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Structural costs; the stakes; the struggle for the NIEO

The claims by Third World states for a 'New International Economic Order' formed a coherent whole whose logic was perfectly comprehensible. Substantial and sustained rises in raw materials prices, strengthened by a debt reduction and more favourable conditions for the transfer of technology, were the method par excellence of improving the financial prospects of a new stage of Third World industrialization. This industrialization, based on what conventional wisdom regards as 'comparative advantages', was conceived on the dual basis of relatively cheap manpower and natural resources allowing for exports to the developed world in an expanded network of world trade. The opening up of developed countries' markets to the export of the manufactures of the Third World would, according to the conventional wisdom, serve the collective interest by making the international division of labour more responsive to the source of inputs. Furthermore, industrial exports would help bridge the Third World food gap through imports replacing aid.

The rise in oil prices at the end of 1973 strengthened the credibility of this programme by showing that it was possible to secure alternative prices for raw materials, and that these were certainly not 'unbearable' for the developed world. It showed that the financial resources generated in this way could be devoted to an acceleration of industrialization in the beneficiary countries. In this sense, October 1973 marks a turning point in the history of international relations, the moment of consciousness of the Third World countries not of their rights but of their power.

It was, therefore, a programme in total accordance with all the sacrosanct principles defended by Western liberal orthodoxy. A programme taking greater heed than ever of the objectives of world economic interdependence and seeking to place this on a footing of comparative advantages. A programme that should have been shaped and proposed by the economics professors in the most conservative institutions rather than by the governments who had constantly been lambasted by those institutions for their bent to 'nationalism', a supposedly obsolete philosophy contrary to the interests of their peoples. It is an irony of history that the initiative came from the 'rationalist' Third World and was unanimously rejected by the apostles of the principles on which it was based!

The claim of the NIEO coincided with the most serious post-war crisis. It was even argued that the oil price rise - the first (and as yet sole) indicator of the implementation of the Third World programme for the NIEO - was the 'cause' of the crisis. A veritable campaign was orchestrated on this theme in 1973 and 1974, using every kind of argument and despite all the facts: the beginning of the international monetary crisis and the appearance of US external deficits since the mid-1960s, the precedence of stagflation, the scale and persistence of inflation rates irrespective of the calculable increase attributable to oil, the (still massive) placing of oil revenues on the Western finance markets, the modest role of petro-dollars in comparison with the movable assets of the transnationals in speculative fluctuations, and so on. The campaign has of necessity long hung fire: erosion of the oil price in the 1 980s and the reversal of the conjuncture ('the end of the era of OPEC') have never allowed it any funkier take-off.

The fact is, that the crisis has its main origin in the international division of labour in force, that challenged by the claims of the NIEO. We should remember that the former international division of labour confined the developing countries to the export of (agricultural and mineral) primary products, as their (import substitution) industrialization was strictly limited to their domestic market. This international division of labour was one of the bases on which the continuing prosperity of the previous quarter of a century was built. A prosperity confined, if truth be told, to the developed centres of the system. If the centres at the time in question enjoyed a high level of employment, continual growth in productivity and comparable growth in wages, for the underdeveloped peripheries and their growth rates the same mechanisms that give rise elsewhere to full employment and growth in real wages produced a continual rise in unemployment and underemployment, stagnation, or a fall in real wages and the rewards for rural producers; there the crisis was permanent. Only from the 1970s did the crisis begin to spread throughout the world system, that is, to pass to the developed centres as well.

If this is the case the best way to overcome the crisis would be to change the ground rules of the international division of labour and accept the claims of the Third World. It must be obvious that export industrialization in the Third World would provide work for a substantial number of the Third World's unemployed, create new outlets for the machine tools of the developed world and correct the imbalances in the profitability of various industrial sectors, since the falling rate of profit shown by the crisis arises from the inappropriateness of the current international division of activity.

Such measures to revise the international division of labour serve only to highlight the economic logic of the system. Here lies its logical strength and current weakness. Since: a) the world system cannot be reduced to a simple 'pure' economic logic, namely maximization of profit on a world scale, without regard to the division of the world into nations, the locus of operation of essential and immediate political forces; and b) the crisis cannot be surmounted except by implementation in a co-ordinated and systematic manner of the new international division of labour, nor is this the 'beet' solution in the light of national factors, nor is this solution the most 'probable'.

Peaceful, co-ordinated and systematic implementation of a new international division of labour might be the dream of a technocrat with a single purpose: the maximization of profit. Oddly enough the Third World states have behaved like this collective technocrat, while the Western authorities, apostles par excellence of the philosophy of profitability, have recoiled from the logical consequences of their own philosophy and rejected the industrial relocation that was on offer.

Accordingly, the internal logic of the programme for the NIEO reflected the contradictory character of capital accumulation on a world scale. To some extent the programme was initially a scheme to deepen the international division of labour through a levy on the rate of surplus value (super-exploitation of labour power at the periphery) it would have permitted a rising rate of profit on the world scale (and at this level looked like a programme of capitalist development), but in another way, within the framework of this common aim of capitalist development, the strategies of the monopolies and the imperialist states and those of the bourgeoisies and the peripheral states would have come into contradiction.

