SPAN
MONETARY REFORM: THE U.S. PLAN
Front cover: His face a mirror of conflicting emotions, Rishyasringa gazes on a woman for the first time in his life. This Mathura redstone sculpture (circa second century) appears in Coomaraswamy film featured on pages 42-48. Back cover: The snowy egret is just one of a spectacular range of birds which can be seen at Everglades National Park in Florida. For a feature on the park, see pages 22-29.
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Monetary Reform: The U.S. Plan
5
New American Ambassador to India: Daniel P. Moynihan by Krishan Gujral
10
u.s. Foreign
Policy in an Era of Transition
by U. Alexis Johnson
15 22
I I
World Monetary Reform: Rethinking the System by Lawrence A. Mayer
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Saving the Incredible Everglades by Wesley Pedersen
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The Environmental
Dilemma
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by Robert S. McNamara
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Selling Cars Is Only Part of the Job
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by Daniel B. Moskowitz
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Science, Learning and the Claims of Nationalism by Henry Steele Commager
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Light on the Art of India by Chidanand£l Dasgupta STEPHEN
ESPIE, Editor; DONALD
The great German statesman Otto von Bismarck once said of the complex 19th-century Danish-German border dispute: "Only two Ipeople have ever fully' understood it: Palmerston and myself IPalmerston is dead, and I have forgotten. " Some day a great economist might speak similarly of the complex 20th-century monetary problems that came to a head on August 15, 1971, when the U.S. declared that dollars were no longer asgood as gold. Indeed, newspaper stories of the ills besetting the world's monetary system often remind us that only a handful oj:economists fully understand how th~ intricate gears of internationalfinance mesh with those of world trade, investment and other parts of the vast machine that is the world economic structure. In this r.espect,SPAN has beenfortunate infinding Lawrence A. Mayer of Fortune maga. zine, whose valuableprimer on monetary reform (see page 15 of this issue) is one of the few. successful attempts to explain the problems clearly in languagefor the layman: After we had set Mayer'f article in type, there was considerable! ferment on the world monetary scene, caused in part by the U.S. making public the detailed text of the proposals for international monetary reform which it had sketched in rough outline in September 1972. The detailed text-which is titled "The U.S. Proposals for Using Reserves as an Indicator of the Needfor Balance-of-Payments Adjustment;'-answers many questions that had been raised when the skeletal outline waspresented last year. And since these American proposals are of interest to anyone reading Mayer's article on the international monetary system, SPAN is reprinting them here, in an I abridged version, divided into three subtopics: The Need for Objective Criteria; Adjustment, Reserves and Convertibility; and Description of the Proposed System.
Y. GILMORE,
Publisher.
Managing Editor: Carmen Kagal. Editorial Staff: Mohammed Reyazuddin, Avinash Pasricha, Nirmal Sharma, Krishan Gabrani, M.M. Saha. Art Director: Nand J(atyaI. Art Staff: Kuldip Singh Jus, B. Roy Choudhury, Kanti R.oy Gopi Gajwani. "Producticln Manager: Awtar S. Marwaha. Photographic Services: USIS Photo Lab. Photographs: Cover, 42, 45 to inside back cover-courtesy Chidananda Dasgupta. IO-Wally McNamee. 22 & Back. Cover-M. Woodbridge Williams,U.S. National Park Service. 23-U.S. Department of Interior. 24-0tis Imboden, © National Geographic Society. 26-27 clockwise from bottom left-Winfield Parks, © National Geographic Society; U.S. Department of Interior; Cecil W. Stoughton, U.S. National Park Service; U.S. Department of Interior (2); Otis Imboden, © National Geographic Society. 28-U.S. National Park Service. 30-A. Pasricha.
The following is a statement of ownership and other particulars about SPAN magazine as required under Rule 8 of the Registration of Newspapers (Central) Rules, 1956. J.
Place of Publication
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United States [nformation Service Bahawalpur fIouse Sikandra Road New Delhi-llOOOI Monthly Arun K. Mehta Indian Vakil & Sons Private Ltd., Vokils House. Sprott Road, - 1.8 &lIard Estate, Bambay-400001 Donald Y. Gilmore . American Sahawolpur House, Sikandra Road; New Delhi-I 10001 Stephen Espie American Bahawelpur House, Sikandra Road, New Delhi-llOOOI The Government of the United States olAmerica 9
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Editor's Name Nationality ,. Address
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Names and addresses own the newspaper
of individuals and partners
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·The.U.S. proposals take as a point of departure that the stability and durability of a new JPonetary system will be crucially dependent on finding an equitable and effective means of promoting the adjustment of external imbalances. In approaching that objective, we believe success is dependent upon finding an appropriate blend among three possible approaches, each of which contains some advantages, but none of which is satisfactory by itself. The three approaches are: .National discretion-a degree of which is essential in a world of sovereign nations and desirable in allowing maximUIllpracticable freedom of action among individual coun-
and reserve changes. Accordingly, in our view the single most valid tries, but which, relied on alone, assures neither equilibrium indicator that a country is in actual or emerging disequilibriumnor an equitable sharing of adjustment responsibilities. as well as the most readily available, the most comprehensive and .Discretionary authority of a central institution-which the least ambiguous-is a persistent movement of its reserves in can bring to bear the influence and collective wisdom of the one direction or another. entire world community on particular adjustment problems, To be viable, a convertibility system must be capable of satisbut which can lead to endless debate, indecision, or unfying the sum ofindividual countries' normal needs for and secular balanced decisions in a potentially politically-charged atgrowth in reserves. Nations individually, either explicitly through mosphere, and which requires at least the appearance of formulation of overt balance-of-payments objectives, or more ceding more authority to an international body than nations implicitly through their behavior, express an effective demand for will yield at this stage of international development. reserves. Unless the international monetary system is capable of .Objective criteria-which can be helpful in establishing meeting these national demands in the aggregate and changing the measurements for indicating adjustment needs for various level of reserves to meet changes in such needs over tlme, a satisnations and various situations on a standardized basis, but factory reconciliation of national balance-of-payments aims, and which do not unerringly point to appropriate adjustments therefore sustained balance-of-payments equilibrium, cannot be or permit needed discretion by national authorities. assured. For if reserves are not adequate to these demands in the The U.S. proposals aim at a balance among these approachesaggregate, nations are incapable by definition of reaching their to utilize the advantages of each, while avoiding the disadvantages desired reserve positions simultaneously. A decision to provide the which might result from excessive or single-minded reliance on any system with too few reserves induces-and sanctions-a destabilizof the three. We propose that objective criteria be established to note and locate the existence of an undesirable degree of balance- - ing and ultimately fruitless competition for scarce reserves. Creation of too many reserves pushes too great a share of the adjustof-payments disequilibrium, and to create a strong presumption ment pressures onto surplus countries and facilitates world that effective adjustment policies should be implemented. But ~e inflation. would leave to the country concerned substantial discretion in A critical defect of the system in the past was that while it tried determining the composition of those adjustment policies. And to promise unlimited convertibility, and while fundamentally it international consultations would be utilized to determine the required a broad measure of balance-of-payments equilibrium for applicability of the criteria to particular situations and to consider sustained operation, it did not provide the supply of acceptable exceptional cases in which the rules might be overridden. reserve assets or the discipline on adjustment policies necessary to Use of objective indicators as an important element of the achieve these objectives. A basic. feature of the U.S. proposals is adjustment mechanism appears essential on grounds of efficacy that nations must, through the process of negotiation, reach a and equity. Adjustment decisions are frequently difficult for any collective decision on the appropriate normal stock and rate of government, and there is a tendency to postpone and avoid such decisions until long after the time when adjustment policies should increase of reserves, apd be prepared to accept the consequences of have been adopted. Equally, international groups are reluctant to that decision in terms of their own individual reserve positions and deal promptly with difficult and politically sensitive adjustment their own freedom of action to run surpluses or deficits. It would be esseJ,ltial in the proposed system that countries questions. Without objective indicators there is a danger that needed actions will not be taken. It is much better to get advance regard their balance-of-payments disequilibria, whether surplus or agreement in principle that when certain internationally agreeq deficit, as a source of concern be.fore the agreed indicators came indicators, recognized as being objective, signal adjustment is needinto play. In other words, countries would not he expected to ed, there will be a strong presumption that appropriate measures ignore imbalances blithely until their disequilibria had become so will be adopted-but recognizing there might be valid reasons for extreme as to prompt strong international concern through the overriding the indicators in exceptional cases. Such an approach is indicator mechanism. Reserve fluctuations would signal emerging much more likely to result in equal treatment for all nations: It disequilibria; movement to outer indicators signaling strong interwould call for comparable adjustment inducements fOf all counnational concern would occur only when countries failed to make¡ tries-whether large or small, developed or developing, reserve the appropriate responses as the disequilibria built up. ' currency country, or not-to eliminate payments disequilibria, Convertibility itself cannot promote adequate or equitable whether surplus or deficit. adjustment. Convertibility is in that sense an asymmetrical tool, operating only on deficit countries. In the framework of the U.S. proposals, the inherent link of convertibility to reserve fluctuations would result in broadly symmetrical pressures upon surplus and deficit nations. In short, the logic of the U.S. proposals is that (A) better balanceof-payments adjustment is required and is essential to the maintenance of a convertibility system; (B) such an adjustment process, in turn, requires recognition by both surplus and deficit countries of their obligations and responsibilities to take action; (C) in that context, objective indicators of the need for adjustment are essenThe U.S. proposals assume that most nations will want to maintial; (D) a broad equality between the availability of, and demand tain established values for. their exchange rates-par values or for, reserves in the system must be satisfied; and (E) all of these central rates-in conjunction with a generalized system of con- needs can be brought together, in the context of a system of vertibility of national currencies into international reserve assets. established exchange rates supported by convertibility, by the use of reserve movements as the main indicator of the need for In a system of esta blished exchange values and convertibility, there adjustment. is a close relationship between balance-of-payments disequilibria
claims on primary reserves. Consequently, a stable system must provide enough primary reserves in relation to the whole to meet reasonable demands for conversion of these potential convertibility claims and/or must limit demands for conversion by individual countri~s that would otherwise claim an excessive proportion of the available supply of primary reserves. There are a number of complementary approaches which could reconcile the existence of foreign exchange holdings in reserves with the stability and even-handed working of a system , These principles could be incorporated into several alternative of reserve indicators. One approach would be to equate the operational frameworks. Such alternative formulations could, for example, (A) emphasize the use of net or gross reserves as aggregate of "base levels" with the total of primary reserves and the basis for measuring fluctuations in reserves; (B) focus attenprovide limits on the disproportionate accumulatiorr of primary reserves by a country above its base level. Some assurance tion largely on changes in reserves from an existing starting level or on an appr'opriate distribution of individual countries' against excessive claims for primary reserves growing out of past reserves in relation to some "objective" standard; and (C) provide accumulation of foreign exchange could also be provided by for either relatively narroW or relatively wide ranges of fluctuaarrangements providing for bilateral or multilateral funding of tion in reserves before international disciplines come into play .. ". existing foreign exchange reserves to the extent the holder wished For its part, the United States wishes to continue to examine the to fund such balances, or by a facility for exchange of such advantages and disadvantages of the alternatives with care, and balances-initially or over time-into SDRs. These aspects of would welcome the contribution toward this effort that others the question should receive careful study. but are not further considered here. can make. Under a reserve-indicator system, certain points would be The use of fluctuations in countries' reserves as the main established above and below each country's base level to guide indicator of adjustment need requires a judgment about a "base" level and trend of reserves for each country. Abstracting from the adjustment process and to assure even-handed convertibility transitional problems, these "base levels" could be established in disciplines. Such points would be set according to uniform procedures for each country, and could be described as follows, several different ways. For instance, the distributional pattern of national quotas in the IMF (allowing for any agreed revisions again abstracting from special arrangements that would be in the future) might represent one approach toward determining appropriate dUring a' transitional period. (A) A "low point'" would be set at some point below the a broadly acceptable distribution of reserves in normal circum"base leveL" In concept, this might approximate a level stances. Another approach would be to give heavy weight to of reserves considered to be close to the minimum level the actual level of reserves at the start of the system for the majority of countries, relying on separate negotiations' for those ordinarily necessary to maintain confidence and to guard countries whose reserves at the start of the system were judged against extreme emergencies. If a country's reserves fell to be seriously excessive or inadequate. Countries' "base below its "low point" for a period of time, definite adjustlevels," in any case, would be expected to rise over time, conment pressures would be anticipated and acceptable adjustsistent with collective decisions about world SDR creation. The ment measures would be expected. In the absence of manner in which "base levels" should be calculated would clearly adequate policies over a specified 'period, international be a matter for careful negotiation. sanctions-for example, refusal to provide credit, or loss of scheduled SDR allocations-might become effective. Use of reserve fluctuations to achieve an even-handed stimulus Such sanctions would be avoided only if the IMF, through to adjustment will require a broad consistency between the total of established "base levels" for individual countries and the approval of a satisfactory program of adjustment, made a finding that sanctions were not warranted. Negotiated actual supply of reserves in the system as a Whole. Conceptually, credits to deficit countries would ordinarily be permitted in a system which did not provide for reserve currencies, this need could be met simply by assuring that the aggregate of gold, -but excessive or prolonged borrowing to circumvent SDRs and IMF positions-that is, "primary reserves'..!.....equaled the indicators would not be allowed. the aggregate of countries' "base levels" of reserves. If in such (B) A "lower warning point" would be set at a point between a country's "base level" and the "low point." a system aggregate "base levels" were above total primary reserves, a destabilizing and potentially deflationary competition Small devaluations would be freely permitted a country at any time its reserves Were below its base level. for reserves could result; if "base levels" were below the total of primary assets, too large a share of adjustment pressures would Proposals for larger devaluations would always require be shifted toward surplus countries and world inflation might IMF approval; such proposals would not ordinarily be be facilitated. looked upon with favor unless a country's reserves had fallen below its "lower warning point." In practice, we assume that some nations will wish to hold foreign exchange in their reserves and should be permitted to do (C) An "outer point" would be established above a so. Some nations will want flexibility of re~erve management, country's "base leveL" As a country moved toward its "outer point," it would be expected to apply adjustment and the system as a whole will benefit from an ability to respond measures of progressive intensity. If reserves rose to the flexiblyto sudden and reversible increases in the need for liquidity "outer point," remained at or above that level for a during periods of strain related to speculative or other factors. Thus, in structuring the proposed system consideration will need specified period, and an adequate program of adjustment were not in place, international action to induce adjustto be given to the complication introduced by the existence of a ment would take effect. For example, the IMF might possibly fluctuating margin of Joreign exchange holdings. In a authorize other countries to impose general import taxes convertibility system, foreign exchange holdings are potential
DESCRIPTION OF THE¡ PROPOSED SYSTEM' .
