Anyone looking back in 1975 at the oil and food crisis, as it has developed since October 1973, and at the whole current economic disequilibrium, will quickly perceive that things are not what they seem. Of course, we must take care not to get involved in the old game of the pot calling the kettle black. But the way events have been presented in the West is at best only a half-truth. There is a politics of food as well as a politics of trade, and oil—from as far back, at least, as the Achnacarry agreement of 1928—has always been a matter of politics. The danger in the present situation, as in the 1930s, is that the politics will override the economics and propel us all into disaster.


Contrary to commonly accepted opinion, the overriding issue since the end of 1973 has not been oil or food, or even inflation and unemployment. What we have witnessed, in reality, and what we are still witnessing, is the opening stage of a struggle for a new world order, a search for positions of strength in a global realignment, in which the weapons (backed, naturally, by the ultimate sanction of force) are food and fuel. If we continue to analyze the situation in economic terms, as though the only issue was how to combat the threat of depression, we shall never get the measure of the crisis which overhangs the world. The scenario (to use the currently fashionable jargon) may be economic, but the action is political.

The steps taken by the oil-producing countries in October 1973 to secure a larger share of oil revenues added a new dimension to the conflict, but it would be totally unrealistic to suppose that they created it. The onset of the crisis was clearly visible five or six years earlier. What happened, briefly, was that the war in Vietnam, and the mounting inflation that ensued, undermined the international system built up since 1947, and in particular weakened the position of the United States, the linchpin of the system. “After 1967,” as Fred Bergsten puts it, “the rules and institutional bases of the old structure began to disintegrate.”1

The event that symbolized the close of one era and the opening of another was the withdrawal (one might almost say the abdication) of Lyndon B. Johnson, his announcement on March 31, 1968, of his decision not to seek re-election. In retrospect, it would seem probable that the operative cause was less the much advertised student unrest than a revolt of big business and corporate finance, frightened by the damage Johnson’s policies were inflicting on the US economy and on its economic position abroad.2 In effect, Nixon and Kissinger were called in to repair the damage, to remodel the system, and to restore US standing in the world. Two new brooms—or, to be accurate, one new broom and a distinctly shop-soiled one—were to sweep away the debris and clear the ground for a brave new world.

They set about the job with impressive speed and energy. On a political level Kissinger’s “diplomatic revolution” (as its admirers liked to call it) got going with a swing. After the announcement of the “Nixon Doctrine” in July 1969, the outlines of the new strategy quickly became visible: withdrawal from Vietnam, détente and understanding with the Soviet Union and with China, and an American-European-Japanese bloc articulated and held together by a new “Atlantic charter.”

On an economic level the going was stickier. The deflationary policies Nixon was elected to carry out resulted, as the London Times was quick to point out, in “a near disaster,”3 and when the Penn Central bankruptcy conjured up the frightening prospect of “a snowballing trend of corporate bankruptcies,” the administration abruptly went into reverse, stoking inflationary pressures at home and abroad which destroyed confidence in the dollar and sapped the foundations of Kissinger’s ambitious foreign policy. The Smithsonian agreement of December 1971 marked, in Douglas Evans’s words, “not only the end of the Bretton Woods monetary system, but the end of an era of American leadership.”4

Even before the Arab-Israeli war of October 1973, it was obvious that Kissinger’s ambitious schemes were not working to plan. Already in April 1973 the icy reception in Europe of his “Grand Design”—the keystone of the world-spanning arch he was building—was a sign of trouble. The war in the Middle East, the oil embargo, and the sudden escalation of oil prices brought a whole series of new complications, and the imposing structure began to topple. No wonder that Kissinger angrily accused the Arabs of betraying him!5 After October 1973 nothing went right, and Kissinger began his feverish journeyings from capital to capital, seeking desperately to prop up the tottering building.

To no avail. The Middle East remained an intractable problem, absorbing and dissipating his energies, and in Indochina the dominoes he had so carefully built up began to fall. By May 1975 South Vietnam and Cambodia were down, Laos was toppling, even Thailand was unsure. Japan, too, was talking of “rectifying” its position.6 There remained the accords with Soviet Russia and China, but what these amounted to in practice it was impossible to say. In fact, the two communist giants could afford to sit quietly on the sidelines, watching their capitalist colleague struggle like Gulliver—and with no greater success—to throw off the bonds in which the Lilliputians had enmeshed him.


There is a story that, as Walt Rostow packed his bags and left Washington for the University of Texas, Kissinger was heard to murmur: “I wonder what it is like in Arkansas.” But what is important is not Kissinger’s personal fate, but the fact that the new constellation of world forces is clearly turning out to be very different from the pattern he so confidently laid down in 1969.

Less than a month before the fall of Saigon, Kissinger told an interviewer that “the design of our foreign policy is intact.” 7 It was a bold affirmation, but not a very plausible one, and for reasons that are obvious. What had happened, quite simply, was that the mounting economic crisis had created a disarray and fluidity in international relationships that cut across all his plans. The shape of the world that will eventually emerge is anyone’s guess, but, if historical precedent is anything to go by, it will be something no one foresaw and no one wanted. Who, in 1933, would have foretold the Nazi-Soviet pact of 1939? Or who, in 1939, the alliance between the United States, Great Britain, and Soviet Russia in 1941? The essential point to grasp is that the situation in the 1970s is as fluid and unpredictable as the situation in the 1930s, and as fraught with danger.

If the Kissinger world—the world he so optimistically envisaged in 1969—has collapsed, what is to take its place? The old international order, we are constantly being told, has irretrievably broken down, and any attempt to rehabilitate it is doomed to failure. It is not merely that the bipolar world of the 1950s—the world we associate with the name of John Foster Dulles—has gone forever, and been replaced by a multipolar world of shifting alliances. More significant is the fact that the looser patterns of the 1960s are coming apart and being transformed, as Seyom Brown puts it, “into a vast web of intersecting adversary and cooperative relationships.”8 But who is cooperating with whom, and who the adversaries are, is another question, and one to which, at the present stage of the crisis, there is no clear answer.

