International economy and development planning

^UNITED NATIONS

'jipmê _iiyusi

AFRICAN INSTITUTE

FOR ECONOMIC DEVELOPMENT

AND PLANNING

Session 19 65 - 19 66

Course of t INTERNATIONAL ECONOMY AND DEVELOPMENT PLANNING.

by Mr

André NIVOLLET.

Economic Commission

For Africa

t

V

■

93

^úÇ

A

^í

_v

UNITED NATIONS

AFRICAN INSTITUTE FOR ECONOMIC DEVELOPMENT AND PLANNING

DAKAR

idep/et/xxxvi11/467-0

30 November 1965 Originals French

Distributions

general/internal

Nivollet

Document no.O

INTERNATIONAL ECONOMY AND DEVELOPMENT PLANNING

; Outline of Course no.9

1st Semester

1965/66

The outline of course no.9 has been drafted taking into account

the "adjacent" courses that will be delivered by the Institute,

that is to say, taking into account the existences

a)

of an optional course

^

in the second semester which will describe the planning techniques of the external sector and examine the solutions to the problems African countries have to face, in the

choice of a trade policy when formulating their development plan.

*)

of a compulsory course on domestic financing

(second semester)

which will deal with monetary problems in relation to development,

whether these problems are internal or external.

c)

^{of a} compulsory ^{course on} economic integration

(designed

for

the second

semester).

So course 9> the plan of which will follow, does not cover such topics as economic unions, monetary unions, trade planning techniques

(projection,

exchange, control,

etc.)

Such exclusiveness enables us to treat in course 9 the fundamental questions relating to international life, in which the African countries take part in one way or another. It is important to grasp why and

how the interdependence between internal economy and national economies is translated into well defined facts.

_1/

The plan of this optional course will be treated in document no.00

idpe/et/xxxvii1/467-0

Page 2

The educational level of trainees attending the

1965/66

^course should

enable them to make fruitful use of a course which links theoretical

training with the attempt to examine specific trade policies. That

is the target aimed at by course no.9.

In order to" avoid

being

too académie,

3

kindTs ôï documents will

".e prepared to be used by trainees? summaries of delivered lectures,

studies of concrete cases, practical exercises. Those documents will

be numbered from 1 to 14 or 16 following the logical sequence of the

course. In addition each trainee will choose a work topic related to

course 9*

IDEP/ET/XXXVIII/467-O

Page 3

Detailled Plan of course no. 9s

(14

periods including

those related to "basic

concept)

BASIC CONCEPTS

Topics of Study Document prepared Other documents for this purpose to he circulated Definition of international

economic relations. How to _ .

Doc. no.1 approach their study? The

decision-making centres

The various concepts of

"Nation" and the assymmetries Doc. no. 2

in I.E.R.

Study of concrete cases of

assymmetriess oil cartel - Doc. no. 3

Fria and Guinea

PRICE APPROACH

International specialization and under-development ^-

classical and recent theories - Doc. no. 4 Examination in terms of

commodities

International specialization

and underdevelopment - Doc. no. 5

Examination in terms of production factors

IDEE/ET/XXXVIII/467-0

Page 4 ^{* _>}

Topics of Study _ Documents prepared Other documents

for this purpose to he circulated

Practical exercises

on international

specialization

Conspectus of the theories relating to

international specia- ^ 0 Course of Dr. Carney

Doc. no. 8

lization in relation to no. 107 ^- lectures

the present problems no. 1,2,3,4?7?8,9

of development in Africa

Doc. no. 6 Doc. no. 7

answer paper •

* 4

idep/et/xxxvi11/46

^7-0

Page ⁵

THE FLOW APPROACH

Period

8/

Topics for study Document prepared Other documents to for this _purpose "be circulated

Growth and international trade links "between

internal and external flows at the different stages of development study of concrete African cases - terms of trade

Doc. no. 9

Course of Dr.Carney

no. 114 - course of Mr.Nivollet

64-65 lectures 12-23-14

9/

10/

External rest-of-the world account. Point of equili¬

brium between internal and external flows.

Technical approach to the problem w Alternatives

domestic or external financing

Practical exercises on the main links between internal and external flows in Africa

Doc. no. 10

Doc.no.