or surcharges against the country concerned, there might be a loss of scheduled SDR allocations, or there might be a tax on the country's excess reserve holdings with proceeds to go to development assistance. Such sanctions could be avoided, or postponed, only if the IMF made a positive finding they were not warranted., .. (D) An "upper warning point" would be set between the "base level" and the "outer point," analogous to the lower warning point, representing an international judgment that adjustment is called for. The IMF would be expected to report on the country's balance-of-payments position and prospects, and revaluation or other adjustment measures would be anticipated. (E) Depending on the volume of total reserves relative to primary reserves in the system, this "upper warning point" might coincide with a "convertibility point," representing the maximum accumulation of primary reserves for each country that would be justified, consistent with the level of aggregate primary reserves in the entire system, for the convertibility mechanism to operate equitably with respect to both deficit and surplus countries. Both to provide an incentive for adjustment, and to prevent countries from placing further convertibility -pressures on others, a country reaching such a "convertibility point" would be unable to acquire additional primary reserves, through either purchase or SDR allocation. A reserve-indicator system should be supplemented and elaborated by consultative procedures within the IMF concerning adjustment programs and problems. For such procedures to be effective, national policy officials at a politically responsive level should be drawn into the process. Such IMF review could take into account supplementary criteria in considering the nature and magnitude of any need for adjustment. Countries would not be expected to delay adjustment action until they had reached the indicator points. The purpose of a reserve-indicator system is to provide strong incentives for countries to act in limited steps, using a variety of tools suited to their circumstances, before their situation becomes so urgent as to involve international concern and action. Moreover, while countries would at given points be brought under overt international preSsure for adjustment, they would still have a range of policy options at their disposal. ... Even though the aim of the system is to promote equilibrium, some scope for fluctuation in reserves is obviously necessary and desirable. No workable system can or should try to assure lock-step economic performance from 124 nations differing greatly in size, stage of development, and economic circumstance. Through the process of negotiation, an international consensus should be reached in defining the indicator points so as to get "enough" elbow room for some fluctuation in reserves to meet transitory payments imbalances, but not "so much" that adjustment is inappropriately delayed.
The reserve-indicator system should be designed to permit countries maximum flexibility to the extent compatible with maintaining the system's basic principles: .As noted, a small devaluation without requirement for approval might be permitted at any time a country's reserves were below base level. Small revaluations might be permitted at any time .... .A country could opt for a transitional float, under agreed rules, in lieu of a discrete exchange rate -change. if it intended to re-establish and maintain a central value for its currency within a given period, a reserve-deficient country could be permitted, under suitable guidelines, to increase its reserves toward its base level. ... .Acountry could depart from the regime of established parities to float for a period of indefinite duration but only if it adhered to internationally agreed standards that would assure the consistency of its actions with the basic requirements of a co.operative order .... .Any group of countries in the process of forming a monetary union-with an implicit high degree of political and economic integration--<:ould choose to operate as a unit. In this instance, the relevant criteria would be applied to the unit as a whole, which would be expected to speak with one voice in international forums .... â&#x20AC;˘ Negotiated official credits (including IMF credits) should be permitted. Satisfactory procedures for the recording of such credits under the reserve-indicator system would need to be devised. . .In general, the system should neither ban nor encourage official holdings of foreign exchange. However, in the context of the proposed system, such holdings would presumably not loom so large relatively as in recent years. Each country should have the right to place limits on the further accumulation of its own currency of issue by official institutions in any other individual country or group of countries. Each country that chose to permit foreign official holdings of its currency must provide reasonable and normal investment facilities for those holdings. The United States proposals neither give special rights to nor impose special obligations on any country or group of countries. They assuP,le a monetary system in which all countries are treated equally. All would have the same freedom to use the full exchange rate margins permitted in the system. All would have the same rights - to allow their currencies to float, transitionally or indefinitely, under the sa~e internationally agreed rules of behavior and surveillance. All maintaining established values for their currencies would have the same obligation to assure convertibility of their currencies-meaning that officially held balances of foreign currencies could be freely presented to the issuing country for conversion into primary reserve assets, with the choice amongSDRs, reserve positions in the IMF, and gold to be made by the issuing country. . . . 0
DANIEL P. MOYNIHAN NEW AMERICAN AMBASSADOR
Daniel Patrick Moynihan has been described variously as academician, public servant, elevision personality, and one of the 100 foremost intellectuals in the United States. A ore specific description would call him uranologist, sociologist, economist, historian nd political scientist. To this long list we may ow add "diplomat." As one of America's leading urbanologists, r. Moynihan is known for his bold, praglatic approaches to the pressing problems of he cities. Himself a product of the New York City slums, he is a crusader for the poor, and has helped shape some of his country's major ocial reforms. Among other things, he was a principal architect of the U.S. Government's Ilrst anti-poverty legislation which later beame the basis of the Economic Opportunity ct of 1964. He is also the author of the amily Assistance Plan which President Nixon M'ants the U.S. Congress to pass to ensure a inimum income for every deserving family. Ambassador Moynihan is a Democrat. He erved both Presidents John Kennedy and yndon Johnson. Later, he spent two years (January 1969-January 1971) on President iXOn's White House staff, working in several ey positions, including those of counselor nd cabinet member. In early 1971 he returned to Harvard Uniersity-where he had been teaching prior to 1969-and rejoined the Faculties of Arts and ciences, the Graduate School of Education, and the John F. Kennedy School of Government. He is also a member of Harvard's Center for International Affairs and an honorary fellow of the London School of Economics' and Political Science. In some ways his most impressive position is that of Director of the Harvard-M.I.T. Joint Center for rban Studies, a prestigious "think tank" concerned with problems of that environment in which most Americans live and workthe city. Ambassador Moynihan is known as a liberal, but one who never hesitates to question the sacred dogmas of American liberalism. He believes that American liberalism needs to bring its commitments in balance with, its resources-overseas and at home. But perhaps more important than being a liberal, I
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Before leaving the United States to assume his ambassadorial responsibilities in New Delhi, Dr. Moynihan is briefed in Washington by India's ambassador to America, L.K. Jha.
he is a pragmatist aware of realities as they are and not as dogmatic liberals or conservatives wish them to be. As a pragmatist, he has a deep dislike 'for ideologies of any shade. Once, angered by the negative and ideological stand taken by some Congressional liberals over President Nixon's welfare proposals, Moynihan said: "God preserve me from ideologues. You know that great remark at the Conference of Vienna where the Russian Ambassador dropped dead and Metternich, upon being informed, asked, 'What could have been his motives?' " In fact it was Moynihan's criticism of his liberal allies that first attracted Mr. Nixon's attention. Addressing a meeting of the Americans for Democratic Action in Washington, Moynihan said "liberals" must do more than merely rail at the nation's international and domestic crises. He said it is the "liberals" who have been in office, and, "in large measure presided over the onset both of the war in Vietnam and the violence in American cities." He felt it is time for them to face up to their responsibilities. Moynihan added that it is necessary to seek out and make much more effective alliances with political "conservatives" who share the concern for social order. During his last two-year stay at the White House, Dr. Moynihan was reputedly close to President Nixon. A seemingly improbable pair, they tried to understand each other's
TO INDIA
point of view and developed, it is said, a strong and healthy respect for each other's judgments. But despite this understanding and friendship with President Nixon, Dr. Moynihan remained, and still is, a Democrat, a "Kennedy Democrat" as he likes to call himself. Moynihan believes that a whole wing of early 1960s liberalism-including such people as Nathan Glazer and himself-is out of intellectual fashion. He told Newsweek's Frank Morgan some time back: "There has been less change in our position than a shift in the political spectrum to the left and that makes us appear more conservative." The day after Mr. Nixon's welfare message to Congress, Moynihan told the President about the favorable reaction among the people, and also about Roscoe Drummond's prediction that the Administration proposals might lead to a new Republican majority. Then, after a pause, Moynihan could not resist a gentle tease: "Now, Mr. President, I'm not at all sure that's a good thing." Why did liberal Democrat Moynihan sign up to work for Mr. Nixon's Republican Administration?The question is asked frequentlv by both fans and critics. The answer, quite simply, is because he was asked. Moynihan amplified that answer candidly and convincingly in a 1969 interview for The New York Times Magazine: "I had been
MOYNIHAN
continued
a member of the Presidential Government [under President Kennedy] and felt very strongly about that obligation. I was doing what any person ought to do. You don't decline to serve the President of the United States in an advisory capacity, under almost any circumstances-that is, if you've got the internal fortitude to advise him as you really see it. On what grounds would you say, 'No, I will not advise the President'?" He feels that Richard Nixon is an extraordinarily civil man and "in his own way as much an intellectual as any President in modetn times." He feels Nixon's ideas are often misunderstood. "Time and again," he says,
"the President has said things of startling insight, taking positions of great political courage and intellectual daring, only to be greeted with silence or incomprehension even within our own ranks."
