976, the four designated commissions held five sessions of approximately ten days each where participants submitted and discussed position papers on the various items of the "agenda." In this "analytical phase" of the Conference (which coincided with the convening of the inconclusive UNCTAD IV in Nairobi) very little progress was achieved. Twice, in April and in June 1976, the Group of 19 issued statements expressing dissatisfaction with the Conference's slow pace, and disappointment with UNCTAD'S limited results. Indeed, the Group of 19 maintained throughout the Conference that while they had offered "coherent, sound and realistic" proposals for negotiation, the Group of Eight produced no "binding" papers and made few counterproposals.
Meeting on July 8-10, 1976, to take stock of the dialogue's progress and to give guidance to its further work, senior officials concluded that the second phase should be "action-oriented," and that the commissions should formulate "concrete proposals for action" to be submitted to the forthcoming ministerial meeting. But they themselves were still unable to agree on the specific areas of negotiation in any of the commissions. Nor did the commissions later succeed in drawing up their own timetables and priorities.
After extensive consultations by the Conference's co-chairmen, the commissions finally adopted a "Program of Work" in September 1976. The Group of 19 presented detailed papers on all major items in the work program, and left the choice of negotiations on any and all of them to the Group of Eight. The latter, however, was not able to agree among its members on a suitable package. Little progress was thus achieved in the ensuing three months except on a few subsidiary issues. Consequently, the ministerial meeting of December 1976 had to be postponed, and the commissions adjourned until April 1977.
Negotiations were resumed by contact groups between April 28 and May 14, 1977 (coinciding with the Western summit meeting). But, again, very little was agreed upon. The senior officials met once more on May 26-28 with the idea of drafting common texts on agreed proposals as well as identifying areas of impasse. A report of a limited nature was prepared on non-controversial issues; but almost all questions of substance were referred to the ministers for action. In the final meeting from May 31 to June 3, the ministers did an enormous amount of hard bargaining. But the positions had become too crusty to be softened by those last-minute deliberations. Here is why.
Conceptual differences between the two sides were by far the most inhibiting single set of factors responsible for CIEC's limited concrete results.
The Group of 19, emboldened by the sweeping (but still unimplemented) resolutions of the United Nations' Sixth Special Session of April 1974, wanted to negotiate on the whole range of international economic relationships in order to establish a new international economic order. Some of the industrial countries (and particularly the United States), however, harbored no particular affection for any such new order. The U.S. delegation (down to the last three days of the Conference) saw neither a need nor a purpose in such an order, and avoided its mention. In Secretary Vance's address to the closing ministerial meeting, there was a fleeting reference to the need for "a new international economic system" characterized by equity, growth, and justice. But the salient features of the new system and its modus operandi were not detailed.
Caught in the midst of this ideological tug-of-war between the supporters and the opponents of the status quo, the new international economic order was never defined within CIEC. For the purpose of identification, however, three distinct concepts, based on the proceedings of the Seventh Special Session, could be noted. At one end, there was the "radical" concept which attributed the present world malaise to some deep-rooted "structural imbalances," i.e., a lopsided (and disadvantageous) interdependence between the Third World and the North. Under this "asymmetrical" interdependence among "unequal partners," the bulk of value-added in world production, processing and marketing is supposed to go to the developed world, and only a small fraction to the developing nations. This trading disadvantage is presumably compounded by the arbitrary and inequitable operation of the international monetary system. The new world order must thus result from a complete institutional overhaul of the existing system. Such a bold and integral restructuring is to give the Third World a long-denied opportunity to enjoy "equal development" alongside the industrial countries - to cease being an appendage of the "West." Equal development opportunity, in turn, calls for a new and radically different long-term development strategy that rejects the "Western paradigm" and the integration into the "Western system." The major emphasis is placed on "self-reliance," i.e., on the restructuring of the domestic economy in order to create an agricultural basis for industry and modern services. In the short run, however, the strategy calls for significant pressures to be put on the industrial countries for meaningful and substantial concessions.9
