Gottfried Haberler, “The Liberal International Economic Order in Historical Perspective” (1979)

This is a single-author scholarly chapter in international economics, historical in scope and polemical in purpose. Haberler assesses the postwar liberal international economic order—freer trade, nondiscriminatory tariffs, currency convertibility, GATT, and the IMF—against the protectionism of developed countries and the developing countries’ demand for a New International Economic Order. His thesis is that the liberal order has served both developed and less developed countries well; its crises arise not from market liberalism itself, but from policy errors, protectionist deviations, monetary mismanagement, and rigidities that obstruct competition.

The liberal order does not imply a policy of strict non-interference on the part of government.

This opening clarification is central. Haberler does not defend pure laissez-faire but a “modern mixed” capitalist order organized predominantly by private enterprise and competition. He then narrows the issue: socialism and central planning matter, but the chapter’s real target is the North–South critique of liberal internationalism.

The main theme is not the East-West but the North-South problem (or better, the temperate zone-tropics problem).

The essay’s structure is historical. Haberler moves from nineteenth-century capitalism to the interwar breakdown, then to post-1945 growth, the terms-of-trade debate, and finally the stagflation crisis of the 1970s. Against Marxist and dependency-inflected arguments, he presents the nineteenth century as an era of powerful capitalist growth confirmed even by Marx, Schumpeter, and Kuznets. The Great Depression, by contrast, is treated not as proof of capitalist contradiction but as a catastrophic failure of monetary institutions and policy under fixed exchange rates, banking collapse, deflation, and protectionism.

The postwar period becomes Haberler’s strongest evidence. He argues that liberalization under GATT and IMF coincided with unprecedented growth, expanding trade, and substantial gains in many LDCs. He rejects the idea of a single structural “gap” between rich and poor worlds, insisting that the third world is internally differentiated and that many market-oriented developing economies grew rapidly.

But there is no single, unique gap between DCs and LDCs in general.

A major conceptual move is Haberler’s empirical reframing of the NIEO critique. If developed-country growth exploited or bypassed LDCs, he argues, that should appear in deteriorating terms of trade. Reviewing the Prebisch-Singer thesis and later statistical work, he denies any secular deterioration for developing countries as a group.

There has been no long-term trend for or against the LDCs.

This claim allows Haberler to reverse the charge against liberalism. LDC exports, especially manufactures, had grown, while obstacles came from tariffs, quotas, “voluntary restraints,” and protectionist policies in both developed and developing countries.

Obviously, it is not liberal policies that hurt the LDCs but deviations from liberalism.

The final sections address the darker mood after 1973: recession, unemployment, inflation, oil shocks, and the breakdown of Bretton Woods. Haberler concedes stagflation is serious, but again refuses to see it as a failure of liberal order. Its cause is excessive monetary accommodation combined with noncompetitive wage and price rigidities; its cure requires monetary restraint plus structural reforms that restore competition.

It is not the liberal order but the increasingly serious deviations from the free market economy and the ensuing price and especially wage rigidities that cause the stagflation dilemma.

The chapter’s relevance lies in its defense of liberal internationalism at the moment when NIEO demands and developed-country protectionism both challenged it. Haberler’s core moves are to distinguish liberalism from laissez-faire, separate market order from policy failure, replace “North–South gap” language with a hierarchy of countries, and treat trade liberalization as the developing world’s ally rather than its enemy. His conclusion is strategic as well as analytical: even if developed countries manage stagflation imperfectly, LDCs would lose by abandoning the order that expanded their markets.

At any rate, if the internal economic policies of the DCs fall short of the optimum and if therefore their growth rate is lower than it could be, it would be irrational for the LDCs to make things worse by retreating further from the liberal international economic order that has served the whole world, including the LDCs, so well.