Not, of course, that there has been any lack of guesses. The temptation to extrapolate current tendencies, or apparent tendencies, and project them into the future is always fascinating, and all sorts of blueprints have been drawn up, among them the division of the world into “superblocs” (American, Russian, Chinese, European, Japanese), 9 a “community of developed nations” (in other words, a tripartite American-European-Japanese hegemony),10 an international class war (the colored poor against the white rich), with China, perhaps, as the champion of the underdeveloped world.11 In addition, there are those who, like Saul H. Mendlovitz, director of the World Order Models Project, “believe that global community has emerged and global governance is not far behind,” and that the question is not “whether or not there will be world government by the year 2000,” but “how it will come into being—by cataclysm, drift, or more or less rational design.”12

These are all intriguing possibilities, but it would be a mistake, in the shifting sands of the present, to pin too much faith in any of them. Few things are more characteristic of an age of crisis than the upsurge of prophetic voices, warning us of the disasters ahead if we do not cooperate to solve the problems that threaten to engulf us. In the 1930s the call was for collective security. Today the slogan is interdependence. The question is whether interdependence will prove more effective as a rallying cry in the 1970s than collective security was in the 1930s. The omens, so far, are not very encouraging. Since the onset of the economic depression the world has become less, not more, interdependent. As Richard A. Falk courageously admits at the end of his impressive plea for “a world order system responsive to global humanism,” the prospects are “bleak.”13 By 1978, when the economic crisis really begins to bite, they are likely to be bleaker still.

On any rational calculation, all sensible people will agree, cooperation is (in the words of the recent report of the Club of Rome) “the only sensible and the most beneficial path” to follow.14 But it is one thing, as Carl-Friedrich von Weizsäcker points out, to “sense” the need for a global approach to the great overriding problems of world poverty, overpopulation, scarcity, pollution, and the depletion of natural resources, and another to “perceive” a way out of the present impasse.15 Too often, the call for “constructive relations of global interdependence” reflects little more than a pious hope, with no discernible structural underpinning. Few people will quarrel with Richard Falk when he picks out as the central point the danger and inadequacy of “a world order system constituted primarily by sovereign states of unequal size and wealth”;16 but this, alas, though everyone is aware how “inherently unstable and precarious” it is, is the reality with which we have to deal.


Nor should we be deceived by all the current talk of interdependence. No government, probably, rejects the concept of interdependence as such, provided it can secure it on its own terms. The question is how the terms are defined. We may all be in the same boat together; but the first question, notoriously, among shipwrecked mariners is whom to throw to the sharks.17 The Club of Rome asks rhetorically whether there is a “danger that some could gain permanently by seeking confrontation,” and concludes that any attempt “by one side to take advantage over the other” would “backfire.” 18 In the long run that may be true. But governments are apt to operate in the short term. As Rajni Kothari puts it, for a quarter of a century “the United States has been the core of the international status quo.” What it has been “trying to achieve” since Kissinger came on the scene in 1969 is “a rehabilitation of this core” and a restoration of United States “hegemony.”19 If “interdependence” is one way to achieve this (and it is a card Kissinger is currently playing for all he is worth), well and good; but what if not?

We scarcely needed Robert W. Tucker, of all people, to remind us, in a much publicized article in January,20 that war is one way out, a desperate means, as it was for Hitler, of cutting the Gordian knot. There is a real possibility that someone, sometime, may decide that a forcible “rehabilitation of the free-world economic order” is a gamble worth taking. It was, after all, an official in Kissinger’s immediate entourage who informed us, as recently as February 15, that “if Western dependence on imported oil is not ended in five years, the choice will be between political surrender or military force.” 21 As the latest calculations—after Ford’s doubling of the $1 import fee—indicate that imports in the United States alone, taking no account of Western Europe and Japan, will rise from 6.2 million barrels a day this year to 9.6 million barrels in 1985,22 no one can say that we have not been warned.


What we are witnessing today, we are constantly being told, is a major transfer of wealth and power on a global scale. In general terms this is almost certainly true. If on a national level we can have a rapid shift of wealth and industry from old manufacturing centers to new ones—from Massachusetts, for example, to North Carolina, or from Manchester to Coventry—there is no reason why the same process should not operate globally.

But however true in general this may be, it tells us neither how the transfer of wealth and power will take place, nor from whom to whom. It may well be, as von Weizsäcker and others believe, that over the longer term the “Asiatic countries will achieve a position of world hegemony.”23 Certainly, no prognosis based—as most are—on the assumption of continuing Western predominance is likely to stand the test of time. As the Princeton economist Arthur Lewis has pointed out, “the underdeveloped countries have all the resources needed for their own development”—so much so that it “could continue even if all the rest of the world were to sink under the sea.”24 The question, of course, is whether the rest of the world will leave the underdeveloped countries of Asia, Africa, and Latin America to develop without outside interference. If Douglas Evans’s searching analysis of the feverish efforts of the major industrial powers to secure exclusive rights and leverage in the Third World is anywhere near the truth, the answer must be no.

The tendency today, when people talk of a transfer of wealth and power, is to think only of the oil-producing countries, and particularly of Iran, Kuwait, and Saudi Arabia. If this were the only issue, prognosis might be easy; but what is happening is something much more fundamental. As the old international political and economic structures begin to topple and disintegrate, the struggle for wealth and power is developing into a struggle of all against all.