At the other end of the spectrum, there was the "conservative" concept, which rejected the idea of a new order as unrealistic or impractical, but was willing to allow enough concessions to the developing world to satisfy their most urgent demands. According to this basic concept, the present order is to be improved gradually, in a step-by-step fashion, and on a "case-by-case" basis to bring about needed marginal adjustments. This concept offers LDCs a new "deal" instead of a new "order." And the deal consists of a marginal patchwork - the poor call it "incremental gadgetry" - on the existing system to compensate for some of the system's most glaring disadvantages. The conservative argument is that the salvation of the Third World lies, not in a "flight into worldwide bureaucratic dirigism," but in improving and strengthening the functioning of the existing free market and free trade system. The idea is to make the existing market system serve the world better instead of changing the world to create a new system.10
In between these two concepts was the "moderate" thesis which envisioned a clear need for some changes in the pattern of North-South economic relations, and for the establishment of a "more just and workable" world economic order. But such a new order, while rejecting "spheres of influence" and recognizing "greater respect for the equal rights of all members," focused its main emphasis on the "growing interdependence" between the North and South. The "moderate" approach calls for the creation of a "mutual survival pact" in which access by the developed countries to energy and other raw materials in the Third World is to be matched by the developing countries' access to Western markets, technology, management skills, and investment capital. The "new order" is to give the South also a fairer share of world income and a greater voice in international institutions.11
The positions of the CIEC participants in the North-South dialogue reflected more or less the differences in these three concepts. The United States, Germany and Japan among the developed countries, up until the last phase of the Conference, behaved as though they believed the existing order was basically sound, and at worst only temporarily out of kilter. The "deficiencies" of the system to which the South made constant reference were aberrations that could be corrected by mutual accommodations. Underlying this attitude were certain key assumptions - that the developing countries were intricately dependent on Northern prosperity (and, by implication, generosity); that the LDCs' progress (and, by implication, salvation) was essentially a matter of their own domestic policy and responsibility; and that the external balance-of-payments problems of these countries could be helped only marginally by foreign assistance, mostly in the form of loans and private investments. In an even more "conservative" variant of these basic assumptions, the world consists of a number of divided and adversary camps in which only those who possess advanced technology have the power and possibility to call the shots. Since "no lasting challenge" to the existing order can be mobilized by the LDCs (because of their politico-economic impotence), helping the eternally poor or the technologically disadvantaged camps is a matter essentially of charity and not self-interest - a question of moral virtue and not one of obligation.12
By contrast, some of the smaller and more progressive countries in the Group of Eight (Holland, the Scandinavian countries, and Canada) had some irresistible sympathy for the other side on such issues as debt relief and increased official assistance.
Most of the developing countries' delegates started off with the assumption that their inherent weaknesses in technological know-how, industrial production, and military strength were the results of the Northern "head start" in a market system that had stacked the cards against them. They believed that market deficiencies were not temporary aberrations, but reflected structural shortcomings in the North-South relationship. They argued that Northern prosperity was dependent on a mutually beneficial trade relationship; and that the "trickle-down" theory had its counterpart in "pumping-up" possibilities. While admitting that an increasing proportion of their needs must be met by their own efforts, many among the LDCs accused the North of being guilty of past "exploitation" and continuing "discrimination." They regarded their own efforts as too meager to meet their basic growth requirements, and did not see the needed economic progress as possible without massive transfers of real wealth - through both aid and trade. In a word, they rejected the notion of technological power as the mainstay of world economic supremacy, and the inevitability of an adversary relationship as the foundation of international politics. To them, power rested in the final analysis just as much on the size of population and the possession of raw materials as on accumulated wealth and advanced technology.
