Development and the Group of 77

While the ability of the Non-Aligned Movement to make a significant impact on the politics of the Cold War world was blunted by its internecine disputes, in the economic field its legacy was more important, for here it acted as a catalyst to the opening of a dialogue between the West and the Third World over development issues.

By the start of the 1960s there was considerable interest in economic development not just among the non-aligned states, but also on the part of other developing countries, no matter what attitude they had towards the Cold War. For example, America's allies, such as Pakistan and the Philippines, were as interested in this area as India and Egypt. The common link between these states was that their economies were still substantially influenced by their colonial heritage; that is, their chief sources of income were derived from the production of commodities for export to the rich, capitalist countries of Western Europe and North America. This was a fragile foundation on which to build a country, for the prices paid for commodities on the world market could fluctuate wildly, thus making economic planning on the basis of a predictable flow of revenue extremely difficult. Moreover, the development agenda also appealed to the states of Latin America: even though most of them had long been independent, they still suffered from the same unfavourable terms of trade as those states that had only just received their freedom. Indeed, work in the 1950s by a number of Latin American economists, such as Raul Prebisch, had shown that the continent's terms of trade were getting worse rather than better.

Rejecting the Cold War paradigm that relegated issues such as development to the periphery of international relations, the Non-Aligned Movement played an important part in turning the vague discontent of the amorphous Third World into more constructive channels.

In 1960, even before the Belgrade summit, some of the key non-aligned states had attempted to place development on the international agenda by making use of the fact that the wave of decolonization sweeping Africa meant that the developing states now constituted a majority in the UN General Assembly (UNGA). In two symbolic moves in December 1960 they mobilized this newly acquired voting power to pass UNGA Resolution 1514, which called for the independence of all states under colonial rule, and Resolution 1522, which called for the 1960s to be a ‘development decade'. In July 1962 the Non-Aligned Movement sponsored an economic conference in Cairo, attended by thirty-six states, including some from Latin America. At this and subsequent gatherings the economic objectives of the developing countries coalesced around two issues: first, that the price of commodity exports should be fixed, and, second, that the Western Powers and the Bretton Woods international financial institutions, such as the IMF and the World Bank, should provide financial aid on more

Bretton Woods

The site of an inter-Allied conference held in 1944 to discuss the post-war international economic order. The conference led to the establishment of the IMF and the World Bank. In the postwar era the links between these two institutions, the establishment of GATT and the convertibility of the dollar into gold were known as the Bretton Woods system. After the dollar's devaluation in 1971 the world moved to a system of floating exchange rates.

import substitution

The process whereby a state attempts to achieve economic growth by raising protective tariffs to keep out imports and replacing them with indigenously produced goods.

see Chapter 17

‘modernization'theory

The idea that rapid economic development is achieved by a state going through a ‘take-off’ stage in which an entrepreneurial class and high investment in economic growth play a crucial part. The theory is closely associated with the Massachusetts Institute of Technology (MIT) economist Walt Rostow, who served in both the Kennedy and Johnson administrations.

see Chapter 16

Alliance for Progress

The American assistance programme for Latin America begun in 1961, which called for an annual increase of 2.5 per cent in per capita income, the establishment of democratic governments, more equitable income distribution, land reform, and economic and social planning. Latin American countries (excluding Cuba) pledged $80 billion over ten years, while the United States pledged $20 billion. After a decade of mixed results, the Alliance was disbanded in 1973.

favourable terms, free of Cold War considerations. More generous provision of aid would, it was hoped, assist with the development of import substitution industries, which would in turn reduce the dependence of the newly independent states on commodity production and trade with the West.

Another factor that allowed for greater progress to be made in the economic field was that by the start of the 1960s the Western Powers were beginning to show considerable interest in this area. One reason for this was that the European colonial Powers had, even prior to independence, been concerned to encourage economic development, and had indeed invested considerable sums of money in their African colonies. Their initial interest naturally had been to develop the colonial economies as useful adjuncts to that of the metropole, but over time they came to see that a certain degree of largess could help to maintain economic links even after independence. The United States, in turn, had its own perspective on the development question. Influenced by the development in the late 1950s of ‘modernization’ theory, the Kennedy administration believed that, through the judicious use of financial and technical aid, and advice on how to construct a modern capitalist economy, the United States could assist developing countries to achieve economic ‘take-off’. Conversely, failure to assist, it was held, might mean that the process of modernization would be drawn out needlessly and that the resultant economic and social tensions might provide a breeding ground for the dissemination of communism.

This was particularly pressing, for it was believed that the Third World was undergoing a population explosion that would only exacerbate its discontents. There was therefore a need to act quickly before conditions deteriorated even further, with the attendant danger that this might lead to a rise in anti-American sentiment. It was in this spirit that Kennedy in 1961 initiated the Alliance for Progress in Latin America. Thus, while the developing states saw the development agenda as separate from the Cold War, this was not how it was interpreted in the West.

