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The Great World Crisis I

World Bank Annual Report 1974

World Bank, 1818 H Street, NW, Washington, DC 20433, 142 pp., free

International Monetary Fund, Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1974

International Monetary Fund, Washington, DC 20431, 155 pp., free

A Time to Choose: America’s Energy Future

by the Energy Policy Project of the Ford Foundation, with a foreword by McGeorge Bundy
Ballinger, 528 pp., $4.95 (paper)

World Hunger: Causes and Remedies Studies, 1520 New Hampshire Avenue, NW, Washington, DC

Transnational Institute (an affiliate of the Institute for Policy, 64, 16 tables pp., free

The Energy Crisis

by Tad Szulc
Franklin Watts, 160 pp., $6.88

By Bread Alone

by Lester R. Brown
Praeger, 272 pp., $3.95 (paper)

I

When the history of the approaching depression comes to be written—a depression likely, on present showing, to be even more severe and more world-shaking than the depression of 1929-1940—the second half of 1974 will appear as the time when an unwilling world, preoccupied with inflation and mounting unemployment, was suddenly brought face to face with the twin issues of food and energy.

Ever since Watergate passed into history we have heard of little else. On the radio, on television, on the front pages of the daily newspapers and on the covers of weekly magazines, the food and energy crisis has become headline news, the subject of endless conferences, study groups, projects, and reports.

When I began writing this review in mid-November, the World Food Conference, attended by representatives of some 130 nations, was meeting in Rome. My desk is littered with reports, all reciting the same facts and proposing much the same remedies. Predictably enough, the annual reports of the World Bank and the International Monetary Fund were dominated by oil and food, and almost simultaneously came the elaborate study commissioned by the Ford Foundation, at a cost of $4 million, on “America’s Energy Future.”

In addition, a whole array of private institutes have sprung into action, all protesting their independent status and therefore, presumably, their disinterestedness: the Trilateral Commission (“A Private North American-European-Japanese Initiative on Matters of Common Concern”),1 the Management Institute for National Development,2 the Transnational Institute (“a community of scholars from different countries dedicated to the study of problems that can no longer be studied within the confines of any single country”), the Institute on Man and Science,3 to say nothing of old established organizations such as the Brookings Institution.4

The result is an impressive volume of information, but a multiplicity of voices. The trouble for the ordinary man and woman—for you, in fact, and for me—is that the gathering crisis has so many facets, so many interlocking ramifications, each reacting upon the other, until in the end we seem to be trapped in a deteriorating situation with no obvious solution in sight.

Merely to list the problems is to see their complexity, the crisscrossing web of unresolved issues in which the world has suddenly become entangled. On the one hand, there is the fourfold increase in the price of oil since the Arab-Israeli war of October, 1973; on the other, the inexorable approach of the end of the hydrocarbon age, the drying up—hard even now to visualize, but by all accounts not more than fifty years away—of the main source of energy on which the industrial world has come to depend. Then, the shortterm famine conditions arising from the droughts of 1972 and 1973, the desperate plight of 800 million people in Asia and Africa, as well as the long-term problem of providing adequate feeding for a growing world population.

Add to these the problems of mounting inflation and growing unemployment, the instability of the Middle East and the shaky future of the Western alliance, the effects of a vastly increased fuel bill on the economies of the United States’s European trading partners and of Japan, and the difficulties of the underdeveloped countries of Asia and Africa, unable to pay for the necessary imports of oil, fertilizers, and foodstuffs, and it is easy to understand the fears and premonitions of ordinary people, in America and in Europe. Suddenly their whole future has become precarious.

So far, as The Washington Post observed last September, people are confronting the crisis “without visible signs of anger and despair.” 5 But the gnawing fear that the good times are past, that even modest expectations are unlikely to be fulfilled, that the industrial West, with its high standards of living, is passing into an age in which shortages are the norm and not the exception, is a traumatic experience, and like all traumatic experiences its consequences are incalculable. That is why it is necessary to analyze what has happened coolly and dispassionately. Economic strain breeds desperate remedies, and economic strain is building up inexorably, nationally and worldwide.

The orthodox view of the crisis, as seen in the West, received its most authoritative formulation some three months ago in The New York Times.6 Analyzing what it called “the real economic threat”—a threat which, if left unchecked, would lead to a “world economic catastrophe as fraught with danger to political stability and peace as was the Great Depression”—the Times found it in the operations of “the international oil cartel” and the “skyrocketing of oil prices.” This, it affirmed, was the “major source of inflation and balance-of-payments instability”; this was what was driving “nations with weak economies … into insolvency.” Through the “sudden and massive transfers of income, wealth and power to the small group of oil-exporting countries,” the world was faced by a “breakdown in trade and payments” and “the double threat of world inflation and world depression.”

The Times article was intended as a call to action, a challenge to “the United States and its allies” to demonstrate “that they mean business.” And yet the assumptions upon which the whole argument rests are not as selfevident as the authoritative tone of the article suggests. No one will deny that increased oil prices have contributed to the inflationary spiral—though their exact share is not easy to quantify—but the approaching economic downturn was clearly apparent, for those who wished to see it, even before the first sharp rise in oil prices in 1971. As one of the Trilateral Commission reports correctly states, the war of October, 1973, the embargoes, cutbacks in oil production, and rises in prices did not create the energy problem; they merely “speeded up trends already visible.”7