These differences in assumptions and attitudes naturally produced widely different expectations. The Group of Eight confidently counted on obtaining worthwhile concessions from the LDCs in return for each privilege granted or assistance pledged. As part of this quid pro quo, key Northern countries intended and hoped to obtain LDCs' devotion to a market ideology, or at least to receive their gratitude, friendship, and alliance. The more idealistic in this camp wished also to press for internal reforms in the aid-receiving countries (human rights' observance, redistributive equity, anticorruption measures, population control, balanced growth, domestic self-help, etc.).13
More specifically, and in the context of CIEC, the North hoped, first and foremost, to get the other side's approval for setting up a new consultative forum on energy. Ostensibly, the idea was to conduct regular talks between oil-rich and oil-poor countries; but the intention of using the new forum as a counterweight to OPEC was too evident. Although such a purpose was emphatically denied by the Northern representatives, the energy dialogue was expected to make the oil issue one of international concern, and to put OPEC members in a "moral straitjacket" to moderate their future oil price decisions. In exchange for its pledge of assistance and cooperation, the North also hoped to obtain the LDCs' agreement on the principles of international arbitration for the settlement of investment disputes, as well as prompt and adequate compensation for its assets in the event of nationalization. Furthermore, some delegates in the Group of Eight, in line with their basic assumptions and interests, expected to be able to get some fresh "piece of the action" for their multinational private corporations in the area of world resources development.
The list of LDC expectations was understandably much longer. In general, they were asking for larger transfers of real resources; stable and remunerative prices for raw materials and agricultural goods; "generalized preferences" for their manufactured exports to the markets of industrial countries, and a bigger voice in the management of international financial institutions. The more advanced among them wanted a more rapid transfer of technology in their favor. The poorest asked for better loan terms, debt relief and debt reorganization. Some, in the words of a New York Times correspondent, "were grappling with global dreams and trying to set well-being, dignity and equity down in dollars and cents."
More specifically and within the purview of the dialogue, the moderate majority in the Group of 19 had an 11-point list of specific preferences. They called for the full adoption of UNCTAD's Integrated Program for Commodities; energy conservation, energy development and energy finance; protection of the purchasing power of export earnings and assets; debt relief and reorganization; the adoption by the Group of Eight of the 0.7 percent ODA target by a specific date; access to capital markets of the developed world; infrastructural development particularly in Africa; full implementation of the Lima Declaration and Plan of Action (calling for increasing the percentage share of LDCs to at least 25 percent of total world industrial production by the year 2000); increased food production in LDCs, food security, and food aid; transfer of technology through private foreign investment under a code of "good citizenship" for the multinational companies; and international financial and monetary reforms (e.g., increases in IMF and World Bank resources, new allocations of Special Drawings Rights, and greater access by LDCs to these resources).
Apart from the differences in concepts, assumptions and expectations, certain miscalculations of power on both sides, and some serious shortcomings in the negotiating process itself further militated against CIEC's success.
An overestimation by each group of its negotiating power was unmistakably one of the major reasons for the failure of the CIEC participants to reach affordable compromises on many agenda items. Throughout the negotiations, neither group wished to realize that its collective bargaining clout added up, ironically enough, to less than the sum total of each member's individual force. In other words, internal conflicts in each group badly reduced its total strength. And yet, while neither the Eight nor the 19 was a single homogeneous bloc, they both acted as though they were.
The Group of Eight, reflecting their previously contrasting positions during the Seventh Special Session of the United Nations, again had no shared views on energy, commodity agreements, debt relief or aid. Strong differences existed even within the European Economic Community. As the Conference moved from the speech-making stage to hard bargaining, it became apparent that the industrial countries had no agreed common line or unified plan to respond to the Third World. On most issues, all that the Group of Eight could muster were some tactically improvised reactions - mostly negative - to the LDCs' demands. Despite their sharply conflicting interests, however, the Eight tried to throw their collective weight around. Assuming (erroneously) that together they had all the trump cards (productive capacity, advanced technology, military strength and wealth), they steadfastly resisted the other side's pressures to compromise on any major issue. But their divergent (and poorly camouflaged) interests encouraged the 19 to remain adamant.