Everyone knows, to begin with, that there are major, though muted, conflicts of interest among the industrial countries of the West. If Kissinger’s appeals for solidarity among the oil-consuming nations seem to fall on deaf ears, one reason is that, for Western Europeans and Japanese, pressure from the United States is at least as threatening as pressure from OPEC. Even before the October war of 1973 the London Economist aired the suspicion that, if “the Americans gave in to OPEC so readily,” it was because “they saw increased oil prices as a quick and easy way of slowing down the Japanese economy.” Since October 1973, as Michael Tanzer points out, Western Europe and Japan—hit far more seriously than the United States by escalating oil prices—have been placed at an even greater disadvantage; indeed, “one key effect” of the oil crisis has been “a drastic shift in economic power from Western Europe and Japan to the United States.”25

The disarray in the Western camp is matched, not indeed (so far as we know) by a comparable disarray among the oil-producing countries, but certainly by an equal lack of clarity about their ultimate aims and objectives. Do they regard themselves as the spear-head of the Third World in a struggle to create a “new world economic order,” or are they, as Abdel Rahman al Zamal recently reiterated,26 an integral part of the existing world economic and monetary system, seeking no doubt a larger share in the spoils, but with “no desire to threaten or destroy it”? The notion, which has hamstrung Western policy for eighteen months, that the oil cartel would collapse if only the consumer countries would line up in a united front behind Dr. Kissinger, was always wishful thinking. But it is also notorious that there is a “conservative” wing in the OPEC camp, led by Saudi Arabia and Iran, and a “radical” wing, led by Algeria and Libya, and it is far from certain which, ultimately, will prevail. What is certain is that the West, led by Washington, will do everything it can to play up, and, it hopes, to profit from, the differences.

Nor should it be assumed that these divisive policies are bound to fail. In the reaction after the collapse in Indochina—and in many instances well before it—it was too easily concluded that the era of American power was drawing to a close. Nothing could be further from the truth. On the contrary, the way things have developed since 1973 has strengthened rather than weakened the effective power base of the United States. Not only, as has already been pointed out, does it stand to gain leverage in the struggle with its capitalist competitors as a result of the oil crisis. Far more important are what Lyle P. Schertz of the US Department of Agriculture aptly enough calls “the brutal facts of the world food market,”27 of which the most brutal is the domination of the United States. As James P. Grant, president of the Overseas Development Council, elegantly put it: “The world power structure is changing massively in favor of the resource-rich countries,” and “as part of this process resource-rich United States is returning to a position of political and economic pre-eminence comparable to that of fifteen years ago, when its leadership was indispensable for the success of any international effort.”28

Food, in short, is the ace up the United States’s sleeve, its secret weapon in the new cold war which is brewing. Assistant Secretary of State Thomas O. Enders explained the position clearly enough at the time of the World Food Conference in November 1974, when he said that “the food producers’ monopoly exceeds the oil producers’ monopoly,” and that “food will give us influence because decisions in other nations will depend on what we do.”29 And James P. Grant added for good measure that “skillful handling of the world’s most essential raw material—food—which it dominates,” would enable the United States to “formulate the rules of the game.”30

If these statements are to be taken seriously—and there is no reason why they should not—what they portend (to borrow Eliot Janeway’s expressive phrase) is a world-wide struggle of “agripower against petropower.”31 It is a struggle from which no country, not even the poorest among the underdeveloped nations of the Fourth World, can opt out. “Food,” Earl Butz has announced, “is a tool in the kit of American diplomacy.”32 Its use, no doubt, requires a different diplomatic style, more low-keyed and less flamboyant, than that for which Henry Kissinger has become renowned. But lowered sights do not necessarily mean smaller gains, and there is a good deal of evidence—atavistic throwbacks like the Mayagüez incident notwithstanding—that Kissinger is adapting his tactics to the new world situation. If he does not, someone else doubtless will.

Meanwhile, the situation remains deceptively quiet. The food crisis, so widely foretold at the time of the World Food Conference last November, did not materialize, not at least on the catastrophic scale predicted. The industrial nations, after the first horrifying shock, learned quickly—too quickly, in the view of some of their political leaders, including President Ford—to live with inflated oil prices. The trade war, which seemed so imminent as long ago as 1971, has not occurred. More important, the actors on the world stage are still cautiously sparring, testing like wary boxers their opponents’ defenses, and waiting for the other side to make the false move which will enable them to pounce. And, most miraculous of all, the world economic crisis, which loomed up so threateningly two years ago, has been deftly side-stepped—except, of course, for the growing millions of unemployed, all (we are told) enjoying paid vacations at the taxpayer’s expense on the beaches of Florida and Puerto Rico.

A lot of people have been deceived by the present lull. It is always comforting to believe that, if we sit still and wait for things to blow over, all our problems will dissolve into thin air. Those who think this way are in for a rude awakening, not this year, perhaps, or even next year, but the year after, or the year after that. Only a fool will try to pinpoint a timetable or predict the exact course of events. The “Great Depression” (as it was called) went on with intermissions and ups and downs for over twenty years, from 1873 to 1895. The slump of 1929 continued until 1940, and would almost certainly have gone on longer, but for the war, though the experts were confidently predicting in April 1930 that the “business recession” had “bottomed out” and things were “rapidly returning to normal.”33

These are precedents to bear in mind during the current economic cycle. Nothing is easier than to be led astray by transitory, short-term fluctuations, but the important thing is to keep one’s eye fixed on fundamentals. What statesmen and politicians do today or tomorrow may have some influence over the way they operate; but no one, certainly not Kissinger, can change their character.


At the present stage of the struggle for wealth and power, all one can safely do is to examine the component elements one by one, and there is no doubt that the so-called “oil crisis”—or, more accurately, the confrontation between oil producers and oil consumers—is still a dominating issue.

With the passage of time, naturally enough, its dimensions and people’s responses to it have changed considerably. Down to September 1974 military intervention was certainly on the cards. It may still be, for the threat to use force, at least as a last resort, was renewed by Kissinger on January 13 and has never been withdrawn. But, for the present, the initial outraged shock has given way to a mood of cooler appraisal. Responsible, right-thinking Americans now admit that the desire of oil-rich countries to control their own resources is perfectly “legitimate,”34 and Kissinger himself, who a year ago was angrily talking of “blackmail,” is now speaking the language of sweet reason and calling for “a structure of international cooperation” encompassing “both the consumers and the producers of the world’s energy…on terms fair to all.”35

Two factors in particular contributed to this change of attitude. The first was a growing realization, not least among the financial and banking community, of the harm that was being done to Western interests by the refusal to engage in a dialogue with the oil-producing countries. The second was the accumulating body of evidence which showed that the impact and consequences of the sudden steep rise in oil prices had been deliberately exaggerated and distorted for political purposes.

