Gamani Corea, and the North-South Relations

I consider it a great privilege that I have been asked to participate in this function to honour Gamani Corea, one of the most distinguished scholars of our time and a great proponent of the causes of the developing countries in the world economy. I had the good fortune of knowing him and working with him in different capacities during his long and most celebrated tenure in the UNCTAD. He of course had a glorious career as a public servant in the Sri Lankan government before he joined the UNCTAD. I knew him only as UNCTAD Secretary General and like many others, admired his erudition, articulation and the analytical capacity to give a shape to what the developing countries wanted at that time and in a large measure wants even now.

It is not possible to think of the North-South relations without Gamani Corea and his contribution. I take this opportunity to pay my sincere respects to him as a person and to the legacy left behind in the North-South movement. I call it a North-South movement, because the idea behind the North-South issues have changed, with the changing realities of the world economy, but the movement still endures and I believe will continue to occupy a central place in the international economic interactions for a long time.

The idea of the North versus South in international economic relations is basically political how a group of developing countries can influence the decision making and the outcomes of those decisions in an international order, which is dominated by a group of countries described as the North. There are of course many differences between the countries constituting either the South or the North, and the nature of these differences also changed over the last three decades. But still it is possible to identify a group of countries in terms of some abiding interest and economic characteristics as "The South". They all are developing countries though varying in their rates of growth and characteristics of the process of their development. But they formed a group called the "South" in juxtaposition of the group called "North", a group of developed industrial countries who dominate the international economic relations. The North and South categories relate to who have greater power, who have greater influence and who have a greater clout in the operation of the international economy. If there were no "North", I submit there would have been no "South". In an unequal world the North are the countries who dominate, not just because they are richer and have greater material and technical resources at their command. They are North, because they have striking similarities in their approaches to the problems of the South. Inspite of all their internal differences at a time when decisions are taken that impact on the international economic system, the northern countries by and large have taken a unified position vis-à-vis with other countries, whether they are socialist or developing nations.

The South came into being, as many leaders of the developing countries realized that if they do not coordinate among themselves and take a stand on specific issues related to the international economy, they will have very little chance of influencing the course of the world economic events. In this, I believe the only way to define "The South" as a category of states, who decided to come together on a common platform coordinating their stand on international issues, inspite of many differences among them, is that they do so to have an influence and some leverage of power in an international system, dominated by a group of countries called "The North". The North and South are, as I mentioned above, categories of states engaged in a power relationship to influence the international economic system.

The idea of the international economic system also emerged after the Second World War, in the setting up of the Bretton Woods Institutions. The IMF, which was the principal Bretton Woods Institution, was created after the economic devastation of the world war that followed the earlier economic turmoil of the Great Crisis and its aftermath. Some of the major industrial powers thought that an international order must be established to regulate and monitor the developments in the field of monetary transactions and capital flows influencing exchange rates, interest rates and inflation rates which required international coordination of the economic policies of different countries. The economics of the Great Depression made it clear to them that these variables which influence international trade, and economic performance, related to employment and output of most of these countries are difficult to manage as their domestic policies can not be pursued in isolation from the policies of the other countries. The IMF was created to establish an order, a system of rules and institutions, for this purpose. The Bretton Woods Conference where many developing countries also participated and the subsequent deliberations in the IMF itself, clearly showed that the developing countries were only peripheral to the system. In fact, in the negotiations of the Articles of Agreement of the IMF, the industrial countries would not want any reference to the notion of development as an objective of a proper functioning of the international order. The only concession they were willing to make to the developing countries was to set up the World Bank, as the International Bank for Reconstruction and Development for providing finance to the developing countries, in the manner in which the Marshal Plan had worked out in the Post War reconstruction of Europe. There was an attempt to create an institution to monitor the trade flows in the world, following the rules of the GATT (General Agreement of Trade and Tariffs), where the developing countries could hopefully put forward their case for trade promotion. But that institution was still-born and the world lived with GATT for all the years until the creation of WTO in 2004-2005. The international economic order for all these years was essentially dominated by the International Monetary Fund and supported by the GATT and the World Bank and later by some other regional development banks. The voting system in these institutions was weighted by the per capita income and the volume of trade and as a result, the developing countries had very little influence on their decision making, especially if they acted on their own and not as a combine. The GATT was supposed to be run on the basis of a consensus but the decks were so much stacked against the developing countries that they could hardly affect any of their rules and institutions.