11/12

COMPREHENSIVE OR OVERALL APPROACH

11/

Balance of payments and currency Formation of exchange rates.

Doc. no. 13 Study of concrete cases on

compensatory financing Study of the balance of

payments of an African Doc.'., no. 14 country

IDEP/Eff/XXXVIIl/467-0

Page 6

12/

Capital movements and Lecture delivered Course of D.Carney Planning J. ^. "by Dr. Carney no. 342 - lect. 7 Study of concrete cases

13/

Technical Assistance

and absorption capacity Lecture delivered

Study

of concrete cases by Dr. Carney ;.b

14/

Compatibility between

external equilibrium

and growth. How does

the planning of the

external sector operate?

The impacts of the various trade policies on the general equilibrium

_1J

The optional course thus follows on from course no. 9

UNITED NATIONS

• 4

AFRICAN INSTITUTE POR ECONOMIC DEVELOPMENT AND PLANNING

DAKAR ...DOCUMENT N° 1 ^....

_ . "a.

Basic Concepts

: '

fir '

International Economic Relations

w-.s-'f :-.C"ÍÍOe:fc ~i'-" x '

First Question: _{Fhen and, bow Ao} they arise?

Let us consider when the basic economic concepts of

. i.

ounoern to internationali' -1 economic relations come into play,

how they are grafted onto the densely branched tree of

economic science or simply "economics" as defined by Samuelsoru

Economics is the study .

i)

of how men and society

choose to use scarce or limited productive resources

(such

as

land, labour

and capital goods - in the form of machinery

or technical knowledge

-)

tw produce various goods and services

(such

^as wheat, beef, overcoats,

concerts, roads, yachts),

Economics is also the study of

2)

how ^men and society

distribute these goods and services to the various members

"XbJ" a

of society for their consumption.

Hence,

economics can be considered as having two sequences:

that of production

(cf 1)

that of

consumption(cf 2)

in other words: that of the creation of national income that of its hiïtrihution.

'.V" Lie I. . ■ ' - ' 11 ;

Does economics essentially involve the idea cf choice?

Refer back to the above paragraph "how men ... choose".

Economics is hence the science of chaices concerning production and consumption.

Ntw, these choices are frequently made outside the

"Nations" framework. They are determined by factors which are

"extra—territorial" or "external" or simply "extra-national"

IDEP/ET/XXXVIII/461

27th

October, 19^5

NIVOLLET

(a)

Samuelson : "EaccomioB" ^.

(LibraryjRef.)No. _63-870)

r

IDEP/ET/XXXVTII/461 '

Page 2

or"international" if you like. This is why we use the term

"

international economic relations" to define them.

When do international economy

relations

arise?

Constantly,

in the _process of production or distribution.

How do they arise? In my opinion, in a very specific manner, that

is through the application of special rules which import a

special "style" to international economic

relations,

bearing

in mind the principles discussed below.

0

0 0

Second Question: Definition of international economic relations

International economic relations are relations between"decision—

making centres" belonging to different national groups. Hence the analysis of international economic relations and their control

imply - a definition of the term "Nation".

Individualistic _concept of the Nation

If the term Nation implies the sum of its individuals, then the national optimum will be the sum of individual well-being. In this

case international economic relations would be a particular aspect

•-jS:.

of the National Market Economy. "Justification for the laissez-faire and laissez-passer policy".

Sociological concept of the Nation

If the term nation implies something other than the sum of its

individuals,

but rs an ordered group of individuals all of whom

°i>ey Jthe same code of ethics-and haver "the same"immediate needs, then

the result is a group optimum

(or

^collective

optimum)

which may differ

from the individual optimum.

"Justification for the overall planning concept".

si>jL',y• ^{■ -} vi tCfii

z.lLt

L

ID EP

/ET/XXXVIII/46I

Page 3

Third Question: Different Working Standpoints to "be considered

j.0., Prom which end should the study of international economic relations be undertaken?

""

The Price Angle

(Classical

and Neo-classical

theories)

A description of reactions similar to those which tend to bring

about an equilibrum on any national markets.