The developing countries, too, despite differences of interest (on such issues as the Common Fund, debt moratorium, price indexation, foreign private investment, seabed exploration, inflation, and monetary reforms) considered their solidarity with the oil-producers as an invincible force. They put too much faith in their collective action to rally world public opinion to their side. They counted inordinately on the North's presumed "guilty conscience" over past "exploitations," and relied too heavily on OPEC's power to exact concessions for them all. But the glue that helped them maintain a solid front was rather thin. OPEC members who were originally responsible for having all matters of interest to LDCs included in the North-South dialogue had, in the meantime, lost much of their clout due to continued recession in the industrial countries, and also because of some internal disagreements on oil pricing. At the same time the heterogeneity of national interests in the group as a whole remained unmanageable. Frequently, the open manifestation of these conflicts (not only in corridor talks but also in various position papers) betrayed the collective invincibility on which they had staked their rights; it also invited the North to maintain its intransigence.
To the miscalculations of bargaining power must be added some particular flaws in the negotiation process itself. To begin with, there were incompatible differences between the two groups in their bargaining strategies. The North's plan was to move fast on the Energy Commission, and maintain a holding position on other issues, particularly on monetary reforms. On energy itself, the essential tactic of the Eight was to emphasize access to supply; resist all overtures on oil indexation; stress, instead, the need for international consultation on oil pricing; and lure the non-oil developing countries to their side by promising them both controlled oil prices and cooperation for the development of new sources of energy. The fallback positions were to go slow on non-energy matters; pitch every concession, no matter how minimal, against a matching gain; and play a guessing game to the very end.14
By contrast, the strategy of the Group of 19 was to hammer out a whole "package" of agreements, and not to accept the other side's separate or incremental offers. Since the interests of the Group varied, and the possibility of a split in the ranks was always present, they decided that unless they stood firm in getting something for everyone, they might end up getting nothing for anyone. A dominant thread running through the Group's thinking was the importance of solidarity at all costs. They were thus willing to trade off some partial short-run gains for a more comprehensive and lasting success.
The result of these implacable strategies was predictable: a long frustrating standstill. In many areas of negotiation, effective bargaining was thus largely preempted because the minimum demands of one party were more than the maximum concessions the other party was prepared to make. The "overlapping zone" was disappointingly limited.
The second handicap in the negotiation process was mutual mistrust. The Group of 19, rightly or wrongly, always suspected the true motives of the other side. They were never fully convinced that the Eight had any real intention of conducting a serious dialogue on anything but energy. They saw, for example, the American proposal for an "International Resources Bank" as another exploitative scheme by private U.S. companies to increase output of raw materials and drive down prices for the benefit of the North. They read into the North's refusal to discuss commodity agreements except on a "case-by-case" basis a clever ploy to pitch one Southern group against another. In short, they suspected that the other side wanted to use CIEC as a means of causing a split in the LDCs by highlighting differences between oil and non-oil countries, and to drive a wedge between some countries within OPEC itself. The North's delaying tactics and evasive behavior reinforced the 19's lingering suspicion that the other side was carefully and insidiously trying to prolong the Conference in order to underscore these conflicts.15 The members of the Group of Eight, in turn going through a "crisis of confidence" in their own solidarity, were always wary of too close an association with the other side because they saw their lack of unanimity on major issues as a golden opportunity for exploitation by the 19.
The CIEC negotiators were in another uniquely inauspicious bargaining situation. Not only did they suspect each other's motives - which is normal in any bilateral negotiation - they lacked proper information about the limits of the other side's capability for making concessions, or altering demands. In domestic labor-management negotiations, the size of corporate profits, the strength and elasticity of consumer demand, the union's strike fund and other such pertinent information is usually known to both sides. The "overlapping zone" is thus extensive enough for bargaining maneuvers. In CIEC, the negotiators were largely in the dark regarding each other's possibilities and tolerances. Thus, despite the "intelligence work," second-guessing, and poker playing that go with any bargaining process, CIEC participants had to do a lot of mind reading as well.
Finally, a most effective impediment to reaching a compromise turned out to be one of the noblest and least offensive "rules of procedures" adopted by the Conference, namely the "principle of consensus." According to this rule, decisions and recommendations of the commissions and the Conference were to be deemed approved when "no member delegation" had made "any objection." The strict observance of this principle by the co-chairmen of the four commissions meant, in effect, that any delegate from any country - whether or not directly involved in, or strongly affected by, a particular issue - could block the adoption of an important section or a paragraph, even through a largely editorial or language objection.
