(a) International Development Cooperation: The Early Phase
(b) Later Developments
(c) "Globalization and Liberalization"
(d) Concerns for the South
(e) The Task Ahead

The changes that have taken place in recent years have had a major impact on the global environment for development. The changes are political and economic, technological and institutional and are of profound significance to both the prospects facing the developing countries and to their policy responses. They are also of significance to the underpinnings of international development cooperation. The developing countries need urgently to fashion their responses to the evolving situation. They need to determine how best they could take advantage of and improve upon the positive elements of the changing scenario and at the same time counter and minimize the drawbacks. They need, for this purpose, to review the platform that has served to guide them in the past in their negotiations on multilateral issues and adapt it to reflect the needs of the day. Many of the basic elements of this platform remain valid; but they require updating and recasting in the new context. Even more important, there are new issues that have arisen or are emerging that call for new responses from the developing countries. All this requires that these countries review the role they are playing in the realm of multilateral decision making and work out approaches and actions that will enhance their cohesion and effectiveness on the international scene.

Major international developments, in particular the end of the cold war and the break up of the socialist bloc, have had a strong impact on the global environment as its affects the developing countries. Much of the earlier motivation for international development cooperation was spurred by super power rivalry and the desire of these powers to prevent opposing forces from extending their influence in the countries of the Third World. This, in the context of the emergence of new sovereign states in the South after decolonization, encouraged support from the major powers and other developed countries for the development aspirations of Third World countries. The numerical preponderance of these countries in the United Nations system encouraged the latter to sharpen the focus on development issues in the economic field. The international secretariats of the United Nations system themselves contributed strongly to setting out the analytical underpinnings of international development cooperation and to drawing out the policy conclusions that flowed from them. This helped to offset the absence of organizational arrangements among the developing countries for conducting studies on multilateral issues and for deriving their policy implications for collective initiatives by them.

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(a) International Development Cooperation: The Early Phase

The early years saw, against this background, a degree of progress in international development cooperation. Most of the leading developed countries launched programmes of bilateral aid to developing countries on concessional terms. Multilateral financial institutions established after the war, particularly the World Bank and the International Monetary Fund, shifted their attention from post war reconstruction and international monetary management to the needs of developing countries. International Development Strategies were launched in the United Nations with the support of the developed countries as a guide to successive "Decades of Development". The early 1960s also saw the mobilization of the developing countries on a global basis. It saw the launching of the Non-Aligned Movement as well as the creation of the Group of 77 in the context of the birth of UNCTAD, the United Nations Conference on Trade and Development. A "platform" of the developing countries came to be forged to reflect their needs and to identify the responses called for from the developed countries in the arena of multilateral negotiations. The platform embodied such issues as the need to enhance capital flows to the developing countries, to improve and stabilize the terms of trade for primary products, to liberalize the markets for their exports and to provide preferential access to such markets on a non-discriminatory basis. These needs were also given quantitative dimensions through the elaboration of such concepts as the "Trade Gap" facing the developing countries in pursuit of accepted targets for their average growth.

The progress made by the developing countries in gaining acceptance of these goals was limited but there were nevertheless some advances. The early years saw the acceptance by the developed countries of such concepts as the generalized system of preferences, overall targets for official aid, the participation of the developing countries in shipping, the need for producer-consumer cooperation to stabilize the prices of selected commodities and the international creation of liquid reserves. There was also a recognition of the special needs of categories of developing countries, in particular that of the least developed among the developing countries. Such progress was not made through the use of the numerical voting strength of the developing countries but with the acquiescence of the developed countries whose support was needed for the implementation of decisions.

The decade of the seventies, in particular, was one of intensified activity in the arena of North-South negotiations. The action of the members of the OPEC, the Organization of Petroleum Exporting Countries, in unilaterally raising the price of oil, created a new atmosphere in which an element of Third World leverage was seen to be present. The years that followed the "oil shock" of the early seventies resulted in a new focus on North-South negotiations for which the 6th Special Session on the UN General Assembly, launched on the initiative of the Non-Aligned Movement, served as a springboard. The Declaration and Programme of Action on a New International Economic Order, embodying the twin themes of structural change in the world economy and collective self-reliance on the part of the developing countries, provided the backdrop to a new phase of intensified negotiations on North-South issues. UNCTAD served as a forum for a number of successful negotiations, including the Integrated Programme for Commodities and the Common Fund, the Code on Restrictive Business Practices, the Convention on Multi-modal Transport, the cancellation of the official debts of the poorer countries, and the first Conference of the Least Developed Countries. These instruments were initiated by the Group of 77 based on studies and policy recommendations by the UNCTAD secretariat. The seventies also saw the inauguration in Paris, outside of the United Nations, of the Conference on International Economic Cooperation (CIEC) to which the term "North-South" dialogue was first applied.