D
aniel Patrick Moynihan was born in Tulsa, Oklahoma, on March 16, 1927, the oldest of three children of John Henry and Margaret Moynihan. His father, the son of an Irish immigrant, was a reporter on a Tulsa newspaper. When young Moynihan was about six months old, the family moved to New York City. Growing up during the Depression, Moynihan attended public schools and Roman
Catholic parochial schools in New York City, and lived in a succession of tenement fiats in Manhattan slum neighborhoods. His mother, a nurse, for a time had to accept welfare aid to support the family. To help out with family finances, Moynihan worked as a shoeshine boy on Times Square and sold newspapers with his brother. At Benjamin Franklin High School in Harlem, Moynihan was encouraged by his teachers, who recognized his potentialities, but he had no plans at that time for going on to college, which he believed beyond his financial means. After graduating in 1943-at the head of his class-he went to work on the Hudson River railroad docks as a longshore-
an. A few months later a friend mentioned o him that City College, New York's free ublic university, was giving entrance examiations, and he decided to take the tests'mainly to prove to myself that I was as smart s I thought I was." After qualifying for adission he attended City College for a year. In 1944, Moynihan enlisted in the United tates Navy and served for three years. He btained his B.A. degree cum laude from ufts University in 1948 and then undertook raduate studies at the university's Fletcher chool of Law and Diplomacy, where he earnd his M.A. degree in 1949. During 1949-50, I oynihan remained at the Fletcher School eaching courses in government. Awarded a
I
Fulbright scholarship, he spent 1950-51 studying at the London School of Economics and Political Science. Returning to the United States in 1953, Moynihan began his active association with the Democratic Party as a worker in the successful campaign of Robert F. Wagner for Mayor of New York City. From 1955 to 1958, Moynihan was on the staff of New YorkState's Democratic Governor, Averell Harriman. As a member of the New York State delegation to the Democratic National Convention in 1960, Moynihan was a loyal supporter of the Presidential candidacy of John F. Kennedy. During the Presidential campaign, he wrote position papers for Mr. Kennedy on urban problems. After taking office as President in early 1961, Mr. Kennedy appointed Moynihan special assistant to Secretary of Labor Arthur J. Goldberg. In 1962 Moynihan became executive assistant to Goldberg's successor, W. Willard Wirtz, and in March 1963 he became Assistant Secretary of Labor for policy planning and research. As such, he was the youngest sub-cabinet member in the Kennedy Administration. Concurrently with his work in government and politics, Moynihan continued his academic career, teaching at various universities, including Cornell, Harvard and Syracuse. The Fletcher School of Law and Diplomacy conferred a Ph.D. degree upon him in 1961. Six years earlier, Moynihan had married Elizabeth Therese Brennan of Boston, a fellow member of Governor Harriman's staff. Mrs. Moynihan is a painter and sculptor, and their three children-Timothy Patrick, Maura Russell and John McCloskey--are all artistically talented. With his family, Moynihan would spend tbe academic year at Cambridge and summers on his farm near Cooperstown, New York, where he worked several hours a day on books, articles, and speeches, taking occasional time off for contemplation, fishing or hiking. Moynihan is a prolific writer. His books and book-length reports include Beyond the Melting Pot, Maximum Feasible j\1isunderstanding, The Negro Family: The Case jor National Action, The Moynihan Report and the Politics ojControversy, and, most recently, The Politics oj a Guaranteed Income. His articles have appeared in many of America's most prestigious magazines. Tall (6 feet 5 inches), blue-eyed, chubbyfaced Moynihan is cheerful and friendly, urbane and articulate. He is frank and straightforward, and known for his caustic wit and humor. Once President Nixon asked him how
many women he had on his staff. He smiled, shrugged and said: "Mr. President, the Civil Rights Act forbids me from asking my staff members about their sex." Always impressed by Moynihan's wit and persuasiveness, M r. Nixon thought these qualities-together with Moynihan's vast knowledge, suave manner and breezy personality-would project America's image at the United Nations in the best possible light. A few months after Moynihan's return to Harvard in 1971, the President asked him to serve on the U.S. delegation to the U.N. One of his major assignments there was to analyze the 1970 United Nations Report on the World Social Situation. When he read the document, he was aghast to find that the passages concerning the United States had "the quality of persistent and seemingly invincible inaccuracy." He said: "Where the facts are knowable, they are recurrently wrong. Where they are not knowable, they are confidently asserted."
Moynihan expects that the United States will soon 'be seen as an exporter of social programs to Europe, reversing a century in which the flow has been from Europe to us.' Moynihan was particularly annoyed by the Soviet delegate's attempts to distort the facts, even after the clarifications, to show "how bad things are in America," repeatedly citing as evidence the frequency of trade union protests against the Nixon Administration. Moynihan retorted: "It is not surprising that this should strike the Soviet delegate. The distinguished delegate comes from a land where the last trade union protest occurred in 1917." In discussing the rigidities of ideologues or bureaucrats, Moynihan often cites the example of a character in a Disraeli novel, a certain gentleman who was "distinguished for ignorance," in that he had but one idea and that idea was wrong. Moynihan fears that contemporary Americans may be just as "distinguished" fortheir ignorance of urban problems and how to solve them, for "what we do and what we say reflect such opposite poles of judgment that we shall inevitably be seen to have misjudged most extraordinarily either in what we are saying about cities or in what we are doing about them." The United States, he feels, faces such a serious urban crisis that it needs a bold, well-
defined national urban policy that will en" compass both immediate and long-range concerns-and priorities among them. He suggests a policy based on his contention that "the poverty and social isolation of minority groups in central cities is the single most serious problem of the American city today." Moynihan believes the Federal Government must devote more research to the problems of people displaced by technology or driven by poverty from rural to urban areasand the concomitant problems of people moving from the densely populated "inner cities" to suburban areas. Secondly, the Government should develop a more heightened sense of the finite resources of the natural environment and of the importance of esthetics in urban growth. On the other hand, Moynihan also feels the Federal Government cannot do everything. Hence, it should constantly provide incentives for state and city governments to cope with urban problems. Related to Dr. Moynihan's concerns as an urbanologist is his interest in reforming America's welfare program-replacing it with Mr. Nixon's Family Assistance Plan, of which Moynihan has been the chief architect. One aspect of the welfare problem in America is that compassionate social legislation to give assistance to the po.or, adopted piecemeal through the years, has mushroomed costs and led to duplication of services, inefficient administration and, in some cases, unjust practices. According to Moynihan, the present system of welfare, which goes back virtually unchanged to the Great Depression of 40 years ago, has outlived its usefulness. He warns that under the present system, the richer the country becomes, the more people it will have on welfare. America's existing welfare set-up, he continues, is "mostly a compendium of ideas we had borrowed from Lloyd George, who had got them from Bismarck. With the Family Assistance Plan, the United States takes its place as the leading innovator in the world in the field of social policy." Moynihan goes on to say: "Soon, I expect, we should be seen as an exporter of social programs to Europe, reversing a century in which the flow has been from Europe to us." The principles of Moynihan's Family Assistance Plan are simple. First, income assistance is not to be conditional on dependency. Unlike the existing welfare programs, the new system does not first create a class of dependent persons and then sustain them in their dependency. It is a system of graduated income maintenance provided as a matter of right, not as a matter of some bureaucrat's
judgment as to whether or pot you are worthy of getting it. Second, the new plan provides incentives to work (the more you earn, the more you keep) and to maintain fundamental family ties. This is in direct contrast to the present system that has evolved with just the opposite incentives. Moynihan does not view the plan ideologically as either a "liberal" or a "conservative" solution to the problem of poverty in America, but simply as a pragmatic solution based upon the observed facts. President Nixon shares Dr. Moynihan's views and hopes to eventually write the plan into law. Speaking on October 30, 1972, while signing the Social Security Amendments Act of 1972, the President said: "The proposed Family Assistance Plan once again provides dramatic and heart-warming evidence that America is the country that cares .... In the next Congress, I will renew my efforts to achievea work-oriented welfare program that will help all deserving people on a fair and equitable basis-but which will contain firm work requirements, and will not encourage idlenessby making it more profitable to go on welfare than to work."
ministration which was already under attack for allegedly backsliding in the struggle for Negro equality. The Presidential Counselor later explained that all he meant to say was that Negroes would fare better if extremists on both sides would lower their voices and concentrate on consolidating the economic progress blacks had made so far.
If one were asked to pick two words that best describe Daniel P. Moynihan, the new U.S. Ambassador to India, perhaps the words should be 'pragmatist' and 'optimist.' The third Moynihan document that attracted national attention-and was also attacked by some Negro leaders-was a 78-page report called The Negro Family: The Case for National Action. Written by Moynihan in collaboration with Paul Barton and Ellen Broderick, the study is widely known as The Moynihan Report.
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r. Moynihan is one of America's leading sociologists, and three of his documents in this field have become famous in the United States. The first, a book titled Beyond the Melting Pot, was written by Moynihan in collaboration with sociologist Nathan Glazer, and was published by the M.LT. Press in 1963. Sponsored by the Center for Urban Affairs and the New York Post, the book offers a scholarly, authoritative study of the Negro, Puerto Rican, Jewish, Italian and Irish communities of New York City, arriving at the conclusion that ethnicity is a permanent quality of American society, and that the ideal of the melting pot has not yet been realized. The book was well received and immediately established Moynihan as an expert on minority groups. One respected critic, Richard H. Rovere, called it "perhaps the most perceptive inquiry into American minorities ever made." The second document was a memo Moynihan wrote to President Nixon in 1970, recounting Negro economic gains and suggesting winding down of racial rhetoric. "The time may have come," he said, "when the issue of race could benefit from a period of benign neglect." The memo, though meant strictly for the President, somehow reached the press and embarrassed Moynihan and the Nixon Ad-
The report, which Moynihan prepared in 1965 when he was an Assistant Secretary of Labor, argued that a leading factor behind poverty, illiteracy and despair of Negroes in urban ghettos was the instability of the Negro family. The report recommended a massive employment program to improve the black male's chances of making a living, and thereby help restore family stability. Moynihan's views on the Negro family stirred up a political controversy. His frank treatment of such questions as illegitimate children and poor performance in LQ. tests among ghetto Negroes gave many observers the impression that he had ascribed these shortcomings to some inherent defect among Negroes-though nothing in the report justified that impression. Restating his views on race relations in a 1972 article in The Public Interest magazine, Moynihan said: "There are, of course, simple moral truths about race which most Americans embrace. We assert, foremost, the equality of the races, which is to say that there can be no question of hierarchical, caste distinctions. Not all Americans, of course, assert this, but the trend of public opinion seems irreversible .... The highest pro-integrationist scores are among the young, and among these, young Southerners manifest the largest net rise." As an example, Dr. Moynihan cited a re-
cent U.S. Bureau of the Census report that showed that in young families outside the South, where both husband and wife worked, black incomes are higher than white. For those families where the head of the family is under 35, black earnings were 104per cent of white. For those with heads under 25, black earnings were 113 per cent of white earnings. Commenting on this, Moynihan said: "It would thus be reasonable to state that these young black couples, starting their lives together, beginning to send their children to school, beginning to look for a house perhaps, have the highest median family incomes ever recorded in the history of the world ($9,777 as against $8,678 for whites). Surely this says something about the recent past, and hopefully also about the future."
I
fone were asked to pick two words that would best describe the new American Ambassador to India, perhaps the words should be "pragmatist" and "optimist." The wellknown critic Richard Schickel, whose article on Moynihan in the "Men of Ideas" series of Horizon magazine was titled "The Compleat American Pragmatist," says of Moynihan: "He is ... an American of that classic type so often described by students of the national character from De Tocqueville on .... He is a rational man whose ultimate test of an idea is a very American one: he cares little about its correctness in terms of some abstract sociopolitical theory and very much about whether it will work as its advocates predict-actually providing more jobs, more housing, better education, or what have you." The other word for Daniel P. Moynihan is optimist. He is annoyed by those who insist upon "denying improvement where it has occurred." He feels that "social change is not easily achieved. When it successfully occurs, we ought to know about it, and permit it to cheer us up. There is little danger that we will grow complacent. [There is a] need for the public to get a good hold on reassuring events when they do occur." Perhaps this belief is summed up most tersely in the epigraph he chose for his latest book, The Politics of a Guaranteed Income. The epigraph is from W.H. Auden and it says, quite simply: In the prison of his days Teach the free man how to praise.
