A reply to Helleiner’s comments on my paper “The case against the New International Economic Order”

Abstract

Nothing in G. K. Helleiner's comments has made me change my mind about the central case against the NIEO. The international redistribution of income through the raising of commodity prices is highly inefficient and may impoverish rather than enrich the developing countries. Resources will be wasted on the administration and stock-piling of materials ; wrong incentives will be created, leading to overinvestment in rawmaterials production and the development of substitutes. If a country's people are poor and the Western countries wish to help them, then the most desirable and efficient way is to provide them with unrestricted aid grants. In the fashion typical of all social reformers and engineers, Helleiner starts from the implicit assumption that free enterprise, the invisible hand and charity by the private sector and democratically elected governments have failed to achieve a world that is as fair and equitable as he would like it to be. Believing in the basic good of man's spirit and with unshakable faith in the ability to plan and engineer economic and social relationships, he proposes to scrap the system which prevents the people from pursuing their good instincts and to install bureaucracies able to guide them in the desired manner. In this spirit, Helleiner, like the other architects of new orders, spent little or no time on examining the historic record of similar schemes, nationally and internationally. At best, minor administrative modifications of old schemes are provided. But there is never any analysis of the long-run reactions of consumers and producers to distorted prices and incentives. My paper was designed to provide a price-theoretic and historic perspective on the NIEO schemes. Helleiner has said nothing to refute the case I have made.