The deadlock in the U.N. Special Session in September 1980 over efforts to organize global negotiations on a New International Economic Order is not a cause for pessimism but an invitation to sober reflection. The breakdown was not just over procedures, though that was the way it appeared. The breakdown came because there are still substantive and fundamental differences between the approaches of the North and the South to these negotiations. Unless we honestly face up to these differences, a mere patch-up of procedural wrangles to revive the global negotiations will not achieve any significant results.

The first question we must face is: Why should the North-the industrialized nations-enter into any serious dialogue at all about restructuring the existing international economic order? The South-the developing nations-wishes to gain more economic power and participation in international decision-making, but why should the North willingly surrender its present privileged position? Unless there is a convincing answer to this question, North-South negotiations are likely to deteriorate into a ritual and skillful exercise in non-dialogue.

I believe that the only real answer is that change in international structures is inevitable, whether there is a dialogue or not. The real experiment involved in the North-South dialogue is whether the pace of change can be accelerated through common consent, and whether the pains of transition can be eased through orderly negotiations. It is tempting, but totally wrong, to jump from pessimism about the prospects of the North-South dialogue to pessimism about the prospects for change itself. The failure of the dialogue so far will not stem the underlying forces of change: it only means that change will continue to be disorderly and disruptive. The real case for the dialogue is that it can lead to an orderly transition and that bargains can be struck by which all sides gain, though not in equal measure.


What are these underlying forces of change? And why is there a certain inevitability about them? To begin with, there is an urge for liberation-"to end the tyranny of man over man" and of one nation over another. It inspired the movements of political liberation; it is fueling the desire for economic liberation now. The recent major movements in the industrialized nations-for trade unionism, civil rights, women's liberation-were inspired by the same urge for equality of opportunity. The initial casualties in this liberation movement will be national orders within the Third World, many of which are unresponsive to the needs of their own people. The current chaos and uncertainty in many developing countries are merely a prelude to that end.

But the desire for liberation, participation and equity cannot be confined within national borders. It will affect all international relations. If we add to it the strong sense of nationalism generated by political liberation of the Third World, it is clear why economic relations between rich and poor nations-whether at the level of governments, or multinational corporations, or private individuals-must proceed in a different framework than in the past.

At the same time, certain structural changes are taking place which are lending an air of urgency to the need to evolve new codes of international behavior. The demographic balance is rapidly shifting against the industrialized nations. Of the net additions to the world population in the next two decades, 90 percent will be in the Third World. The future markets and labor surplus lie in the South; the accumulating and underutilized capital in the North must come to terms with this reality. The South is also becoming rapidly urbanized. By the year 2000, about 40 cities in the South will have a population of over 15 million each, compared to 16 cities in the North. These exploding cities will provide powerful instruments of change within national orders as well as restless pressure for international migration.

Another powerful stimulus is the rising real cost of energy. The comparative advantage of industrialized nations in energy-intensive agriculture and industrial production is fast disappearing. There will have to be a major structural change in their industrial and trade patterns, environmental concerns and modes of urbanization, and in the whole conception of their life-styles. If we add to this picture the rapid emergence of China, the entry of more communist countries into the international market, the fierce competition from newly industrializing countries such as Brazil, the shifts in economic power within the industrialized bloc (particularly in favor of Japan and West Germany), and the major breakthroughs in communications, it becomes obvious why national and international orders will continue to undergo rapid changes in the next two decades.

These changes are going to be too large to be handled successfully without proper planning. In the absence of a dialogue, changes will be traumatic, abrupt and disorderly. There will be periods of unilateral actions and complete breakdown of any international rules. An orderly international dialogue is not essential for change, but it can avoid unnecessary costs which will arise otherwise, it can help balance the interests of various groups of nations, and it is the best guarantee against periodic anarchy and insanity in human affairs.

Despite the failure of the formal North-South dialogue so far, there has been a significant change in human perceptions and understandings during the 1970s. From a mindless pursuit of economic growth, there has been a gradual shift to a better understanding of the problems of poverty and the urgency of meeting basic human needs. From a period of relative indifference to the real problems and enormous potential of the Third World, the industrialized nations may at last be becoming aware of their own dependence on the developing countries and of the need to reach some form of accommodation with them. From the belligerence of the early stages of the dialogue, we may finally be entering a second phase of serious negotiations during the 1980s. While the new decade has started on a cheerless note, this may well prove to be the decade for either a major advance in North-South relations or a deep international crisis. When the outlook is so bleak, it is, perhaps, wise to analyze what could be done differently to revive hopes for progress.