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About the Author: Krishan Gujral is a former staff correspondent and feature writer of The Times of India, New Delhi. He has written for many other Indian newspapers, including The Hindustan Times, The Statesman, The Hindu and Amrita Bazar Patrika. At present, he is a feature editor with the U.S. Information Service in New Delhi.
u.s. rOBlIGI POLICY II AI BRA or TRAISITIOI
The article that appears alongside is a statement delivered before a Foreign Affairs Subcommittee of the U.S. House of Representatives in 1972. Although it was written before President Nixon's victory last November, its analysis of the long-range trends of American foreign policy is as valid today as it was at the time of writing.
I am now in my 38th year in the Foreign Service of the United States. When I entered the Service in 1935, I took an oath that I would "support and defend the Constitution of the United States against all enemies, foreign and domestic," and that I would bear "true faith and allegiance to the same." I take that oath to mean that I am sworn to do everything I am able to do to promote the security and well-being of the United States. Like most Foreign Service Officers, I consider that not only a professional obligation, but a personal one. I have also had very much in mind that my oath was not as an officer of the Department of State, but rather as a Foreign Service Officer of the United States responsible to all the departments and agencies of the Government with interests abroad. I realize that we are trying to look into the future. But I hope you will permit me a brief detour into the past. I believe much of our nation is now in considerable disarray and confusion as to what our position is in the world, and what it should be. Before turning to those questions, I think it right to let you know where I, at least, think we have been. In my early service, it was clear to me and to a growing number of my fellow citizens that the security and well-being of the United . St.ates were deeply threatened by the developments in Europe and the Far East. The need for a more adequate national defense was obvious. The need to provide diplomatic and material support to those nations immediately threatened by the Axis powers was clear. We ultimately made a supreme national effort to that end. Its justification was beyond question, on either moral or practical grounds. After the Second World War, the United States quickly came as a nation to recognize a somewhat parallel situation. Large portions of the world lay inert, victims of physical and psychological destruction on an unprecedented scale. Desperate men and shattered states saw a bleak future. They were tempted to embrace, or submit to, a new tyranny which openly professed hostility not only to the United States, but also to any international structure in which we could survive. We alone had the strength and the confidence to provide an alternative center of leadership and help. It seemed to me then-and it seems to me now-unthinkable that we should have ignored the need and the opportunity. Strong as we were, we were not then-and we are not now-strong enough to be indifferent to the world we live in. It would have been worse than foolish-it would have been feckless-for the United States to have declined to lead the non-Communist world in the aftermath of World War II. It is now fashionable to question our motives and accomplishments in the postwar era. I find such questions extraordinary. To my mind, our accomplishments speak for themselves: • Our bitterest enemies of three decades ago are now among our closest friends. And surely it is better to have strong friends than strong enemies. • The dreadful prospect of another world war, this time between the Communist and non-Communist powers, seems now more remote than at any time since the mid-1940s. • The American people have prospered to an unprecedented degree during this period. • More than 60 free nations came into being in the remarkable and largely peaceful liquidation of some 400 years of colonial history. (Not a single one of these nations has chosen the Communist system.) .A new sense of the interdependence of nations has grown
in only a few decades from being a bitterly disputed premise to a commonplace statement of the obvious. • We have kept the atomic genie in his bottle and have made significant progress in establishing international limits which lessen the atomic threat to mankind-and enhance the potential of the atom's beneficial use. • We have made a singular contribution to the economic recovery of the world from World War II and have witnessed record levels of prosperity in large parts of the world. • We have helped create an international economic system which has resulted in an explosion in trade between nations on a scale unprecedented in history with immeasurable benefits to the people of the world, notably including our own. These are not negligible accomplishments. They are, in fact, historic accomplishments. I do not think that we need be apologetic or defensive about them. Rather, I think the United States should be proud of them. I think the Congress, which has contributed so greatly to them, should be proud of them. The fact that we have had some failures-and that we still face serious problems-gives no basis for the denial of the accomplishments of the past three decades . I expressed the opinion earlier that much of the nation is now confused about our foreign policy goals. In times of confusion, it is useful to go back to fundamentals. The U.S. Constitution is a domestic compact describing how to organize and run the United States. It does not say how we will deal with the rest of the world. But from the Constitution, and particularly the preamble which speaks of establishing justice, insuring domestic tranquillity, providing for the common defense, and promoting the general welfare, certain obvious foreign policy guidance can be derived. It is, for example, clear that the first responsibility of government is the physical safety of its people. This responsibility rests no less on Foreign Service officers than it does on military officers, and our objective is identical-to maintain an international environment in which the incentives and opportunities for conflict are kept to a minimum; and if conflict occurs, to contain and defeat it quickly. And while I am on this subject I want to say a word about my military colleagues. For a good part of my life, in fact going back to my association with the U.S. Marines in North China in 1939, I have worked closely with professional American military men. I think I know them as well as any civilian can. We have, on occasion, had disagreements, sometimes vigorous ones. However, on broad policy issues, it has been my experience that differing views are rarely drawn solely along military and non-military lines. The American military professionals I have known have served with devotion and skill the well-being-and the peace-of this land. To picture them otherwise is to draw a caricature. I find extremely painful and dangerous the growing tendency in the United States to belittle the armed services and the contribution they have made to the country and to the world. Neither as indi- . viduals nor as national institutions do they deserve it; and although they have better champions than I, I wanted to take this opportunity to say a word on their beh.alf. I cannot understand the argument that we should reduce our military strength as a contribution to the national search for peace. In my experience, military strength is not an alternative to a national search for peace. It is an essential element of it. In the world as it is-and is likely to be for the indefinite futuremilitary strength and diplomacy are fingers of the same hand. A
national commitment to the search for peace, not backed up by military strength, would not be a policy at all. It would be a pious expression of hope, devoid either of credibility or effect. To my mind, the Berlin crisis of 1961 and the Cuban missile crisis of 1962 were excellent demonstrations of how diplomacy and military capabilities were orchestrated by a skillful President to achieve an important national security purpose without resort to violence. Without deft diplomacy, our strength would not have been enough to save our people from tragedy. But without our strength, the most brilliant diplomacy could not have met these blunt challenges to our security. On a somewhat different plane, I believe that the SALT (Strategic Arms Limitation Talks) agreements give clear evidence of the fact that diplomacy and military strength are not contradictory -but very much complement each other. They are self-reinforcing, and both are necessary instruments of a national policy that aims at a peaceful world. The efforts and the sacrifices that we have made over the years have established the environment in which the President has been able to take great and constructive initiatives in 1972 in both Moscow and Peking. One can recognize the consummate skill involved in realizing those profits, without losing sight of the wisdom of the investments which made the profits possible. The subject of this discussion could hardly be more timely. We are in a transition period, and some of the central assumptions upon which our policies were based during the last two and onehalf decades are no longer valid. The ultimate shape of our policies is not yet clear. Nor, for that matter, is the ultimate shape of the international environment. All that is clear is that both the world situation and our own policies are changing. With this change comes uncertainties, and it is with these we must concern ourselves. One of the uncertainties is the question of what the American people and their Congressional representatives will be willing to support in the way of national security and foreign policies in the future. What investment will the United States be willing to make in the years to come in order to influence the international political environment we live in? That uncertainty has led to serious doubts abroad about the future course of U.S. foreign policy. This is a matter of the greatest importance for our national security and well-being. For unless America's foreign friends understand the U.S. policies clearly, and have confidence in the continuity-the dependability-of those policies, then they cannot concert their policies with ours. Let me put it bluntly. If they cannot count on us-they will not for long be willing to be counted with us. Both our friends and our antagonists now see divisions in the United States on many fundamental aspects of policy. They see us divided: • On the wisdom of our current levels of defense expenditures. • About the maintenance of U.S. forces in Europe. • Over the assistance we should provide to poorer nations. • About the future U.S. military presence in East Asia and the Western Pacific. .About continuing military assistance to friendly developing nations. They also see us divided about whether to continue to support more liberal world trade, or return to building protectionist walls to isolate national economies from each other. Taken together, these uncertainties lie at the heart of our relations with most of the countries of the world.
I do not know how U.S. society will resolve its disagreements on these issues. But I do know that the national interest requires that they be resolved without much delay. For it is a truism that a great power cannot exercise its influence abroad unless its policies have assured continuity. Ours cannot be given assured continuity by anyone but the American people and their representatives in the Congress. [Editor's Note: This address was delivered before the American people, in re-electing President Nixon to a second term, assured a reasonable amount of continuity in U.S. foreign policy.} As the American domestic scene has changed, so has the international situation. There are few who would now dispute the fact that a monolithic Communist world has ceased to exist. We should keep in mind that the only combat employment of the Soviet Army since World War II has been against its own alliesEast Germany, Hungary, Czechoslovakia, and the People's Republic of China. But the fact that the Communist world is internally in conflict does not mean that it is benignly disposed toward the United States, or that an "era of negotiation" must automatically succeed. We still have real and serious differences with the Soviet Union, China, and other Communist powers, and some of them could conceivably lead to conflict. Certainly, the earlier conceptions of bloc confrontation and monolithic Communism must now give way to recognition of a complex set of new and changing relationships. But the salient fact is that almost nothing is certain about those new relationships.
'I expect that economic considerations may dominate foreign policy over the next two decades, as security concerns have dominated the last two.' We may now have opening before us a prospect we have not seen for a very long time. There are concrete reasons to believe that the tensions between great powers may, in the next few years, be reduced to a level unknown since before the First World War. A pattern of accommodation is beginning to emerge, by which the great powers exercise restraint in asserting and pursuing their own interests and treat with respect each other's legitimate interests, even when they are in conflict. Such restraint opens the prospect of broad co-operation in areas where interests are complementary. But it is an uncertain prospect-fragile and tentative. It would be folly to read into this possibility the attributes of certaintyor even of probability. For this is a delicate process upon which we have embarked, vulnerable to a host of difficulties, any of which could prove fatal to the emerging structures of co-operation. Indeed, it is only the recognition of the vast benefits which all would share from co-operation that gives me genuine hope that the difficulties may be overcome. Moreover, we must not close our eyes to the fact that the decline in tensions between the United States and the major Communist powers also tends to threaten the stability of the Western alliance. It is a fact that the primary cement of that alliance was fear of Communist aggression. As tensions decline, that fear declines, and that is very much to be desired. But it also weakens the
cement upon which our security and well-being have rested for over 20 years. And it does more. It opens temptations for the Western allies to engage in competition with each other in making favorable arrangements with the Communist powers. Such pursuit of narrow national advantage can only undermine the association of sovereign allies which has, itself, created the environment in which an adjustment of relations between the traditional antagonists is possible. We will need to be very careful to avoid the unraveling of our unity-and very scrupulous in making sure we do not encourage it by our own actions . . The point I am trying to make is simply this. The United States should-and certainly will-pursue with full vigor the openings to a new relationship with the Soviet Union and China. But we would be imprudent, indeed, while engaged in that pursuit, to dismantle our own defenses or to permit our alliances to fall into disrepair and disrepute. If we try to purchase a better relationship with the Communists at the price of our strength and our friends, we shall -without a doubt-end up losing all three. Let me illustrate. The U.S.-Chinese relationship, so long as it does not threaten war, is not likely to determine a U.S. Presidential election. The same issue in Japan can bring down a government. Because the United States and Japan are allies, how each of us handles our bilateral affairs with China is a crucial U.S.-Japanese issue as well. While studying the changes that are taking place in the international environment, we need to keep clearly in mind that there are certain things that have not changed. The security equation continues to be bipolar. The United States and U.S.S.R. may not be the only ones that count, but they clearly count the most. The state of mutual nuclear deterrence that exists today has little to do with the fact that there are five nuclear powers, but a great deal to do with the fact that there are two very large ones. That is why SALT is a bilateral exercise and, in fact, why earlier arms control initiatives like the limited nuclear test ban of the early 1960s were bilateral. Neither Europe nor Asia have developed as wholly independent sources of military power. Therefore, if you accept that deterrence is a sensible strategic concept, then our alliance systems and the forces devoted to them are also sensible, since it is through those alliances that U.S. military power can be brought to bear in concert with our allies in a deterrent role. Without them, we either force the creation of new military power centers, with their attendant instabilities, or the creation of new and probably hostile political and economic alignments of our former allies and the Communist powers. Finally, the concept of forcing the negotiation of differences by foreclosing the alternatives of military coercion and political blackmail also seems likely to survive as a workable policy. I do not foresee instant detente or guaranteed peace coming out of the various diplomatic initiatives that the United States-and its allies-are engaged in with the Communist powers. It is a promising beginning. But only if we maintain a stable security environment, can we deny exploitable openings to potential enemies. And only under those circumstances, do I see a realistic possibility, over time, for the accommodation of the national interests of the Communist and non-Communist worlds. Let me turn now to the question of the economic side of diplomacy. Here, I believe, we face the most intractable problems for the future. I expect that economic considerations may domi-
nate foreign policy over the next two decades, as security concerns have dominated the last two. Technology is hurrying us into the future at a rate that neither our understanding nor our institutions, including our diplomatic ones, seem able to comprehend or cope with. A small, recently published book called the Limits of Growth presents a very dismal future for the world, arguing that the planet's finite resources cannot possibly support the exponential growth rates of people and production that have marked the last century. It concludes that catastrophe faces us within the next generation or so if drastic action is not taken now. To whatever degree this bleak picture has validity, to it must be added the problems created by the maldistribution of economic development. The gap between rich and poor, or, if you will, North and South, is growing at a very disturbing rate. In a few nations, the rate of per capita economic growth is nearly zero or actually negative. This fundamentally unacceptable situation becomes explosive in a political sense, when the developed world, by contrast, is able to maintain a steady growth rate of already very large and healthy economies. These two phenomena-rates of growth and their distribution -present the world with two serious dilemmas. First, how can the many nation states of the world concert their separate decisions on resource use which, taken together, will in the end determine whether the human race will prosper, or perish, either from starvation or from suffocation in its own garbage. Second, how can the job be done without denying to either the developed or undeveloped nations the resources and rates of growth on which their prosperity and, in some cases, their survival depends. We need to redefine the whole concept of development. We have tended to equate development with the achievement of traffic jams and urban sprawl. It seems to me that it should be possible for us to devise concepts of development which would eliminate the worst effects of industrialization as experienced in the advanced countries. Furthermore, I do not believe that industrialization or development can be imposed from outside. The poorer countries must determine the direction, and control the processes, of their own development. Their progress must reflect their own personality, even though they obviously need both capital and technical assistance from outside. Above all, it will take time, given both luck and everyone's best efforts. I think it is right-politically and morally-that we should assist the process with material resources. But I think it is at least equally important that the advanced countries devote a greater measure of energy and time, at high political levels, to remedying the belief among the less-developed countries that they are increasingly forgotten or ignored. If the less-developed nations have no stake in the international structure, then they will inevitably become its enemies. I have no answers to these questions; I doubt, in fact, that such answers now exist, although I am optimist enough to believe they can be found. The difficulties, however, are immense. If an apparent international consens'.lS on whaling, as expressed at last year's Stockholm conference, cannot be made effective in practice, one may legitimately wonder how we are to deal with the much more important issues of environmental pollution, and the conservation of energy and mineral resources.
