10. World Monetary Problems and the Challenge of Commodities
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230 The UN and Global Political Economy 230 10 World Monetary Problems and the Challenge of Commodities • A World Turned Upside Down • All Quiet on the Commodities Front • Pérez-Guerrero in Pursuit of the SDR-Aid Link • A Secretariat for the Group of 77? • Gamani Corea Seizes the Initiative • The Contradictions of UNCTAD IV • The Negotiation of the Common Fund, 1976–1980 • Political versus Research-Based Negotiation A World Turned Upside Down After 1968, the world political and economic situation began to undergo profound changes that weakened the international power and prestige of the OECD countries. Student unrest, which had started on the U.S. West coast, spread across to Europe. The Paris events of May , when students momentarily allied with workers, sparked a continuing student protest movement that was partly inspired by Mao Tse-dong’s Cultural Revolution in China. The new social and political radicalism among the rising generation in the West seemed to portend larger-scale changes, and it made the tasks of governments more difficult. At this time, the industrial countries were suffering from a poor quality of political leadership; their weak governments were all at sea when the traditional levers of power no longer produced their expected effects. This was the era of the sudden departure of de Gaulle, the forced resignation of the disgraced Nixon, and the maladroit Heath’s provocation of his own electoral defeat at the hands of the British coal miners. Despite the great upheaval of the Cultural Revolution, the U.S. took dramatic steps toward restoring normal diplomatic relations with China after more than twenty years of refusing to deal with its communist government. World Monetary Problems and the Challenge of Commodities 231 Though hailed by some as a geopolitical masterstroke, it could not hide the fact that the U.S. was undergoing a military humiliation at the hands of a small Third World country—Vietnam.When final defeat arrived with the fall of Saigon in April , it sent a message to the world that immense technological superiority could not guarantee victory against a dedicated peasant army when supported by the local population. There were limits, even for a superpower. Economically, the collapse of the Bretton Woods system marked the end of the West’s “golden age” of postwar prosperity. The twin evils of unemployment and inflation, in the theoretically unexpected combination of “stagflation,” beset the developed-market economies and were passed on to the developing countries in the form of falling demand for their exports and higher prices for their imports The developing countries and the intellectual champions of their interests responded with a new spirit of militancy. Partly they were emboldened by the difficulties that they believed were weakening the West,partly they were moved by fears that the changing world scene could harbor new dangers for them,1 and partly they responded to a sense that, because of all the reversals and uncertainties, the world order was losing its former legitimacy. Onto this increasingly turbulent international scene burst another Middle East war in late , followed by a dramatic increase in the price of oil.OPEC, a group of major oil-producing states, succeeded in using oil as a weapon against an oil-dependent West that had already been alarmed by warnings of rapidly depleting exhaustible resources.2 This crisis produced major challenges to both developed and developing countries. The industrial countries faced the prospect of having to find ways to stabilize their economies after a massive external shock and, in the longer term, to decrease their dependence on oil. Moreover, they also had to face a more threatening problem of finding ways to prevent other groups of commodity producers taking similar action. The developing countries were divided into those that could produce oil,which would benefit from the price rise, and those that could not, which would, like the industrial countries,also face a large external shock.The latter would need increased balance-of-payments financing while they struggled to adjust their economies,and the immediate question that they faced was how and by whom their increased indebtedness should be managed. This chapter argues that the increased militancy of the developing countries in matters of trade, finance, and development in this period was not triggered by the rise in oil prices. Although powerfully reinforced by the increase , such militancy had built up gradually from accumulating frustrations over the whole previous decade. Prebisch’s successor at UNCTAD, Manuel 232 The UN and Global Political Economy Pérez...