Both North and South have made major mistakes in their approach to the negotiations for a New International Economic Order (NIEO).

First, a quick catalogue of the mistakes made by the South:

(1) The objectives of the dialogue were not clearly perceived. At least two distinct schools of thought emerged. One bargained for short-term concessions; the other negotiated for long-term structural change. The first school would have been satisfied with more aid, more debt relief, more trade concessions, etc.; the second would regard such "progress" as an increase, not a reduction, in dependency. The second school sought a fundamental change in prevailing market rules and a loosening of ties between North and South, including a major de-linking of trade and aid relationships. The confusion between various objectives made it difficult to pursue any consistent strategy of negotiations.

(2) Many developing countries did not sufficiently realize that internal reforms were even more important than international reforms for the welfare of their people. Some of them started viewing the NIEO as a "soft" option, as an alternative to hard decisions to restructure internal orders. Lack of progress on the NIEO became an alibi for explaining a variety of economic sins at home. It was also not recognized that internal reforms would have made external change merely a matter of time, as developing countries would then be speaking from a position of strength. It is also interesting to note the divergence between official and unofficial dialogue on this issue. The official dialogue has at times pretended that there was no need for internal restructuring in the Third World. The intellectual dialogue in the Third World, on the other hand, has attacked inequities of international as well as of national orders, without ignoring their logical link.

(3) The Third World did very little service to its own cause by presenting the NIEO as a "demand" of the South. It should have been presented, right from the start, as a global need, since the existing economic order has not been working very well for any side-as is evident from problems of global inflation and monetary instability, the energy crisis, environmental concerns, commodity price fluctuations, increasing protectionism, fast-increasing armament spending and a whole range of global headaches. Furthermore, the South should have taken the interests of the North fully into account in designing any package of negotiations. This was all the more necessary since the South started with limited bargaining power; it needed the goodwill and enlightened interest of the North to "enforce" any change.

(4) The South entered the dialogue without adequate preparation. Since its membership was large and diverse, it needed frequent South-South dialogues to shape a package of negotiations which would satisfy the different interests of its various constituencies. It needed to establish a basis for mutual support from some of its richer members, particularly oil-exporting and high-income countries. It badly needed a Third World secretariat to articulate and coordinate its economic proposals.

(5) Finally, the South made the fatal mistake of assuming that a new order would be "given" to it by the North. It conveniently forgot that such an order will evolve mainly through its own actions, particularly in accelerating its economic development, in undertaking internal reforms, and in organizing its countervailing power to correct existing market imperfections.1

The mistakes of the South were, however, more than matched by those of the North:

(1) The North assumed that the NIEO was essentially a demand of the Third World and, as such, no concern of its own. It adopted a strategy of filibuster in U.N. negotiating forums-finding numerous problems for every solution that the South offered, rather than trying to explore honestly a number of policy options for each problem. The only area in which it showed a keen interest was that of energy, because of the immediate crisis the North faced. But the North failed to appreciate that the energy issue was only a part of the wider global crisis of excessive demand on increasingly scarce physical resources by a handful of privileged nations.

(2) The leaders from the North have been preoccupied with the immediate problems of recession, inflation and unemployment. It was felt that solutions to the short-term economic difficulties could be found without the cooperation of the South. This was a mistake. The energy issue itself should have made this clear. The existence of surplus capital goods capacity in the North in the face of unmet needs in the South should have given the Northern decision-makers some uncomfortable moments. The shifting demographic balance should have made them more conscious of potential markets in the South. But these perceptions were quite dim and seldom translated into policy. It was not realized in the North that its short-term economic problems were not temporary but part of a long-term structural change-much the same way as this was not realized in the 1930s within the national orders until Keynesian thought and President Roosevelt's daring initiatives combined to rescue Western capitalism from its inner contradictions. The same drama is now being replayed at the global level, the economically disenfranchised now being the teeming millions in the South who lack effective demand to buy goods and services from the North.

(3) Even when the North recognized the pressure for long-term structural change, there was a natural temptation to delay adjustment. Faced with shifting comparative advantage, the normal response was to protect declining industries and regions for fear of unemployment and popular unrest. Confronted with radically altered prospects of oil pricing and supply, the North postponed the more difficult conservation policies and deregulation of oil prices. Beset with mounting balance-of-payments deficits, the United States made increasing use of its international credit card and incurred more debt, thereby creating even more international liquidity and worldwide inflation. All these responses were mere temporizing. They delayed the adjustment costs, but magnified them in the process. When confronted with saving the next election or the next generation, the political leaders of the North frequently opted for the former. In such an environment, long-term changes were often mortgaged to short-term expediency. This is nothing unique in political life; but it is not the stuff of great leadership.