Poor timing, inadequate organization, and ineffective leadership were further responsible for blunting the Conference's progress.
By an unhappy coincidence, CIEC began its work at a most inopportune time. While the multitude of complex and diverse questions on the Conference's agenda would, in all probability, not have been wholly resolved in any other equal length of time, the dialogue's 18-month time frame coincided with certain inauspicious circumstances. First, for most of its time, CIEC faced the longest and the most damaging postwar recession in the industrial countries - making it difficult for them to accommodate the Third World's most persistent demands: increased aid and liberalization of trade. Second, in its first half, the Conference was overshadowed by four impending and uncertain national elections in Germany, Italy, Japan and the United States - making it impossible for the incumbent administrations to offer any credible long-term commitments. Third, throughout its existence, the dialogue encountered difficult and precarious political situations in the United Kingdom, France, Spain and even to some extent in Australia and Canada - keeping these countries from decisive moves on any crucial issue. And finally, the expectation of a change in the U.S. Administration and the aftermath of the November elections turned the last half of the Conference's time into a period of agonizing and largely unfulfilled expectations.
The dialogue's hard luck in timing was aggravated also by inadequate headquarters support. The Conference's initiators, bent on taking "politics" out of the Secretariat, gave the latter "an exclusively administrative and technical function." The result was a bevy of exceedingly elaborate and unnecessarily detailed proposals tabled for discussion by individual delegates. There was virtually no sifting, analyzing, coordinating, and putting together of the many position papers for real negotiations. Instead, the Secretariat, not being able to obtain the reactions of the Group of Eight to any substantive issue, became a gigantic copying machine and a documents-distribution center - with no say on the number, quality, or relevance of the papers being circulated. A small professional secretariat, staffed by some bright men and women, could greatly have helped the co-chairmen of the Conference and the commissions to properly channel, and efficiently conduct, the business of the day. It might also have saved a great deal of wasted time and misdirected energy.
Lack of effective leadership and direction, both at the political and administrative levels, was another CIEC handicap. For reasons that cannot be rationally explained fully, it became an article of faith for all delegates soon after the beginning of the dialogue that without the United States' active interest, strong leadership, and enthusiastic hard work, the Conference's success was doomed. The European Economic Community and Japan seemed unwilling to offer any concessions to the 19 unless theirs were matched by the Americans. The other members of the Group of Eight, too, had no real alternative but to follow their bigger partners.
But the United States, beset at first by some ill-concealed philosophical and personality conflicts within its administration, and later preoccupied with election campaigns (and unsure of the continuity of its incumbent leadership) was in no position to exercise any such dynamic and effective leadership. The change in administration after the November elections made it impossible for the outgoing team to decide unsettled policy options before January 20, 1977.
While work resumed in April and May 1977 at the level of technicians and contact groups, real progress continued to be limited partly because of the timing of the CIEC sessions in relation to the forthcoming Western summit meeting in London on May 7-8, and partly due to the insufficiency of time for the Carter Administration to come up with some attractive new proposals. Secretary Vance and his team tried to reassert leadership in the third and final phase of the Conference by taking a conciliatory and cooperative posture toward the Third World. But time ran out on them.
The Group of 19 had its own leadership vacuum. It had a larger membership than the other group; it represented a much wider constituency, i.e., the Group of 77; and it reflected a much greater heterogeneity in geographical size, population, stage of technological advancement, access to external markets, domestic political regimes, special affiliations with the industrial countries, and possibilities for rapid economic development. For these reasons, the Group was unable to follow any country's undisputed or permanent lead, although its solidarity remained astonishingly unaffected to the very end.16
The absence of a strong voice, capable of integrating the separate interests of the Group into a negotiable mold and bringing recalcitrant delegates into line, resulted in a good deal of time spent on rhetoric. It also gave a misbegotten opportunity to some young and passionate firebrands to lock their country's position into an irreversible gear, and to induce the other side to take an equally intransigent line. The time and talent that could have been mobilized by a strong leadership in search of possible compromises and solutions were, instead, used on prolonged and exhausting verbal gymnastics.
