The New International Economic Order (NIEO) was a set of proposals put forward during the 1970s by some developing countries through the United Nations Conference on Trade and Development to promote their interests by improving their terms of trade, increasing development assistance, developed-country tariff reductions, and other means. It was meant to be a revision of the international economic system in favour of Third World countries, replacing the Bretton Woods system, which had benefited the leading states that had created it – especially the United States. This order was demanded by the Non-Aligned Movement.
The term was derived from the Declaration for the Establishment of a New International Economic Order, adopted by the United Nations General Assembly in 1974, and referred to a wide range of trade, financial, commodity, and debt-related issues (1 May 1974, A/RES/S-6/3201). This followed an agenda for discussions between industrial and developing countries, focusing on restructuring of the world's economy to permit greater participation by and benefits to developing countries (also known as the "North-South Dialogue"). Along with the declaration, a Programme of Action and a Charter of Economic Rights and Duties of States (12 December 1974, A/RES/29/3281). were also adopted.
In the 1970s and 1980s, the developing countries pushed for NIEO and an accompanying set of documents to be adopted by the UN General Assembly. Subsequently, however, these norms became only of rhetorical and political value, except for some partly viable mechanisms, such as the non-legal, non-binding Restrictive Business Practice Code adopted in 1980 and the Common Fund for Commodities which came in force in 1989.
The main tenets of NIEO were:
- Developing countries must be entitled to regulate and control the activities of multinational corporations operating within their territory.
- They must be free to nationalize or expropriate foreign property on conditions favourable to them.
- They must be free to set up associations of primary commodities producers similar to the OPEC; all other States must recognize this right and refrain from taking economic, military, or political measures calculated to restrict it.
- International trade should be based on the need to ensure stable, equitable, and remunerative prices for raw materials, generalized non-reciprocal and non-discriminatory tariff preferences, as well as transfer of technology to developing countries; and should provide economic and technical assistance without any strings attached.
Resource allocation mechanisms
Haggard and Simmons claimed that:
- A number of social mechanisms are possible to affect resource allocation in any economic order. An authoritative allocation mechanism involves direct control of resources while, at the other end of the spectrum, more market-oriented private allocation mechanisms are possible. Most of the debates within the NIEO occurred over allocation mechanisms, with the southern hemisphere countries favoring authoritative solutions.
NIEO proposes central planning, as opposed to free markets. It is based on the (French) mercantilist idea that international trade would be a zero-sum game (i.e., causes no net benefits), and on the view that it does not benefit the rich at the expense of the poor. Some American economists challenge the idea of trade as a zero-sum game transaction.
Virtually no part of the New International Economic Order was implemented. Instead, from the 1980s onward, the Bretton Woods framework would be replaced with the Washington Consensus and economic globalization on terms often described as neoliberal. The economic reach of multinational corporations, rather than being circumscribed, would be expanded significantly. Trade in commodities would shift away from state-dominated cartels towards increasingly financialized markets. The NIEO's emphasis on central planning and state-oriented resource allocation mechanisms would be almost wholly rejected, even amongst the (former) Socialist bloc, in favor of economic liberalization. The formation of the World Trade Organization and the proliferation of free trade agreements would compel the reduction of barriers to trade, generally on strictly reciprocal terms.
In Matsushita et al.'s World Trade Organization, the authors explained part of the legacy of the NIEO:
- ... tensions and disagreements between developed and developing countries continue: the latter expect a greater degree of special treatment than industrialized countries have afforded them. This demand was expressed comprehensively in the New International Economic Order and the Charter of Economic Rights and Duties of States promoted by UNCTAD in the 1970s. Although the Charter was never accepted by developing [sic] countries and is now dead, the political, economic, and social concerns that inspired it are still present. The Charter called for restitution for the economic and social costs of colonialism, racial discrimination, and foreign domination. It would have imposed a duty on all states to adjust the prices of exports to their imports. The realization of the New International Economic Order was an impetus for developing country support for the Tokyo Round of trade negotiations. Critics of the WTO continue to state that little of substance for developing countries came out of either the Tokyo or Uruguay Rounds.
The NIEO can considered to have something of a spiritual successor in the alter-globalization movement, which, like the NIEO, owes much to French academic criticism (generally rooted in Marxist economics) of international trade.