In many ways, both North and South have failed to understand the imperatives of the growing interdependence of mankind. The North tried to sell the old relationships of dependency to the South under the newly dusted slogan of interdependence; unfortunately, it did not recognize the practical implications of its own growing dependence on the South, or the fact that genuine interdependence is impossible without greater equality of opportunity. The South bargained for greater equality, without paying sufficient attention to the Northern interests or to the costs of sudden adjustment. The result has been a stalemate.

In this strange environment of formal motions without actual movement, the communist countries (containing one-third of mankind) have been quietly neglected by both sides. Nor have these countries themselves shown a keen interest in the North-South dialogue, opting to stay on the sidelines. In any real dialogue for a restructured world order, it would be important to obtain the active participation of them as well.


The non-dialogue of the last six years has persuaded some observers that no serious discussion between North and South may be possible in the early 1980s.2 This may well be true. It is possible that only a real international economic or political crisis will convince all sides to rush to the negotiating table-as has happened so often in human history. But to give up now on the dialogue would be a defeatist strategy. One can hope that both sides have learned some quiet lessons from the experience and mistakes of the last few years. These should be drawn upon in making a new attempt to revive the stalemated global negotiations.

A fresh approach can be made by examining the premises of the old global order in several specific fields-such as energy, food, the monetary system, resource transfers, trade, economic development, technology, multinational corporations, and international institutions. The basic strategy should be to let the analysis itself lead to the final solution rather than to start with any preconceived proposals. Four concrete questions must be posed in each case:

-What are the premises on which the old order was based?

-Are these premises still valid?

-If not, what are the new premises which should replace them?

-Will the new global order meet the legitimate interests of all sides?

We will make an attempt in the following discussion to analyze the present framework of the global order in several economic fields in this spirit.


The energy issue must be demystified. No reasoned dialogue on that issue has taken place so far, as it gets bogged down in side issues and peripheral controversies. Either OPEC (the Organization of Petroleum Exporting Countries) is made to feel guilty-which is hardly a brilliant strategy for soliciting its cooperation-or the industrialized nations and developing countries are asked to adjust to a new energy environment without having a clear idea of what historical and long-term forces are shaping this environment.

The energy problem can be seen in its proper perspective only if it is viewed as one of the many structural transformations that the world is going through, and if it is placed within the framework of restructuring of national and international orders which has become increasingly urgent. The energy issue arose when the world was already confronting a profound transition: concern for protecting the world environment; for eradicating absolute poverty; for developing new self-reliant styles of development in the South and a new value system in the North; for controlling the impending international monetary crisis; for the establishment of a New International Economic Order. The energy issue greatly sharpened the global perception of these other transitions by demonstrating the essential interdependence and vulnerability of all nations. It is within that broad perspective that the energy issue can be helpful as an engine of transition, so long as it is linked with other related issues.

There is a popular belief that the energy crisis (i.e., the rising real cost of energy) has "caused" the world economic crisis. This, in a way, reverses the sequence of events. The rising real cost of energy is the result of the overload of the world system, not its cause. The fast rate of increase in oil consumption in the past few decades has led to a rapid depletion of non-renewable resources. This happened because the price of oil was kept artificially low by international oil companies for a long period. Paradoxically, it was this artificially low price of oil which caused the eventual crisis by leading to an unregulated appetite for energy. If the oil price had been set not in relation to the cost of production-which was irrelevant-but the cost of alternatives, the adjustment process would not have become so abrupt and traumatic.

It is widely believed that oil prices are being kept artificially high at present through cartel-like action by OPEC: with the dismantling of OPEC, prices will crash. This is a fallacy. The current price of oil is largely determined by the forces of supply and demand as well as by the cost of alternatives. Before there are any screams of protest, let it be noted that production decisions are generally made by the national policies of OPEC members-not collectively-much the same way as the United States decides to curtail its wheat production to limit excessive supply.

In fact, many OPEC members are producing more oil (because of international considerations) than is required by their own national needs for revenue. If OPEC did not exist today, oil prices would probably stay at the same level or even rise, since it is a reasonable premise that oil production may go down in such a case, rather than increase, since many oil-producing and exporting nations may well decide to eliminate financial surpluses they do not immediately need and instead try to protect the real value of their depleting assets by keeping more of the oil in the ground.