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(b) Later Developments

The situation, however, began to change over the succeeding decade of the eighties. A number of developments contributed towards this change. Conservative regimes, with market oriented ideologies, assumed office in the United States and several countries in Europe. They initiated domestic policies of contraction aimed at overcoming the "over-heating" of their own economies. They also viewed efforts to fashion the international economic environment for development, through multilateral negotiations in United Nations bodies, as "interventionist" and "statist". At the same time developments in the market for oil saw a weakening of the position of OPEC and its ability to sustain the rising trend of prices.

All these changes had a severely negative impact on the developing countries as a whole and on their ability to initiate and influence multilateral negotiations on North-South issues. The contractionary forces emanating from the leading developed countries severely affected the demand for the exports of the developing countries with drastic consequences for their external payments balances and their growth rates. It was these years that witnessed the deepening of the debt burdens of many developing countries and the recourse they had to the multilateral financial institutions for relief. The attention of the developing countries shifted away from multilateral negotiations on global economic issues to corrective responses at the domestic level. Such responses were linked to prescriptions for structural adjustment provided by the World Bank and the International Monetary Fund with the support of the major donors of bilateral assistance. These prescriptions embodied a progressive widening of the parameters of "conditionality" as they applied to the domestic policies of the developing countries.

The crisis facing the developing countries was compounded by further developments on the international political scene. The end of the eighties and the early nineties saw the finish of the super power rivalries of the earlier period following the collapse of the communist regimes of eastern Europe. This development signified the beginning of a whole new era in international relations with many ramifications. It signaled the beginning of a phase in which the political and economic ideologies of the United States and the Western powers gained a new ascendancy. The changed context affected some of the earlier underpinnings of international development cooperation and the political considerations that had fashioned them. As mentioned before, the political compulsions that had earlier served to focus the attention of the developed countries on the situation in the Third World came to be diluted. The problems of the former communist countries of Eastern Europe and the need for a smooth and successful transition by them to a market oriented system became issues that claimed the prior attention of the developed countries of the West. These developments had their impact on both their bilateral aid and their commitment to multilateral negotiations on North-South questions.

There were also economic and institutional dimensions that attained an added significance in the new scenario. The emphasis that the United States and the developed countries of the West had already begun to place on market forces and the private sector was further reinforced and woven into policy prescriptions for the developing countries authored by the multilateral financial institutions. At the same time, the quest for lowering the barriers to international trade and other exchanges and flows acquired a new vigour calling for responses from both the developed and the developing countries. Multilateral negotiations with a North-South or development orientation came virtually to an end giving way, in the arena of trade for example, to activities and negotiations that essentially reflected the priorities of developed countries.

The new environment also had institutional consequences affecting, in particular, the development contributions of the United Nations and its organs. With the end of the cold war vetoes that thwarted the political role of the Security Council, a new emphasis came to be placed on the involvement of the United Nations in peace keeping and other political issues. Given the budgetary and other constraints this change was at the expense of the previous focus of the United Nations and its secretariat on economic and development questions. The Bretton Woods institutions and the newly established World Trade Organization, on the other hand, benefited from an enhancement of their role. The end of the cold war also diminished the voting strength the developing countries had earlier been able to mobilize in the United Nations on their behalf. There was no longer a socialist bloc to support their quest for systemic changes in the global economy in favour of development. The relative numerical strength of the Third World countries in the United Nations was itself, in fact, reduced by the adhesion of new members that followed the break up of the Soviet Union and the other communist countries of Eastern Europe.

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(c) "Globalization and Liberalization"

The result of all these changes was the emergence of a new ideology sponsored by the countries of the West and the international organizations they influence. The new thinking came to be summed up under the caption "Globalization and Liberalization". To a large extent this concept displaced many of the principles that guided earlier multilateral negotiations on economic issues, in particular the acceptance of the role and responsibilities of the state and the recognition of the need of the developing countries for special treatment. Globalization and Liberalization came to be presented as an universal panacea of benefit to the developed and developing countries alike. Its principal theme was that trends towards the integration of the global economy, stimulated by political and technological developments, needed to be accelerated to bring virtually unlimited benefits to all countries. The concept of an eventual "Global Village" excited the imagination of many.

At the level of policy, the principal active channels for the transmission of the changes called for by the theme of globalization and liberalization were the Uruguay Round and its product the World Trade Organization, and the Bretton Woods institutions. The Trade negotiations under the Uruguay Round extended the concept of trade liberalization to new areas beyond that of the trade in merchandise that had been the focus of earlier GATT rounds of negotiations on the reduction of trade barriers. These included the trade in services, trade related investments, and intellectual property rights. The World Bank and the International Monetary Fund, for their part, promoted the further unilateral opening up of developing country markets under the aegis of structural adjustment policies that became the core of conditionality packages. These and other changes adapted the framework of national and international policies to facilitate the process of globalization that had already begun to gain momentum because of the changes in the global political scene, technological developments in fields such as transportation and communications, and the related increase in the mobility of transnational corporations and other agents of private economic activity.

