The Lost Massey Lectures (4 page)

Where there is a prospect for developing petroleum, bauxite, iron ore or other resources for supply to the United States or Europe, private capital continues to go abroad. This is related to the profits to be made in the U.S., Canada or Europe. A little capital also goes to develop additional markets—trucks, tires, soap, pharmaceuticals—for American or European firms. But almost none goes to build the power plants, railroads or factories which are designed to serve the people of the poor countries as British capital in the last century built railroads in the United States, Canada and the Argentine to serve Americans, Canadians or Argentineans. This is partly because the poor countries being poor are an unattractive market as compared with the rich countries. Capital goes where people have incomes and money to spend and where, accordingly, money can be made. And, as I shall suggest in the following lectures, there are other problems. Some of the poor countries lack the social institutions and manpower which enable them to make effective use of capital and hold out a reasonable promise of repayment. In others the social system is unfavorable to effective capital use; power lies with those for whom government is not an instrument of economic progress but
a means to personal enrichment. But even the countries which can make effective and secure use of capital for power, irrigation, transportation and basic manufacturing are unlikely to get it from private sources. They compete badly for funds with the developed and high-income countries. They must, therefore, have help of other governments or such international organizations as the World Bank. Failing this, we shall leave them in a painful and perhaps losing struggle for progress. We shall go forward, meanwhile, with increasing ease. It takes a certain effort of mind to suppose that this will be the basis for easy relationship between ourselves and the poor lands. If we are to have a tolerable relationship with the poor lands, we shall need to supply the kind of assistance that is appropriate to their needs.

A scarcity of economic resources is not a purely passive matter. It deeply affects the economic policy of a country. We think of ideology as having a controlling influence on the way governments manage their economy. Ideology is not without importance. But the availability of capital, and the associated poverty or affluence, is a much greater influence than we imagine.

Thus, in the United States or Canada, where capital is abundant and privately mobilized through the capital markets, no one need give thought as to how it is used. It may go into steel mills, fertilizer plants, power stations or other good Calvinist employments. But equally it may go into a deadfall in Las Vegas, a racetrack in florida or a plant to manufacture electric golf carts and electric exercise machines so we can extirpate, once and finally, the remaining occasions for employing muscular energy. Capital may even be conscripted, on occasion, for wholly hypothetical mines deep in the Canadian wilderness. We recognize
that there is some waste but we do not worry, if our own money is not involved.

The poor country has no such easygoing option. It must use its resources for the right things; if it fails to do so—if funds slip into fancy housing, a glittering airport or official Cadillacs—the cries of outrage and horror will come first of all from the most rugged American free enterprisers. If it is getting aid, such wasteful expenditure shows it is unworthy of help; if it is not getting help, this proves it is wholly undeserving. It must, in short, exercise firm control on the nature of its growth. It must use its capital in accordance with a well-considered, though not necessarily elaborate, plan. And conservative critics are among the first to insist on such planning. If private entrepreneurs are not around to undertake the investment, the government will be urged to take the initiative itself.

So we come to the fairly remarkable result that free enterprise—the practice of letting the market decide where we invest and what we produce—is in part the product of well-being. Planning, by contrast, is in some degree compelled by poverty. This, of course, is not the whole story. Many of the governments of the new countries have embraced socialism and planning as a matter of conviction—capitalism has come to mean the British, French, Dutch (or, for that matter, American) companies that were associated with colonial rule. Or, as in Africa, it denotes the merchants and traders—also usually foreigners—who are firmly identified in people's minds with high prices and high profits and a good deal of sanguinary swindling. Students from such backgrounds learned eagerly about socialism at the Sorbonne, Oxford and the University of London, though almost never at Moscow. They now are cabinet officers.

None of this, I might add, is the good fortune of the poor country. Socialism and planning are very demanding in the administrative
apparatus that they require. An unplanned economy is infinitely easier to run than a planned one. And the rich countries that are not obliged to plan have the most highly developed systems of public administration. The United States or the United Kingdom could go in for fairly complete planning without undue difficulty—and did during World War II. But they have no great need or urge to do so. In Asia and Africa, where both the desire and the need for planning are far greater, the administrative structure is weaker and in some cases almost nonexistent. Whoever arranged matters in this way is open to serious criticism.

It follows further that we must be tolerant of different and far less efficient economic performance in the poor countries than in our own. Their task is both different and far more difficult. We are right to press for sensible use of funds that we supply and for economic policies that insure that they will be effective. But we cannot press for a carbon copy of western capitalism and we cannot hold others even to our sometimes imperfect standards of performance.

I turn now to the effect of wealth and poverty on national behavior. Here, also, a clear view will have a considerable effect on the wisdom with which western countries conduct their foreign policy.

In Europe in the last decade governments have been stable and secure because their people have been contented and secure. International cooperation, and most notably the creation of the Common Market, has been possible for the same reason. If unemployment is minimal and unfeared, then governments have freedom to reduce tariffs, lift quotas and arrange migration. Even now a bad depression in Europe would cause governments to concern
themselves with their own people, if necessary, at the expense of their neighbors. If things got bad enough, politicians would be tempted to divert attention from economic problems to national concerns and grievances—to the German military threat, the nationalism of General de Gaulle, possibly even such ancient issues as the Sudetenland and the Saar.