To lay the blame for current economic dislocations on “the international oil cartel” is, in fact, a gross simplification. “Even before the recent sequence of events,” the secretary-general of the United Nations has pointed out, “it was clear that the world monetary system was suffering from malfunctionings”;8 and the International Monetary Fund states in its 1974 report that “it is only in the past few years that rising costs of primary commodities and fuels have become significant elements in the inflationary trend.” Moreover, “a slowing down of economic expansion in most industrial countries was already in process in the course of 1973, prior to the sudden emergence of energy problems later in the year.”9

It is possible, of course, to argue that, while these facts may be true, the actions of the oil cartel have changed the whole situation, transforming what was at worst a controllable secondary recession, comparable to the recession of 1957-1958, into a global economic crisis which threatens, through an uncontrollable chain reaction, to trigger off a world depression. That, I suspect, is the position of The New York Times. If so, it is a partial and inadequate interpretation. Neither the oil crisis nor the food crisis is a chance happening. On the contrary, they are the outcome of policies which have been pursued with unswerving tenacity and disregard for consequences for a quarter of a century. What confronts us, in short, is the crisis of neocapitalism, and it is sometimes tempting to wonder whether the barrage of propaganda to which we have been subjected during the last six months may not have the hidden purpose of diverting attention from that unpalatable fact.

The problems of food and energy are not, after all, sudden afflictions which descended upon us out of a blue sky in 1973. Millions were starving to death in Bangladesh and India long before the droughts and crop failures of 1972. For twenty years at least scientists like Harrison Brown have been warning us of the disastrous consequences that will ensue if we continue to use up the limited world reserves of fossil fuels at the present spendthrift rate. It would be encouraging to think that the plight of the so-called Fourth World—the underdeveloped countries of Asia and Africa with per capita incomes less than $200 a year—has at last stirred the conscience of mankind. But the impression one gets, as one reads through the pronouncements of politicians and the inspired comments of journalists, is different. What worries The New York Times is not the specter of world poverty and rampant starvation but the leverage which the “shift of wealth” will give to “the oil-producing states of the Middle East,” their “growing influence” over “business and government establishments,” and their ability “to acquire vast holdings of industrial and real estate properties in the West.”

The same preoccupation characterizes the much-heralded “five-point energy plan” announced by Henry Kissinger on November 14.10 Here, if anywhere, what the secretary-general of the United Nations calls the “cold reality” of the situation is exposed to view, and the cold reality is that the developed nations get the lion’s share. For the rich, if the plan goes through, there is to be a $25 billion “international lending facility” for “recycling, at commercial interest rates, funds flowing back to the industrial world from the oil producers”; for the poor, a nebulous “trust fund” of indeterminate size, managed not by the countries of the developing world, but by the International Monetary Fund, in which the United States and the United Kingdom between them control more than 30 percent of the votes.

I do not for one moment wish to suggest that this concern with the problems of the industrialized world is illegitimate. Here also, after all, are millions of ordinary people—clerks, schoolteachers, shop assistants—whose modest aspirations and even their livelihood are imperiled through no fault of their own. But this does not alter the fact that the key to the present clamor is not the plight of the starving peoples of Asia and Africa but (as one commentator puts it) the “devastating impact” that the “siphoning of billions of dollars from the business market and into OPEC accounts” is having on “the shaky economies of Italy, Britain, and France” and the repercussions that may ensue for the United States.11

There is, of course, an impressive body of economic doctrine which justifies this priority, arguing that the hub of the world economy is the industrialized West, and that the first necessity—upon which all else, including the welfare of the poor nations, depends—is to set the industrial world, like Humpty-Dumpty, back on its feet again. How far, if at all, this hoary argument is true in present-day conditions is a question I shall come back to. For the moment, it is sufficient to say that it is more likely to commend itself to Western governments than to the great majority of the world’s population. I do not mean that the concern of people like Robert McNamara for the starving millions of Asia and Africa is not genuine. But what is driving Western politicians to despair is not the plight of the poor nations but the plight of the wealthy nations, and above all else the dislocation of the economic system which has made the wealthy nations wealthy. This preoccupation is natural enough; but we should be very foolish if we expected the rest of the world necessarily to take the same view or endorse the same priorities.

  1. 1

    John C. Campbell, Guy de Carmoy, and Shinichi Kondo, Energy: The Imperative for a Trilateral Approach (Triangle Papers, no. 5, The Trilateral Commission, 345 East 46th Street, New York, 1974, 35 pages).

  2. 2

    World Food Supply: A Global Development Case Study, prepared by J. Carlisle Spivey (Management Institute for National Development, 230 Park Avenue, New York, 1974, 62 pages).

  3. 3

    The World Food and Energy Crises, a report by Richard N. Gardner, cosponsored by the Institute on Man and Science, Rensselaerville, NY, the Aspen Institute for Humanistic Studies, the Overseas Development Council, and the Charles F. Kettering Foundation, November, 1974, 76 pages.

  4. 4

    Cooperative Approaches to World Energy Problems (Brookings Institution, Washington, DC, June, 1974, 51 pages, $1.00).

  5. 5

    Bad Times,” by Haynes Johnson and Noel Epstein, Washington Post, September 22, 1974.

  6. 6

    The Real Economic Threat,” The New York Times, September 22, 1974.

  7. 7

    Energy: The Imperative for a Trilateral Approach, p. 9.

  8. 8

    The World Food and Energy Crises, p. 2.

  9. 9

    International Monetary Fund, Annual Report 1974, pp. 5, 7.

  10. 10

    Energy Crisis: Strategy for Cooperative Action,” address by Henry A. Kissinger, Chicago, Illinois, November 14, 1974 (Department of State, Washington, DC).

  11. 11

    Investing Arab Oil Profits,” by Eliot Marshall, New Republic, October 12, 1974, p. 8.

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