Moreover, there is no substitute for oil on the horizon which is cheaper than oil right now. In fact, those oil-importing nations which are making costly and long-term investments in finding alternative sources of energy have a major interest by now in a relatively high price of oil which alone would justify these investments in alternatives. Finally, and most important, the real determining factor for the future price of energy may well turn out to be on the demand side: the extent to which conservation policies are pursued.

There is a widespread belief that OPEC nations are extremely rich; that they "create" enormous financial surpluses which they cannot use themselves and which put considerable pressure on the world economy; and that they are responsible for compensating oil-importing developing countries for the rise in their oil-import bills but are as yet providing inadequate financial assistance to them. Such reasoning only tries to put OPEC nations on the defensive, without either having the benefit of objective analysis or leading to any constructive results.

To begin with, most OPEC nations are not rich. They are liquid but not wealthy, though liquidity and wealth are being freely confused these days. Even including the capital-surplus nations of Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Libya and Iraq, the thirteen OPEC members had an average per capita income of less than $1,000 in 1978, only one-eighth of that in industrialized nations. Besides, most of the OPEC nations are underdeveloped, with low literacy rates, short life expectancy, unskilled labor, a low level of technology and research, little diversified development outside the oil sector, and with all the problems of a single-resource economy. OPEC nations have suddenly become financially liquid but they have yet to translate their good fortune into lasting sources of real wealth.

Second, OPEC does not "create" financial surpluses; it is the appetite of the industrialized nations for energy which does. These surpluses are "desired" by industrialized nations. If OPEC were to cut production further to eliminate present surpluses, the world economy would experience a severe slump. For OPEC nations, the economics of these surpluses is not very clear: there is a fair question whether oil in the ground will appreciate more over time than the real value of these financial surpluses. Moreover, let us also remind ourselves that these surpluses become a problem only because the world monetary system has not yet discovered either adequate market mechanisms or international intermediation through which these surpluses could be recycled to deficit countries on appropriate terms. This requires a reform of the monetary system, not of oil-pricing policies.

Finally, the capital-surplus OPEC nations have already provided over 4 percent of their gross national product (GNP) on the average during 1974-79 for concessional assistance, compared to 0.35 percent by industrialized nations-in other words, about 12 times as much as developed countries even when their per capita income is less than half that of developed countries.3 This is truly remarkable when it is realized that OPEC assistance is being given not out of current income but out of the proceeds of oil-a depleting capital asset. Hardly any other nation in the world provides assistance by running down its capital. This is not to suggest that OPEC assistance policies are optimal, or to foreclose any further avenues of mutual collaboration between OPEC and the rest of the Third World, but only to restore some perspective on this issue.

In short, the old premises of the global energy order have all collapsed by now; new premises cannot be constructed under the dark shadow of unfounded myths and unnecessary controversies. It is possible to identify key areas for global negotiations only within such a perspective. Let me turn now to three critical questions in this field.

First, how will future oil prices be determined? Obviously they will no longer be determined by a handful of powerful oil corporations dominating the international oil market-nor by the unilateral actions of OPEC. They will be determined by a whole range of decisions and factors: OPEC national production policies; global conservation policies, particularly in the industrialized nations; investment in the expansion of oil production and other energy alternatives in the non-OPEC nations; the probable cost of future oil substitutes; the pace of growth in the world economy, etc. Until some of these unfold and have their full impact, the international community will live through a transition period when oil prices may remain volatile unless a tacit international understanding is reached.

Most present forecasts indicate a real increase in oil prices (by three to five percent a year) over the 1980s. All nations have to gain if such an increase is gradual and predictable, rather than in sudden and delayed bursts. But before any international understanding or agreement can be reached in this area, the interests of various sides will have to be identified. While oil-importing nations would like to have some agreement on the future course of oil prices, OPEC nations would probably be reluctant to enter into any such agreement without clear understandings on conservation policies in industrialized nations, protection of the real value of their financial surpluses, and assistance with the conversion of their oil revenues into real, long-term development in order to prepare their economies for a post-oil stage. It must also be recognized that OPEC alone cannot "enforce" or "guarantee" any particular oil price, since a whole range of policy decisions will influence the market, as argued above. OPEC can only reach understandings on matters within its direct control.