As most delegates agreed, the North-South dialogue neither began nor ended in Paris. CIEC was the end of a beginning - the first step in a long and arduous journey to (one still hopes) a more peaceful, more prosperous, and more equitable future for all.
The Conference's 18-month try came to an expected end, but without much of the expected results. The alternatives now are to go back to square one, i.e., confrontation, or to continue the dialogue. A rational choice must obviously favor the second option. Confrontation would be dangerous, destructive and wasteful; cooperation could result in mutual benefits. The costs of pursuing a global collision course may be different for each side, but neither side is likely to emerge as a clear winner.
Despite its unmourned demise, CIEC's raison d'être is as valid today as it was in 1974 when it was conceived. World destiny is no less interdependent; the planet earth no less finite; the objective of a fully employed and inflation-free world for the troubled North still stubbornly elusive; and the goal of a just and equitable new life for the volcanic South still distressingly distant. Structural disequilibria in payments balances, the growing tendency toward neo-protectionism, grim energy prospects, commodity price gyrations, and the intolerable debt burdens for some LDCs still remorselessly threaten the fragile fabric of the existing order. The question is whether the establishment of a new order should be facilitated through cooperation or force-fed by confrontation.
Professor Leontieff's report on The Future of the World Economy issued by the United Nations in October 1976, provides a forthright and candid testimony to the truly herculean efforts needed to close the income disparity between the world's rich and poor. Vividly and clearly, the report reaffirms previous findings that (a) even the six percent growth target set by the International Development Strategy for the Second U.N. Development Decade will not be sufficient to narrow this disparity by the year 2000; (b) the principal limits to sustained economic growth in the world are social, political and institutional in character rather than physical; and (c) faster development by the Third World (compared to growth rates in the industrial countries) in the rest of this century will depend not only upon domestic socioeconomic reforms, but also upon significant changes in North-South relationships as perceived by the U.N. Declaration on the Establishment of the New International Economic Order.17
Thanks to the CIEC experience and the lessons learned from its critical inadequacies, the ground is now better than ever prepared for a serious pursuit of further consultations and cooperation between the North and South. Thanks also to some in-depth discussions of unresolved issues, the community of interest between the two groups has become too evident for leaders on either side to underestimate or ignore. But the mutual long-term advantages of such ongoing dialogues may not yet be understood and appreciated by the public at large.
A big hurdle now is the skeptical, if not indifferent, attitude of the electorate in Western democracies - an electorate which mistakenly equates North-South economic cooperation with its own immediate economic "sacrifices" in terms of jobs, incomes and standards of living. This attitude is, in turn, reinforced by a small but influential segment of the press and the public in the North along two basic lines: first, by portraying the dialogues between North and South as an effort to change the rules by which "the wealth of the world is distributed"; and second, by depicting conciliation and compromise by the industrial countries as a sign of political timidity, economic weakness, and military incapacitation.
The first step toward finding a new basis for further fruitful dialogues is thus a change in public attitudes. The electorate in the affluent part of the world must be convinced that the present pattern of international economics is still based fundamentally on a system of colonial relationships with unequal partnership between the haves and the have-nots; that the North's growth and prosperity through its freedoms and initiatives are becoming increasingly dependent upon the resources of the Third World (so that its responsibility for the latter's growth and prosperity assumes new dimensions); that "human rights" embrace not only the right to free speech, assembly, and political association, but also the right to a decent life free from desperation, despair, disease, ignorance and idleness; that the North-South economic injustices and inequalities are as much a threat to global peace and prosperity as the East-West political conflicts; and that a more efficient use of world resources (and a larger all-around world production through a more effective transfer of technology) would make it possible for everyone to have more out of a larger pie instead of dividing a given pie into smaller pieces. In short, the public in the rich countries should be helped to realize that the achievement of fairer economic relationships with the Third World for the rest of this century is no less an act of enlightened self-interest than the Marshall Plan was for the United States in the immediate postwar period. The North might as well make a virtue out of necessity.
