"One Percent": The Problem of Economic Aid

Abstract

The suggestion that highly developed industrial states divert one percent of their gross national income or product to direly needed credits and subsidies for the developing countries is unsound. The developing countries' need for external financial support is caused by their unfavorable economic position in the international market and their low domestic capital-accumulation rate. Deteriorating terms of trade vis-àvis the Western states, high tariffs and other barriers hindering expansion of Third World exports to the West, and capital outflow to the West in the form of payments on private capital investments are conditions that have to be eliminated to improve the economic position of the developing countries. The "one percent" proposition is fallacious, in that it places socialist states on the same level as the Western capitalist states which, over decades of colonial rule, plundered the countries of the Third World. The West's responsibility to make good on those losses caused in the past as well as those caused today by the workings of the international capitalist mechanism cannot be limited to "one percent." In addition, the guaranteed "percentage" would conserve ineffective regimes in the Third World and their concomitant economic stagnation.