Second, policies for energy conservation will be an extremely crucial part of adjustment during the 1980s. Cheap oil has encouraged wasteful patterns of energy consumption and choice of inappropriate technologies. One of the problems in adjustment is that some of the decisions are frozen by now in some societies, e.g., stress on private automobiles and public highways, suburban modes of living, energy-intensive industries. Unfreezing these decisions for the future will require tremendous political and economic courage, particularly in the industrialized nations. The developing countries have as yet more options available if they review their future patterns of development and consumption styles in the light of the new energy situation. There is generally considerable room for economizing if energy prices are allowed to rise to their proper level in oil-importing nations. To a limited extent, conservation policies are already working in some of the industrialized countries, but the eventual adjustment in their patterns of consumption and development is so fundamental that it has barely begun.4

Third, oil-importing developing countries require substantial resources for financing larger investments in domestic energy production. These investment needs are estimated by the World Bank at around $80 billion a year (in current dollars) during 1980-90.5 Various proposals are currently being made to provide investment resources to oil-importing developing countries for energy development, such as an energy affiliate in the World Bank to provide $5 billion a year over the next five years; expansion of the present OPEC Fund into a development agency with a capital of $20 billion; schemes for mobilization of larger private foreign investment. The total investment needs in energy are so large that there is room for all these initiatives and great merit in having diversification of channels for this purpose. What is important, however, is to ensure that these initiatives lead to additional transfers; that they reflect the changing balance of financial power in the world; and that they are based on a participatory system of management and control.

These are some of the key issues around which global negotiations can be organized in the field of energy.6 The energy issue was analyzed at length merely to illustrate that even in a sensitive area like this, there are ways to avoid irrelevant issues and to focus on the new premises which should replace the old while meeting the legitimate interests of various nations. In the following discussion, this point is illustrated further in a few more areas under negotiation, though much more briefly.


In the monetary field, just as in energy, most of the premises on which the global monetary order was built have quietly disappeared.

The Bretton Woods system after World War II was based on fixed exchange rates and the relative stability of world prices. Since the early 1970s, exchange rates have been fluctuating freely (and even violently for the dollar) and we are living with high rates of global inflation.

The International Monetary Fund (IMF) was expected to bring pressure on both deficit and surplus countries to take the necessary bitter medicine and quickly to nurse the balance of payments back to a happy equilibrium. The Fund never enjoyed much leverage with surplus countries to begin with. By now, it cannot put much pressure on the biggest deficit country-the United States. The huge financial surpluses of OPEC confronted the Fund with yet another challenge, and it has so far found no satisfactory way to recycle these surpluses to deficit countries, either in an efficient or an equitable manner, though the scale of its operations in developing countries has increased significantly in recent months. Commercial banks quickly assumed the role of recycling financial surpluses and have done a fairly good job, but only within the narrow confines of their criteria of creditworthiness and profit. About two-thirds of commercial credits have been channeled to only ten middle-income developing countries.

The United States assumed the role of a central bank; nearly 80 percent of the additional international liquidity in the last three decades was supplied by the dollar. For all practical purposes, the United States carried an international credit card which it used indiscriminately to flood the world with excess liquidity. Instead of carrying out real adjustments at home, the United States has been paying for its balance-of-payments deficits through the simple device of international deficit financing. The IMF has not been able to exercise much control over the creation of international liquidity through national reserve currencies.

The IMF was charged with the responsibility for providing balance-of-payments support to deficit countries, with reasonable policy conditionality to adjust the causes of their fundamental disequilibrium. The potential resources of the Fund have increased substantially in recent years; it can lend as much as $40 billion to developing countries from a maze of windows (called "credit facilities"). Unfortunately, there were few takers in 1979, when the IMF received more payments from developing countries than the funds it lent to them. Recently, the IMF has adjusted the policy conditionality of its lending and the scale of its operations has increased impressively. However, the critics of the Fund charge that (a) its finance is fairly short term while the adjustment problem of the developing countries is not, and (b) its policy conditionality is very tough, as it often requires that the books of a nation be balanced, irrespective of the level of economic activity and employment at which this new balance is reached.7

Finally, the socialist bloc still operates largely outside the framework of the IMF. In view of the growing economic and monetary importance of this bloc, any new monetary order must seek their full participation and cooperation.

Overall, the global monetary system is in such bad shape at present that an entirely fresh start may have to be made. No marginal improvisations will suffice in the 1980s. The new premises on which the monetary order should be rebuilt are implied by the foregoing analysis and are worth recapitulating.

