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New International Economic Order (NIEO)

Background

• In the 20th century, economists widely discussed the New International Economic Order (NIEO) concept. It was a movement initiated by developing countries to overcome economic colonialism and dependency by establishing independent economies.
• The NIEO was first officially proposed at the United Nations General Assembly in April 1974. The assembly committed to creating a new international economic order based on equity, sovereign equality, common interest, and cooperation among all states, regardless of their economic and social systems.
• The aim was to correct inequalities, address existing injustices, narrow the gap between developed and developing countries, and promote sustainable economic and social development, as well as peace and justice for current and future generations.
• The existing economic order was deemed unfair, highlighting the need for a new international framework to foster cooperation between developed and developing nations.

Rise of Third World: Need for NIEO

• During the Cold War, the term "Third World" was used to describe countries that did not align with the West (NATO) or the East (Communist Bloc).
• French demographer Alfred Sauvy first coined the term in 1952 in his article "Three Worlds, One Planet."
• Countries were categorized into three groups:
  • First World: Countries like the United States, Canada, Japan, South Korea, and Western European nations.
  • Second World: The Soviet Union, China, Cuba, North Korea, Vietnam, and their allies.
• After the Soviet Union's collapse and the Cold War's end, terms like "developing countries" and "least developed countries" emerged.
• The term "Third World" came to represent countries with colonial histories, including regions in Africa, Latin America, Oceania, and Asia.

The Rise of the Third World

• Third World countries are economically underdeveloped, with high birth rates and financial dependence on developed nations.

• During World War II, Japan played a role in liberating Asia from European colonial powers, including freeing Indonesia from the Dutch and Burma, Singapore, Malaya, and other colonies from British rule, as well as capturing the Philippines from the Americans.

• After Japan's surrender in August 1945, there was a surge in demand for independence by nationalist movements in Asian colonies.

• The United States and the Soviet Union wanted to influence the newly independent nations in Asia,Africa,Latin America, and the Middle East.

• Most of today’s Third World countries were once colonized by European nations. These countries are now economically least developed and dependent on more powerful nations.

• They were dependent on European powers due to effective governance and financial support. Meanwhile, Western powers exploited many parts of Africa and South-East Asia for their raw materials,human resources, and territory.

• However, after World War II, colonial rule came to an end, paving the way for the emergence of independent and sovereign Third World countries.

The Need for NIEO

The New International Economic Order (NIEO) was established during the Sixth Special Session of the United Nations General Assembly in 1975. The aim of the NIEO is to reshape the global economic system, which is currently dominated by Western and European countries, and to promote a more equitable relationship between developed and developing nations.

Challenges Faced by Developing and Least Developed Countries1. High Population Growth

• Many least developed and developing countries experience rapid population growth, leading to increased demand for resources such as food, water, and shelter.
• Factors contributing to this growth include lack of family planning,religious beliefs, and limited access to healthcare.

2. Unemployment

• These countries often have a underutilized labor force, with many individuals willing to work but lacking job opportunities.
• This high level of unemployment contributes to low living standards and economic stagnation.

3. Poverty

• Poverty is a pervasive issue in many developing and least developed countries, largely due to high income inequality.
• A significant portion of wealth is concentrated in the hands of a few, leaving the majority in extreme poverty.

During the pandemic, the World Bank estimated that 97 million people were in extreme poverty. According to UNCTAD, the rate of excessive poverty in some least developed countries is between 70 percent and 80 percent.

4. Poor Education and Health Facilities

• Many developing nations struggle with a poor educational infrastructure, resulting in high illiteracy rates, particularly among women.
• Lack of medical facilities and basic sanitation contributes to high mortality rates and prevents overall health improvement.

5. Political Instability

• Political stability is crucial for economic growth
• Countries facing political turmoil often see a decline in foreign investment, which is vital for development.
• Economic growth can be severely impacted by political changes, as seen in Afghanistan after the Taliban's return to power in 2021.

Contribution of the Third World Countries to the Global Economy

By 2030, emerging economies (third world nations) are projected to contribute nearly 60% of the world's total GDP, according to the OECD Development Centre's publication, "Perspectives on Global Development: Shifting Wealth."

• Growth Rate: The 2000s witnessed a significant pickup in the growth rate of developing countries.
• India's Global Standing: According to Professor T N Srinivasan's study, India ranks fourth in global growth contribution, following the United States, China, and Japan.
• Global Growth Share: India's share of global growth was 8.0%.
• GDP Contribution: In 2005, India's contribution to global GDP in Purchasing Power Parity (PPP) terms was 5.9%, making it the fourth-highest globally.