This had, of course, been the contention of the OPEC countries from the start. At a time when everybody in the West was arguing that the “world economic slump,” the sudden “leap in unemployment,” and the skyrocketing price of “everything…from food to transportation and firewood” were “due to inflated oil prices,”36 Sheik Yamani of Saudi Arabia and the Iranian ambassador to the United Nations pointed out that imported oil contributed at most “1 to 2 percent” to an inflation rate which already, on average, was around 12 percent.37 But it was easy to ignore their arguments, or brush them aside as propaganda, and it was only in the second half of 1974, when a number of Western experts with no evident axe to grind came up with similar estimates, that any serious attempt was made to distinguish fact from fiction.

The first serious doubts about current assumptions came from OECD itself, which, in its authoritative July 1974 Economic Outlook, expressed the view that the increased cost of oil (before the further rise in September) had only directly added about 1.5 percent to prices, “or one-fifth of the overall increase.”38 This assessment was subsequently confirmed in The New York Times Magazine by Paul Lewis in the most level-headed survey of the oil situation that has come my way.39 Writing in December 1974, Lewis stated quite categorically that “the fourfold oil price” had “at the most added between 1 percent and 2 percent to the cost of living,” and even Alan Greenspan, the chairman of the President’s Council of Economic Advisers, agreed that “if the oil price were to flatten out and stay flat indefinitely, we probably wouldn’t lose more than a small percentage of our current inflation rate.”40

But if the inflationary effects of the increase in oil prices were grossly exaggerated, so also were the early estimates of the size of the accumulated OPEC surplus by 1980. In the first excitement this was put at the alarming figure of $650 billion. But, here again, the second half of 1974 brought second thoughts and “a more relaxed attitude.”41 In its mid-year review of the economy OECD cut the earlier estimate to $250-300 billion—that is, by more than half42—and by the beginning of 1975 Dr. Emminger of the West German central bank was even prepared to predict that by 1980 the surplus might be entirely eliminated.43

All such estimates must be taken with a grain of salt, but at least they indicate that things are by no means as catastrophic as they have been made to seem. This certainly was the view taken by two well-known Yale economists, Robert Triffin and Richard N. Cooper. By 1980, according to the latter, OPEC wealth would “still amount to only 2-4 percent of the world’s capital stock and a smaller percentage of total assets, financial as well as real.”44 Even 2 percent, of course, is no bagatelle; but a transfer on this scale is hardly a prospect to get hot under the collar about. In fact, as Professor Triffin pointed out, its impact, spread over two or three years, would be “well below” that of the recurrent trade cycles and fluctuations which all nations “have often experienced in the past” and learned to live with.45

Another well-known figure who expressed similar views was Hollis B. Chenery, vice president of the World Bank,46 and further confirmation came in a report on the international implications of the energy crisis recently released by the Ford Foundation. According to the authors of that report, “the international investment position of the financial-surplus oil-exporting countries” by 1985 “might be about equal to that of the United States today.”47 Unless one assumes (as some people may very well do) that US direct investment abroad is excessive, this is scarcely an alarming prospect.

The Ford Foundation report also concludes, on the basis of its estimates, that “the increase in the real cost of energy could amount, on the average, to approximately 1 percent of the total GNP of the non-Communist oil-importing countries.”48 If true, this does not sound unmanageable, and certainly does not warrant the alarmist and apocalyptic assessments which have so long been current. As the First National City Bank put it in June 1975, “what began in 1973-74 as a ferocious tiger was first declawed and is now becoming a Cheshire Cat.”49

The immediate results of these reappraisals were to cast doubt upon the handling of the oil crisis and to inaugurate a debate about American policy which is still continuing. Those who had suspected from the start that the oil companies rather than OPEC were the real villains began to ask whether the energy crisis might not, after all, have been “contrived.”50 At the same time, influential voices in political circles, alarmed at the damage they believed Kissinger was inflicting on the international financial system, launched an attack on his policies, in particular upon his obdurate refusal to negotiate with the oil producers, at least until the major industrial countries—that is to say, the United States, Western Europe, and Japan—had formed a common front. This, they suggested, was like waiting for the Greek Calends. Meanwhile, they argued, the whole capitalist economy, as reconstructed after 1947, was falling apart, with the imminent risk of trade war, quotas, competitive currency depreciation, control of capital movements, and ultimately moratoria and debt repudiation—the scenario, in short, of the 1930s, with the Four Horsemen of the Apocalypse waiting impatiently at the end of the road.

To follow in detail the ensuing debate is as unnecessary as it would be tedious, because—as I shall try to show—it is a hollow controversy, of interest perhaps in terms of American political infighting and maneuvering, but with little bearing on the wider issues. That is to say, although the differences between the two sides are real, they are tactical rather than fundamental. The liberal wing may seem to be (and probably is) more sympathetic to the aspirations of the oil producers and the Third World countries, but not to the extent of endangering the existing system. Its object, no less than that of the conservatives, is to stave up the capitalist world economy, rather than to transform it, and the controversy is therefore a controversy about ways and means.

So far as oil is concerned, the question on which it hinges is that of the most appropriate and advantageous approach to the oil producers. Put bluntly, the difference is between the “hard sell” and the “soft sell,” and if Kissinger is the leading proponent of the former, the driving force behind the latter is the international banking confraternity, whose mouthpieces, it would seem, are David Rockefeller and George Ball, now a senior partner of Lehman Brothers. Behind them stand the liberal establishment (represented, for example, by the Council on Foreign Relations) and a number of closely interlinked front organizations, among which Zbigniew Brzezinski’s Trilateral Commission is probably the most prominent and certainly the most vociferous.51

The attack was launched, or at least the tone was set, in a much publicized speech which George Ball delivered at a meeting of the Trilateral Commission in Washington on December 8, 1974. The problem for which the oil producers were “responsible,” Ball declared, was not—as was commonly assumed—“the fact of the increase” in oil prices; rather, it was “the fact that it came so abruptly,” and since the governments of the consuming nations had not faced the situation with any sense of urgency, the result was “major dislocations in world financial markets.”52