-National reserve currencies must be phased out of the international payments system and replaced by an international currency (modified Special Drawing Rights), to be created and managed by international jurisdiction.

-The creation of international currency should be guided by the real increase in world output and exports so as not to generate inflationary pressures.

-The distribution of this international currency should be based on present as well as potential balance-of-payments needs, including a link between international currency and development assistance.

-The IMF, or a wholly new institution, should be gradually evolved to perform the role of an International Central Bank

-For this purpose, the ICB should include all nations (socialist bloc as well) and its management and control should be genuinely international.

-The ICB should be empowered to put as much pressure on deficit countries to adjust their balance of payments as on surplus countries, so that the present asymmetry of treatment is removed.

-The ICB should also act as the lender of last resort, to refinance short-term debts, provide a "safety net" against unforeseen liquidity crises, and play a decisive role in recycling financial surpluses in collaboration with the private capital market.

These are not minor reforms; this is drastic surgery. The new monetary order can emerge step by step once an overall framework has been accepted. Major economic powers will find this degree of international discipline irksome to begin with, but they will gain a great deal in the long run from rules which are accepted by all nations. The developing countries, of course, would reap enormous benefits from these reforms. Lord Keynes' vision in the 1940s would finally have been adapted to current realities-after 40 years of drift and indifferent experimentation.


Before searching for a new basis for international resource transfers, it is 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 completely on the fluctuating political will of the rich nations. The attempts by the United Nations and the Pearson Commission to enforce greater discipline in this field through the 0.7 percent-of-GNP target for Official Development Assistance (ODA) has failed miserably by now.

-Most of the present official assistance (75 percent) flows through bilateral channels rather than multilateral institutions. As such, it is greatly influenced by bilateral political relationships. For instance, only 45 percent of the bilateral official development assistance is directed toward the poorest nations that need it the most, compared to over 90 percent of ODA which flows through multilateral channels.

-The resource transfers have been in gross terms, with insufficient concern for net transfers. Inappropriate terms in the past have created a major debt problem, so that debt servicing reduces the gross transfers by about one-half by now.

-The international framework for resource transfers has excluded the socialist bloc, which has provided little assistance so far. New OPEC sources, while very generous, have been geographically concentrated on a few countries.

-The "aid relationship" is often viewed as a relationship of dependence, not partnership, in the Third World. Unlike the Marshall Plan, developing countries which receive assistance do not participate in the basic decisions governing such assistance.

There is no doubt that international assistance has performed a valuable role in the past. However, it is already becoming clear that a serious search must start for finding new premises for international resource transfers in the 1980s, somewhat along the following lines:

-International resource mobilization should become more "automatic" and be accepted as an international obligation toward the poor nations. International taxation can be introduced through a variety of devices: a progressive income tax on all nations, with a minimum exemption limit; introduction of a link between creation of international liquidity and development finance; indirect taxes on consumption of non-renewable resources by the rich nations; taxation of armament spending; and royalties from ocean-bed mining. The proposals are well known. What is needed during this decade is to undertake serious technical studies on them and to create a favorable political climate for the acceptance of the concept of international taxation.

-A clear distinction must be made between automatic mobilization and automatic transfer of resources. What is implied by proposals of international taxation is the former, not the latter. Once resources are raised automatically, they need to be channeled through international institutions to needy countries according to certain performance criteria-as national treasuries must determine national priorities before committing the resources they raise through taxation. In this case, the control of international institutions can become genuinely international once their resource base has become automatic and internationalized. The present awkward situation where international financial institutions are totally dependent on the goodwill of individual creditor nations will then be replaced by shared international responsibility and control.


The world food system-if we can call it that-has been influenced by three main assumptions over the last four decades:

-The comparative advantage in growing food surpluses was supposed to lie with developed countries possessing vast areas of good agricultural land and sufficient capital and technology. Thus, the United States, Canada and Australia emerged as the breadbaskets of the impoverished world. This situation is likely to change radically. Higher energy costs will shift the comparative advantage away from traditional food-exporting areas, since agricultural production has become extremely energy-intensive in these countries; in the United States it takes ten times as much energy to produce one ton of food grains as it does in India. Over the coming decades, low-income countries of Asia and Africa are expected to develop a major comparative advantage in food production.

