[In-depth] New International Economic Order (NIEO)

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Much has changed in the global economic picture since the concerted efforts were made towards establishing New International Economic Order (NIEO) during the 1970s yet its relevance is still discussed and questioned. NIEO was one of the major concerted efforts by the UN to establish a new world economic order to support the least developed and newly independent countries to have their say in the global economic picture. Though the global community is making efforts towards redefining the world economic order in the era of the Covid-19 pandemic amidst mounting inflation concerns and oil prices yet vaccine crisis and vaccine inequality are headlining these days. The issues show how the world is still struggling with age-old issues of the North-South divide and economic inequality. Vaccine nationalism and the Intellectual Property Rights (IPR) issues have further deepened the divide and brought out the issues into the open. The pandemic is showing how the gap is yet to be filled.

Meaning

  • It was a set of proposals or an economic and political concept that advocated the need for fundamental changes in the conduct of international trade and economic development to redress the economic imbalance between the developed countries and their less developed counterpart.
  • The least developed countries (LDCs) mainly advocated for the adoption of such an economic and political concept.
  • Following this, the UN responding to their demand issued the Declaration and Programme of Action on the Establishment of an NIEO in 1974, which laid down the principles and measures designed to improve the relative position of the LDCs. 

Origin

  • During World War years, the colonies (LDCs) were recklessly exploited for their resources and manpower which weakened their very foundations. 
  • After the end of World War II, the economy of the developing countries was facing various threats and the gap between developed and developing countries widened.
  • These led to the grievances and demands by the least developed countries (LDCs) or the Third World Countries to seek a political and economic alternative to the existing capitalist system that will benefit them. The developing countries viewed the existing system as biased in favour of the rich nations and thus they intended to have a fairer deal.
    • The LDCs also desired to have material improvement and greater political recognition through economic strength.
  • Another cause that gave rise to such demands was the newly independent hitherto colonised countries’ rise in political and economic power with the rise in their bargaining capacity. The developing nations realised that the developed countries were not self-sufficient, and were dependent on the former for the supply of natural resources (oil) and raw materials. This gave them the bargaining power to advance their political and economic interests. 
  • Besides, the developed countries were suffering from unemployment, inflation, and high cost of energy whereas the developing ones suffered unemployment, shortage of hard currency and poor social infrastructure. These interconnected issues led to deteriorating economic relations amongst developed and developing nations.
  • Following all these, the Non-Aligned Movement (NAM) leaders put forward the formal idea of the NIEO in the Algiers Conference of non-aligned countries in 1973 and urged the UN to discuss the hardships faced by Third World Countries. 
  • The initiative received widespread support from the UN members especially LDCs resulting in the adoption of a declaration on the establishment of a “New International Economic Order (NIEO)” in 1974 by the United Nations General Assembly (UNGA).

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Principle of NIEO

  • It was thought to be based on equity, sovereign equality, common interest and coopera­tion among all States, irrespective of their eco­nomic and social systems, which shall reduce inequalities and redress existing injustices, make it possible to eliminate the widening gap between the developed and developing countries and ensure steadily accelerating economic and social development and peace and justice for present and future generations.

Objectives

  • To ensure social justice among the trading countries of the world.
  • To restructure the existing institutions and form new organisations to regulate the flow of trade, technology, capital funds in the common interest of the world’s global economy and due benefits in favour of the LDCs. It is based on the spirit of a ‘world without borders.’
  • To have a more equitable allocation of the world’s resources through increased flow of aid from the rich nations to the poor countries.
  • To overcome world mass misery and alarming disparities between the living conditions of the rich and poor in the world at large.
  • To provide poor nations with increased participation and have their say in the decision-making processes in international affairs.
  • To introduce reforms in the International Monetary Fund (IMF) which included the establishment of a new international currency, the implementation of SDR aid linkage, the increased stabilisation of the international floating exchange system and the use of IMF funds as interest subsidies on loans to the poorest developing countries.
  • For the South, it sought:-
    • To promote economic development among the poor countries through self-help and South-South cooperation.
    • To deal with its major problems such as the balance of payments disequilibrium, debt crisis, exchange scarcity etc.

Has it succeeded in achieving its objectives?

  • Arguments in favour
    • Many argue that it led to a lot of economic and social development of the developing nations and made their voices being heard globally.
    • Reforms in the trade-related areas led the developing nations to enter the markets of the developed economies.
    • The development assistance initiatives of the UN and other agencies encountered a major shift and resulted in the establishment of new institutions such as the International Fund for United Nations Audiovisual Library of International Law Agricultural Development and the Common Fund for Commodities alongside existing commodities agreements. 
    • The development of certain international legal regimes also got influenced as a result of the NIEO. Universally, the seabed was conceived as the shared heritage of all. Similarly, protection of the natural environment was now considered the responsibility of all. Regionally, the NIEO allowed the developing countries to enter into economic and trade convents.
  • Arguments against
    • Some argued that the NIEO was politically and economically averse to the existing liberal economy and globalization.
    • It is also criticised for being biased in the favour of LDCs. Its efforts in the direction of more favourable terms of trade in favour of developing nations are considered to be discriminatory. 
    • The NIEO was further criticised on the grounds of being ignorant or oblivious to the internal problems faced by the LDCs and their inability to look over or deal with the activities of transnational corporations. 
    • It is considered to be less successful because of its failure to regulate its strategy and lack of unity amongst the LDCs. 
    • Some argue that it failed to reach its utmost aim of ending poverty in the Third World, especially in Africa.

Relevance in the present global scenario

  • With the dawn of the slowdown in the world economy during the 1980s and early 1990s, most countries had turned inward to solve their domestic issues of slow growth and unemployment. This led to the loss of relevance of the NIEO in the present context.
  • In 2016, an updated report of the UN on an overview of the major international economic and policy challenges that must be addressed to achieve the aims of the Declaration on the Establishment of a New International Economic Order (NIEO) 1974 found that some of the ideas raised at the time are still relevant and useful for implementing the 2030 Agenda for Sustainable Development.
  • Meanwhile, the rebirth of the Cold War and trade wars between the U.S. and China further threatened the goals of a new world economic order. 
  • However, given the challenges the COVID-19 pandemic has posed, it is imminent that the legacy of the NIEO may be taken into account and put forward into action.

Conclusion

The conflict between the North and South and their uneven natural resource distribution, economic and military capability are going to be a part of the world order for a long time. Although the global community is making efforts to minimise the differences, the efforts have not bore expected outcomes. Major international institutions could play a major role in filling the gap and establish a world based on equity, independence and interdependence. 

Practise Question

Q. What is the relevance of the NIEO in the present global scenario? Do you think it succeeded in its efforts to have a fairer world economic and political order? Discuss.

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