This tacit admission that the increase in oil prices in itself was not unreasonable contrasted sharply with the line taken by the State Department; it also shifted the onus for the deadlock from the oil producers to the oil consumers. If Ball argued, “the entire financial structure of the non-Communist world” was threatened with “collapse,” the reason was “the strategy of confrontation” pursued by Kissinger, and his determination “to confront the oil-producing countries rather than seek their co-operation.” The alternative proposed by Ball, and subsequently propagated by his associates in the Trilateral Commission, amounted in sum to persuading the OPEC countries that “both sides have a stake” in keeping the floundering capitalist ship afloat, and that “to cause economic breakdown in the industrial countries…cannot be in their own interest.”53

Ball’s charges against Kissinger were not without substance. From early in 1974 the oil producers had offered “to sit down and discuss” the impact of the sudden rise in oil prices, “and see how,” in Sheik Yamani’s words, “we can solve the problem.”54 As early as February 22, 1974, the Shah of Iran himself put forward a scheme for “increasing world liquidity and providing additional resources for the development of less advanced countries.”55 How genuine these offers were we cannot tell, for under pressure from Kissinger they were never put to the test. Instead, as Dr. Fallah of the Iranian National Oil Company complained, “the consuming countries turned a deaf ear to indications by OPEC that they would like to have a round table conference on the question.”56 The result was that by the time of Ball’s speech fourteen months had elapsed since the October war, and for all practical purposes nothing had been done to adjust the monetary and financial system of the Western world to the new situation.

The procrastination was in no way accidental. Kissinger’s avowed object was to force down oil prices and disrupt OPEC, and for this reason he opposed any move which implied recognition of the changed situation or cooperation with the oil producers. But if Kissinger’s motives and calculations were never in doubt, those of Ball and his associates, in advocating an opposite course, will bear investigation. Fundamentally, their quarrel with Kissinger’s policy stemmed less from its aims than from its methods. What they objected to was that, by excluding the oil producers, it meant that “the costs and burdens” of supporting the industrial economies most severely affected by the extra cost of fuel—and, almost as an afterthought, those of the underdeveloped countries—“would be borne exclusively by the oil-consuming nations,” and specifically by the United States. As some of these countries—notably Italy—involved “very bad credit risks,” the danger (as Senator Jackson put it in his usual bluff way) was that “Uncle Sam” would end up “with all the funny money.” Ball’s aim, openly expressed, was to “involve the oil-producing states in assuming part of the burden.”57

This, needless to say, was easier said than done, for the oil-producing countries, though they claim to have no desire to see “Italy, France or England…go bankrupt,” have also no intention of accepting responsibility for bailing out the West from a crisis which, as the Shah of Iran once bluntly observed, “you of the West have wished on yourselves.”58 But if Ball’s initiative and the subsequent efforts of the Trilateral Commission to spell out its implications in detail have had no visible effect on OPEC, they at least resulted in a modification of the State Department’s tactics, which became visible after the failure of the so-called “preparatory meeting” between consumers and producers in Paris in April 1975.

Hitherto, the State Department had stuck firmly to the line not only that there should be no full-scale meeting between consumers and producers until the industrial countries were lined up in a common anti-OPEC front—indeed, as Ball says, a considerable part of the United States’s diplomatic effort in 1974 was devoted to preventing the EEC nations from meeting with the oil-producing states—but also that, if and when such a meeting occurred, “the main subject [in Kissinger’s own words] must inevitably be price.”

These two hurdles, particularly the unwillingness of France to join a consumer pressure group, effectively sabotaged any hope of a conference in 1974, and it was only after the meeting between Ford and Giscard d’Estaing in Martinique in December, when the differences between France and the United States seemed to have been patched up, that the project was revived. Even now, the timetable showed no sign of urgency. First, it was agreed, there should be a “preparatory meeting” in March (it actually took place in April), then “intensive consultations among consumer countries…to prepare positions.” Only when these had been completed should there be a full-scale producer-consumer conference at an unspecified date “before the end of next summer.”59 Whether it will actually take place, or whether 1975 will prove as barren as 1974, is still anyone’s guess.


Meanwhile, several important developments have occurred. The first, which became apparent at the “preparatory meeting” in April, was a hardening, or apparent hardening, in the position of the oil-producing countries, expressed in their refusal to limit discussion to oil (still less, to the price of oil) and to separate oil from other questions, such as raw materials and commodity prices, in which all the underdeveloped countries were involved. This, in the words of The New York Times, was “the fundamental issue” on which the talks “foundered.”60 The second development, some six weeks later, was a sudden, totally unexpected softening, or apparent softening, in Kissinger’s position. Backing away from his previous tough line, he announced in two major policy speeches on May 27 and 28 that he was ready to broaden the dialogue between producers and consumers “to include the general issue of the relationship between developing and developed countries” and to discuss “all the issues of concern to developing countries.” 61

At first glance, this change of front has all the appearance of a major victory for the OPEC countries. In reality—though, to the best of my knowledge, we have no reliable information about what went on behind the scenes—it seems far more probable that it represented a victory for the powerful interests in Washington and on Wall Street which are worried sick about the financial consequences of a continuing confrontation. Certainly, a tug-of-war has been going on in Washington, ever since Ball’s pronouncement in December, between the hard-liners and those who will, I suppose, inevitably be called the “appeasers”; and Kissinger’s speeches of May 27 and 28 seemed a clear sign that—for the moment at least—the latter had won the day. As the attack on Kissinger, which Ball mounted in December, gathered force and rumors of his imminent fall filled the newspapers, he had come—or so it would seem—to realize that persistence in his old intransigent attitude could easily cost him his job.