The flow angle

(Post-Keynesian _theory)§

a description of the links between the variations in the national product

(or

national

income)

on the one hand and the level of imports and exports, or the condition of the balance of payments, on the othe

The angle which reconciles that of price and flows, bringing

in either psychological assessment

elements,

or the interaction of large production units on small ones, or again the effects of domination of one large nation over another.

0

0 0

Fourth Question: Reasons why this third angle is the only one suitable for teaching at IDEP.

— the inequalities between decision making centres which confront each other in international trade.

Consequence No 1 - the external dependence of Africa on the rest of the world

(1

)

Consequence No 2 — "backwash effects" v in international trade Consequence No 3 - deterioration in the terms of trade

Fifth Question: How much time will be needed to grasp the essentials cf the

"price'1 and "flow" angles?

(ï)

Myrdal: Eoonomic theory and under-developed regions.

IDEP/ET/XXXVIII/461

^-o-

Page 4

Answer:

a)

The minimum ,of time possible for ..the price, angles--

b)

^{As for the} flow angle - as much time as is needed to understand the interdependence between external

equilibrium and internal equilibruim, to grasp the relationship between internal and external financing

of

development, and

to

understand

the consequences of

the confrontation of economies with different structures.!

o) However,

in this connection, greater part of ^our time

•_ i. ■ ÍÍ-- •-~'

will be devoted to the consideration of concrete cases^

African or others

d) Lastly,

the "basic concept" which I recommend that you remember above all others, in the study of international

economic relations is not an economic concept, but

rather a common sense concept: Keep your feet firmly planted on African soil and adopt the most pragmatic approach towards ready made theories ^... prepared

elsewhere.

Annexes: ^-

Bibliography

for the Anglophone Trainees®

- Por all Trainees: List of the most common basic economic concepts.

:VL.

•l'y

vQ

0 0

#

UNITED NATIONS

IDEP/ET/XXWIIl/464

AFRICAN INSTITUTE FOR ECONOMIC 28 Oct. I965

DEVELOPMENT AND PLANNING

DAKAR Mr. Nivollet

SOME READINGS FOR "ANGLOPHONE"STUDENTS

On concepts on International Economic Relations

KINDELBERGER : International economics ^- IDEP No. 64-567

VINER : International trade and economic development

Institut BIRD - IDEP 64-774

HARROD & HAGUE : International trade in developing countries

IDEP 64-1006

MYRDAL : Economic theory and under-developed regions -

IDEP 63-141

MYRDAL : An international economy - IDEP 64-1192

SAMUELSON : Economies - IDEP 63-8705 ^pp. 693 ^- 772 ^.

J

idep/et/xxxvxix/461

_{./> J....7 il'j1}

ANNEX 1 Basic Economic Coneepts

I ^-

Used, in the study of international

economic relations

\ ' . v

Concepts of ^a more theoretical nature:

(D

- Notions - various formulations

- International effects of domination

-

decision-making

centres and large scale international units

- Backwash effects and circular causation

- structure preferences

- economic space

- comparative costs

- marginal substitution cost and bloc of factors

- bloc of factors of production and law of factor productions

- opportunity costs and shadow prices

- external economies

- economies of scale

- monetary zones and focal points of growth Concepts of a more practical nature

(2)

a)

^v concerning the various notions of equilibrium

- equilibria of goods and services and international trade

- financial equilibrium and international trade trade disequilibpiuB and aid in real terms

- import _coverage

- balance of payments

(trade

_balance, account

balance)

- the ".invisibles"

compensatory financing

- basic balance

— international flows of capital ^{• •}

Only the most essential concepts

(or

^{the most}

accessible)

will be explained during the introductory lessons

Some of these will be used later in exercises.

râi\\iiivxx;

;,r ^, ji ^Annex-2 Page 2

b)

relative to forecasting —::

- average and marginal.jorojpens ity ..te import

- reflection effect of neighbouring economies or exports

-

indemne

elasticity and price elasticity

- foreign trade multiplier

(

^one-way and two-way

systems)

- '•-i • r - ''

- external dependence !B"~ ~

- measurement of foreign tráde

- absorption capacity

- absolute^ terms of trade, factorial terms of

trade, etc."

c)

relative to the exchange of goods and services

- customs systems and tariff protection

- protection of infant industries

- general system and special system

(in customs)

, — transit, warehouse, temporary admittance,

draw-back,

customs nationalisation

- dommon external tariff

— the most favoured nation clause

- monopoly of the flag

(shipping)

- excess price system

- quantitative and

4ùota

restrictions

- freeing of trade

- ínteínational oonimodl'ty'agreements

■

yj " ■

-

d)

^{relative to economic} integrations

- preferential system and

customs

union

- f" e trade area and economic union

- associatãd states

(.2

systems in

force)

- African payments union n ; j;

- African development Bank ,.