Influenced by such ideas, and afraid that refusal to discuss the developing world’s concerns would constitute a propaganda reverse, the Western states proved receptive to the need for talks. In 1964, following a declaration issued under the authority of seventy-five developing states calling for the UN to take action, a conference took place in Geneva where the West agreed, although somewhat reluctantly, to the formation of the United Nations Conference on Trade and Development (UNCTAD). The developing states, which had by this point organized themselves outside the Non-Aligned Movement’s auspices into the Group of 77 (G-77), tried over the coming years to use UNCTAD as a forum to press for fairer terms of trade and for greater access to development aid. However, while UNCTAD was able to make some progress by loosening the IMF’s lending rules and bringing about a slight lowering of the West’s protective tariffs, overall the results were disappointing, for there were strict limits on how far the Western states were willing to compromise.

The failure to achieve all of their goals naturally led to increasing anger on the part of the developing states, which began to believe that nothing less than a major transformation of the international economic order would address their concerns. The disenchantment of what was now becoming an increasingly self-conscious

Third World was stimulated further by the intellectual environment surrounding development issues.

As early as the 1950s a Harvard economist, Paul Baran, had argued that underdevelopment was largely the result of the dominant presence of foreign firms in the economies of the developing countries. These companies, he argued, contributed little to economic growth because they exported their profits back to their home country, leaving little capital for local investment. These ideas were developed further in the late 1960s and early 1970s in a series of studies on Latin America by Andre Gunder Frank, who argued that the operation of the capitalist world economy meant that the Third World had to be kept in a permanent state of underdevelopment. These conclusions reinforced the impression that only fundamental change could assist the G-77 countries.

Group of 77 (G-77)

An organization, originally of seventy-seven nations, that has lobbied at the United Nations for the need to equalize the terms of trade between the developed and developing worlds and to ease access to international aid from institutions such as the World Bank and the IMF.

Clearly, however, the advanced capitalist states were not likely of their own volition to accept such a transformation; rather, it rested with the Third World to force them to meet its demands. In the early 1970s it appeared that the moment had come, for the United States, after its debàcle in Vietnam, was perceived to be weaker economically and politically, and thus susceptible to pressure. This realization helped to contribute in 1970 to a revival of the Non-Aligned Movement, which, after a period of inactivity in the late 1960s, held its third summit at Lusaka in Zambia. Using its moral weight and increasing organizational coherence, the Non-Aligned Movement now concentrated on pushing the Third World's economic interests, although it continued also with more political concerns such as calling for the ostracism of South Africa and Israel. However, it did not prove to be the most important organization in the economic field, for that prize went to another body — the Organization of Petroleum Exporting Countries (OPEC).

Organization of Petroleum Exporting Countries (OPEC) The organization founded in I960 to represent the interests of the leading oil-producing states in the Third World.

OPEC had been founded in 1960 as a group designed to further the interests of the oil-producing states of the Third World in the struggle against the rapaciousness of the Western-owned oil companies. At first it had made little impact, but by the early 1970s it began to acquire more power. This development arose for two reasons: first, the developed economies were becoming increasingly reliant on oil produced by OPEC members, and, second, OPEC had begun, following an example set by Libya, to force the oil companies to allow its members to set the price of oil. Initially OPEC used its new influence tentatively and purely for economic gain, but in the autumn of 1973 its position changed dramatically. The issue that sparked this transformation was a political one, and one, indeed, that was dear to the Non-Aligned Movement, that is, opposition to Western support for Israel in the October 1973 war in the Middle East. Outraged by a massive American airlift of arms to Israel, OPEC announced a fourfold increase in oil prices. The commodity producers were finally having their revenge.

Although their own members also suffered from having to pay more for oil, the G-77 countries and the Non-Aligned Movement expressed their approval of OPEC's action. Furthermore, emboldened by this challenge to the West, in April 1974 the Non-Aligned Movement, led by President Houari Boumedienne of Algeria, used the occasion of a special session of the UN General Assembly on the energy crisis to press for the establishment of a New International Economic Order (NIEO). The NIEO proposals once again reiterated the G-77's stance on fixed prices for commodities, but added demands for sweeping changes in the operating methods of the World Bank and the IMF, including greater voting rights for Third World countries. Using their majority in the General Assembly, the nonaligned nations were able to pass a resolution supporting the NIEO. This was a dramatic moment, for it appeared that the Third World, in the face of Western weakness, was now setting the international agenda and that the development paradigm was now centre stage. However, turning these aspirations into reality proved to be a difficult undertaking and, in retrospect, the demand for the NIEO can be seen as the zenith of the Third World's ability to influence international relations and to act as a cohesive bloc.

New International Economic Order (NIEO)

The proposal put forward by the Non-Aligned Movement and adopted by the UN in 1974 for major changes to be made to the international trading and financial order.

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Source: Best Antony. International History of the Twentieth Century and Beyond. Routledge,2008. — 638 p.. 2008

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