An international framework to facilitate the flow of financial resources among the countries of the Third World could significantly strengthen their resource base. At present, many oil-producing countries have a surplus of financial resources that require investment outlets; in the future, there may be other developing countries in a similar position. Nevertheless, the organized investment outlets today are almost exclusively in the industrialized countries, a situation that results in a net transfer of capital from the third world to these countries. The oil-producing countries have responded to the needs of other developing countries through an encouraging expansion of official aid flows, but they have still too few opportunities for productive investments that afford them both security and an adequate rate of return. To some extent, multilateral financial institutions like the International Monetary Fund and the World Bank have served as a channel for the recycling of the surpluses, and the petro-dollar has played a similar role. Although there is scope for the continuance and even strengthening of these links, there is also a need for some direct mechanisms for providing the investing countries with access to investment outlets in the developing countries. Such a development will hardly occur spontaneously; it will need to be facilitated by new mechanisms and institutions within the Third World that would guarantee adequate rates of return and security of investment. The establishment of appropriate instruments could constitute an important element in a system of cooperation among developing countries.
To cover growing deficits, non-oil exporting countries in the Third World and some socialist countries have increasingly turned to the private international capital markets, which have re-cycled some of the OPEC surplus funds to them and have additionally lent them other funds at high rates of interest that found no borrowers in the industrial countries where investment has been low. The extension of these loans and particularly their roll-over rescheduling to finance the growing debt service when the borrowers are unable to pay have become the basis of stringent economic and political conditions that the private banks and/or the International Monetary Fund (IMF) acting as their intermediary have imposed on Third World (and some socialist and developed) countries. The standard 'conditionality' to the IMF package that governments are obliged to accept in their 'letter of intent' before being certified to receive further loans always includes devaluation of the currency, reduction of government expenditures especially on consumer subsidies and popular welfare, the reduction of the wage rate through various devices, and more favourable treatment for private and especially foreign capital. These conditions have sometimes led to 'IMF riots' as the people sought to resist the enforced curtailment of their standards of living. It has been said that the IMF has overthrown more governments than Marx and Lenin put together. An important political economic consequence, if not rationale, of these IMF promoted government policies in the Third World is to promote 'export led growth' by cheapening Third World labour and its fruits for international capital and foreign importers (by lowering the price of Third World wages and currencies) and to lend support to the domestic forces in these Third World countries that have an economic interest in export promotion. Thus, the international financial system and the financing of the Third World debt serves to perpetuate the mechanism of the emerging international division of labour based on Third World export promotion. The political consequences of all these economic policies are that it is necessary to repress the labour force in order to keep wages low or to reduce wages.