-j:

: I.Í!

j o to cwol, "b jox■f ■ i■■

a|

^-

r frry

. . ,

, .f 1 Jrfif.coo.

Annex I

Page 3

e)

^relative to international payments

- exchange rate and. de-valuation

- fixed, flexible, multiple exchange rates

- exchange control

- multilateralism ^or bilateralism

- clearing agreements

- monetary unions or agreements

- payments union

- convertibility

- gold exchange standard vs euro dollars

- international liquidity and foreign exchange reserves

- drawing rights in the IMP sense of the word

- drawing rights accounts and stand-by agreements

- collective reserve units

f)

^concerning international organizations involved in international economic relations in the developing

countries.(trade

^or

payments)

IMP IBRD OECD COMECON

GATT UNTAB EEC Kennedy-Round

"Group of the 10" BIS European European Development Investment _Fund

Fund

Pinal Notes

The trainees might well make their own small glossary

of special terms concerning international economic

relations,

either by noting down those terms which will be commented upon at the

beginning,

or by finding the definitions of the

other terms in the textbooks before they are dealt with j£.v

the Lecturer.

UNITED NATIONS

AFRICAN INSTITUTE FOR ECONOMIC

• DEVELOPMENT AND PLANNING DAKAR

idep/et/xxxviii/467

Document No. 2

INTERNATIONAL ECONOMIC RELATIONS

Baaio Concept No, 1. The Nation

International economic relations

(ï

E

R)

^can be understood

through the concept of a nation

(cf.

document No. 1, page 2, 2nd

part).

First formulation of the Concept Nation : Nation ^■= a mass of individuals grouped within the same administrative district

(a).

In this case national political frontiers have no practical effect

on the direction or importance of I E R. We are in a space which is characterized by the establishment of a perfect market. Capital and labour move naturally towards the' most productive employments.

. .. The nation is only an administrative district*

permeable

to the

equalizing currents of the market.

(This

is why the diagram below is drawn in broken

lines^.

/""*>

v

iNc;

Symbols: (I E Rf- Zone of mobility of factors of production : within which the uses of capital and labour evolve.

Na, b, c, d, / eÎ Nations: they pla.v no special role in trade. They are

U- ■

neutral. They ^are administrative districts

(1),

^The

result here is genuine cosmopolitanism.

References: XVTIIth and XlXth centuries : Adam Smith, Turgot, the

first socialist rhéorists.

(ï)

Terminology borrowed from Professor BYE in the new edition of his

précis "Relations économiques internationales". Dalloz, Paris

1965»

^—

the best textbook for the use,.pf the francophone trainees.

idep/et/xxxviii/467

^a

Page 2

'

Practical Consequences; The State has no decisive role to play in making

the Nation a cohesive whole. If we-push this-argument

to the extreme, it would justify a massive transfer

of populations ..in Africa from the interior to the

"coastal _areas,

'or' t'c

other states

(from

Niger to

Nigeria)

or emigration overseas,

(from

Mali to.

France),

This would

mean;^"the<disappearance of those^{' '} States which are not ^. endowed economically viable because they are

insufficiently/with

factors of production

(natural

resources, men or

capital)»

It would be impossible to justify an active national

development" policy

^- that is the industrializatio

of underdeveloped countries. ; ^

. rrxeiun t. . l£-~-: ■ i

if

* '■>.r.^{; í} 9 i n i'

JB :: ■..* x i k -..o ;:i- o/i

.:: :rn It ... .. v;i;. (/j ^. ■■.o'

Second.Formulation of the Concept Nation : Nation = mass of individuals grouped within an area with relative immobility of factors of production.

■x.j, Labour and capital move freely within the Nation, but

their movement from one Nation•to another is. ^{more or} less

a matter of chance.