But if Kissinger’s new line had a certain interest in the context of American political infighting, the real question is whether it reflected a substantial change in foreign policy. Here the indications are anything but reassuring. Certainly, it is only necessary to compare the proposals he put forward in Paris at the end of May with the demands of the oil-producing countries to see that the two sides are still far apart. For the oil-producing countries, the essential point is not simply that any eventual discussions should include raw materials as well as oil; they also insist that the question of raw materials shall be given “equal priority.”62

In Kissinger’s plan this stipulation is conspicuously missing. Now, it is true, he is willing to allow commissions to be set up to “monitor” such questions as raw materials. But their function, as he defines it, is limited to review and discussion, and “only the energy commission would do substantive work.”63 In spite of Kissinger’s claim that American thinking has “moved forward,” this is effectively a return to square one. For all the rhetoric about “co-operation,” “interdependence,” and “mutual understanding” in which Kissinger’s proposals are decked out, they represent neither overdue recognition of the negotiating position of the oil-producing countries nor a genuine offer to enter upon a “dialogue” on mutually acceptable terms. Rather, they should be seen, as I have suggested, as a concession to the liberal wing of the ruling establishment and an attempt to deflect its criticism.

There is, on the other hand, little reason to think that the liberal wing is genuinely prepared to recognize the negotiating position of OPEC. Here again, it is necessary to distinguish between rhetoric and reality. The Trilateral Commission, which has set itself up as the main liberal mouthpiece, claims, sincerely enough, that it is not—contrary (it must be said) to appearances—simply a “rich man’s club,” and that it is seeking to find a basis for “cooperation between developed and developing countries, corresponding to the new balance of economic and political power, and responsive to growing demands for welfare and justice.”

The fact remains that its aims, as set out in its various pamphlets and manifestoes, are clearly designed to preserve the existing structure of Western power and predominance. Nothing could be more indicative of its attitude than its repeated description of the developing countries as “sources of raw materials” and “export markets” for the West; for it is precisely this subordination to Western interests that the Third World is determined to cast off. And its second main aim—security of “access to supplies” and “agreed limits on the ability of producers to cut off essential supplies…for political or economic reasons” would deprive them, if it is achieved, of the most effective weapon they possess to liberate themselves from Western control.64

The aim, sometimes more and sometimes less explicit, of all the many ingenious proposals put forward by Western spokesmen since the fall of 1974 is to persuade the rich oil producers, by a show of conciliation to place their surplus funds at the disposal of the West in order to bolster the Western economies and (to a lesser extent) those of the poorer developing countries, George Ball’s idea was to inveigle them to participate, apparently on a 50-50 basis, in a “Fund or Bank for Capital Recycling.”65

Another banking consortium, including Robert Roosa of Brown Brothers Harriman as well as the chairman of Iran’s Development Bank, came forward at the very moment when widows and orphans and most other Americans were getting out of mutual funds as quickly as their legs would carry them with the brilliant idea of setting up a whole string of new investment trusts to mop up $10 billion of Arab money “in the first year” (and goodness knows how much thereafter) and guide it into “private enterprise.”66 Ball himself, noting the plight of the less developed countries, said they had “got to be subsidized by the OPEC countries.” Though he had the grace to add, as an afterthought, that he “assumed” it must be on “some kind of a sharing basis,” Senator Jackson boldly went the whole hog and asked the Kuwaiti ambassador pointblank to “undertake to feed the developing countries and relieve us of that burden.”67

The Trilateral Commission, worried about the possibility of “civil violence” and social unrest, which would certainly be bad for American multinational corporations, has also concentrated its attention on the “resource-poor developing countries,” proposing to help them by setting up a “$3 billion emergency aid programme.” No one will deny that this is an admirable project, but the operative question is who is going to foot the bill.

In its first scheme, put forward in the summer of 1974, the Trilateral Commission—perhaps taking its cue from George Ball—suggested that the OPEC countries should put up one half, the other half to come from the United States, EEC, and Japan.68 Considering that the combined gross national product of the advanced industrial countries amounted to about two trillion dollars, while that of OPEC was around $150 billion—or “less than one-tenth of the Trilateral total”—this was not an easy proposition to sell, and in its next foray, some six months later, the Trilateral Commission lowered its sights, in order to make its proposals more palatable to the OPEC countries. Abandoning the “50-50” split, it now proposed what it called an “effective division” of the cost that “would be two-thirds Trilateral, one-third OPEC.”69 But, on closer examination, this apparent concession is illusory, since (as the report frankly admits) “all of the $3 billion each year” was now to be put up by the OPEC countries, and the additional one-third they were asked to contribute ($300 million, as compared with a proposed $170 million from the US) related, broadly speaking, only to servicing the loan.

The OPEC countries were thus, in effect, being asked to service their own loan to the tune of one-third, hardly an attractive proposition. Moreover, it was made clear that the real object of the scheme was to bolster the flagging exports of the industrial world, particularly of the United States, which, for a contribution of a mere $170 million, was told that it might expect up to “$1 billion in additional US exports.”70 Why OPEC should subsidize the United States in this way was not explained.

The trouble with all these proposals, as George Ball frankly admitted, is that the West lacks “effective bargaining counters.” In particular, it is unrealistic to expect OPEC to contribute substantial funds to international agencies, such as the World Bank or the International Monetary Fund, in which it has no effective voice. This was realized even before the Arab-Israeli war of October 1973;71 but it was only after the oil crisis that the West moved, haltingly and ineffectually, to remedy the situation. In the summer of 1974 the Trilateral Commission urged that “the developing countries, and particularly the oil-producing countries,” should have “a greater role,” “more voting rights,” and “a reasonable share of decision-making”;72 but as everything depended upon the interpretation of the words “greater,” “more,” and “reasonable,” this was not a particularly enticing offer, and in a second paper, six months later, the commission came out with precise figures for adjusting representation and voting rights to take account of the “new economic power” of the OPEC countries.