An equally significant obstacle to successful North-South negotiations is the (understandable) impatience of the masses in the Third World for an immediate improvement in their living and working conditions. Long suppressed aspirations and genuine frustrations resulting from past international dialogues (within UNCTAD and elsewhere) have made the public in the developing countries highly disillusioned. They want action. And their persistent demands are becoming increasingly difficult for their leaders to resist.
Of crucial importance to the progress of future talks between the North and South is, therefore, a proper understanding and appreciation of the process of change by the people in the LDCs. The public in the Third World must be helped to realize that age-old global injustices and inequities cannot be redressed in a few weeks or a few months. They ought to be convinced that a continued dialogue with the industrial countries is the safest and most assured - if not the most efficient or fastest - mechanism for building a better and healthier world.
Whether one likes it or not, mankind is now rowing a large, fragile and uneven boat. Those who are relatively more comfortably placed than others are obviously not interested in rocking it. But this short-sighted preference for stability over equity may end up giving them neither. The fatal flaw in unshared affluence is its tendency to sow the seeds of its own decay.
A continued dialogue between the industrial countries and the developing nations is thus a matter of global welfare, if not survival. An appropriate and convenient forum for such a dialogue is surely within the United Nations. Yet, in order for the United Nations to facilitate this task, there is need for a new, CIEC-type body or council. For the present extensive configuration of the U.N. agencies, satellites, and affiliates still lacks an effective mechanism for a "planetary bargain" at a high political level. General and special assemblies of the United Nations itself are too large and too unwieldy to accommodate meaningful give and take. Furthermore, the participants in the United Nations assemblies are, as a rule, foreign ministers and career diplomats who possess broad political vision, but do not usually carry the key to their nation's treasuries. By contrast, the annual meetings of the specialized and affiliated agencies are crowded with "technical" ministers and professional staff who generally take a rather parochial view of world problems related to their specialty. Even the International Monetary Fund and the World Bank (and their Interim and Development Committees), which deal with broader world economic issues are generally governed by finance ministers and central bankers who are by law and nature primarily concerned with their country's fiscal accountability and economic strength. They shy away from sociopolitical issues.
What is missing, and badly needed, is a relatively small but sufficiently representative standing "council" of top officials from both the developed and the developing countries who could engage in a truly global, politico-economic dialogue. The membership of this mixed body, as in the case of CIEC, need not be limited to any one species, but could include ministers of foreign affairs, finance, development, or trade, as well as central bank governors, and others of similar rank, at the discretion of the member governments. The task of the council would be to negotiate a whole range of economic relationships between the North and South - at the political level - and to issue recommendations to specialized agencies. The responsibility for translating political compromises into action, devising specific schemes and administering them would rest with existing agencies and institutions. The council would have no operational or technical functions, and would address itself only to broad political decisions. Occasional summit meetings between the heads of state of the council members might be held to crown the council's achievements, or to give it fresh direction.
Future dialogues in such a council need not necessarily have to produce a detailed blueprint of a brand new system. Rather, they could be expected to set in motion an effective machinery to cope with outstanding and emerging conflicts and contentions. The new order that may emanate from these dialogues might not favor sweeping changes at once, but would be receptive to evolving circumstances, and responsive to the challenge of new conditions.
The establishment of such an order, however, requires a far stronger political will, a greater cooperative spirit, more profound mutual trust, better negotiating skills, more vigorous leadership, and more stark realism than were shown in CIEC. It would probably also require much less exaggerated expectations.