In that framework the only way the developing countries could build some leverage of influence was either by taking a joint stand by themselves or by siding with the Socialist Countries, who were more often not opposed to the position of the industrial countries. To take up a joint position, the developing countries would need to analyze the process of development and causes of underdevelopment and formulate rules and regulations which would help their development or resist the negative effect of the dominance of the industrial countries. It so happened that most of the developing countries, had recently been liberated from the colonial rule of the major industrial countries. Even when countries in Latin America were not directly under any colonial rule, they were overwhelmingly dependent on the colonial powers. Similarly, even when industrial countries like the United States did not have a direct colony, it was integrally involved with the policies of the other industrial countries. This political history made it easier for the developing countries to assert the identity of their own, as a group of countries which had been historically exploited by the industrial countries and who perceived the dominance of those countries in the international economic order as an extension of their earlier colonial rules. Whether in practice this was the case or whether the industrial countries intended to exploit the developing countries any further in line with the earlier colonial rule are not quite relevant. It is the perception of the developing countries about the behaviour of the industrial countries was good enough to explain their formation as a group called "The South". And in that process seminal contributions were made by several economists of the South, emphasizing the communality of their interest and the adverse impacts of the way the international economic system worked.

Among those economists Raoul Prebish was probably the most influential, because he combined the analytical rigor of an economist with the knowledge and experience a major public policy official. In his writings, the problems of the developing countries, especially in the field of international trade, were quite clearly seen as the effect of an unequal relation between the industrial developed countries and the primary producer-developing countries. These issues were elaborated in several studies on the adverse movements, in the medium to long term, of the terms of trade of the primary producing countries. Similarly, the inability of the developing countries to expand their manufactured exports were portrayed as resulting from protectionism in the industrial countries and also a dualistic production structure distorted by the centre-periphery relationship between the developed and developing countries. In the areas of finance and capital flows, the developing countries were seen as critically dependent on foreign aid and low cost financial flows from the industrial countries, while most poor developing countries suffered from unserviceable debt burdens. It was clear to most developing countries that they cannot solve their problems of development without coming together on a common platform and pressing for public action and policy measures from the industrial countries.

The UNCTAD was born in 1963-64, mainly to serve as an institution to help the developing countries to consolidate their position and conduct negotiations on equal terms with the industrial countries. Towards that end UNCTAD also built up a major research programme to analyze the problems of development. To be able to negotiate, the developing countries must have the expertise and command over technical aspects of the problems, which UNCTAD was supposed to provide. But there was no mistake about the primary purpose of UNCTAD, which was to build up the negotiating strength of the developing countries in all international forums where the power balance were very much tilted in favour of the developed countries.

Gamani Corea’s terms in UNCTAD coincided with the period of renewed hope and perception of the strength of the developing countries when they acted together. That was the period when the developing countries demanded and many other countries, their academics and experts more than their governments responded positively to the call for the New International Economic Order. This was backed by the increase in the petroleum prices by a cartel of developing countries that had an almost revolutionary impact on the international economic relationships. The OPEC which spear-headed this oil price hike at that time, also openly championed the cause of all the developing countries. Gamani Corea’s UNCTAD brought out many studies and report

spelling out how the developing countries could extract concessions and changes in the rules of operation of the international system in negotiations with the industrial countries. Those studies encompassed all the areas of trade, debt, financial flows and technology transfer and made it possible for the developing countries to address all issues of international relations from the perspective of the interests of the developing countries in all international forums.

