State Rights against Private Capital: The “New International Economic Order” and the Struggle over Aid, Trade, and Foreign Investment, 1962–1981


Ronald Reagan’s opening remarks at the development summit in Cancún in the fall of 1981 left little room for interpretation. While he professed America’s interest in generally continuing “global negotiations” about the problems of developing countries, Reagan issued a clear veto to most of the demands put forward by the fourteen developing and eight industrialized countries in attendance. The “have-not nations” of the world, as a commentator put it, wanted a larger say in institutions like the World Bank and the IMF, whose politics they viewed as detached from their own goals for increasing growth and alleviating poverty.1 Preferably, development aid and international trade regimes would become matters solely of the United Nations, where the developing countries of the Third World formed the majority in the General Assembly and affiliated UN organizations.

But as the same commentator continued, “sound lending practices don’t mix with one-country, one-voting or Soviet meddling,” and Reagan therefore declared himself opposed to granting the rights that Third World nations had been claiming for their newly independent states for almost twenty years.2 This essay charts the history of such rights claims presented by Third World countries seeking to achieve what Reagan vetoed in 1981, more control over the ways in which aid, trade, and above all foreign investment affected their economic performance.3 The politics of what eventually came to be termed the “New International Economic Order” (NIEO) posed a credible threat to business as usual for Western governments and multinationals, a menace that Mark Mazower has called “the most serious challenge to [U.S.] global leadership since the end of the Second World War.”4 The consequences of the oil shock and the vortex of debt, dependency, and loans with strings attached ultimately removed any leverage the NIEO might have previously had, symbolized in Reagan’s cold-shouldering the developing world at the Cancún summit.

Throughout the 1960s and 1970s, the NIEO sought to assert through the UN system, and through groupings like the G77 or the Non-Aligned, the state’s right to permanent sovereignty over natural resources, a Declaration of Economic Rights and Duties of States, and the least developed countries’ right to a more equitable trade regime. The NIEO and related claims therefore sought to harness the power of the state in controlling key industries, trade regimes, and multinational corporations engaged in what they viewed as the plundering of their wealth and resources. Bolstering the state and state sovereignty would fend off private investors, market forces, and unrestricted free trade. In the growing field of inquiry into historical “rights,” the emergence of the NIEO is a reminder that economic rights of the state were once viewed as a meaningful instrument against the interests of private capital and the brutality of unfettered free-market capitalism.5 The NIEO’s history, as this essay argues, should be viewed as a contribution to the history of economic development, which hitherto has neglected the role of private capital in the process. At the same time, as proposed here, the NIEO should be historicized in the context of state-based rights claims more broadly.

This content is restricted to site members. If you are an existing user, please login. New users may click here to subscribe.

Existing Users Log In