An excerpt from The world needs a new socialist development theory
1] Critiques of modernisation theory from the Third World
resulted in the establishment of the UN Conference on Trade and Development (UNCTAD) in 1964, with Raúl Prebisch serving as its founding secretary-general. The work of Prebisch and UNCTAD, as well as the emergence of a new literature against the neocolonial global architecture (notably, Kwame Nkrumah’s Neo-Colonialism: The Last Stage of Imperialism, 1965), provoked serious discussion in the capitals of the Third World about the limitations of modernisation theory’s conception of development and in the academies of the Third World about its theoretical shallowness. Academic debates about the absence of social history in modernisation theory and its failure to appreciate the theft of wealth from the colonies, along with the influence of Prebisch’s ‘terms of trade’ argument, led to the creation of the dependency theory school of thought (which had both Marxist and developmentalist sections).
It was this recognition of modernisation theory’s inadequacies amongst Third World political leaders that began a decade-long discussion about the external factors that hindered the development of the formerly colonised countries, which in turn led to the drafting of a programme called the New International Economic Order. The intellectual and political work against modernisation theory produced a serious challenge to the neocolonial paradigm, not only within university classrooms and the offices of international agencies, but also in the headquarters of the United Nations in New York.
2] The Era of the New International Economic Order (1970—1979)
Within UNCTAD, Third World countries took their own experiences with the limitations of modernisation theory and combined them with the insights they gleaned from dependency theory. This process within UNCTAD led to the publication of numerous reports and studies that emphasised the external factors that structured the Third World countries’ failure to overcome their internal challenges. These external factors included the paucity of financing available at concessionary rates to build the depleted infrastructure in these countries, the West’s unwillingness to transfer technology and science to the Third World or to allow a trade regime (with tariffs and subsidies) that would permit the industrialisation and diversification of the Third World countries’ often one-commodity economies, and the failure amongst Third World states to break their economic umbilical cord with their former colonial powers and substitute this dependent relationship with greater cooperation amongst themselves. No significant or lasting internal change—such as building technical capacity in their population through universal education, constructing state institutions committed to social equality rather than the maintenance of law and order, or developing norms in public life to fight against corruption—would be possible if the external neocolonial environment continued to deplete the resources of the Third World states.
Conversations at the UNCTAD meetings and in the Non-Aligned Movement (established in 1961) began to draw up an agenda for the construction of what became known as the New International Economic Order (NIEO). In October 1970, the UN General Assembly passed resolution 2626 calling for the Second United Nations Development Decade. Notably, as a result of this pressure from the Third World, the resolution called upon UN member states to ‘pledge themselves, individually and collectively, to pursue policies designed to create a more just and rational world economic and social order in which equality of opportunities should be as much a prerogative of nations as of individuals within a nation’. The resolution declared that ‘qualitative and structural changes’ are necessary in order for ‘existing disparities — regional, sectoral and social — [to] be substantially reduced’. This UN resolution set the stage for the third UNCTAD session, held in Santiago (Chile) in April—May 1972, where UNCTAD Secretary-General Manuel Pérez Guerrero pointed out that Third World countries ‘rightfully want a voice in world monetary decisions which otherwise could be very detrimental to them. And since the greatest part of their foreign income comes from the sale of their primary products, it is obvious that they consider this to be the most important field where action would bring immediate and substantial results’.
These two issues—decision-making in world monetary policy and control over the prices of primary products—formed two important pillars of the NIEO.
On 1 May 1974, the UN General Assembly passed the NIEO, a comprehensive set of economic proposals that were the fruit of this decades-long debate over the structural factors that had been inherited from colonialism, the importance of transcending these barriers, and the paralysis engendered by the borrowing-debt-austerity trap set by the Bretton Woods institutions and their modernisation theory, which did not produce the ‘take off’ promised by Rostow. The principles of the NIEO remain vital in our own time; a few of them merit reflection here:
‘Sovereign equality of States, … [with] non-interference in the internal affairs of other States, … [their] full and effective participation on the basis of equality of all countries in solving world economic problems’, and the right to adopt their own economic and social systems;
‘Full permanent sovereignty of every State over its natural resources and all economic activities’ necessary for development, as well as regulation of transnational corporations;
A ‘just and equitable relationship between the prices of raw materials… [and] other goods exported by developing countries, and the prices of raw materials’ and other goods exported by the developed countries;
Strengthening bilateral and multilateral internationnoal assistance to promote industrialisation in developing countries, in particular by providing sufficient financial resources and opportunities for the transfer of appropriate techniques and technologies.
A few months later, in October 1974 in Cocoyoc (Mexico), UNCTAD and the UN Environment Programme gathered for a symposium where they put forward a new conception of development, one which underpinned the NIEO project:
Our first concern is to redefine the whole purpose of development. This should not be to develop things but to develop man. Human beings have basic needs: food, shelter, clothing, health, education. Any process of growth that does not lead to their fulfilment—or, even worse, disrupts them—is a travesty of the idea of development.
This inspirational and hopeful vision of humanity and the future could not establish itself due to several adverse and complementary processes, including:
A political attack by the newly established Group of Seven (G7) countries (Canada, France, Italy, Japan, the United Kingdom, the United States, and West Germany), created in 1975 to push back against the challenge presented by the NIEO. The G7, which emerged in the context of Third World oil-producing countries building a cartel the prior decade known as the Organisation of Petroleum Exporting Countries (OPEC), flexed their muscles to produce the Oil Shock of 1973. OPEC was the first of several primary commodity cartels to give the countries that produced these products power over price setting against multinational corporations, which otherwise set the prices against the countries that produced and exported these goods.
An economic attack on Third World countries through the Volcker Shock (1979—1987), when the U.S. sharply raised interest rates that spurred on the permanent Third World debt crisis.
The IMF and World Bank’s use of the Third World debt crisis, requiring countries that needed loans to cover their short-term balance-of-payments problems to conduct extensive ‘structural adjustment’ policies as a condition to receive financing. Structural adjustment policies imposed severe funding cuts to social welfare programmes while promoting a general austerity regime, often ensnaring Third World countries in a borrowing-debt-austerity trap. This weakened these governments’ development agendas and political power on the global stage.
The disarticulation of the Fordist mode of production and factory system and the creation of fragmented, global production chains, a process enabled by new developments in communications and transportation technologies as well as by new laws on intellectual property rights established in the final round of the General Agreement on Trade and Tariffs from 1986 to 1994.
The assault by agribusiness on small landholders and peasants in developing countries (furthered by the entrenched subsidies given to agribusinesses in advanced countries) and the emergence of the subcontracted global supply chain, which weakened the working class and peasantry in the global class struggle and posed new and significant obstacles for trade union organising. Furthermore, this meant that developmental strategies such as nationalisation longer operated as before.
These developments undermined the progressive forces in the Third World and led to the gradual marginalisation of the NIEO debate, setting the stage for neoliberal theory and policy’s ascension to dominance.