It will be wrong to write off UNCTAD IV, because the conference at Nairobi has just entered the crucial phase of behind-the-scene discussions and also because in the long-drawn-out struggle poor countries have to wage against the rich in their search for a less unjust and more equitable economic order they cannot expect any dramatic results in the short run. Even so, the timing of UNCTAD IV is not very happy.
With the raging presidential election fever, the United States is hardly in a position to apply its mind constructively to the issues raised by the Geneva-based secretariat of UNCTAD. Mr. Kissinger’s address at Nairobi is at least partly an expression of this inability. His own inclination is said to be different.
Again, the rich industrialised countries are only about beginning to get over the recession which hit them towards the end of 1973, partly as a result of the oil embargo and the four-fold rise in the prices of crude. They are naturally more reluctant right now than they might have been in different circumstances to consider sympathetically the demands which UNCTAD is making on them.
There are, of course, some industrialised countries like Sweden, Holland, Denmark and Norway which are sympathetic to the demands formulated by the UNCTAD’s secretariat for stable and just commodity prices, creation of a fund of up to six billion dollars which can be used to finance stock-piling in periods of low demand and compensate for losses due to crop failures and drop in prices, generalised trade preferences and debt relief. But they cannot prevail in the face of tough opposition by the United States, West Germany, Japan and Britain.
Issues
Behind the question of timing loom much larger and basic issues. Can third world countries seriously expect from the rich something much more substantial than crumbs from their table? Even if the answer is in the affirmative, will it not involve a virtual integration of the economies of the poor countries with those of the rich? Should the third world countries not instead try to insulate their economies to a substantial extent from the uncertainties which are likely to plague the Western nations and Japan in coming years? And, above all, should they not try to work out a path of development which is different from the one the West and Japan have traversed in very different and much more favourable circumstances?
Right now attention is focussed on the first issue not so much because the third world leaders have suddenly woken up to the fact that the prosperity of the West and Japan has at least partly been built on exploitation of their resources as because, in the wake of the OPEC’s success in raising oil prices, they convinced themselves that the same story could be repeated in respect of other commodities. But they themselves are beginning to discover that this is possible at best, if at all, in respect of a couple of commodities. For, even in cases where a small number of countries hold a near monopoly of a certain raw material, synthetic substitutes are available, the producers are unable to cope with even temporary loss of foreign exchange earnings and there are no countries which can play the role Saudi Arabia and Kuwait have played in stabilising the prices of oil by cutting their own production. In plain terms, no group of commodity producers enjoys the advantages of the OPEC members – monopoly, the lack of equally versatile and cheap substitutes, small population and near absence in several cases to produce and sell at whatever price.
Alternative
Be that as it may, implicit in the strategy worked out by the UNCTAD leaders is the assumption that Western economies will continue to grow at something like the old rate. For, they would not otherwise think of making their own development dependent on their foreign exchange earnings from their exports to the West and Japan on the one hand and a sizable transfer of resources from the latter on the other. The validity of this assumption is open to question. In the West itself there are today not many economists who believe that an effective answer to the twin problems of inflation and stagnation is within their grasp.
The UNCTAD strategy could have been justified despite its weaknesses if there was no alternative or if it was intended to cover a transition period in which third world countries would seek seriously to achieve a fairly high level of self-reliance by pursuing a path of development which conforms to their resources and needs. But there is an alternative. So eminent an economist as Sir Arthur Lewis has written that there is no earthly reason why the countries of Asia, Africa and Latin America cannot continue to develop “even if the rest of the world were to sink under the sea” (Some Aspects of Economic Development, Panther House, P. 15).
Also there is no worthwhile indication that the third world leaders look upon the present strategy of reliance on the West as a temporary affair because not many of them have at least so far tried either to break away from the Western model of development or to develop meaningful co-operation among themselves. Thus a tragedy of the first order may be in the making and UNCTAD’s success may prove even more dangerous for poor countries in the long run than its failure.
It will clearly be unrealistic to expect an early rectification of this state of affairs. The third world elites are by and large sold on the Western model. It is irresistibly attractive from a distance because the costs in terms of social disruption are covered from sight. It creates the kinds of jobs for which their Western-style education trains the best among them. The hope for a corrective must, therefore, wait. Even so it may perhaps be useful to recall the point which Sir Arthur and other qualified economists, Westerners as well as Asians, have made again and again in recent years. They have said that the free flow of trade and investment in recent times have done more harm than good to under-developed countries and that some of them might be better off if they reduce rather than expand economic ties with the West.
Sir Arthur is aghast that several developing countries should have geared their programme of industrialisation to gross national product rather than to employment, that they should have tried to compete with industrialised countries in the markets of the latter instead of building trade among themselves, that they should have used their best lands to grow tea, coffee, cocoa, sugar, cotton and rubber, all of which are a drag on the market, when there is a booming market for cereals, livestock products and feeding stuffs and that they should have ignored heavy industries, depended solely on the import of machinery and concentrated on light industries where the competition is extremely tough and the market easily saturated. He has shown most convincingly that the main beneficiaries of growth based on foreign investment and technology are the investors and not the countries in question. Brazil’s current difficulties should help illustrate his conclusion amply.
Propositions
The President of the World Bank, Mr. McNamara, has been making similar points. According to him, the fruits of whatever growth has taken place have not reached the poor – around 50 per cent of the population in India, for example – and the poor are not contributing significantly to growth because they do not have the means. Thus any sound strategy of development must break this vicious circle which is just not possible under the Western model.
All this is not to suggest that the third world should seek closer ties with the Soviet group of countries than with the West or that they should adopt the communist path of development or that they should reject or even slow down industrialisation. The first two propositions are not feasible, the first because trade with Moscow and its allies cannot replace that with the much richer West and they cannot provide the aid the third world receives from it, and the second because revolutions cannot be made to order. They are also extremely costly in terms of human suffering. It is also open to serious doubt whether the Soviet model is likely to work any better for highly populated countries, for example, in South Asia.
Finally, it should be self-evident that, unlike in the West where agriculture played a supporting role to urban industrialisation, industrialisation in Asia, Africa and Latin America must serve the needs of rural transformation. This is easier said than done. But there is no other way out of degrading poverty and hopelessness and anger it breeds.
The Times of India, 12 May 1976