One reason I do not give way to despair is that although we can only see through the glass darkly, I sense the beginning of an outline of a more rational world order. I sense this not because of any grand designs that have been put forward by political scientists, but because of the practical foundations of interdependence that I see being laid throughout the world. These foundation bricks of interdependence are being laid not only by governments, but at least of equal importance by business and by private citizens. At the business level, there is the phenomenal growth of the multinational corporations which operate on a supranational basis with an international staff. To such a corporation and its personnel, the world and its problems look very different than when viewed from behind a single national boundary. We need new political concepts and organization for dealing with both the problems and opportunities of these corporations.
A growing number of national needs can be met only through international co-operation: combating terrorism, air piracy and drug traffic; solving ecological and environmental problems. Beyond the growing interdependence of business and national economies, there has been a fantastic growth in what might be termed person-to-person relations. I was especially struck by this when I was last serving in Japan. Just as one small example, I once went over to Niigata, a medium-size and relatively remote city on the Japan Sea coast, and found the mayor, the president of the Chamber of Commerce, and more than a score of others from Galveston, Texas, with sister city, sister bank, sister radio station, and sister department store relations long and soundly established. Meetings of Japanese and American doctors, scientists, engineers, musicians, TV producers, baseball teams-and on and on-took place so frequently and steadily that we in the Embassy had great difficulty in even keeping up with what was going on. In many other countries, the situation is similar. On the government level, we take part each year in some 600 international meetings, conferences, commissions, and working groups. These cover a staggering array of subjects-tuna fish, air navigation, meteorology, marine pollution, forestry, fur seals, seabeds. Virtually every important field of human endeavor is now the subject of a co-operative, and by and large constructive, examination on an international scale. The number of our critical national needs which can only be met through international action and co-operation is continuing to grow. Narcotics cannot be controlled any other way. Air traffic cannot be made safe any other way. Endangered species cannot be protected any other way. The flow of goods vital to our economy and health cannot be guaranteed any other way. The benefits of satellite communications cannot be enjoyed any other way. Let me stress that I am not saying these problems are made easier by co-operation between nations. I am saying that there is -literally-no other way to solve them. This is what President Nixon has called the New Dimension of Diplomacy. More than anything else, it has to do with what is
now called the quality of life. It will become, in some ways it has already become, a major preoccupation of American diplomacy. In the years to come, the U.S. Government's performance on these problems will be a very large factor in the way its people view their government. And the nation is not well organized for it. By definition, these activities cut across the responsibilities of many agencies of government and of U.S. civil life. We have done remarkably well in dealing with many of the problems, considering the jerry-built machinery we are using. But we cannot, in the future, leave the solution of these important problems to a process of muddling through. I would very much like to see the U.S. Congress devote more attention to this issue. Finally, I would like to comment on the tendency, very marked in the United States, but visible abroad as well, to look inward and to concentrate attention on domestic problems. The tendency itself is neither surprising nor necessarily bad. But it appears to be encouraging some people to make some very surprising and very bad assumptions: â&#x20AC;˘ First, the assumption that we can be active at home, or active abroad, but not both, because we lack the resources, the energy, and the talent. â&#x20AC;˘ Second, the assumption that we have broad freedom to choose between domestic and foreign affairs and that our internal problems can be solved in isolation from the rest of the world. Both of these assumptions are wrong. I find absurd the concept that a nation of 200 million people and a trillion-dollar economy is too poor and exhausted to provide for and manage both its foreign and domestic problems. I find even more absurd the concept that we have the freedom to choose. I do not need to spell out the degree to which U.S. domestic prosperity and security depend on good management of both our domestic and our foreign affairs. The first question is not what we can afford. It is what does our well-being require. We are not a subsistence economy. If, however, the American people believe they are too poor, too inept, or too distracted with domestic problems to deal with the world abroad, then this too is a reality our foreign policy will reflect. I would suggest that our problem is not, in fact, caused by a shortage of either material or psychological resources in our society. We face, instead, a problem of will and of public confidence. I am absolutely convinced that American society will invest in those things which are important to it. Peace is important to it. One of the characteristics of our times is the widespread effort to instill a lack of confidence among our people in the operations of government. This has tended to undercut the national consensus of support for our foreign policy. The relationship between our people and our government, therefore, is not only a problem for our domestic affairs. It is a serious problem in our foreign affairs. It is, I believe, the urgent responsibility of all who are concerned with these matters both in the Executive and Legislative Branches to so conduct themselves that our people both understand the need for and the benefits that flow from the investments we make in a peaceful and secure international environment. 0 About the Author: U. Alexis Johnson was Under Secretary of State for Political Affairs until January 1973, when President Nixon appointed him Ambassador-at-Large and chief of the U.S. delegation to the Strategic Arms Limitation Talks (SALT) with the Soviet Union, the second round of which is scheduled to open this month. Johnson has also served as American Ambassador to Czechoslovakia, Japan and Thailand.
Persistence, almost unabated, of the same pressures and strains that led to the 1971 monetary crisis has evoked warnings from experts that reform of the entire international monetary system had better come soon if the world is not to plunge into financial chaos. It was against this somber background that President Nixon opened the 1972 annual meet of the International Monetary Fund (IMF) last September in Washington. «We must make certain," he said, «that international commerce becomes a source of stability and harmony rather than a cause of friction and animosity." Though the IMF meeting did not produce a new monetary system, its deliberations reflected the members' anxiety to rid the world of recurring monetary crises. The most important steps taken at the meeting were the formation of the Committee of Twenty, to prepare the draft of a new monetary system; and the Group of the Deputies, to assist the Committee in carrying out the actual reform negotiations. The Group has already met twice to solve some of the most crucial issues involved and discuss and debate the various proposals for monetary reform. At the end of its last meeting in Paris in January, the U.S. Under Secretary of the Treasury for Monetary Affairs, Paul A. Volcker, said that the American proposals (see page 1) proved useful in providing a focus for the Group's discussions. He was hopeful of achieving some sort of consensus before the next IMF meeting later this year in Kenya. The following interview with Lawrence Mayer, a member of the board of editors of Fortune, took place before these recent meetings and, of course, before the devaluation of the dollar last month. Mayer elucidates some of the issues involved, the problems that will have to be solved, and the kinds of« rethinking" needed to build a new monetary order that will assure financial «stability and harmon);."
QUESTION: It seems clear that the international monetary system is going to be changed. Is it at all clear yet how the new system, when it emerges, will differ from the old? MAYER: You can find quite a bit of agreement among the major monetary powers on what the basic goals of reform should be, though not on how they can be attained. It's widely agreed that there should be more flexibility in exchange rates. And that there should be some arrangements to prevent great amounts of short-term capital from suddenly starting to slosh around the world. Also-and this could be the most fundamental change of all-that the dollar's role as a reserve asset should be ended, or at least reduced. QUESTION: So the dollar is in for a sort of downgrading? MAYER: Yes, you could call it that. You could also say it's an inevitable repositioning of the dollar. When World War II ended, the United States was the only significant economic power in the world. At that time, too, the rest of the world was, on the whole, woefully short of goods; it also needed to rebuild its ability to produce. The only place to get goods and financing on the requisite scale was the United States. So foreigners welcomed dollars. They needed them to buy U.S. goods, and they also wanted to hold on to dollars for working balances or for future emergencies. The dollar came to play three leading roles in the world monetary system. It became the principal "transaction currency" for international trade and financial dealings. It became the principal "reserve currency" held by foreign governments. And it became virtually the only "intervention currency" used by central banks to stabilize their own currencies in foreign-exchange markets.
