Model Answer
0 min readIntroduction
The New International Economic Order (NIEO), a set of proposals put forth by developing nations during the 1970s, aimed to restructure the global economic system to address perceived inequalities between the developed and developing world. Driven by the Non-Aligned Movement and the 77+China group, the NIEO sought greater control over natural resources, fairer trade practices, and increased development assistance. While the initial momentum faded, the core concerns that fueled the NIEO – namely, global economic disparities and the power imbalances inherent in the international system – remain strikingly relevant in the present era of globalization, albeit manifesting in new forms. This answer will discuss the continuing relevance of the NIEO’s demands in the context of contemporary global economic realities.
Historical Context and Principles of the NIEO
The NIEO emerged in the wake of decolonization and the growing frustration of developing countries with the existing international economic order, largely shaped by the Bretton Woods institutions (IMF and World Bank) and dominated by Western powers. The 1974 UN General Assembly Special Session on the New International Economic Order adopted a Declaration and a Programme of Action, outlining key demands:
- Sovereign Control over Natural Resources: Developing countries demanded the right to nationalize or exercise permanent sovereignty over their natural resources.
- Improved Terms of Trade: Addressing the declining prices of primary commodities exported by developing countries and the rising prices of manufactured goods imported from developed countries.
- Increased Development Assistance: Calling for a significant increase in Official Development Assistance (ODA) from developed to developing countries, aiming for 0.7% of Gross National Income (GNI).
- Technology Transfer: Facilitating the transfer of technology from developed to developing countries on concessional terms.
- Reform of International Institutions: Demanding greater representation and decision-making power for developing countries in international organizations like the IMF, World Bank, and WTO.
Relevance of NIEO in the Era of Globalization – Positive Aspects
Despite the failure of the NIEO to achieve its goals in its original form, its underlying principles retain significant relevance in the context of globalization:
- Addressing Global Inequality: Globalization, while fostering economic growth, has also exacerbated income inequality both within and between countries. The NIEO’s focus on fairer distribution of wealth and opportunities remains crucial. According to the World Inequality Report 2022, the richest 1% globally own nearly half of all wealth.
- South-South Cooperation: The NIEO fostered a spirit of solidarity among developing countries, leading to increased South-South cooperation. This continues today through initiatives like BRICS, the India-Brazil-South Africa (IBSA) Forum, and the Belt and Road Initiative (BRI).
- Debt Sustainability: The NIEO highlighted the issue of unsustainable debt burdens faced by developing countries. This remains a pressing concern, with many countries struggling with debt distress, particularly in the wake of the COVID-19 pandemic. The G20’s Debt Service Suspension Initiative (DSSI) is a recent attempt to address this issue.
- Digital Divide & Technology Transfer: The NIEO’s call for technology transfer is even more pertinent in the digital age. Bridging the digital divide and ensuring equitable access to technology are essential for inclusive growth.
Relevance of NIEO in the Era of Globalization – Negative Aspects & Challenges
However, the context of globalization presents new challenges to the NIEO’s original framework:
- Rise of Global Value Chains (GVCs): Globalization has led to the fragmentation of production processes through GVCs. This makes it difficult to apply traditional NIEO principles related to commodity prices and value addition.
- Shifting Power Dynamics: The rise of China and other emerging economies has altered the global power balance. The NIEO was largely a North-South agenda, but the emergence of new economic powers complicates this dynamic.
- Neoliberal Policies & Trade Liberalization: The widespread adoption of neoliberal policies and trade liberalization has often undermined the NIEO’s goals of state intervention and protection of domestic industries.
- Fragmentation of Developing Countries: The developing world is not homogenous. Divergent interests and priorities among developing countries hinder collective action and weaken their bargaining power.
Contemporary Manifestations & Way Forward
The spirit of the NIEO can be seen in contemporary debates surrounding:
- Fair Trade Practices: Advocacy for fair trade agreements that prioritize the interests of producers in developing countries.
- Climate Finance: Demands for developed countries to fulfill their commitments to provide climate finance to help developing countries mitigate and adapt to climate change. (Paris Agreement, $100 billion pledge)
- Special and Differential Treatment (SDT): The principle of SDT within the WTO, which allows developing countries to receive preferential treatment in trade negotiations.
- Reform of the International Financial Architecture: Calls for reforming the IMF and World Bank to give developing countries greater voice and representation.
Moving forward, a renewed focus on multilateralism, coupled with a commitment to inclusive and sustainable development, is essential. Strengthening South-South cooperation, promoting technology transfer, and addressing the challenges of debt sustainability are crucial steps towards realizing the core principles of the NIEO in the 21st century.
Conclusion
The NIEO, though largely unsuccessful in its original form, remains a vital historical reference point for understanding the persistent inequalities in the global economic system. While the context of globalization has altered the landscape, the underlying principles of fairness, equity, and sovereign control over resources remain profoundly relevant. A reimagined approach, acknowledging the complexities of the modern global economy and fostering greater cooperation among all stakeholders, is necessary to address the challenges of inequality and build a more just and sustainable international economic order.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.