In the poor countries nearly all governments are insecure. That is partly because people have little to lose from a change. Things are always bad. There is a certain uniformity in misfortune. The prerogatives and spoils of office also look attractive to those on the outside—not only is it good to throw the rascals out but you get a Mercedes as a reward. Meanwhile, the man who is clinging to office and who finds economic development hard going looks for a scapegoat for his failures or some object of popular antipathy which will engage passions and thus divert attention. The British, French or Dutch are at fault. Or the Yankees. Or the Indians, Pakistanis or Malaysians next door. Or the Muslims, Hindus, Christians or Jews. Or the Turks or Cypriots. As well-being is a solvent for tensions, so poverty is a principal cause. The poor countries are the focus of internal disturbance, insecurity, interracial friction and international conflict because these are intimately a part of the politics of privation.

We often have a simpler explanation for disorder in these lands. It is the Communists who are at fault. There is a fine, simple, hard-boiled quality about this explanation which economizes thought and goes down well with the modern American conservative. An official never arouses the men from the intellectual boondocks by blaming things on the Bolsheviks. It is the more or less automatic reaction of one type of older State Department official. (George Kennan once said that in the making of American foreign policy it is not the American interest that is consulted but the American right.) There is no better test
of sophistication than mistrust of the man who attributes everything that goes wrong to the reds.

Obviously, differences in income have a penetrating effect on national behavior. Let us reflect on what they explain. Poverty or well-being affect attitudes toward technical change. They have a controlling effect on the ease or difficulty of economic progress and affect the nature of the country's economic organization. They determine political behavior and international attitudes. They have a profound effect on human reproduction and demography.

We have only to look a little further to see why they are more comprehensive than the differences associated with ideological preference or commitment. I have spoken of the effect of privation on the behavior of the countries of the non-Communist world. Its effects as between China and the Soviets form an almost exact parallel. China, under the pressure of need and ambition, has tried different and more radical (although not for that reason more successful) forms of economic organization than the Soviet Union. These the Soviets have thought wrong. The Chinese have taken this ill. They have accused the Soviets of being unfaithful to Marx and his prophets. But clearly the Soviets in their more comfortable situation were not as hard pressed. What served in a comparatively affluent country such as Russia could hardly be expected to serve in a poor one such as China. The parallel between the United States and India is evident.

The Soviets have also used economic aid as a political lever. When the Chinese failed to follow their lead it was withdrawn. The Chinese have bitterly resented this and, given the pride of the poor country and the importance of aid, one can see how this
could be a source of contention. Finally, the Soviets have criticized the Chinese for chauvinism and adventurist foreign policy. We have seen that these are also at least partly the products of poverty—of the need to fix people's eyes on non-economic goals and to divert them from domestic failure. Thus the main points of contention between the two Communist countries are immediately explicable in terms of the conflicting interests of rich and poor. However, I did not come here to Canada to instruct the Soviets on how to get along with China or vice versa. We may perhaps better reflect for a moment on some of the lessons for our own relations with the poor countries.

There are several. We must, for example, be braced for the resistance to change and react to it with sympathy and understanding. It is not irrational; rather it reflects an experience different from our own. We must also be scrupulously careful that the change we advocate is sufficiently riskless to be acceptable to people who cannot afford risk. More than one eloquent American agricultural specialist in these last fifteen years has converted villagers to techniques, which, however impeccable in Michigan or Missouri, did not pay off in a distant clime. The price was paid by the villagers and not by our man who by then was back home.

We must be aware of the difficulty which the poor countries have in finding savings and resulting capital. We must encourage them to conserve and husband their resources; we must be exceedingly cautious about urging expenditure for anything but the highest priority. On occasion we have allowed our much more easygoing standards of spending to influence our recommendations as to what the poor countries should do. Educational luxuries are a case in point. More important, we certainly have not been sufficiently sensitive to the very great burden that is imposed on these countries by military expenditure. I venture to think that Mr. Dulles's military alliances and their concomitant military
expenditures will eventually be shown to have done more to promote than to prevent Communism by the burdens they imposed on people who could ill afford them.

Most important, we must not waver on the importance of aid. It is not a luxury of modern foreign policy. It is, in fact, the obvious accommodation between countries where saving is easy and automatic and those where it is difficult and painful. It is the principal basis for harmonious coexistence between the rich countries and the poor.

And it has been serving this purpose very well. In the last fifteen years, errors and setbacks notwithstanding, the United States has won a position of influence and esteem in the poor lands. We are regarded not as remote, self-interested and selfish, as well we might be. On the whole, we are considered a friend with a concern for the less fortunate. This is a great achievement for a nation that is both economically and geographically as far removed from the experience of the poor countries as we are. There should be no doubt as to what accomplished it. It was not our military power. It was not the acuity of our propaganda. It was not the exceptional deftness of our intelligence organization. It was not even the skill or eloquence of our diplomats, political or professional. It was the American aid program. One type of modern conservative opposes the aid program because he imagines all change, including that which conserves peace and stability, to be a conspiracy against the American form of government or, at a minimum, his pocketbook. I do not worry about these people. They have always been with us; they add variety to life. Their ancestors opposed steam navigation, fire and the wheel. Their fathers opposed the cream separator and the National Banking System. But I confess to some discouragement over the tendency of more thoughtful conservatives, as well as men of liberal goodwill, to become apologetic about foreign aid. We need to adjust
the form of aid much more closely to the circumstances of the poor lands—as I will argue in the next two lectures. But we must also bear in mind that it is our most distinctive contribution to the comity of nations.