This book is about the creation of a particular form of dialogue between “the North and South”. In the postwar environment the ideas for decolonization gained traction as newly-minted international institutions found their purpose; the UN for international dialogue and conflict resolution, and the IMF and World Bank to fund and manage investment in foreign, developing countries. These relationships were instrumentalized during the Cold War to counteract Soviet influence around the Third World, but its consequences went far beyond. A tightly coupled mechanism was formed uniting the global North and South, by which raw materials flowed towards central countries from the periphery was developed, one where diplomatic concessions and military interventions were used to maintain the regular resource flow. The unfortunate consequence was that development and aid fell short of their objective of creating self-sustaining economic growth. Often, what it caused was spurious and inadequate funding of disparate projects, and it encouraged corruption across the world. What it did achieve was sustaining US hegemony throughout the period, promoting and instituting a super system of integrated economic exchange, ultimately going against the very interests that the system was supposed to maintain: the growth and best interest of the Third World.
“On 20 January 1949, when Harry Truman came onstage at the Capitol and took his oath for the second term as the thirty-third president of the United States of America, he probably did not anticipate that his words would be included on the list of the history’s most influential speeches. As the fourth point in his program, he launched a policy of making US scientific advances and industrial progress available to underdeveloped areas in order to fight misery, malnutrition, and illness. Truman’s Point Four, as it soon became known…”
In this speech, Truman posited a radical new role for the United States vis-a-vis the rest of the world, and conceived as the great resistance of the West against the Soviet Union on the eve of the Cold War, of democracy against communism. Already for decades experiments had been conducted on southern Italy. “The Mezzogiorno was a laboratory of the kind envisaged by economist Eugene Staley in the 1930s.” Here the wisdom of economists, engineers, technicians and other experts was put into practice. The World Bank was put into action in order to kickstart Italy’s largely traditional economy into self-propelling industrial development. Albert O. Hirschmann, Manlio Rossi-Doria are some of the prominent actors in this area, and were related with the creation of the Associazione per lo Sviluppo dell’Industria nel Mezzogiorno think tank, which designed the direction of development across “Backward Areas” of Italy. The language of Willard L. Thorp (economist, assistant secretary of state for economic affairs, writer of Formulating a Four Point Program, on a 1950 special edition of Annals of the American Academy of Political and Social Science), was clear in the preeminence of “technology, international cooperation, and promotion of democracy,” this was more of an excuse to foster conditions for foreign direct investment, the taming of “nationalist and leftist tendencies among peasants and workers” that were so characteristic of their time. Along with the Marshall Plan to rebuild Europe, a vast enterprise was undertaken by the United States to single-handedly kickstart development across the globe.
To accommodate the interests of the aid-giving nations around the issues surrounding development, a circle of elites began to coalesce and develop methods and ideas suited for this purpose. This included educators, engineers, health practitioners, anthropologists, activists and internationalists of various sorts. The project intended to “educate” more than just dialogue, and instill attitudes that favored US interests such as openness to free trade, suspicion of Soviet and communist relations, and respect of foreign investments. Aurelio Peccei, founder of the Club of Rome think tank that funded the controversial Limits to Growth, and Beyond the Limits, which stressed the importance of managing the adverse consequences of exponential growth. Other economists created the frameworks still in use today to measure hunger, poverty, and development, most prominent among stands Colin Clark, the creator of the modern methods for calculating GDP. The World Bank defined poverty as under $100 annual GDP per capita. The failure to satisfy the goals of creating self-sustained growth was presented as evidence that infrastructure was not enough. Although the use of uniform standards of poverty highlighted the structural possibility of a transition from underdeveloped to highly developed and even a donor country, it did not offer any clues to help the transition. So if the measures employed were not shown to promote the self-sustained growth that was the goal, why was this policy pursued? We will have to consult Eisenhower.
“While Harry Truman saw development assistance as a way to increase security in the changing decolonizing world and as a tool in the Cold War, his successor, Dwight D. Eisenhower, did not share his enthusiasm. It was during Eisenhower’s administration, though, between 1953 and 1961, that the soviet challenge in the Third World became palpable and a discussion about foreign aid moved to center stage. Unable to reconcile anticolonialism with its overriding determination to contain communism, preserve ties with the European allies, and promote a liberal capitalist international economy, the Eisenhower administration endorsed conservative elites in the Third World, backed repressive regimes, and resorted to covert operations to prevent a communist seizure of power. As a result, it nourished the kind of revolutionary violence that Americans most feared.”
