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Rich and poor countries
Book Rmiews
35s
Hans W. Singer and Javed A. Anrari, Rich and Poor Countries (The Johns Mopkins University Press, Balti~;ore, 1977) pp. 228. Singer and Ansari have written a very useful little volume which summarizes the principal issues of the 1970s in the economic relation&p between developed and less developed countries. The first three chapters provide an overview of North-South relationships. The authors find that ‘ . . . the most sign&ant deficiency of the modern international economic order is its manifest inability to spread wide the fruits of growth and prosperity’ (p. 16). They believe that one of the fundamental characteristics of the system is the concentration of economic power in the hands of a few nations which can adjust to disequilibrium and imbalances in wor!d markets with a minimum of friction and cost. The adjustments are more painful to poorer countries, as shown by the oil crisis. The non-OPEC LDCs had to transfer increased resources because of both the higher oil prices and the higher prices of manufactured goods resulting from the intlation in rich countries. Also, since OPEC countries were not able to absorb more than half of their export earnings, they ‘. . . will thus in effect transfer their surplus earnings from the poor countries to .the capital markets of the rich industrial nations, this action being in sharp contrast to their avowed intentions expressed in UN forums’ (p. 22). Singer and Ansari are convinced that the industrialization of many LDCs has increased their dependence 03 Iich coluntries. The basic advantage to the latter is ‘. . . not that they produce certain t+‘pesof dzommodities, but rather that they are the home of modern technology and the seats of the multinational corporations. It is because of this that the rich industrial countries will tend to be the chief gainers from any type of commercial relationship with the Third World-be it in the form of trade or investment’ (p. 37). They feel that ‘ . . . Salvation lies not in mere industrialization as such, but rather in the development of indigenous scientific and technological capacities within the developing countrres and in a reorientation of the present system of research and development which by and large ign.ores their needs’ (p. 37). This theme is tottchec! upon in many parts of the book. While the zuthors’ view falls very much within current thinking i,l tl~c:profession, it has yet to be shown cmpi::ically that there is such a thing as ‘indigenous technology’, which is something other than nutmoded technology that, if promoted, might lock LDCs into permanent backwardness. It also remains to be seen Jf the adoption of more labor-intensive technology in manu:‘acturing would make math of a dent in the employment problem of those countries. There is an illuminating di!;cussion of the conR:ct between attempts of the iv~~s~~y~~gtheir exports an LDCs to increase their share of world tra the social goals of rich countries which ‘. . . commit them to maintaining the income of workers in the classicai labour-intensive industries’ (p. 86). This is
followed by a survey of various attempts at regional economic integration and the reasons for their failures to date. Their analysis of the failure of most commodity agreements leads them to conclude that they tend ‘. .. . to obscure the ma.cro-economic problem of the stabilisation of export receipts, by concentratialg on the maintenance t.jf prices for individual commodities’ (p. 223). They favor compensatory finaming schemes because under them ‘. . . the market will be allowed to find its OWEequilibrium and the necessary compensating adjustments will not directly inte-rfere with the inarket-determined pattern of resource determination’ (p. 124). Singer and Ansari make a strong plea. for a continuation and increase in resource transfer through ‘aid. They argue that A primary objective of aid allocation policy must be the reduction of the ever-widening international gap. Aid must not be seen as a temporary selfliquidating stop-gap mea.sure. Instead, it must be frankly recognized that aid, as we know it, ought to be the first step that has been taken towards the evolution of a progresrive international taxation structure hased on the principle: ‘From. each accordiilg to his ability; to each actor &ng ic; his ,need’. In other words, the fact must be faced that aid is a permanent feature of the process of international resource allocation. (pp. 142-3) They then survey the vario:ls aspects of aid - its se\,sral definitions, the problems of adhering to an agreed-upon percentage of rich countries’ GNP to be transferred, how certain types of aid distort the development gracess, etc. A chapter on multinationals presents a well-balauced account of their positive and negative impact on LDCs. The authors concluci? that ‘. . . In a world .where aid and techl:ical assistance programmes are shrinking daily, the multinational will in all likelihood increase in importance as the agent of technology transfer to the developing countries. However, the quanttcy and quality of the technology supplied by the multinational leaves a great deal to be desired. The form of international integration that the multinationals seem to be aiming for will not, at least in the short-run, lead to a closing of the gap between the rich and poor c:ountries’ (pp. 209-10). Xtth1a.c!Mows that ‘. . The most sensible thing to do is to try to offset the social arid economic inequalities created as a consequence o”foreign investment by government pclicies that aim 11tcontrolling the muItinai:iznal and at inducing it to transfer an increasing propoh’ion of its profits tc>the goveri,ment. The government sh(.;lld then use this money to reduce incor le inequalities within the EDC’ (p. 211~. The book concludes wii h a chapter devoted to a sketch of the costs and benefits resulting from the LDCs’ ‘brain drain’ to richer countries. Both new and older s&ients of LDCs shoulld find this book a usefill and refreshing summary of the nature of North-South economic relaiiJns and a convinci::g argument for changing their terms. Werner Baer
