SEPTEMBER 01, 1964 by EDWARD ROSSIT
Mr. Rossit is a free-lance writer and business consultant in Seattle.
First, what in the world is UNCTAD? Well, it is short for the United Nations Conference on Trade and Development convened in Geneva, Switzerland, in the Spring of 1964 — the largest trade conference in history, with some 2,000 delegates from 121 countries in attendance.
Even before the conference began, it had already developed some strange alliances between the "have nations" and the "have not nations" of the world. The conference also developed ominous racial undertones in that the so-called "have nations" happen to be populated with white people, while the "have not nations" are populated by people who are black, yellow, and brown.
Soon after the conference began, from the myriads of currents and crosscurrents, there began to emerge a philosophy about the relationship between rich and poor nations. This philosophy is the old share-the-wealth attitude which we have come to recognize when applied within a national economy to individuals. Tax the rich and give the money to the poor! Redistribute the wealth! Now, instead of referring to individuals, the would-be wealth sharers refer to rich and poor nations.
The rich nations somehow are guilty of something because their inhabitants have produced more, and the inhabitants of the poor nations, for some reason not yet clear, have a right to ask for and receive some of the wealth of the rich nations. Because of the racial alignment of the rich and poor nations, the white nations of the world owe something to the colored nations of the world. Since compulsory redistribution of wealth must carry with it a compelling force or threat of such a force, that too has been strongly hinted at in the course of the conference.
The Secretary-General of UNCTAD is an Argentinean economist-reformer, Raúl Prebisch, who is also the head of ECLA (Economic Commission for Latin America). Schooled in the Keynesian dogma, he sees no hope whatever for free enterprise economic systems, and is a firm advocate of "planned" and "directed" economies. According to Secretary-General Prebisch, the U.N. has the responsibility to take "political action in the field of trade and development." Prebisch ominously and explicitly said, "Unless the developed countries change their trade policies so that the world’s financial resources become more equitably distributed, the developing countries will resort to drastic measures. No country could afford the ensuing holocaust." (Italics supplied.)
Barbara Ward, British political economist, referring to the rich white nations and the poor colored nations, says it is up to the rich nations to redistribute their wealth voluntarily. She believes that if they fail to do this, then Marx will have been proven right, that a class struggle (presumably also a race war) will explode among nations, and that "we shall deservedly not long survive" (presumably because the rich nations will lose). It need not be pointed out that to redistribute your wealth "voluntarily" because otherwise there will be violence used against you is just what a victim does when he "voluntarily" gives his money to a hold-up man at gun point.
In tune with most of the poor nations at the conference, Brazil’s delegate Rodrigues warned, "The bells are tolling for the rich North, and you don’t have to listen too closely to hear them."
Though boldly spoken, there is little to fear behind these threats. If the poor nations cannot support a thriving peace-time economy, they certainly cannot sustain a far more stringent war-time economy. There is no real danger forthcoming from this quarter. There is a danger, however, that the United States and other nations with relatively free economies will make concessions to the underdeveloped countries in the form of trade agreements which will invariably become involved with the regulation of prices and quotas. Once price and quota controls are firmly established, they cannot be enforced unless there are also controls over wages, rents, profits, and so on to a fully regimented economy.
The "need" for all this control is based on the claimed right of the poorer nations to be just as rich as the richest nations, for no reason other than that this is how it ought to be.
The theory advanced by Secretary-General Prebisch is that some 90 poor nations with a population of approximately two billion people sell commodities at falling prices to some 33 rich nations with a population of one billion people, who in turn sell manufactures to the poor nations at rising prices. These divergent price trends result in a "trade gap" increasingly unfavorable to the poor nations. Projected to 1970, according to Prebisch, this so-called trade gap will be twenty billion dollars. The proposed cure is a four-point program put forth by the poor countries.
The first point involves a dubious system of price and quota agreements, intended to help those poorer nations largely dependent on a single crop. Similar agreements, like those for coffee and sugar, have existed for some time. Trade in excess of the quotas presumably would be at prices arrived at in a freely adjustable market. Though such agreements might temporarily help to stabilize one-crop economies, they would also discourage diversification and so would tend to perpetuate an unstable condition, which in turn would call for continued regulation.