The imperialist monopolies took a narrow view of the 'new order'. To them it meant taking greater profit from the cheap manpower and natural resources of the Third World, by relocating segments of the production processes they themselves controlled. Under this strategy relocation was not aimed at creating integrated national industrial economies in the Third World, however outward-looking. On the contrary, the interest of the monopolies was in exporting discrete segments in such a way as to retain control over economic life as a whole on the world scale. In this framework the monopolies could make small concessions to the 'host countries', or even in extreme cases renounce formal ownership of the capital. Competition, the absence of integration of the segments, their technological dependence, such as the obligation to sell their output on the oil-rich markets controlled by the monopolies, all reduced the meaning of formal ownership of the capital; the monopolies could impose very harsh conditions on their partners. It was laissez-faire on the scale of a world under monopoly domination. In such circumstances, even the financing of the relocation through the Third World countries' own means could bring an additional benefit to the monopolies as vendors of turnkey factories. This profitable exaction was in effect included in the pricing structure. Meanwhile the exaction could be enlarged through visible financial transfers by way of technology sales, licenses and trade marks, and through interest on loans for plant expansion. Sometimes even the pricing structure was distorted to remove the apparent profitability from the segments transferred: loans supposed to make good 'management deficits' are nothing less than resurrected forms of capitalism's perennial tendency to plunder. Financial neo-capital, in imitation of the old mercantilist capital, appeared anew, as at the dawn of capitalism: 'primitive' accumulation is always with us.

This strategy has its own name - and not by chance - of 'redeployment'. It has the active support of the World Bank, the IMF and other institutions of the developed capitalist states, and wins acceptance as a 'new order' for the new enclaves of the 'free zone' kind. Obviously the strategy reduces to a minimum the local state's role, which becomes a mere administration policing the exploited labour force. It also aims to divide the Third World not only by widening the gap between countries of 'strong growth' and 'stagnant' countries, but also in setting the former to compete against one another.

What the Third World, or at least the driving element among the nonaligned, meant by a new international order was very different. Revision of the international division of labour along the lines described was intended to accompany and implement the establishment of a self-reliant industrial national economy.

The strengthening of the national state, and the active role of state policy were, in this strategy, to ensure that industry was not made up of discrete fragments, but of every stage of the production process. The resort to importation of the ingredients of these production lines (the purchase of turnkey factories) entailed a high level of exports, whether of 'traditional' raw materials or new industrial products. Hence the success of the strategies was largely dependent on the capacity to win concessions, which was in turn the programme for the new international economic order.

The conflict of these two 'interpretations' of the new order has appeared in all the negotiations on the industrial international division of labour and relocation. The points of discussion were the character and options of establishment, the degree of decentralized decision-making, the methods of financing the transfers, issues of personnel training and management, and access to external markets. The Third World states generally pressed for: the establishment of as complete industries as possible, with upstream and downstream links, agreed rules subjecting the management of industrial units to the state's industrial policy, an option for management of units by local staff, access to international distribution networks for manufactured goods to localized firms (as the lowering of protectionist barriers by the developed countries was not regarded as a sufficient guarantee of access to these markets), support for national technological research, regulated financing (to avoid, for example, a subsidiary of a multinational financing its investment by calling on local banking sources without bringing in new capital), regulation of transfers (a sharing of risks, ceilings on exportable profits, obligations to invest part of the profit in the national economy) and so on.

These demands were regarded as unacceptable by the multinationals whose sole interest was in partial relocation through subsidiaries under their virtual control.

Gradually, most of the Third World states have had to come to terms with the redeployment strategy. The only states in a position to negotiate are those that refuse the direct establishment of subsidiaries and seek an alternative in the purchase of turnkey factories within the framework of their overall industrialization policy.

The strategy of these states counted on the possibility of successful change of the international order through unilateral joint action, and through further action from North-South collective negotiations. The idea, it should be remembered, was to organize cartels of Third World producers who could insist on price revisions for raw materials. National control over natural resources should allow scope for manoeuvre not only on supply, but also and above all on exploitation of the resources that took into account long-term national interests and halted the rates of exploitation governed entirely by the needs of the developed world. With this new-found strength, the Third World countries hoped to enjoy a genuine negotiating power that would oblige the North to make concessions: for instance, access to its markets, a code of conduct for transfers of technology. Co-operation between Third World countries ('collective self-reliance') was part of this bid for strength (cf. Chapter 7).

This is the essential context for discussing the use of oil surpluses. On some views the NIEO was to be no more than the rise in oil prices alone and the relocation of export industry a minor operation. On this view the oil revenue surpluses should be made available to the developed financial markets to supply their own policies of intervention in relations between developed countries, and marginal support for the 'survival' of the old international division of labour in the developing countries. This rescued the attitude of 'aid' as a permanent safety-valve ensuring the perpetuation of a system that was increasingly unjust day by day. The actual use of oil surpluses has in fact served this purpose (cf. Chapter 6).

In the mid-1970s there was still the hope that the Third World would reject this narrow view. The non-aligned movement and the group of 77 were seeking a strategy for collective battle for across the board increases in raw materials prices, as the resolution on the solidarity fund and producers associations taken at Dakar in February 1977 showed. This strong and valid approach was not sustained. Under the pressure of the developed countries and the bias of UNCTAD and endless 'negotiation' and 'dialogue', the 'stabilization' fund strategy replaced that of producers associations for collective unilateral intervention where such was required.

So, in the end, the battle for the NIEO was lost. As well as the failure being noted, the causes have to be studied. Are they purely circumstantial (in the economic crisis)? Can they be attributed to 'tactical errors' by the Third World (its own divisions and weaknesses)? Or do these circumstances and weaknesses show the impossibility of autocentric development at the periphery of the modern capitalist system? We shall return to these fundamental issues (cf. Chapter 8).

This failure being so, what has actually happened? Relocation advances at tortoise-like pace, heightening differentiation with the Third World, feeding the illusion of possible compromise between the bourgeois national plan and integration in the world system for some, and marginalization for others. The seeming successes of Korea, Brazil and India have forced the collective plan of the NIEO into the background. We shall return to these successes (cf. Chapters 6 and 7) to assess their character and extent.

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