The Nation is once again a valid reference point for

the! study of I E R. It is no longer a permeable district, but rather a block of factors which are

more or less impermeable to external influences.

(This

is á-ííyf'j. . ; ftáj;.• -s-O'Xa ^{;.■■ ;}; ... ». .... ;eXvun.yo

why the diagram below is drawn in a continuous

line).

International Specialization in production results from a comparison between the costs of varipus.products.

Instead of the factors of production moving from one nation to the other, it is the products which move.

"Trade is a substitute for the immobility of factors"

(Ohiin).

J.VXX?-

idep/et/xxxvi11/467

Page 3

gypboBa»

^{Ijja, ; b, Cj} blocks of factors of ..production-

Direction of the movement of products

(outside)

-^Direction of the movement of factors

(labour, capit-l) (inside).

Referencia: Ricardo, J.S. Mill, Bastable, Taussig, Hecksher, Ohlin,

Practical Consequences: In I E R, the nation plays a mainly passive role.

It is bound by the laws of 'supply and demand, that is by

"effective" demand. Only the "market" economy counts.

This reasoning cannot be applied'to «lírica, where a part

of production is not placed on the market, where a part of à:

demand is not "effective". The Nation or

(the State)

cannot

evade its responsibilities vis-à-vis the non-effective or

potential demand of the young. There can be no justification

for a policy of "laissez-faire", "laisseg-passer". It cannob

be denied that specific

measures

^are useful in promoting tho development of the backward countries. We must therefore,

revise the Concept of the Nation,

Third Formulation: Nation = heterogenous sociological group.

The Nation is a "group of groups" united

hy a*

common belief

and a common- destiny, united in the acceptance of sacrifice r.s

a means to achieving this common destiny *(-)^.

intervene in the .field of I E R, either to regulate them, or ic prohibit them, or to conduct them on its own responsibility

(state trading).

Haberler, etc

x x

This sot of _groups is materialized by decision-making

oonters which are heterogenous for three reasons:

(a)

The State as a monopolist of public coercion, can

(a)

Merigot: "The nation is a complex of heterogenous economic activities which ^are closely interdependent and subject to the powers of tho stato

"Quoted by Marcy in Economie Internationale", IDEP Library No,

idep/et/xxxviii/467

Page 4

Id)

^{Large Scale} International Units

(LIU)

are the cause of the

asymmetrical

nature of 1ER. These units have their own policy. for1'

produp$;f.on,

?• --.h.' Vir'*

invostmcn

trade and maximization of profit. They ^are

not concerned with the Rations

proper, hut they operate in plurinational spaces and sometimes in

world

spaces. These large scale units are beyond the- control of the states and

make their imprint on the network of international relations.

c)

Domination effects derive from the fact- that growth

' j&I

&&--OGCur noar the industries of a largo country

(country a),

and this gives ^a collective advantage to the industries of that country.: ^; They exert an attraction

from country A

(developed country)

^{on country B}

(developing country)

^when

international economic relations come into play.

The perfect symmetry of the preceding sketches is no longer valid.

Fit h the. structure preferences

the large-scale units

domination effects

becomes

and in turn becomes

Symbolst <L-

I* ^L

>0)

, maintained, considc

means for example: ^excess priceë

able bilateral aid ^-

backwash effects in Myrdal's sense

(See Annex)

-"^-^deterioration of the terms of trade. ' - •

- -

/

References: The most recent analysis on international trade: Myrdal, Pcrrou Bye, Prebisch, Hirschmann, Feiller, etc..

Practical Conséquences: It was assumed in the above diagram that the structure preferences had resulted in the continuation of a

system of excess prices for exports from lib' to Na' of a habitu

.. .. bilateral aid of Na' to Nb'.

It was assumed that large scale international units woro

responsible for the deterioration of the terms of trade for the under-developed country.

(ï)

More.than market price.

idep/et/xxxvi11/467

Page 5

"■It was equally assumed that the domination effects were produced

"by a disorganization of the international capital market s Private

underinvestment was or was not compensated "by public investment through external grants^

Generally, the production structures of Na' mould the production

structures of lib' indirectly through international economic relations-,

Not only is the Nation a ''group of groups", but these groups vary in

their degree of cohesion from one nation to the other..