The second point involves a complicated form of taxation whereby rich countries which import products from poor countries would tax these products and return the proceeds to the exporting country. In effect, American and European taxpayers would be compelled to finance public works in the poor countries, all under United Nations control. This proposal clearly reveals the impatience of the poor countries to be as rich as the rich countries, by means of wealth-sharing, rather than production. Such government – to – government systems of financing projects would stimulate in the poor countries "big government" planning for "little people," socialistic developments instead of private ones, and an impoverishing burden of bureaucracy.
The third point in the proposed UNCTAD program would impose tariffs on a "nonreciprocal" basis. The poor nations want to continue tariffs on the import of products from the rich nations, but they want the rich nations to abolish their tariffs when importing from the poor nations. The word "reciprocal," when applied to tariffs, is a diplomatic euphemism for retaliatory. Since sovereign nations cannot control the "internal" affairs of other sovereign nations, one of the factors which helps to keep tariffs down is the fear of counter-tariffs, or of retaliation. Now, the poor nations want the rich nations to volunteer not to retaliate. Involved in this third point is the old device of nations with infant industries imposing protective tariffs on imported goods which compete. The result would be to deny to the consumers of poor nations the use of such products until such time as they can afford the more costly domestic brands.
The fourth point proposed by the poor nations is to make UNCTAD a permanent world trade agency with cartel-making functions. International cartels were once looked upon in the same light as domestic monopolies. They restricted free trade. They diminished or abolished free competition. Monopolies, when located entirely within a country, continue to be viewed in this same undesirable light. However, international cartels, which are the same things as monopolies, are increasingly welcomed as a way of doing international business.
The rich nations of the world have heretofore remained more or less committed to relatively free and unregulated domestic markets. Being practical as well as proud nations, they have practiced reciprocity. The other UNCTAD nations have shown they dislike the rough justice of reciprocity, and they have not evidenced any strong commitments to a system of free trade. Many of the rulers of UNCTAD nations are strongly socialistic. Many of them are dictators. Many of the attitudes of UNCTAD nations are alien to nations with free traditions. For example, if one nation happens to possess an extraordinarily large share of some resource, many UNCTAD representatives are apt to look upon this resource as an international one being hoarded by that particular country. Being poor, and at the same time impatient, they have strong redistributive inclinations, and tend to rationalize these inclinations into "rights."
No redistributive process has ever been able to create wealth. All that redistribution can do is impoverish. The answer the people of the poor nations seek does not lie in the direction of regulated and shared wealth. It lies in the direction of freer and greater production, and freer and greater trade.
In reality the quickest way for the poor nations to become rich is for the inhabitants of the poor nations to produce more, which means that they require more capital. One way to get capital is to provide attractive environments for private foreign investment. This is not done through veiled or open threats of nationalization, nor by encouraging unstable conditions and vague, restless philosophies to permeate domestic thinking. It is encouraged by facing up to the fact that private capital can be lured freely into a country only by the prospect of profit, with reasonable assurance that such profit will not be confiscated, unjustly taxed, or otherwise restricted. This calls for a reasonably stable economy, a stable political structure, and a sound and freely convertible currency.
If the people of the United States would serve their own interests and the interest of rich and poor alike elsewhere in the world, they will do their utmost to practice and promote free trade rather than the UNCTAD type of international cartel.
Who Is to Blame?
Seen from the point of view of the economically backward nations, the conflicts between "capital" and "labor" in the capitalist countries appear as conflicts within a privileged upper class. In the eyes of the Asiatics, the American automobile worker is an "aristocrat." He is a man who belongs to the 2 per cent of the earth’s population whose income is highest. Not only the colored races, but also the Slays, the Arabs, and some other peoples look upon the average income of the citizens of the capitalistic countries — about 12 or 15 per cent of the total of mankind — as a curtailment of their own material well-being…. It is false to blame the European powers for the poverty of the masses in their colonial empires. In investing capital the foreign rulers did all they could do for an improvement in material well-being. It is not the fault of the Whites that the Oriental peoples are reluctant to abandon their traditional tenets and abhor capitalism as an alien ideology.
LUDWIG VON MISES, Human Action