Criticism of price regulation
The powerful countries of North America and Western Europe felt threatened by the NIEO and continuously tried to criticize and minimize it; according to economist Professor Harry Johnson, the most efficient way to help the poor is to transfer resources from those most able to pay to those most in need. Instead of this, NIEO proposes that those poor countries that have monopoly power should be able to extort these transfers. In practice such power has caused most harm to other poor countries.
Commanding prices above their natural level usually reduces consumption and thus causes unemployment among producers. Moreover, price regulation typically gives the extra income to those in control of who is allowed to produce, e.g., to governments or land-owners.
- ^ Declaration for the Establishment of a New International Economic Order: United Nations General Assembly document A/RES/S-6/3201 of 1 May 1974
- ^ Charter of Economic Rights and Duties of States: United Nations General Assembly document A/RES/29/3281 of 12 December 1974
- ^ The New International Economic Order, Harry G. Johnson, professor of economics, Woodwart Court Lecture, Oct 5, 1976, p. 6
- ^ The New International Economic Order, Harry G. Johnson, professor of economics, Woodwart Court Lecture, Oct 5, 1976, pp. 1-2
- ^ The New International Economic Order, Harry G. Johnson, professor of economics, Woodwart Court Lecture, Oct 5, 1976, pp. 6-7
- ^ The New International Economic Order, Harry G. Johnson, professor of economics, Woodwart Court Lecture, Oct 5, 1976, pp. 11-12
- Jagdish N. Bhagwati (editor) (1977) The New International Economic Order: The North-South Debate. ISBN 0-262-52042-7.
- Cox, Robert. (1979) Ideologies and the NIEO: Reflections on some recent literature. International Organization 33 (2): 257-302.
- International Progress Organization (1979) International Meeting of Experts on the New International Economic Order–Philosophical and Socio-cultural Implications
- Rothstein, Robert L. (1979) Global Bargaining: UNCTAD and the Quest for a New International Economic Order Princeton: Princeton University Press. (Traces formation of UNCTAD and its role in the NIEO.) ISBN 0-691-02190-2
- Craig Murphy (1984) Emergence of the NIEO Ideology. Boulder, Colorado: Westview. ISBN 0-86531-664-3
- Zaidi Sattar reviews Threat to Development: Pitfalls of the NIEO by William Loehr; John P. Powelson in Journal of Economic Literature 22(1) (March 1984) 130–131
- Breda Pavlič and Cees J. Hamelink (1985) The New International Economic Order: Links between Economics and Communications. UNESCO. ISBN 92-3-102311-X
- Stephan Haggard and Beth A. Simmons (1987) Theories of international regimes. International Organization 41(3):498.
- Robert Looney (1999) ‘New International Economic Order’ in Routledge Encyclopedia of International Political Economy. ISBN 0-415-14532-5
- Antonio Cassese (2001) International law. Oxford University Press. ISBN 0-19-829998-2. Page 400. And, second edition, 0-19-925939-7. Page 330.
- Mitsuo Matsushita, Thomas J. Schoenbaum, Petros C. Mavroidis (2003) The World Trade Organization: Law, Practice, and Policy. Oxford University Press. ISBN 0-19-927425-8. Pages 388–389.
- Rao, M. P. (2004) The “New International Economic Order”
- Hugo Ruiz-Diaz (September 2005) Une tribune pour les pays du Sud. Le Monde diplomatique. Pages 20 and 21.
- Adam Sneyd (2005) “New International Economic Order” in Globalization and Autonomy Online Compendium edited by William D. Coleman and Nancy Johnson
- Rist, Gilbert: Le développement, Histoire d'une croyance occidentale, Presses de Sciences Po, Paris, 1996 - engl. The History of Development: From Western Origins to Global Faith, 3rd edition, London: Zed Books, 2008, ISBN 1-84813-189-5 Chapter 9
- The Darker Nations: A People's History of the Third World by Vijay Prashad and Howard Zinn (Editor) A "people's history" of the world's impoverished countries and their failures to oppose the United States and Soviet spheres of economic influence following World War II to the present. ISBN 1-56584-785-7
- Introductory note by Ahmed Mahiou, procedural history note and audiovisual material on the Declaration on the Establishment of a New International Economic Order in the Historic Archives of the United Nations Audiovisual Library of International Law
- Procedural history, related documents and photos on the Charter of Economic Rights and Duties of States in the Historic Archives of the United Nations Audiovisual Library of International Law