QUESTION: Why did the dollar retain its pre-eminence, with the tremendous changes in the world economic picture since the end of the war? MAYER: Well, despite all the changes, the United States still has the world's biggest economy. The United States, moreover, has a long history of governmental stability, and its geographical position and military strength make it seem less vulnerable than any other major nation. The special status of the dollar got formal recognition at the founding of the International Monetary Fund (1M F)-partly because the dollar was, until August IS, 1971, the only currency in the world that foreign central banks could convert into gold upon demand. The dollar is the only currency mentioned in the IMF's Articles of Agreement, and, without specifically saying so, that document clearly implied that the dollar was as good as gold. A key clause, in fact, ties gold and the dollar together as the twin standards of the world's monetary system. The clause specifies that a currency's parity must be fixed in terms of gold or in terms of the U.S. dollar "of the weight and fineness in effect on July 1, 1944." This means a dollar valued at 0.888671 grams of fine gold, a ratio more familiar when expressed the other way around, that gold is officially worth $35 per troy ounce. So all currencies, including the dollar, were tied to gold, but other currencies were also thought of as tied to the dollar. In the actual behavior of nations, gold is in a sense secondary. When a government fixes its exchange rate, it primarily thinks of the rate in relation to the dollar. Once that relation is determined, the government simply calculates what the rate comes out to in terms of gold. QUESTION: Are IMF members supposed to keep their exchange rates from moving at all? MAYER: Under the IMF rules observed before the crises of 1971 an exchange rate could vary only a little bit, at most 1 per cent above or below par. Keeping the rate within a specified range of its par value involves keeping the supply of the currency and the demand for it in some degree of balance. For this reason central banks abroad use dollars to buy and sell their own currencies, and this is essentially the way international deficits and surpluses get registered. If a country is a heavy or a consistent buyer of its currency in order to bolster the exchange rate, it is losing dollars and is in deficit. If a country is a consistent seller of its own currency in order to keep the rate from rising, it takes in dollars and goes into surplus. Under the Smithsonian Agreement countries are allowed-temporarily, at least-to permit their currencies to rise 2.25 per cent
above the officially declared rate¡ or 2.25 per cent below it before they are required to intervene in the exchange markets to stabilize their exchange rates. Most experts expect some such provision for "wider bands" of fluctuation to be part of the long-term reform that will eventually be negotiated. QUESTION: How is the par value of the dollar itself maintained? MAYER: Well, the dollar does not have a declared par value in terms of other currencies -it has been serving as the reference point for their values. The dollar does have a parity expressed in terms of gold. At the insistence of other countries, the United States agreed to a moderate change in this parity-or, to put it the other way around, a change in the dollar price of gold. A change in the gold price, however, does not necessarily mean a change in relative exchange rates. If other major countries had kept the exchange values of their currencies at the old dollar rate, the change in the gold price would have left the dollar precisely where it was before in relation to the other currencies. As things stand, the dollar price of gold has been effectively increased by 8.57 per cent, which means a devaluation of the dollar in terms of gold. However, most other major countries either retained the gold value of their currencies (as France and Britain did), or decreased it (as Japan, Germany, Belgium, and the Netherlands did). Consequently all of these currencies are now worth more in terms of the dollar. In this process, the relationships among these currencies have also been altered, a factor other countries took into account when they assessed what the new relation of their currencies to gold and the dollar should be. QUESTION: Are you implying that the United States does not have the same freedom as other countries to alter its exchange rate? MAYER: That has been so, at least until August 15, 1971. And as a reserve and an intervention currency, the dollar ideally shouldn't change in value because it would tend to lose its desirability as an anchor of the international monetary system. But even so, the United States was far from helpless. If we had held prices and costs in better check, there would have been less strain on the dollar. For a long while, moreover, we had leeway in the form of a large store of gold that we sold to other nations on demandthat is, when they felt they had been accumulating too many dollars. QUESTION: Why did the United States have to take drastic action in August 1971? MAYER: The situation had been deteriorating for quite some time, of course, partly because we didn't hold prices and costs in check. Early in 1971 a lot of money flowed
away from the United States because interest rates were then appreciably higher abroad. That increased an already sizable deficit in the balance of payments. Rumors of revaluations in Europe and the poor look of our trade statistics subsequently caused still more money to flow out of the United States. Individual speculators and, more important, corporations and commercial banks that wanted to protect themselves against changes in currency values began to think the game was up and scurried out of dollars, nearly $4 billion, in the second week of August. At this point, the United States had only about $13 billion of gold and other reserves against potential obligations of around $60 billion. There is reason to think that around this time a major country made demands that, if followed by others, could have cut deeply into the remaining reserve assets of the United States. Then President Nixon slammed the gold window shut and the dollar became inconvertible. QUESTION: Could the United States hGl'e avoided this predicament? MAYER: A better economic performance by the United States would have staved off the crisis, but risk is inherent in the dollar's position as a reserve currency. As world trade and investment expand, the world needs more reserves. In practice that has meant more dollars. Now the only way the rest of the world can continually take in more dollars is for the United States to run a continual balance-of-payments deficit. And that deficit must be finely tuned-big enough to satisfy the world's requirements for reserves, but still small enough to keep other countries from feeling that they are being inundated with dollars. This reserve-supplying function is in effect a limited license to print dollars for worldwide distribution. The United States unfortunately exceeded that limit. The United States is at fault, of course, but so are other countries. Since the United States couldn't readily devalue the dollarbecause it is the pre-eminent reserve currency -other countries should have revalued their currencies in order to correct the imbalance. But they were so enamored of their surpluses that they in a sense continued to force extra dollars out of the United States. In the end, the pile-up of dollars abroad put the world into the fix it's now in. QUESTION: Could the IMF have done anything to prevent the monetary system from getting into so much trouble? MAYER: Well, its powers are really quite limited. The IMF is pretty much what its name implies-a fund. Member nations contribute gold and their own currencies, and this creates a pool of money that a country may draw on when it gets into difficulty on its balance of payments.
QUESTION: But aren't there rules the Fund's members are supposed to abide by? MAYER: Yes, there are. A country that is in chronic deficit or chronic surplus in its balance of payments is supposed to acknowledge that it is in fundamental disequilibrium, and alter its exchange rate. But the term "fundamental disequilibrium" has never been officially defined. To define it precisely would be not only difficult but also politically inconvenient. For various reasons the member nations don't want stringent rules. The Articles of Agreement left it up to each country to determine for itself when its exchange rate should be altered, and in general this had been the IMF's actual practice.
'The dollar is the only currency mentioned in the IMF's Articles of Agreement, and ... that document clearly implied that the dollar was as good as gold.'
QUESTION: Doesn't a country that is in fundamental disequilibrium have reasons to want to change the situation as soon as it can? MAYER: Yes, but it also has reasons to put off corrective action. Let's take a deficit country first. A deficit country can usually correct its position if it deflates its domestic economy enough, but no modern nation is willing to risk a high level of unemployment to save the exchange rate. It usually won't devalue immediately either, for devaluation is generally interpreted as an admission of previous economic mistakes. Moreover, although devaluation makes a country's exports cheaper, it also makes its own imports more expensive, and therefore tends to raise domestic_ prices. Accordingly, deficit countries usually borrow from the IMF and put off devaluing until circumstances force it on them. The extreme example among the advanced nations is Britain, which delayed devaluation from 1964 until 1967. All it bought with that time was a huge foreign debt and prolonged economic stagnation. A surplus country, on the other hand, tends to like its strong position, even though it gains far more reserves than it needs. For several reasons, it ought to revalue, that is, raise its exchange rate. The excess reserves serve to expand domestic credit and so can contribute to inflation. Also, undervaluation of the currency holds down domestic supplies -in effect, the current standard of livingbecause exports are encouraged and imports discouraged. Chronic surpluses, moreover, entail deficits elsewhere, and so tend to destabilize the international economic system. But a surplus country is reluctant to revalue until it literally gets swamped with incoming money, as Germany was in the autumn of 1969. For one thing, its exporters don't like to see their sales abroad reduced. Besides, running a balance-of-payments surplus is often interpreted as a sign of economic virtue. QUESTION: Is there anything at all the IMF can do to nudge reluctant countries to act? MAYER: On paper, the IMF has power to put pressure on surplus countries, but in
fact the Fund has never invoked this clause. The Fund does take some action to discipline countries with weak currencies. If a country asks for more and more credit, the Fund lays down stricter conditions with each successive request. This happens most often, however, in the case of those poorer countries that are more or less continually in heavy debt to the Fund, and their currencies are not of much significance for the world as a whole. That can be said, indeed, about the currencies of most oftheIMF's 124members. Great international difficulties arise only with half a dozen or so major currencies such as the British pound or the German mark. If the value of a currency of this stature remains out of line for too long, what should have been a fairly routine exchange-rate adjustment can blow up into an international monetary crisis. QUESTION: What you've been saying suggests that the system would work better if exchange rates were less rigid. MAYER: Exactly. Experts say we now have a system with "adjustable pegs," but the pegs are not really very adjustable. That's why there are so many schemes for getting exchange rates to move more or less automatically. A number of academic economists in the United States go all the way and advocate free-floating exchange rates. QUESTION: What do you think about freefloating rates? MAYER:The idea is attractive. Just think of the advantages free floating would bring. Since currencies would be exchanged at their market values, there would be no balance-ofpayments surpluses or deficits. Since adjustments would be taken care of by the market, countries could practically dispense with holding international reserves. And that would eliminate the problem of what the reserves should consist of-gold, dollars, pounds, Special Drawing Rights (SDRs), or whatever-as well as the intricate problem of keeping the values among these various reserve assets stable. And with free-floating rates, a country would to a great extent be at liberty to run its domestic economic policy without worrying about the alignment of its price level or business cycle with the rest of the world; the movements of the exchange rate would adjust for any imbalances. QUESTION: So why don't nations simp~v adopt free-floating rates? MAYER: For one thing, most businessmen and bankers oppose the idea. They maintain that free floating would make it more difficult to do business across national boundaries. They say they need fairly stable rates to carry on trade and investment, especially for longterm commitments. In any case, nations are extremely reluctant to surrender control over their exchange rates, since marked revisions
â&#x20AC;˘
in the relations among currencies can have far-reaching effects on prices, incomes, employment, and the structure of industry. So it's hard to envision the day when central banks cease all intervention in the exchange markets. In short, it is not an idea whose time has come. Even Milton Friedman of the University of Chicago-the best-known advocate of free floating-said as much when he testified before the U.S. Congress in September 1971. QUESTION: Aren't there possibilities in between the present system and completely free rates? MAYER: Certainly, and monetary experts have been thinking about this for quite a while. Some have invented devices that they call the "crawling peg" or the "gliding parity" or the "sliding parity." There are numerous versions, some with rather imaginative filigree, but the essence of the idea is to let countries devalue or revalue by small stages. One formula would allow a change of 1/26 of a per cent a week, which would amount to 2 per cent a year. A country's adoption of a crawl, glide, or slide should reduce the incentive to move capital in or out on speculation that the currency will be revalued or devalued -gradual alteration is already under way. QUESTION: What's been the response to such proposals? MAYER: A lot of attention from academics but not much from central bankers. The bankers are generally against formulas. They like discretion. QUESTION: From what you've said it sounds as if we wouldn't get greater flexibility anytime soon. MAYER: Actually, the prospects are pretty good. For instance, there is a chance that some measure of increased fleN:ibility will come naturally. After the costly experiences of the recent past, countries may be willing to change outmoded parities sooner. It's not beyond possibility, moreover, that the IMF will legalize transitional floats-intervals in which a currency is set adrift temporarily so that it can find a market-guided level instead of being immediately repegged to an arbitrary rate. The IMF could even do some prodding. It might set up procedures calling for consultation whenever a member country's reserves get to be, say, 50 per cent higher or lower than normal. A country's position might be considered normal if it had the same share of world reserves as of world trade. If the position were abnormal, the Fund would try to work out an agreement on whether the country should alter its economic policies or its exchange rate.
QUESTION: Is there any other route to flexibility? MAYER: Yes, it has to do with widening the so-called "bands." Since economic conditions among countries differ, the Fund's original rules allow a currency to fluctuate 1 per cent above or below its par value. That is the band. At present, of course, the permissible bands stand widened to 2.25 per cent above or 2.25 per cent below a nation's declared exchange rate. Central banks normally intervene well before the price of a currency reaches either limit of the band. If the currency touches the lower limit, the bank has no choice but to buy it with dollars, and prolonged buying may foreshadow a devaluation. On the other hand, if the bank needs to keep selling the currency for dollars to prevent it from breaching the upper limit, that may foreshadow a revaluation. In practice, until the crises of 1971, almost all major currencies had been holding their currencies within about threequarters of 1 per cent of parity. The Smithsonian Agreement, however, put the present wider bands into force. QUESTION: How do wider bands improve matters? MAYER: If accepted bands of fluctuation are 4.5 per cent instead of 2 per cent wide, a central bank can withstand more pressure because it doesn't have to defend the rate within such narrow limits. Wider bands should also help solve another large problem -short-term capital movements from country to country induced by differences in interest rates. Between major countries these differences usually don't exceed 2 to 3 per cent, so the possibility of changes in the exchange rate that could be even larger would introduce a large measure of uncertainty. Such uncertainty should have deterrent effects on movements of capital. QUESTION: Would wider bands just about eliminate the troublesome capital movements? MAYER: No, some kinds of short-term capital movements would continue. One kind takes place when money is tight at home but easily available somewhere else. That was the case in Germany early in 1971. German companies got all the money they wanted from outside, and the inflow made a shambles of Germany's anti-inflationary policy. It is also generally agreed that neither wide nor narrow bands would stop massive speculative movements that take place if a currency starts to hover at the top or bottom of its band. Then the idea gets around that a change in a currency's parity is inevitable. That was a big problem for the Germans in 1969, for example. QUESTION: Can governments do anything to prevent these kinds of capital movements? MAYER: There is an increasing tendency to rely on capital controls. All countries now
'The SDR ... ought to replace both the dollar and gold as reserve assets and also become the common denominator of the [reformed] system.'