35s
Hans W. Singer and Javed A. Anrari, Rich and Poor Countries (The Johns Mopkins University Press, Balti~;ore, 1977) pp. 228. Singer and Ansari have written a very useful little volume which summarizes the principal issues of the 1970s in the economic relation&p between developed and less developed countries. The first three chapters provide an overview of North-South relationships. The authors find that ‘ . . . the most sign&ant deficiency of the modern international economic order is its manifest inability to spread wide the fruits of growth and prosperity’ (p. 16). They believe that one of the fundamental characteristics of the system is the concentration of economic power in the hands of a few nations which can adjust to disequilibrium and imbalances in wor!d markets with a minimum of friction and cost. The adjustments are more painful to poorer countries, as shown by the oil crisis. The non-OPEC LDCs had to transfer increased resources because of both the higher oil prices and the higher prices of manufactured goods resulting from the intlation in rich countries. Also, since OPEC countries were not able to absorb more than half of their export earnings, they ‘. . . will thus in effect transfer their surplus earnings from the poor countries to .the capital markets of the rich industrial nations, this action being in sharp contrast to their avowed intentions expressed in UN forums’ (p. 22). Singer and Ansari are convinced that the industrialization of many LDCs has increased their dependence 03 Iich coluntries. The basic advantage to the latter is ‘. . . not that they produce certain t+‘pesof dzommodities, but rather that they are the home of modern technology and the seats of the multinational corporations. It is because of this that the rich industrial countries will tend to be the chief gainers from any type of commercial relationship with the Third World-be it in the form of trade or investment’ (p. 37). They feel that ‘ . . . Salvation lies not in mere industrialization as such, but rather in the development of indigenous scientific and technological capacities within the developing countrres and in a reorientation of the present system of research and development which by and large ign.ores their needs’ (p. 37). This theme is tottchec! upon in many parts of the book. While the zuthors’ view falls very much within current thinking i,l tl~c:profession, it has yet to be shown cmpi::ically that there is such a thing as ‘indigenous technology’, which is something other than nutmoded technology that, if promoted, might lock LDCs into permanent backwardness. It also remains to be seen Jf the adoption of more labor-intensive technology in manu:‘acturing would make math of a dent in the employment problem of those countries. There is an illuminating di!;cussion of the conR:ct between attempts of the iv~~s~~y~~gtheir exports an LDCs to increase their share of world tra the social goals of rich countries which ‘. . . commit them to maintaining the income of workers in the classicai labour-intensive industries’ (p. 86). This is
followed by a survey of various attempts at regional economic integration and the reasons for their failures to date. Their analysis of the failure of most commodity agreements leads them to conclude that they tend ‘. .. . to obscure the ma.cro-economic problem of the stabilisation of export receipts, by concentratialg on the maintenance t.jf prices for individual commodities’ (p. 223). They favor compensatory finaming schemes because under them ‘. . . the market will be allowed to find its OWEequilibrium and the necessary compensating adjustments will not directly inte-rfere with the inarket-determined pattern of resource determination’ (p. 124). Singer and Ansari make a strong plea. for a continuation and increase in resource transfer through ‘aid. They argue that A primary objective of aid allocation policy must be the reduction of the ever-widening international gap. Aid must not be seen as a temporary selfliquidating stop-gap mea.sure. Instead, it must be frankly recognized that aid, as we know it, ought to be the first step that has been taken towards the evolution of a progresrive international taxation structure hased on the principle: ‘From. each accordiilg to his ability; to each actor &ng ic; his ,need’. In other words, the fact must be faced that aid is a permanent feature of the process of international resource allocation. (pp. 142-3) They then survey the vario:ls aspects of aid - its se\,sral definitions, the problems of adhering to an agreed-upon percentage of rich countries’ GNP to be transferred, how certain types of aid distort the development gracess, etc. A chapter on multinationals presents a well-balauced account of their positive and negative impact on LDCs. The authors concluci? that ‘. . . In a world .where aid and techl:ical assistance programmes are shrinking daily, the multinational will in all likelihood increase in importance as the agent of technology transfer to the developing countries. However, the quanttcy and quality of the technology supplied by the multinational leaves a great deal to be desired. The form of international integration that the multinationals seem to be aiming for will not, at least in the short-run, lead to a closing of the gap between the rich and poor c:ountries’ (pp. 209-10). Xtth1a.c!Mows that ‘. . The most sensible thing to do is to try to offset the social arid economic inequalities created as a consequence o”foreign investment by government pclicies that aim 11tcontrolling the muItinai:iznal and at inducing it to transfer an increasing propoh’ion of its profits tc>the goveri,ment. The government sh(.;lld then use this money to reduce incor le inequalities within the EDC’ (p. 211~. The book concludes wii h a chapter devoted to a sketch of the costs and benefits resulting from the LDCs’ ‘brain drain’ to richer countries. Both new and older s&ients of LDCs shoulld find this book a usefill and refreshing summary of the nature of North-South economic relaiiJns and a convinci::g argument for changing their terms. Werner Baer