The most radical programme was the brain child of Gamani himself and it was in the area of commodities, where UNCTAD was able to show how a producers’ association of developing countries engaged in the production and supply of primary products could enhance their revenues and stimulate their development through the regulation of their supply. The UNCTAD was able to show that a long term impact of such supply-regulation and forming buffer-stocks of the different commodities would also be beneficial for the consumer of their products in the industrial countries. The proposal for the International Common Fund was based on that analysis in the hope that several industrial countries would contribute to the capital and finance of that institution. I am referring to the Common Fund in particular, because the developing countries showed an exceptional order of reconciliation of their interests for taking a joint stand. Negotiating for the Common Fund became a sort of inspiration for all the developing countries negotiators and the UNCTAD officials and Gamani Corea himself played the role of providing constant support to all of them.

The negotiations were conducted in all other areas, for international trade, manufacture and agricultural products in the GATT framework together with strong positions on textiles, on debt and financing flows, in the forums of the OECD and the IMF and on technology in several forums of the United Nations progressing towards an international regime. In the IMF which was overseeing the international financing flows, the primary emphasis was on conditionalities associated with these flows for binding up the repayment capacity irrespective of the requirements of long term development. The UNCTAD studies provided an analysis of structural adjustment programmes on the basis of which the developing countries could stand up to the IMF pressure for putting forward the objectives of development first before the objectives of repaying the past debts. There was one area of financial flows coming from the Compensatory Financial Facility, which was created in pursuance of an idea floated by UNCTAD itself, where the logic of unconditional financing of reversible short-falls of foreign exchange was accepted by the industrial countries themselves in the IMF.

I am recounting all these to show how UNCTAD played a major role in international negotiations between the industrial and the developing countries, and how Gamani Corea was principally responsible for building up the capacity of UNCTAD. He was able to bring in a group of outstanding experts into the staff such as Barnard Czidero from Zimbabwe, Drag Abrahmovitch from Yugoslavia, Gerry Arsenis from Greece Surendra Patel on technology from India as well as consultants and adviser of extraordinary ability such as Godfrey Gunatileke from Sri Lanka and Sydney Dell from the U.K. Looking at the history of that period, one would unhesitatingly describe Gamani Corea as the indefatigable leader of the developing countries. His contribution would remain written in golden letters in the annals of international economic development.

The times have changed. Many of the developing countries of the yesteryears have become developed in terms of their production and financial capacity as well as progress in technology. But inspite of all that the world still remains divided between the North and South, between the industrial countries and the developing countries. Again this divide is determined politically by power relationship between the group of countries that influence the international economic transaction and the other groups who do not have the leverage to change the course of international institution. The reality of the situation comes out very sharply if one examines the economics and politics of globalization that have dominated the world in the 1980’s and 1990s. One has to read only Joseph Stiglitz’s remarkable book on "Globalization and its discontents" for this. The issues are decided, whether in the field of international trade or international finance, in the intellectual property regime or international human rights, in terms of the politics of influence, through the interplay of positions taken by the group of industrial countries as opposed to the developing countries. Several developing countries have been able to increase their economic strength, but still they find joining the coalition with other poorer developing countries, allows them to play a greater role in international economic relations. The interaction of the North versus South is still potent to bring about changes in the world economic order. May be, over time this North versus South divide will translate itself into the divide between the rich and poor, between the haves and have-nots, which would transend the boundaries of nation states. But until then the divide between the group of states known as the North with economic power to influence and change the economics and politics of the international system and a group of nation states reacting to those changes and pressing for their interest known as the South, will continue to characterize our world.

(Arjun Sen Gupta is the Chairman of the National Commission on Enterprises in the Informal Sector of India. He is the former UN Independent Expert on the Right to Development and current UN Independent Expert on Human Rights and Extreme Poverty. He is a former professor at the School of International Studies, Jawaharlal Nehru University.)

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