have such controls to some degree. Among the advanced countries, the United States, Canada, and Germany stand for the least control, France and Japan for the most. It's possible that an international code of conduct for the control of capital may be drawn up. Perhaps a good deal of freedom will be left to long-term capital, but it seems inevitable that there will be controls over shortterm capital, particularly capital inflows. The real choice will lie between detailed administrative types of controls, like those of the Japanese,or market-oriented controls. Marketoriented controls are the sort that, for example, require banks to set aside large reserves against foreign deposits. The more countries stick to the latter type, the better. QUESTION: You said earlier that in addition to increased flexibility and better control of short-term capital movements, a revised monetary system will involve a reduced role/or thedollar. What could substitute for the dollar? MAYER: Special Drawing Rights, which the IMF first created in 1970 as a new international reserve asset. Until about the middle of 1971, interest in the SDR seemed to be waning. With all those dollars pouring into official reserves abroad, went the thinking, why create more SDRs? But then-especially after August IS-the thought suddenly struck that, if it was desirable to reduce or eliminate the role of the dollar as a reserve currency, the SDR or something like it was the only substitute. Even the French, who had reluctantly joined in the origination of the SDR in 1969, have been mentioning it with favor. QUESTION: Just how does the IMF create SDRs? MAYER: With a stroke of the pen-whenever its members agree. SDRs are bookkeeping entries, much as checkbook money is. But SDRs are not money in the usual sense; they can only be used by central banks. not by the public.
storing convertibility would await negotiation of fundamental reform of the whole international monetary system. When-or even whether-a form of convertibility in the familiar sense will be restored is therefore somewhat of an open question, despite all the talk of some limited convertibility soon. In the end, we may not see the overhang of dollars converted in the usual way at all. They might be funded-that is, replaced-instead. Funding might be accomplished in any of a number of ways. One replacement might be special long-term bonds that the U.S. Government would be obliged to redeem eventually in the currencies of the countries holding the bonds, currencies that the United States would have to earn by running a surplus in its balance of payments. Another replacement might be SDRs. A country could gradually transfer dollars to the IMF in return for SDRs. In that case, the United States might redeem the dollars by issuing bonds to the Fund. Of course, if the IMF held the bonds, it would expect to get interest on them. That interest could go to the countries that swapped dollars for SDRs, or to the Fund, or to less-developed countries as a form of aid. It may turn out that if the United States can achieve a balance-of-payments surplus, the overhang-especially with the passage of time-won't seem so ominous any more. I also suspect that the U.S. Government isn't prepared to see the dollar's role as a reserve currency ended-not yet, at least not entirely. The United States isn't really ready to give up the advantages of being able to finance its deficits by issuing dollars to the world. Moreover, the United States isn't sure what would happen if it were able to alter the dollar's exchange rate in the future: the dollar is so influential that if it were devalued in the years to come, that might set up a round of competitive devaluations.
QUESTION: You mentioned replacement of the dollar only as a reserve currency. How about its role as a transaction currency and an QUESTION: How do central banks use them? intervention currency? MAYER: At present, for international pay- MAYER: Everybody expects that, for years to ments between the banks. The SDRs never come, the dollar will be the main transaction leave the IMF-the Fund simply transfers currency, which also means that businesses them from country to country on its own and commercial banks will hold considerable books. But there's a lot of discussion right balances in dollars. The dollar will also probnow about expanding and changing the use ably continue to be the main intervention curofSDRs. For example, SDRs offer one means rency of the world, although perhaps less of solving the so-called overhang problem. predominantly than before. This means that central banks will still be holding considerable QUESTION: Overhang of what? dollar balances. Just how large such balances MAYER: The term is used to refer to the ex- might be depends on the manner and extent cess amounts of dollars in foreign countries' to which currency union is achieved in the reserves.Those dollars are excess in the sense European Common Market and on the ultithat governments would probably like to con- mate strength of the dollar itself. vert them at the U.S. Treasury into other reserveassets-gold, SDRs, or other currencies. QUESTION: How could the dollar's role as However, under the Smithsonian Agreement a reserve currency be ended? the major monetary powers agreed that re- MAYER: The most straightforward way
would be for all countries to turn all their official reserves-US. dollars and gold, as well as whatever other currencies are being used as reserves-into the IMF in return for a special allocation of SDRs. The SDR would then be the sole reserve asset, aside from the various members' own reserve positions at the IMF. QUESTION: Would it really be as simple as that? MAYER: Probably not. It may not be easy to phase the dollar out as a reserve currency so long as it also remains the world's main intervention currency. There's a certain amount of fuzziness here because it's hard to know to what extent a central bank retains dollars for intervention purposes or for reserve purposes. Because the banks can continue to hold dollars for either reason, it's possible to envisage renewed interest in the dollar on the part of central banks. At present, many advanced nations no longer like to accept U.S. dollars because they have too many already. But if the U.S. balance of payments improves greatly, dollars might someday get scarce again, and foreign central banks might want to tuck dollars into their reserves once more. To prevent this from happening, in the future there may have to be some international agreement or IMF policing authority to control the size of reserves and the kinds of assets that can be held in them. QUESTION: Would sovereign nations accept the idea of turning their reserves over to the Fund? MAYER: Other countries, of course, won't mind getting rid of their excess dollars. But apart from that, the many plans for turning reserves over to the IMF are up against a big obstacle: national sovereignty. There are all kinds of power in the world-political, military, financial, moral. Financial power is not the least of these, and if a country turns its reserves over to an international organization, it is giving up some potential ability to act independently. The day may come when all reserves are turned over to some international authority, but probably not in the near future. Perhaps not for a long, long time to come. QUESTION: Generally speaking, though, SDRs seem to become a key element of the system no matter which way you turn. MAYER: Or something like SDRs, as long as you want to reduce or end the reserve role. of the dollar. QUESTION: What is an SDR worth? Right now, it is defined in terms of gold. One SDR is equivalent to 0.888671 grams of fine gold-which, as we saw earlier, was also the declared value of the dollar, before the United States agreed to change it. MAYER:
QUESTION: Is the SDR convertible into gold? MAYER: Not in the normal operations of the Fund. But today neither the dollar nor any other currency is convertible into gold. Even President Georges Pompidou of France has said-and he could only have been referring to the dollar-that the idea of converting currencies into gold has become just an idle dream. QUESTION: If you can't convert SDRs, dollars, or other currencies into gold, what is the role of gold in the monetary system? MAYER: Gold remains the common denominator of the system-the ultimate standard of value. As the ultimate standard of value, in the nature of the case it can't be defined in terms of anything else. No matter how many dollars are declared equal to an ounce of gold, in the final analysis an ounce of gold is still an ounce of gold.
'There are all kinds of power in the worldpolitical, military, financial, moral. Financial power is not the least of these .... '
QUESTION: Will gold always be the base of the system? MAYER: Not necessarily. In theory you could substitute something else; for example, another commodity or, as some economists have proposed, the average price of a bundle of commodities or of a bundle of currencies. In practice, if countries don't soon agree to drop gold as a reserve asset, it may later be phased out in the natural course of events. The official dollar price of gold has been raised only 8.6 per cent despite the rise in the freemarket price, which has run as much as 40 per cent above $35. In the long term, the freemarket price will presumably keep going up, because demand for gold for jewelry and for industrial uses is expected to outstrip supply. Since the price of gold as a reserve asset shouldn't really change at all, the spread between the price of gold as a commodity and the price of gold as money will progressively widen. At some point, individual countries or the IMF-whichever then holds monetary gold-could decide to start taking profits by gradually selling gold in the free market. In the end gold may become too valuable to use as money. QUESTION: Didn't some economists once advocate doubling the gold price? MAYER: They don't any longer. The idea was to make the U.S. gold stock worth enough so that the United States would be able to redeem all the dollars held abroad. Today, when the U.S. gold stock amounts to only about $10 billion at the official price, a doubling or even a tripling of the price would not be enough. Moreover, a sufficiently large increase in the official price would correspondingly increase the value of the gold stocks held by other central banks-not to mention gold in private hoards. The inflationary potential would be great. Even Jacques Rueff, once the foremost advocate of doubling the price, now thinks it would have to be more than
quadrupled, and he calls that large an increase "absurd." QUESTION: Why then did some governments ask that the United States devalue by raising the price of gold a few per cent? MAYER: It was partly a political demand. They wanted an admission of guilt from the United States for getting into the jam it did. They also wanted the United States to share the "burden" of realigning the values of currencies. Moreover, some countries wanted to preserve the role of gold rather than see it diminished. QUESTION: What happens if gold does disappear from the international monetary system? What's the ultimate standard then? MAYER: Probably the SDR or whatever else has meanwhile been devised. At that time you will be able to say that an SDR is an SDR. In fact, some experts are suggesting that we define currencies in terms of SDRs right now. That's not likely to happen overnight, but it's interesting to wonder whether the SDR itself would then still be defined in terms of gold. Many argue that if the new SDR is to be acceptable or credible to all countries, it will be necessary to preserve a direct or indirect link to gold. At some point, however-who can tell when?-the SDR should stand on its own. QUESTION: What sort of international monetary arrangements would you like to see? MAYER: We ought to start scrapping the dollar's role as a reserve currency, and put the United States on the same basis as other countries. Gold ought to be removed from the system. The SDR or some substitute ought to replace both the dollar and gold as reserve assets and also become the common denominator of the system. And we ought to get more flexibility in exchange rates. Those are the goals I think the world will move toward, but probably not so fast as would be desirable. We already have wider bands. That seems fairly certain to be a lasting change, although the exact width might be altered. There will be a good try at getting countries to adjust their pegs faster. If the crawling peg isn't the answer, more thought will be given to other means of encouraging flexibility. It's likely that we will have to resign ourselves to some form of universal or widespread regulation over short-term capital movements-particularly on the receiving country's side. This agenda is heavy enough for the next few years. Over the longer term, we can hope to advance still further toward monetary unity. The main objective is for the United States and the world to work out a smoothly functioning system, one that allows countries to trade and invest freely without undergoing the uncertainties and crises we have seen in recent years-and are seeing now. 0
SAVING lHE INCREDffiLE EVERGlADES
A subtropical paradise unbelievablyrich in plant and animal life is formed by Everglades National Park and the adjoining Big Cypress Swamp in Florida. Today the region is threatened as never before by 'progress,' in the shape of various industrial and residential development projects. Fortunately, the U.S. Government-spurred on personally by President Nixon-has intervened to safeguard the entire ecology and .the natural beauty of the wilderness area. This conservation measure will also protect the major source of south Florida's water supply. Story begins on page 27. Snowy egret and her offspring (left) nest in an Everglades mangrove swamp. Fifty years ago, plume-hunters decimated the ranks of this handsome bird which is today protected by law.
Epiphytes or "air plants" (above) grow in wide variety in Big Cypress Swamp. It is believed to contain the widest assortment of such plants anywhere in the lVorldoutside of the tropics.
Overleaf: "Flying" on water, an airboat laden with tourists skims over sawgrass in the Swamp. Sawgrass, a thin-leaved sedge with very sharp teeth, sometimes grows twice as tall as a man.