Factors leading to NIEO

• Gap Between Developed and Developing Countries: The significant disparity between the North (developed countries) and the South (developing countries) limits economic and trade relations.
• Widening Gap: The North is reinforcing its control over international trade and income due to its technological advancement and industrial development, leading to increased prosperity in developed countries and greater poverty in developing nations.
• Global Interdependence: Despite the gap, there is a significant interdependence between developed and developing nations. Both rely on each other for raw materials, labor, and technological advancements.
• Exploitation by Developed Countries: Developed nations, due to their technological and industrial prowess, often exploit the human and natural resources of developing countries to the fullest.
• WTO's Failure: The WTO's inability to address the need for a North-South dialogue over NIEO has strained relations between developed and developing countries.

Objectives and Aims of NIEO

Objectives of the New International Economic Order (NIEO)

• Assistance: Developed nations should be empathetic and provide aid to underdeveloped and less developed countries to help them eliminate poverty and achieve balanced regional growth.
• Trade: Developed countries should assist underdeveloped countries in correcting their balance of payment deficits to establish a just international economic order.
• Industrialisation and Technology: Negotiations between developed and developing countries should focus on the potential transfer of industrial capacity from developed countries to the Third World.
• Democratic Global Order: Establishing a just and democratic global economic order is a primary objective of the NIEO.
• Reforming Global Institutions: Reforming the International Monetary Fund (IMF), World Bank (WB), and United Nations Organization (UNO) is crucial for establishing an equitable world order.
• Addressing Social Issues: The NIEO aims to tackle social problems faced by the international community through cooperation between developed and less developed countries.

Challenges to the NIEO

• Powerful countries oppose the NIEO due to their vested interests, hindering fruitful outcomes in negotiations and implementations.
• Developing countries possess weak negotiating capacities and powers, making it challenging to advocate for their interests.
• There is a weak trade link between Least Developed Countries (LDCs) and the socialist bloc, further complicating the situation.

India’s Role in Establishing NIEO

Post-World War II Era and the Rise of the Cold War

• After World War II, the world saw the beginning of the Cold War, marked by political tensions between the USSR (Soviet Union) and the US (United States).
• Many countries gained independence from colonial rule during this period. Their main focus was on economic development and lifting people out of poverty.
• The Cold War bloc politics posed challenges to the economic progress of these newly independent nations.

Non-Alignment Movement (NAM)

• Leaders from the Third World, such as Josip Tito(Yugoslavia),Jawaharlal Nehru(India),Gamal Nasser(Egypt), and Kwame Nkrumah(Ghana), initiated the Non-Alignment Movement (NAM) to avoid taking sides in the Cold War.
• India, as a prominent member of NAM, played a pivotal role in advocating for the New International Economic Order (NIEO).

Advocacy for NIEO

• As NAM expanded, it began addressing economic issues facing the Third World. India was instrumental in promoting the interests of developing countries in the global arena.
• NIEO aimed to restructure the international system to benefit developing nations more than developed ones.
• India influenced the General Agreement on Tariffs and Trade (GATT) rules to allow developing countries to impose import restrictions and enhance their exports.

South-South Cooperation

• India established itself as a key player in South-South cooperation, sharing its development experiences and expertise with neighboring and other developing countries.
• The Panchsheel principles promoted by India laid the groundwork for South-South cooperation, emphasizing mutual respect and non-interference.
• India also provides technical assistance and funding through multilateral platforms.

Multilateral Alignments and Global Advocacy

• India advocates for NIEO through various multilateral groupings, including BRICS(Brazil, Russia, India, China, South Africa),IBSA(India, Brazil, South Africa), and G4 Nations.
• Indian representatives played a crucial role in establishing the UN Conference on Trade and Development (UNCTAD), aimed at promoting social progress and international economic cooperation for developing countries.
• India mobilized resources to advance NIEO goals, focusing on industrial development,scientific applications,technology acquisition, and managerial skills.

Conclusion

• The NIEO has evolved into a crucial framework for globalisation and international trade, initially designed to protect the interests of developing countries.
• Despite its potential, NIEO faced challenges due to the reluctance of developed nations to relinquish their dominance in the international order.
• Since its independence, India has been a strong advocate for NIEO, collaborating with developing nations and pushing for reforms in global institutions like the UN Security Council,International Monetary Fund (IMF), and World Bank.