These figures are worth looking at in detail, since they show better than anything else what the real issues are. The suggestion is that, in return for their cooperation in funding long-term loans to the resource-poor developing countries, the oil producers should be offered “a 15-20 percent voting share” in the IMF and the World Bank and one-third representation on the board of the so-called “Third Window,” i.e., the proposed emergency program.73

This proposal, if adopted, would certainly represent a distinct improvement on the current situation. But, considering that the OPEC countries will “soon dispose of at least half the world’s monetary reserves” and are being asked simultaneously “to make major financial contributions to IMF recycling plans and to the purchase of World Bank bonds,” it can hardly be described as generous, or even realistic. Moreover, the 15-20 percent figure is entirely hypothetical, and the one actually being canvassed is 9-10 percent. As this would confer less than half the voting power at present enjoyed by the United States or by the countries of the EEC as a group, it would leave OPEC with the cheerful prospect—reminiscent of the early days of the United Nations—of being permanently outvoted by the Western bloc.

But even an adjustment on this scale, unlikely though it is to satisfy OPEC, is already provoking hostile reactions in the West. Nothing perhaps is more ironic than the fact that the more the Trilateral Commission and those associated with it seek to draw OPEC into supporting the World Bank, and the larger the amount of OPEC money the World Bank manages to secure, the greater is American reluctance to support it. Indeed, according to one recent report, the US administration is desperately seeking “to take aid for the most seriously affected countries away from the World Bank altogether.” 74

Nor is there any secret about the reasons for this hostility. For one thing, Washington has no intention of providing funds on concessionary terms “without the anticipation of political benefit.” In addition, it has a “veto power” in the World Bank and the IMF which (in the discreet words of the Trilateral Commission) it is “reluctant to lose”; in other words, to the extent that the United States and the other Western countries lose control, the less likely they are to continue to contribute, “or even permit the Bank a certain amount of independence.” This, no doubt, explains the anxiety of the Trilateral Commission to emphasize that even “a 15-20 percent OPEC voting share would not fundamentally alter the balance of power” to the detriment of the West.75 Since, however, the whole purpose of OPEC is to alter the balance of power, one is left wondering what the object of the whole exercise is.

The answer is that behind the tedious arguments about percentages and voting rights, the real issue is a struggle for power and influence. It is not necessary to go the whole way with Teresa Hayter’s impassioned denunciation of the World Bank or Cheryl Payer’s powerful attack on the International Monetary Fund to know that both were created and structured to subserve Western and particularly American economic interests;76 and the Trilateral Commission lets the cat out of the bag when it talks of the danger of these “multilateral institutions” being “eclipsed by OPEC-country institutions with aid programmes that are not only geographically limited but often politically linked.”77 Since everyone knows that Western aid programs—including, not least of all, American food aid—have always been “politically linked” and “geographically limited,” the issue is clearly not whether aid should be distributed without political strings, but who is going to pull the strings and exercise the leverage. It is here, beneath a camouflage of verbiage and conciliatory gestures, that we come to what is vulgarly but expressively called the “nitty-gritty.”

If we try to sum up the debate at policy-making level in the United States, the first thing to say is that it is almost entirely irrelevant. It is irrelevant because, as I hope I have shown, it is concerned with tactics and does not touch the fundamental issues. “I want you to adjust yourself to the new economic reality,” Sheik Yamani told a high-level conference of American officials, economists, and executives last October.78 What we have witnessed instead is a dispute about the best means to circumvent it. Meanwhile, the controversy—hollow in any case—has been overtaken by events. As the movies used to tell us in the old days, time marches on; and the plain fact, if we compare the position today with that of twelve months ago, is that—in spite of Kissinger’s more conciliatory posture at the end of May—the situation is worse, or more fraught with danger, rather than better. That is the second reason why the sort of solutions proposed by the liberal wing of the establishment are no longer relevant. Like the many other fruitless attempts to salvage declining imperialisms with which history is littered, they illustrate once again the old adage “too little, too late.”

What has happened, quite simply, is that, as a result of Kissinger’s delaying tactics, the stakes have been raised. Just possibly, if the West had accepted OPEC offers of discussions in the spring and summer of 1974, a separate settlement of the oil question might have been practicable. Today it is too late, and the notion of the Trilateral Commission that it is still possible to refurbish the abortive proposals of the Shah of Iran, which have lain neglected in a dusty corner since February 1974, shows an astounding lack of political realism. There is no sign whatever that OPEC is any longer prepared to negotiate on this basis.

Too much has changed between the summer of 1974 and the summer of 1975 for it to be practical politics—if it ever was—to turn the clock back. When Kissinger ignored the OPEC overtures, threatened military action, and did all he could to line up the oil consumers in a hostile bloc, the obvious—almost an inevitable—reply from the oil producers was to look for compensatory support in the Third World. The alliance between OPEC and the other developing countries, which emerged into broad daylight at the April meeting in Paris, was in a very real sense a response to Kissinger’s intransigence. It has added a new dimension to the conflict. What might still, a year ago, have been handled as a purely practical negotiation about oil payments and debt transfers has turned into a question of principle and ideology.


The question we are faced with today is no longer oil, or the price of oil, but a conflict between two irreconcilable conceptions of a just world order. That, in the end, is why the attempts of American liberals to patch over the differences are to all appearances doomed to failure. It is also why there has been a notable revival of demands for a tough or tougher line, ranging from pleas for the United States to “use its economic power” to break the cartel, to the advocacy of sheer force, if the oil producers and the developing countries do not “respond constructively and co-operatively” to American initiatives—i.e., do not do what the United States wants.79

Kissinger’s speeches on May 27 and May 28 were widely hailed as marking a “significant change” in American policy.80 This may be true; but the real question is the nature of the change and it would be a mistake at this stage to draw premature, still less optimistic, conclusions.

No passage in either speech more clearly reveals Kissinger’s real preoccupations than that in which he called for an end to “the theoretical debate over whether we are seeking a new world order or improving the existing one.” No one knows better than Kissinger that this is not a theoretical question but the real issue dividing the world today. In all the capitalist countries, but particularly in the United States, there is a gnawing fear that the Third World, fortified by the new wealth of the Arab countries and their control over an essential source of energy, is going to take its revenge for centuries of colonial humiliation and tear down the existing system. It is this fear, as much as pressure from the liberal wing in Washington, that explains Kissinger’s recent change of tactics. It also explains why—at the very moment when the United States has extricated itself from the war in Southeast Asia—it has been saddled with a military budget of startling proportions.