-It has been assumed so far that developing countries need not grow all their own food; they can always import it. The food deficits of the developing countries have been increasing rapidly, from about 20 million tons in 1960 to nearly 80 million tons in 1980, and to an estimated 145 million tons in 1990.8 Only recently has it been realized by the developing countries that, without accelerated agricultural production, there will be little stimulus for their industrialization or overall growth. Nor is there any other effective means of putting adequate purchasing power in the hands of the poorest population in the countryside. Moreover, the developing countries lack both the physical and financial capacity to import such huge food deficits, apart from the uncertainty such dependence inevitably creates. The working assumption for the next two decades has to be that developing countries would like to achieve relative self-sufficiency in food grains.9 This means increasing the food production by four to five percent a year, compared to an average of less than three percent for the last four decades. It would require an annual investment of $30-50 billion, major agrarian reforms in the Third World, and a coordinated effort by the international community to help developing countries achieve these new goals.

-Almost by default, U.S. food grain surpluses had become an unofficial guarantee against periods of unexpected crop shortfalls in the developing world. However, world grain reserves have fallen by now to only 40 days of the annual consumption requirement. Obviously, small fluctuations in world food production can play havoc with food prices and human lives in the absence of adequate reserves. A world food security system cannot be based on the present precarious assumptions. From an unofficial system, we must move now toward an agreed framework of food grain reserves over which there is multilateral, not national, control.

Thus, in the food area as well, many of the original assumptions of the global order are losing their validity. In this case, some of the adjustments can be made through national development policies and do not require an international agreement. However, accelerated food production in the developing countries and establishment of a system of world food security do require international help and collective agreement.


Perhaps the main point has been amply made by now. A productive way of making a fresh start on the North-South dialogue would be to take up concrete areas of the global economic order, to examine critically the premises on which they were built in the past, and to negotiate new premises wherever the old assumptions have been eroded with the passage of time or new assumptions are required to serve the mutual interests of all nations. Such an approach would take the present dialogue away from empty rhetoric, costly filibuster, and skillfully engineered stalemate to more practical and constructive channels.

If this basic approach is accepted, it can be extended to all other areas of global economic concern-whether they be future patterns of international trade, codes for transfer of technology, environment for operation of multinationals, or management and control of international financial institutions. There is an obvious link between all these fields, but the negotiations cannot be conducted simultaneously in all areas nor can the new rules be designed in one giant step. Once it has been recognized that reconstruction of a new global order is the joint responsibility of all nations, appropriate forums can be established for concrete negotiation. The initial step is to agree on the basic approach. If the U.N. Global Negotiations are revived in the next few months, as they must be, they provide a unique opportunity to travel down this road.

If these global negotiations are not to repeat the sad history of the Conference on International Economic Cooperation (CIEC) negotiations in Paris in 1977, at least two mistakes must be avoided. First, all sides must approach the negotiating table in a spirit of shared responsibility and not as adversaries. Second, the negotiating agenda and format should be manageable and have something in it for all sides. The minimum agenda can consist of three items: the search for a new international energy order; fundamental monetary reforms; and more automatic mechanisms for international resource transfers.

Any enlargement of the agenda in the first instance risks dilution of negotiations and paralysis of real bargaining. Once the agenda is so limited, the best way to proceed may be to agree on some overall objectives in the U.N. Committee of the Whole but then break into three separate negotiating groups, each with a substantive secretariat and a concrete timetable, with the mandate to produce specific proposals (and various alternatives, if agreement is lacking) for final bargaining sessions and tactical compromises in the Committee of the Whole.

The purpose of this article is to suggest an approach, not a blueprint. It is perhaps foolhardy to be optimistic about the revival of North-South dialogue in the current, rather barren, international political environment. But great initiatives in history have often been taken not in times of affluence, but in moments of crisis.

We should take some heart from the heady (some may call it naïve) optimism of the recent Report of the Brandt Commission.10 Whatever the critics might say, this Report marks a tremendous advance in the intellectual journey we have all made since the days of the Pearson Commission Report in 1969-from concepts of camouflaged dependency to genuine interdependence among nations; from a preoccupation with resource transfers to a concern with restructuring all international economic relations and institutions; from a quiet defense of the structure of Bretton Woods institutions to a searching analysis of the need for their future evolution.

There may be little hope that some of the concrete ideas of the Brandt Report-whether international taxation or an international currency under international control-will be implemented in the next few years or even during the decade of the 1980s. But I find great comfort in the fact that practical men and women of the world are beginning to "distill their frenzy from some academic scribbler of a few years past," as Keynes so elegantly put it in his defense of the power of ideas. If ideas are changing so rapidly, can concrete action be far behind? And why not make yet another effort to revive the presently stalled North-South dialogue? We have nothing much to lose but the present paralysis in human affairs.