The principles and policy prescriptions that arose out of the theme of Globalization and Liberalization had virtually a devastating impact on the themes that had earlier been interwoven with the concept of international development cooperation. They shifted the focus of policy from multilateral negotiations on development issues to the domestic actions and policies of the developing countries. The key to boarding the fast train of Globalization was the opening up of the domestic economies of these countries to the powerful forces of the market, both local and foreign. Liberalization, deregulation, privatization and monetary-fiscal discipline became the policy instruments needed for economic success. Countries that adopted them would be carried to ever increasing heights of progress while those that failed to do so would be left behind and be "marginalized". International actions aimed specifically at improving the global environment for development, such as aid on concessional terms, measures to counter the instability and weakness of commodity markets, preferential tariffs for developing country exports, debt reduction, and guidelines for the transfer of technology, to name a few examples, ceased to form part of the imperatives for global policies. To the extent that some of them were still applied they would be focused on the poorest and the weakest countries and made subject to a strict adherence to the dictates of conditionality. The North-South dialogue has ceased virtually to exist. For well over a decade now there have been no negotiations on international development issues comparable to those that took place before and during the seventies. In effect, the Globalization and Liberalization philosophy has displaced the concept of international development cooperation.

There have been significant developments in the global economy under the influence of the Globalization and Liberalization doctrine. There has been a vigorous, and possibly historically unparalleled, surge in the growth rates of international trade and financial flows across borders. But, the overall growth rates of the developed countries, and consequently of the global economy, have not shown any dramatic acceleration in recent years. The opening up of national markets for goods, services, and investment in the context of striking advances in the field of science and technology, particularly communications technology, has indeed made a reality of some of the expectations concerning global integration and global linkages. Domestic markets, including those of an ever increasing number of developing countries have been progressively opened up along with the liberalization of investment requirements. Liberalization within regional groupings also provided an additional tier to the global process. The overall picture of developments in the global economy did indeed suggest the birth of a new phase with the promise of even greater possibilities for the future.

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(d) Concerns for the South

The achievements on the positive side, however, have had their limitations and drawbacks in respect of the developing countries and in the more recent period the initial euphoria about Globalization and Liberalization has begun to wane. In the first place the distribution among countries and regions of the benefits of the process has come into question. World trade growth though rapid has mainly been a reflection of the growth of trade of, and between, the developed countries. The share of the developing countries in the recent increase in world trade has been modest. The same is true of the growth of financial flows and foreign direct investments. The distribution of benefits among the developing countries has also been highly unequal with much of them being confined to a relatively small number of developing countries mostly in East and South East Asia.

In fact, there is now an increasing recognition that the benefits of globalization have to a greater or lesser degree by-passed most of the developing countries despite their adherence to the tenets of structural adjustment policies. The poorest of them in parts of Africa, Central America and Asia have experienced, in fact, an increasing marginalization of their place in the world economy. The result of all this has been a widening of the gap in income distribution between the categories of the developed and the developing countries taken as a whole even when the rapidly growing countries of the latter group are included. Globalization and Liberalization has, paradoxically, increased the economic distance between rich and poor countries at least in the initial phase. Domestic policy reforms undertaken by a large number of developing countries in the direction of liberalization and deregulation have not ensured them a place on the Globalization Express.

There has also arisen a second category of concerns relating to the fact that policies of extensive deregulation and liberalization seem to be doing little or nothing to promote a pattern of development which serves to promote equity and social justice and widespread human development -- the end purposes of all development endeavours. The domestic liberalization measures undertaken by many of the developing countries have contributed towards a widening of internal income disparities as well. A number of countries that have witnessed some acceleration of economic growth in the wake of liberalization and deregulation have witnessed a shift in income distribution in favour of those in the upper income groups. Budgetary constraints on health, education and welfare measures and social programmes, tax concessions on profits, the modification of price controls, and the dismantling of state owned enterprises have been among the contributory factors. Many developing countries have also experienced the pressures of rapid urbanization accompanied by unemployment and social unrest. Not a few of them have also witnessed an intensification of social and political problems, including such phenomena as crime, corruption, drug trafficking, sex exploitation, illegal migration and terrorism. Moreover, the economic and social pressures arising from domestic and international policies have sometimes contributed to igniting severe internal conflicts, which themselves stand in the way of making any significant progress on the development front, as do armed conflicts between countries of the South.