The purpose was not necessarily providing a measure of aid or development to the recipient country, but to crowd out Soviet “solidarity” from corrupting the country elites towards communist sympathies. It was mostly thanks to the charisma of John F. Kennedy that the American approach to development is not recognized as simple imperialist or colonialist policy. He proclaimed to the UN General Assembly in 1961 that this would be the “Decade of Development.” He increased funding for aid agencies by $800 million, and consolidated all agencies under USAID, the Agency for International Development. There was a special committee for Latin America called Alliance for Progress: A Program of Inter-American Partnership, a “ten-year, $20 billion foreign aid program” that was orchestrated by Albert O. Hirschman, Paul N. Rosenstein-Rodan, Federico G. Gil, Walt W. Rostow, and included input from Felipe Herrera, president of the Inter-American Development Bank, and Raul Prebisch the principal intellectual force of the United Nations Economic Commission for Latin America.
“Chile, Brazil, the Dominican Republic, and Colombia received almost 60 percent of all US funding. The Alliance failed, and weaknesses in its administrative structure are usually blamed. At the core, however, stood the flawed assumption (held for the whole developing world, not just Latin America) that foreign aid would convince leaders to change their policies and accept US ideas about development.”
It was not just about the failed attempt to indoctrinate the Third World with US ideas about development, and particularly about the choice of capitalism over socialism as a source for progress and well-being. It was also about the creation and satisfaction of a vast machinery aligned to produce “scientific” solutions to the problems of development. “Economist and US ambassador to India John Kenneth Galbraith was an eyewitness to this transition. He explains how in 1949 development economics hardly existed, but within fifteen years, with contributions from private foundations such as Ford, Rockefeller, and Carnegie, attention to poverty and its conundrums had increased exponentially.” This problem was not just one of a technical nature, it often entailed the restructuring of social relations in various countries, particularly when they were underdeveloped. But the language of economics that was used to justify these interventions clouded the fact that the relationships that were raised were often not in the interest of these developing nations. “The World Bank promoted an idea of efficiency based on the theory of comparative advantage. It encouraged solutions in which poor countries exported raw materials while advanced countries produced and exported technology.” It also excluded any projects that were not compatible with the ideas that were associated with capitalism during the era.
The consequences of these biases often spelled disastrous consequences for the recipient countries. The technocratic body that was responsible for these policies came to terms with their radical inefficacy when Hans W. Singer produced a 1949 report titled UN Report on Relative Prices of Exports and Imports of Underdeveloped Countries. His findings were shocking, because he found that the theory of comparative advantage was in fact creating a systematically worsening situation for developed countries that primarily exported raw materials. “The terms of trade for goods exported by poor countries tended to worsen, while the terms of trade for manufactured goods tended to improve.” The political consequences of this study are evaluated by Raul Prebisch in his The Economic Development of Latin America and Its Principal Problems. He develops the language that evoked a rise in consciousness among the developing country elite on the importance of economic as well as political sovereignty.
The retreat of colonial rule represented the recognition of the political sovereignty of these developed nations, well then the recognition of the systematic unfairness observed in the worsening terms of trade from Singer’s study. Many Third World countries found their voice when Prebisch spoke of a “long-standing pattern of trade” that was “systematically disadvantageous” for Third World countries. It would be thanks to these books that the discourse around development would focus now on the possibility of a renegotiation between the First World and the Third World, the creation of a New International Economic Order (NIEO) to right the scales in favor of the Third World.
Countries were demanding their sovereignty in the economic domain, which included “sovereignty over natural resources, controls on foreign investments, better trade terms, access to the markets of developed countries, reduction in technology costs, more aid, a moratorium on debt and its eventual reduction, and the redistribution of power within the World Bank and the IMF.” They would however, unfortunately, receive exactly the opposite deal, although this is better explained in another book, Oil Revolutionaries, by Christopher Dietrich. By some account they are successful, for oil producing countries established OPEC and took control over price and production of many of the world’s most important oil fields, particularly in Iran, Saudi Arabia and Kuwait.
The nationalist rhetoric encouraged plenty of politicians to take advantage of the opportunity: “seventy-nine U.S. firms were expropriated in 1967-1971; fifty-seven were expropriated in 1972-1973.” However, it was not enough, because the plans for the NIEO would fall through and non-oil producing developing nations would face one of the hardest decades that they would see during the 20th century. But this is better left for my review of Oil Revolutionaries, which will follow soon.
For now, I really liked this book, I think it’s worth most people’s time if they’re perversely interested in development economics, and particularly how development is instrumentalized by rich and powerful countries. This book will be very useful in my upcoming essay, Malign Logic, which will decompose the thought behind Nick Land’s language when describing the relations between developed and developing countries.