Let me add a final word on the North-South Summit which may meet in June 1981 in Mexico, according to present indications. History offers few such opportunities to think collectively about our global future. Careful preparations are needed from now on to realize the full potential of such a Summit meeting.

If I had a chance to brief the Summit, I would stress the essential principles, not the details; the broad architecture, not the intricate design. Political breakthroughs come from a change in political perceptions, not from detailed technocratic blueprints.

My message to the North-South Summit will be a simple one:11

(1) Please recognize that the world's economic and political crisis is not a temporary one. It is deeply rooted in present international structures and institutions. National actions alone will not help, unless the global structures themselves are changed, preferably through an orderly dialogue and certainly in the long term interest of all nations.

(2) What is really at issue is a sharing of economic and political power, within nations as well as internationally. It will prove extremely disruptive if existing power has to be changed only through the organization of countervailing power or through unilateral national or collective actions. There is a historic opportunity for all of you to engineer an orderly change, and to minimize the costs of transition.

What is urgently needed is for the global community to finally show its readiness to assume certain global responsibilities in key areas of policy and to set in motion certain mechanisms and processes through which these responsibilities can be implemented. Such a political compact of global responsibilities should include an agreement in at least the following essential areas:

-An internationally accepted floor below absolute poverty all over the globe and a concrete framework through which this objective can be reached over the next two decades.

-An agreed system of international food security, based on additional investment for less-developed countries' national production, adequate food reserves, and emergency assistance in times of crisis.

-A global responsibility for putting in place a new international energy security system, including global understanding on energy conservation, vastly increased investment resources for energy development, and mechanisms for more predictable increases in real prices.

-Acceptance of the principle of greater automaticity in mobilization of resources to be channeled through international institutions under genuine international control

-Acceptance of the principle that any international reserve currency should be created only under international jurisdiction and for the benefit of all nations.

-Acceptance of the global responsibility for creating adequate recycling mechanisms, particularly to ensure that adjustment in the next few years is not at the cost of either economic growth or social programs, or political survival of developing countries.

-Clear recognition of the contradictions between present levels of armaments spending, global population increase and global environment deterioration for the evolution of a new order.

I would like to suggest to the Summit that by initiating such a global Magna Carta of new premises for an old order, they will unleash forces of creativity and enterprise all over the world and provide a framework within which global negotiations can meaningfully proceed. It may even lead to a new Bretton Woods Conference to implement much of this new vision. And I should like to plead with the Summit's members that what the world badly needs today is a new vision for this ailing planet, however long it takes to implement each individual element of reform and however headstrong the incrementalism we generate, not a quick fix to get through the next six months.

2 Roger D. Hansen, Can the North-South Impasse Be Overcome?, Development Paper 27, Overseas Development Council, November 1979.

3 For source of data, see Robert S. McNamara, Address to the Board of Governors of the World Bank, September 1980, p. 13.

4 World Development Report 1980, Washington: The World Bank, 1980, p. 14.

5 Energy in the Developing Countries, Washington: The World Bank, August 1980.

6 For a fuller discussion of these issues, see Salah Al-Shaikhly and Mahbub ul Haq, Energy and Development: An Agenda for Dialogue, North-South Round Table, Paper No. 2.

7 "The International Monetary System and the New International Order," in Development Dialogue, 1980, No. 2.

8 Willy Brandt, et al., North-South: A Program for Survival, Cambridge, Mass.: The MIT Press, 1980, p. 91.

9 See the final communiqué of the World Food Conference, Rome, 1974.

10 To indulge my own vanity, I would refer the reader to some of the proposals in chapters 10 and 11 of my book, The Poverty Curtain, New York: Columbia University Press, 1976, which find an echo in the Brandt Commission Report.

11 These suggestions are based on my concluding statement to the North-South Roundtable in Ottawa on November 16, 1980.



You are reading a free article.

Subscribe to Foreign Affairs to get unlimited access.

  • Paywall-free reading of new articles and a century of archives
  • Unlock access to iOS/Android apps to save editions for offline reading
  • Six issues a year in print, online, and audio editions
Subscribe Now
  • Mahbub ul Haq is Director of Policy Planning at the International Bank for Reconstruction and Development, Washington, D.C., and is the author of The Poverty Curtain and other works. The views in this paper are expressed entirely in a personal capacity.
  • More By Mahbub Ul Haq