In addition to the above, there have also been concerns over the curbing of national sovereignty including in such fields as trade and investment regulation. Indeed, critics are already beginning to point to the parallel between the domestic policies of developing countries in the era of globalization with those of the colonial period. The colonial epoch also saw, in many parts of the world, a framework of domestic liberalization accompanied by balanced budgets, stable exchange rates, openness to foreign investment, the free movement of funds to and from other parts of the world, and indeed even the relatively free movement of labour. This framework saw the partial integration of many of the colonial territories into the world economy through the export of primary products and the import of consumer and capital goods from abroad. But the process stopped short of industrialization and left behind a legacy of dependence characteristic of the relationship between the "centre and the periphery".

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A third concern is that until now the Globalization and Liberalization process has unfolded in such a way that developing countries have not participated in shaping the policy framework that underpins such a process. As mentioned before, the global political changes following the end of the cold war and the liberal market oriented ideologies of the major developed countries served as the launching pad for the new global economic environment that has now come into being. Understandably, the major powers placed emphasis on the directions of change that served to enlarge the opportunities open to them. This was reflected in the new issues brought before the Uruguay Round and its creation the World Trade Organization. It is also, in a sense, reflected in the policy prescriptions of the multilateral financial institutions that are applied virtually entirely to the developing countries. The developing countries did not have an agenda of their own to guide and shape the unfolding of the process of globalization and liberalization. They lacked the organizational capacity for serious substantive work in such a field. In the event, the task they faced was one of reacting to the initiatives of the developed countries and engaging, where such initiatives were unfavourable to their concerns, in efforts at modification and damage limitation.

In the more recent period a fourth cause for concern has become manifest. The economic performance of the countries of East and South East Asia was seen as compelling evidence of the success of Globalization and Liberalization in speeding up the tempo of development. The experience of these countries in sustaining impressive rates of economic growth over a considerable period and their advance towards modernization and transformation were indeed striking. The differentiation among the developing countries, never a homogenous group, increased still further and those that did not enjoy the success of the "emergent economies" were urged to follow their example in the realm of domestic policies. Now the optimism has given way to anxiety and concern. The emergent economies in Asia are in crisis experiencing sharp downward pressures on their currency and capital markets and emergent stresses on their economic and social well being and political processes. There are, indeed, fears of widespread international repercussions.

Many explanations have been given about the crisis and its causes, both internal and external. But one of the lessons that has become all too obvious is the vulnerability of economies to uncontrolled financial flows of various kinds, including those of a speculative nature. The globalization and liberalization environment contained no safeguards that served to control and regulate destabilizing factors in the context of the vast movements of finance across national borders that have become manifest in recent times. The response of the multilateral financial institutions and the major powers to the East Asian crisis has been ad hoc and ex-post but the need in the first place was for preventive mechanisms. All these developments have added a new dimension to the global and liberalization experience and brought into focus the workings of the international monetary system in the context of the evolving global scene.

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(e) The Task Ahead

The experience of the changes in the global economy over the last few years brings out important lessons for the countries of the Third World. The trend towards globalization and liberalization has been dictated by a constellation of forces -- political, economic and technological. Whatever its limitations its general thrust is, in a sense, irreversible. The growing linkages between countries, the opening up of markets, the spread of investments, and the impact of technology on standardizing products, shortening distances, and modern communications offer new vistas of opportunity for the development process if their positive aspects are grasped and their drawbacks averted. The task facing the developing countries is one of adapting the globalization and liberalization process to reflect their own situations and development imperatives. Their central concern must be on utilising such a process for the strengthening of their own indigenous capabilities at the national, regional, and global levels. They need to match the priorities of the developed countries in multinational negotiations with their own priorities and identify and pursue the adaptations, modifications and objectives that reflect their interests. This in essence would be the primary objective of an economic Agenda of the South in the evolving global economy of today.

Such an agenda needs to be pursued in a setting of Southern unity and cohesion. The developing countries were never a homogenous group, but in the early phase of North-South negotiations the countries of Latin America, Africa, and Asia were able to forge common positions and present a united front through the Group of 77 and the Non-Aligned Movement. In the recent period the differentiation among the developing countries has increased further. Their range extends from countries described as newly industrializing to least developed with vast differences in their economic and social situations. Nevertheless there continue to be powerful factors that serve to bind them together and give reality to the concept of the South. None of the countries of the South partake in the management of the global economy. Their impact at multilateral negotiations still derives from the strength of numbers. Their unity and cohesion remains, therefore, the source of their strength. A common platform for the South needs to take account of the major interests of all the developing countries. While individual items in the platform could be of varying importance to different countries, the platform, taken as a whole, needs to be one around which all could rally. The sections to follow attempt to identify the major issues that need incorporation in an Agenda of the South. They are intended as a guide to the further work that needs to be initiated in the period to come.