C '

^{- ■ - '}

IDEP/ET/XXXVIII/467

í

Nivollet

ANNEX to DOCUMENT No. .2

OTHER BASIC CONCEPTS WHICH WERE MADE EXPLICIT IN THE FORMULATION OP THE CONCEPT. : NATION.

• ' r 1. 1

Domination effects; These are asymmetrical and irreversible influences which result in International economic relations being relations

between economies of different strengths, between dominants

I

and dominated economies,

(cf.

all the work of Professor Perroux ^-

his book "Economie des Jeunes Nations" _, page

80-81,

IDEP

library and Hirschmann : "Strategy Chapter X IDEP library,

Reference No. 64 ^-

930).

Large Scale International Unitss The classical and neo-classical

theories of international relations assumed a standpoint based

on micro units, with no "decision-making centres", likely to impose a "plan for the long-term maximization of profit"

( ).

•j But actually, such decision-making centres do exist, They are often constituted by large' firms which carry on their activity

2 "2

in several national _spaqes

( ).

They may also be

states( )

acting

as a political force. They may also be large firms which are supported by the power of the Nation in which their head office is

A

located

( ).

Por a comprehensive view of the concept of internation large-scale units : see the books by Professor Bye.

Backwash Effects : "On the international as on the national

level,

trade

does not by itself necessarily work for equality.lt may, on the contrary, have strong backwash effects on the under-developed countries ^..» But trade by itself does not lead to such a

development^ it rather tends to have backwash effects and to strengthen the forces maintaining stagnation or regression ".

(cf.

Myrdal, Economic Theory and Underdeveloped Regions, chapter V, IDEP library ... Ref. No. 63 -

141)»

xxx

(1)cf.

Document No. 1, page 25 definition of I E R.

2)

Standard Oil

3)

USSR, China, etc..

(4)

Phillips and the Netherlands.

idep/et/xxxviii/467

Annex

i

Page 2

Structure Preferences î "Persistence of traditional trade patterns invol¬

ving the same products "between the same countries or

between

the-same-groups of countries"

(cf. Weillers -l'Economie-

Internationale depuis 19509 IDEP library, Réf.lo.

65-2149)•

Economic _{space t} The international economy is "broken down

into

international spaces which either totally or partially encompass several national economies. These spaces may "be "homogenous"

"heterogenous"

(or polarized)

or "planned".

The polarized or planned spaces comprise a "leading decision¬

making centre" and national

economies

which are subordinate

to this centre,

(cf.

Work of Professor

Perroux).

eg. The United Kingdom in the 19th century - Switzerland and the Swiss

economic _{space -} the Ruhr and the German -economic

space).-

x x x

(1 )

Concentration of Trade? 'This marks the influence exerted by the

'

structure of an economy on the spread of its foreign trade,

(see

^the study by Michaëly ï International Concentration - Amsterdam 1962 ^- taken up again by Hirschmann and in other

textbooks which have been published since

then).

This last concept is a combination of "structure preference",

the "economic space", the "domination effect", and the

"large-scale international unit". It is in fact an illustration

of these preceding concepts.

The domination effect and the large-scale international unit

will be the subject of case studies in document Ko. 3.

(ï)

We will come back to this concept during our

practical exercises later.

united nations

african institute for economic, development and planning ~

DAKAR / '

idep/et/xxxvii/467-3

nivollet

Distributions

general/interna?

Document no. 3

a study of concrete examples

An example of the effect of dominations the Oil cartel An example of the action of the Great International Units?

Fria in Guinea

In document no. 2 the emphasis had "been laid on the assymetrical

character of international economic relations. We had given a definition

of the "effect of domination", and of the "Great International Unit".

Today ^we turn to the concrete study of those concepts.

We shall choose as an example s

a)

^{of the} effect of domination,

the case of the dependence of producing states on the private firms organised into ^a cartel the oil cartel.

b)

as an example of the action

of the GIU, that of Fria in the Republic of Guinea.

Those problems must be approached with an analytical and objective

minds that of a research worker who is dissecting an insect. All feelings

should be excluded. International economic relations are explained such

as they are, without trying to say today "whether this is good or bad",

"without claiming to find remedies on the effectiveness of which we wi-11 have to reconsider later on when our knowledge has grown sounder".