1 Communiqué of Meeting of Senior Officials (CCEI-CP7), CIEC, Paris, July 10, 1976.
2 Technically, even the Group of Eight's dollars-and-cents pledges on aid, the Common Fund, and the Special Action Program were not really the direct outcome of CIEC bargaining. All three, while not unrelated to the pressures by the LDCs during the 18-month dialogue, had already been announced by the North prior to the final ministerial meeting. In development aid, the Conference produced no substantive further "concessions" to the Third World beyond what had been announced by the summit conference of Western leaders in May 1977. In monetary matters too, CIEC did not go much beyond the recommendations of the International Monetary Fund's Interim Committee in April 1977. Or even beyond the endorsements of the Committee's Manila meeting in September 1976.
3 Statement of the Nineteen Developing Countries participating in the Conference on International Economic Cooperation, Paris, May 5, 1977; and Statement of Mr. M. Perez Guerrero on behalf of the Group of Nineteen Developing Countries participating in CIEC, May 31, 1977.
4 British Foreign Secretary David Owen, Speech at the Ministerial Meeting of CIEC, May 30, 1977; and Secretary of State Cyrus Vance, Address to CIEC, May 30, 1977.
5 These were the delegates from the European Economic Community, the United States and Japan plus those of Algeria, Brazil, India, Iran, Saudi Arabia, Venezuela and Zaïre.
6 The Group of 19 consisted of Algeria, Argentina, Brazil, Cameroon, Egypt, India, Indonesia, Iraq, Iran, Jamaica, Mexico, Nigeria, Pakistan, Peru, Saudi Arabia, Venezuela, Yugoslavia, Zaïre, Zambia. The Group of Eight included Australia, Canada, EEC (as one unit), Japan, Spain, Sweden, Switzerland and the United States.
7 Final Declaration of the Preparatory Meeting for the Conference on International Economic Cooperation (Doc. RPII/12) CIEC, Paris, October 16, 1975.
8 The U.S. list is Doc. RP II/11, CIEC, Paris, October 13, 1975, and the list of the Group of 19 is CCEI-CP, CIEC, Paris, January 26, 1976. The latter is based on the February 1975 "Manila Declaration and Program of Action" of the Group of 77.
9 For an avowedly partisan account of this thesis see Geoffrey Barraclough, "The Haves and the Have-Nots," The New York Review of Books, May 13, 1976. For part of his thesis, Mr. Barraclough receives support from Professor W. Arthur Lewis, Some Aspects of Economic Development, London: Panther House, 1970.
10 For a glimpse of this position see the assessment of the U.N. Seventh Special Session in The Washington Post, September 17, 1975, and The New York Times, September 19, 1975. For the verbatim report of the Seventh Special Session see U.N. Doc. A/PV 2326-2349.
11 For various presentations of this basic thesis, see A Turning Point in North-South Economic Relations, New York: Trilateral Commission, 1974; New Structures for Economic Interdependence, Rensselaerville, New York: Institute of Man and Science, 1975; The New International Economic Order, Dutch National Advisory Council for Economic Cooperation, 1975; Jan Tinbergen, Reshaping International Order, New York: Dutton, 1976; and Toward a New International Economic Order, London: Commonwealth Secretariat, 1977.
12 For a critique of this last thesis, see Guy F. Erb, Beyond Dependency: The Developing World Speaks Out, Washington, D.C.: Overseas Development Council, 1975.
13 See R. L. Rothstein, "A Different Table for America's Third World Policy," The New York Times, January 27, 1977; and P. G. Peterson, "Helping Others - and Ourselves," The New York Times, May 13, 1977.
14 The New York Times candidly reported that the strategy of the Group of Eight vis-à-vis the LDCs was "to talk them to death." (September 19, 1975.)
15 The LDCs' suspicion was reinforced, rather unexpectedly, by the leak of an alleged U.S. State Department cablegram to the Group of Eight - advising them to concentrate on intensifying Third World restraints on the major oil exporters. (The New York Times, December 14, 1976.)
16 It was, after all, the Foreign Minister of Jamaica - an energy-deficient, small island country - who, at the closing plenary meeting of the Conference, defended OPEC's position and priorities with great eloquence and unmistakable sincerity.
17 See Jahangir Amuzegar, "The North-South Dialogue," Foreign Affairs, April 1976, p. 552.