If we wish to understand Kissinger’s speeches of May 27 and 28, it is against this background that they should be evaluated. In particular, it explains his attempt to separate oil from the wider issues of raw materials, commodity prices, and international monetary reform. If in 1974 his object was to beat down OPEC and restore oil prices to their old level, in 1975 it is to undermine the OPEC-Third World alliance which his earlier policy did so much to consolidate. Back in April 1974, at the time of the UN Conference on Raw Materials, the foreign minister of Cuba charged that the United States was trying to undermine the solidarity of the Third World by creating a split between the oil producers and those without oil.81 If this was true then, it is even more true today. For it is the OPEC-Third World alliance, with its demand for a new world order, that threatens to push the tottering structure of neocapitalism over the brink. This, not oil, is now the essential question.

Actually the oil-producing countries have never made any secret about their position. From the beginning they insisted that any negotiations must include the underdeveloped countries as a whole, and that they will not (in Sheik Yamani’s words) “sit down to a discussion” with the oil consumers alone.82 Oil, in their view, is but one commodity among many, and they insist that there can be no fruitful discussion which does not simultaneously include other commodities, particularly foodstuffs.

But these and other arguments, though they were put forward repeatedly throughout 1974, received little attention until the so-called “preparatory meeting” between consumers and producers in Paris last April. When President Boumédienne declared that the object was to achieve “the economic emancipation of the underdeveloped countries” by promoting “the destruction of the unfair economic structure which governs the world today,”83 his statement was dismissed as rhetoric or bluff, in the expectation at the very least that it would be disavowed by the more conservative Arab states. Only when the conference broke down over this very issue did the realization dawn that the threat to the industrialized nations and the economic system they had set up might be serious.

The response was the impassioned defense of the capitalist order which Henry Kissinger delivered in Kansas City on May 13.84 The present economic system, he repeated no less than three times, as though afraid he might not be heard, had “served the world well,” but “the so-called Third World” was threatening to disrupt it by following the dictates of “ideology and national self-interest.” It would be interesting, as Norman Birnbaum has observed, to know what dictates Kissinger supposes the United States to be following;85 but the significant fact about Kissinger’s speech was his belated recognition of what the real issues are. Oil and the “strategy” of bringing “pressure on the oil price” still figure prominently. But the burden of Kissinger’s speech is no longer oil but the “challenge” from the Third World, and the clear warning that the United States has no intention of accepting “unrealistic proposals”—that is to say, proposals which call for “a totally new economic order.” If Boumédienne threw down the gauntlet, Kissinger has picked it up, and the lines are now firmly drawn.

In the wider perspective of history, it may well turn out that the long-term significance of the “oil crisis” is the way it has served as a catalyst for the wider and more fundamental confrontation between the poor nations and the rich, which threatens to engulf the world. The issue today is not oil, in any narrow sense, but whether the existing economic system, upon which Western preponderance is based, can withstand the challenge from the Third World. This is the question which OPEC, through the example it has given the underdeveloped nations, has brought to the center of the international stage.

How far we have moved from the original issue is shown by the fact that Kissinger and others who, a year ago, were clamoring for a reduction of the price of oil to $3 a barrel are now insisting that it must not be allowed to drop below $8. Nor is it easy, if the estimates quoted above of the short-term and long-term effects of increased oil prices are anywhere near the mark, to believe that the real question is simply the transfer of a relatively modest share of the world’s wealth to the oil-producing countries. But this, of course, is no longer the main issue. What the Western nations, particularly the United States, fear is the loss of the power and leverage they wielded in the past, and of the affluence they helped to create and sustain.

This is the threat implicit in the program of “the economic emancipation of the underdeveloped world,” and it is hard to believe that the West will accept it without fighting back. Indeed, Kissinger’s uncompromising speech at Milwaukee on July 1486 is clear evidence that, so far as the United States is concerned, it will not. The defense of the present international economic system, with all the built-in advantages it gives to the industrial countries, which was implicit in his pronouncements on May 13 in Kansas City and on May 27 and 28 in Paris, has now been made specific.

If previously Kissinger had spoken with the voice of a dove, he spoke at Milwaukee with the voice of a hawk. Not only did he insist that US policy would be directed to ensuring that American firms abroad would “continue to be both profitable and beneficial to the countries in which they operate”—as if those aims were necessarily compatible. He also declared that “those countries which are eager to industrialize must also be ready to create the conditions that will attract large-scale investment.” The United States would have no truck with bloc demands that “simply do not reflect economic reality.” The idea of Henry Kissinger as an authority for what is economic reality and what is not would be laughable, if it were not pathetic—and dangerous.

“I have not become the First Minister of the Crown,” Winston Churchill once said, “in order to preside over the dissolution of the British Empire.” No one supposes, either, that Henry Kissinger became Secretary of State in order to preside over the dissolution of the American empire. Nor is there any reason why he should. Nevertheless, it might pay him to reflect on how little influence Churchill’s brave words had over the course of events. If he is not careful, Kissinger, who began as a pocket Metternich, may easily end up as a latter-day King Canute, vainly bidding the waves to retreat before his royal fiat.

The moralistic argument that the West owes a debt to the Third World for centuries of exploitation never had much to commend it. It is not so much wrong as irrelevant. The West has as much right—no more and no less—to defend the existing system as the Third World has to attack it and pull it down. The question is, of course, at what cost. The United States cannot stand sentry forever garrisoning a hostile world, any more than the Roman legions could permanently hold back the people beyond the Imperial frontier. Just conceivably Kissinger may succeed in disrupting the OPEC-Third World alliance by playing upon the rivalries and conflicting interests among the developing countries; indeed, such conflicts could call in question the notion of the Third World itself. But Kissinger may also be right—as time marches on the evidence mounts that almost certainly he is right—when he surmises that “we are headed for an era in which economic problems and political challenges are solved by tests of strength.”

(This is the second in a series of articles on the world economic crisis. The first appeared in the issue of January 23, 1975. A third will follow.)

This Issue

August 7, 1975