• . ' . : .-.r; ;;r r. •/.. ::,• .

O O

©

_l/Mr.

Amin will doubtless deal with the other aspect, i.e. the case of the domination of one state by another state, in the introductory

seminars. ' -

r

idep/et/xxxviI1/467-3

Page 2 1

The Oil Petroleum Cartel

Oil Trade in the Worlds It is equal tos

- nearly half of the tonnages carried during the

international

exchanges of goods realised in one year

- nearly 7 per cent of the total value of

international"trade

- about 1 thousand million tons per year

The Oil Cartel; - 8 Companies control 85 ^per cent of the oil production

extracted in countries other than those with a socialist economy

- 61 _per cent of the oil extracted in other countries than

those

with a Soviet-type economy

- 52 per cent of all the petroleum extracted in the world

See Table I

See Table II lower part

Price policy - Those Companies prospect, extract, refine and distribute oil.

The last two

stages

are

not

^very

profitable, the first is uncertain. The

main profits are drawn from the extraction. -Hence the importance given to

the price of "crude oil - ex-field". This price should be such as to

allow a substantial profit, but in fact it is compressed

between the cost

price on one hand and the rate of the fiscal taxes on petrol on the other

hand. But the price of crude oil is not freely fixed. Ho question

of

comparative advantages or marginal cóst. The price is fixed according

to

the price -which makes the exploitations of the

gulf'of1

Mexico paying

(See

Table II

).

It thus makes possible huge profits in certain

regions

where the cost price is very low

(Middle East).

The producing

state has

only' a small share in those profits, and it is in this connection

that the

effect of domination of the private firms is exercised on the States.

The

cartel uses its profits to practise a reinvestment policy, conceived

at

the world scale —'î/and realized sucfiessfull.7 ^{- we} must recognize at - since

oil production has been greatly increasing for ten years and without major difficulties.

J_/i.e.

without taking into account

the country

or

the nation from which

the profits have been drawn.

L

idep/et/xxxviii/467-3

Page 3

Tahle I - Estimation of the crude Petroleum production in the industrial Companies in 1960

(million tons)

Esso „ , „ _ Esso ,, , ., -n t, nTTn Total of Total

>T T Gulf Texaco ^{_ .. . „} Mohil Shell B.P. CEP ,, Q Others „ ,

IT. J. Calif the o Producti

North, iwaerioa 25.2 17.4 22.8 14.5 11.5 16.2 0.2 0.1 IO7.9 265.1 373.0

Latin America 65.9 10.6 10.5 3-5 7-9 49-0 1.6 - 149.0 48.5 197-5

Tfctal for the Western

hemisphere 91.1 28.0 33-3 18.0 19-4 65.2 1.8 0.1 256.9 313.6 570.5

Europe 2.1 1.7 ^{- -} 1.1 1.3 0.1 ^- 6.3 8.4 14.7

Africa ^{_ — —} _0.2 1.6 1.0 3-2 6.0 4.4 10.4

Middle-East

^

^28.8 _{43-5 22.9 22.9} 16.6 21.0 74.0 17.0 246.7 15.9 ^262.6

Par-East 2.1 ^- 4.1 4.1 2.0 14.3 3» 23.6 2.3 25-9

Total far the Eastern

hemisphere 33.0 45-2 27.0 27.0 19.9 35-2 75.1 ^{20.2 282.6} 31.0 313.6

TOTAL 124.1 73.2 60.3 45.0 39.3 100.4 76.9 20.3 539-5 344-6 884.1

Countries with a

__

planned _economy

~~~~~~~ 7« 2 ^ ^

World Total 124-1 73.2 60.3. 45-0 39-3 100.4 76.9 20.3 539-5 511.8 1,051.3

In percentage of the „„ 0 „ „ _ n

total production

11"8 7"° 5"8 4"3 3"8 2'° 51-6 48.4 100.0

Then those eight international companies provide

51-6$

of the total world production, more than

61$

of the

world production outside China and the countries of Europe with a planned _economy, and nearly

85$

of the production outside Maniland China, the countries of Europe with a planned _economy and North America.

*

J_/Distributior

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