SAVING THE INCREDIBLE EVERGLADES
At the tip of the peninsular state of Florida sprawls the 565,600-hectare tract known as Everglades National Park, the largest subtropical wilderness in the United States. For miles the park is covered with sawgrass, with exotic trees and flowering plants. And it is inhabited by many forms of uncommon and endangered wildlife. Just north of the park and fanning out over a tremendous 600,000 hectares is Big Cypress Swamp with its huge stands of cypress, wet prairies and islands of pine trees. Ecologically the park and the swamp are inextricably bound together, and animals and birds move freely between the two, unaware of the artificial borders drawn by man. Ecologists believe that Big Cypress is the key to the Map of Florida shows the 'Glades and Big Cypress Swamp salvation of the park and of booming south Florida's water supply, which are threatened today by man and with Lake Okeechobee, the largest natural body of fresh water in machine as never before. Happily, all three have President Nixon on their the Southern United States. side (the Everglades is one of his favorite locales), Pictures alongside show (clockwise from top left): Rare species of along with prominent members of the U.S. Congress. aquatic life; a typical scene in Two years ago, the President intervened personally to the Swamp; a rat snake, harmless to help halt construction in Big Cypress of what Miami- humans like most other snakes in area planners had envisaged as the world's largest the area; rangers patroling the . commercial jetport, with attendant satellite industries Park on the lookout for alligator and residential developments. The facilities would have poachers; an alligator surfacing straddled one of the state's last natural watersheds, with its catch-the slow-moving and hydrologists, geologists and biologists all had garfish; a fire caused by drought. warned that its completion would spell ecological ruin for southern Florida. Today, spurred on by Richard Nixon, the Federal Government is looking toward the acquisition of 221,000 privately owned hectares of Big Cypress Swamp for conversion into a National FreshWater Reserve safeguarded from land developers. Now, as one eyes the lacy trees dripping wisps and clusters of Spanish moss that give Big Cypress its name, one recalls President Nixon's description of the swamp: "A unique ecological [region] of paramount importance to the future of southern Florida" which would be decimated if private development were permitted to continue and which would cease to exist as an effective watershed. He added: "This land acquisition [planned by the Government] is intended to secure the future not only of Big Cypress, but also of an adequate water supply for the western part of Everglades National Park. This action will also assure an adequate water supply to the growing communities on Florida's west coast, because the swamp is a natural water storage area." On a visit to Big Cypress, one of the most exciting things is a ride through the grasslands aboard an airboat-a flat-bottomed, propeller-driven craft that skims over the marshes at speeds as high as 110 kilometers an hour. The pilot is an affable young Seminole Indian, one of many entrepreneurs offering air-boat tours. It's a breath-taking experience, "flying" this way, but the boat is so noisy that it frightens away
SAVING THE INCREDIBLE EVERGLADES
Mangrove islands blossom with
birds at Everglades National Park. Thousands of wood ibises (better known as storks) and a sprinkling of egrets raise their young in this labyrinth.
birds before one can get an adequate view of them. At Everglades National Park, a park official answers questions about the importance of Big Cypress to the park and by itself. "Big Cypress," he says, "is one of the world's great wildlife strongholds, every bit as much as this park. Put Big Cypress and the park together and you have a home for a really remarkable variety of animals, fish and birds, including rare and endangered species-the alligator, the Florida panther, the Florida Everglades mink, the bald eagle, the mangrove cuckoo, and the great white heron, to name a few. A lot of the birds that roost and nest in the park feed in Big Cypress, and some of them get as much as 40 per cent of their food there. They couldn't survive if their habitat were limited strictly to the park. "As far as plant life is concerned, I'm a bit jealous of Big Cypress. You won't run across such an assortment of epiphytes-you probably call them 'air-plants' -anywhere else in the world outside the tropics. As a matter of fact, you'll find seven species of orchids in Big Cypress that exist only there. "This is first and foremost a biological preserve: animals, birds, pinelands, big mangrove forests, all in the largest fresh-water marsh in the world. It's mostly brownish Jamaica sawgrass-miles and miles of sawgrass, stretching out just like a Kansas wheat field before harvest.
"The park wouldn't last very long if the bulldozers were allowed to come in in force up north. Big Cypress is our major fresh-water reservoir. Fifty-six per cent of the surface water that enters the park from outside comes from Big Cypress, and without that supply the park would probably rot in 50 or 100 years. "Of course, as the President has said, it wouldn't be only the park and Big CYpress that would suffer. All of south Florida would be affected, including the sport and commercial fisheries in Florida Bay and off the southern Gulf coast, as well as the multi-million dollar shrimp industry, all of which depend on the flow of fresh water through the park." The park official walks over to a map across the room and points to Lake Okeechobee which sits on the spine of Florida like an enormous watery hen. "This is where the Everglades begin," he says. "Okeechobee means 'big water' in the Seminole language and the lake is big, all right. It has an average depth of only seven feet, but it covers about 730 square miles and it's the largest natural body of fresh water in the southern United States. Water creeps down from Okeechobee to the Gulf of Mexico, flowing 120 miles through Big Cypress and the park as well as the water conservation area near Miami. "It runs 50, 60, even 70 miles wide, but it's generally only a few inches deep. In the autumn, which is our
wettest season, the average depth of the water is hardly ever more than nine inches, and it doesn't flow much faster than a third of a mile a day. In the spring -the dry season-there are weeks when there's no water at all. "In recent years, we've had a series of really bad droughts. At one time there were only a few square miles in the park with as much as an inch of water on them. The only way we could keep the wildlife alive in one area was to pump 2,500 gallons of water a minute into it from wells. In an average year, south Florida gets between 50 and 60 inches of rain, but that's never been enough by itself. We've always had to rely on the lake. "The acquisition of Big Cypress, and its strict supervisionby the state of Florida under an agreement with Washington, won't solve all of our problems here in the park. It won't guarantee us all the water we need and it won't prevent development, but it will be a great help. And we need all the help we can get." Outside the park official's office is a plaque which carries the words of President Harry Truman at the dedication of Everglades National Park in 1947: "Each national park possesses qualities distinctive enough to make its preservation a matter of concern to the whole nation. Certainly this Everglades area has more than its share of features unique to these United States. Here are no lofty peaks seeking the sky, no mighty glaciers or rushing streams wearing away the uplifted land. Here is land, tranquil in its quiet beauty, serving not as the source of water but as the last receiver of it. To its natural abundance we owe the spectacular plant and animal life that distinguishes this place from all others in the country." Exploring the Everglades' endless trails, the visitor sees close at hand an astounding variety of tropical and subtropical birds, flowers, plants and animals, with an abundance of fish almost everywhere. The Anhinga Trail is particularly delightful. Named for a fishswallowingbird with a snakelike neck, this boardwalk winds half a kilometer over Taylor Slough, a microcosm of life in the park. Limpid waters teem with turtles, alligators, fish and more unusual kinds of birds than most people see in a lifetime. Watching an Anhinga spear a fish with its needlesharp beak, one is suddenly startled by what sounds for all the world like a cow mooing. "No," grins a park ranger, "that's a bull-a young bull alligator. He's in love. When he gets older, his mating call will be a lot different. He'll roar like a big truck trying to get out of a mudhole." The ranger cautions against throwing tidbits to the alligators. "If they get enough food given to them," he explains, "they get lazy and they lose both the inclination and the knack for hunting their own dinners. When that happens, they sometimes starve to death when they wander away from the trails." The alligator, the ranger goes on, is a species of the
crocodilian family that exists only in America. Despite its fearsome appearance, it is timid and somewhat sluggish. A fresh-water animal, it has a shorter, blunter snout than the crocodile, which is an agile and aggressive salt-water predator. There were more than three million alligators in the United States a century ago; today, there are only a tenth that many. The park wages a relentless war against 'gator poachers, who slaughter the reptiles for their hides despite increas}ngly stringent surveillance. "There are more than 60 kinds of reptiles and amphibians in the park," says the ranger, "plus 30 species of animals and about 300 kinds of birds." Ultimately, it is the birds that impress one most. They are everywhere, by ones and by hundreds, in great flocks and thunderheads. There are the waterlovers: ibises, herons, cranes, egrets, pelicans, cormorants, skimmers, kingfishers, grebes, limpkins, ducks and gallinules. And there are the "land" birds: barred owls, wild turkeys, great bald eagles, and swallowtailed kites and Everglades kites. But "the glory of the Glades" is the roseate spoonbill. Often confused with the flamingo, it is certainly the strangest and most unmistakable of the park's wading birds. Bright pink with carmine epaulets, red legs and a beak like a flat spoon or paddle, it is nothing less than magnificent when it takes wing in the full sunlight. The species was nearly extinct in Florida 25 years ago. But strict protection has now increased its population to more than 150 nesting pairs. Finally leaving the Florida wilderness, one checks with officials of the U.S. Department of the Interior in Washington on details of the projected acquisition of the 221,000 hectares of land in Big Cypress. It is estimated that it may take up to 10 years, several pieces of related legislation, and as much as $156 million for the new "major wildlife haven and recreation area," as President Nixon has described it, to become a reality north of the park. For although much of the land which would comprise the reserve is still undeveloped, there are more than 21,000 property owners to be considered, and each will require individual treatment and fair-market payments. President Nixon, through his Secretary of the Interior, has pledged that "there will be no move by this Administration to oust or evict anyone." The plans for the acquisition drafted by the Department specify that, wherever possible, lifetime tenancy must be arranged if it is desired. Harry Truman, one recalls, said it a quarter of a century ago: "Like liberty itself, conservation must be fought for unceasingly to protect earlier victories." 0 About the Author: Wesley Pedersen, whose articles have appeared in newspapers and magazines around the world, has edited more than 20 books. He is also the author of the bestseller Legacy of a President, a book on John F. Kennedy.
'Here is land, tranquil in its quiet beauty, serving not as the source of water but as the last receiver of it. To its natural abundance we owe the spectacular plant and animal life that distinguishes this place from all others in the country.' -PRESIDENT
HARRY S. TRUMAN
dedicating Everglades National Park
Must man choose between economic growth or a polluted environment? No, says the president of the World Bank. 'There is no evidence that the economic growth-which the developing countries so desperately requirewill necessarily involve an unacceptable burden either on their own or on anybody else's environment.' The state of development throughout most of the developing world is unacceptable. It is unacceptable because hundreds of millions of people are living at levels of deprivation that simply cannot be reconciled with any rational definition of human decency. Throughout the developing nations: Hunger and malnutrition are sapping energy, stunting bodies, and slowing minds. Illiteracy is locking out learning, and paralyzing opportunity. Unemployment is not only robbing men of the minimal means to make their way, but leaving their pride broken and their ambition atrophied. Wholly preventable diseases are injuring infants, killing children, and aging adults long before their time. In sum, hundreds of millions of individual human lives-with all their inherent potential-are being threatened, narrowed, eroded, shortened, and finally terminated by a pervasive poverty that degrades and destroys all that it touches. The picture is not exaggerated. Throughout the developing world the estimates are that well over a billion human beings are hungry or malnourished. There are 100 million more adult illiterates than there were two decades ago. Under-employment and unemployment entrap roughly one Reprinted by courtesy of War on Hunger, published by the United States Agency for International Development.
out of every five in the labor force. Infant and child mortality is four times greater than it is in the affluent world; the life expectancy is 40 per cent shorter. To alleviate pain and arrest disease, there are in some developing countries fewer than one doctor for every 50,000 people-compared to one per 700 in the United States. These facts are neither pleasant nor comfortable. But they are facts. They symbolize the lives of three-quarters of the human race. Current development programs are seriously inadequate because they are not significantly reducing the poverty which shapesand limits these Iives.And though the matter is complex, basically we know why. There are two overriding reasons: the developing countries are not moving decisively enough to reduce the severe social and economic inequities among their own peoples; and the developed countries- are not moving decisively enough to reduce the gross imbalance between their own opulence and the penury of the less-privileged nations. The broad statistical evidence is clear that there is dangerously skewed distribution of income both within developing nations, and between the collectively affluent and the collectively indigent nations. Development simply cannot succeed unless that massively distorted distribution of income-both at the national and international levels-is brought into a more just and reasonable balance. If it is not, the penalties of prolonged injustice are likely to be unavoidable. Restlessness will edge toward rebellion, and reason will give way to violence. Not only would that fail to assure development, it would prove to be catastrophically costly to rich and poor alike. If development is to succeed, action is required by rich nations and poor nations alike-and that action can only proceed in a climate of growth. It is here that the complexity of the problem becomes apparent. For a poor country to operate an economy which distributes income among the people more justly, there manifestly must be economic growth. Without economic growth a poor country can only remain poor. There is little point in trying to redistribute indigence. But economic growth means manipu-
lating the traditional environment. As we now know well enough, it is at this point that injury to the environment can take place. If nature is abused beyond limits, its revenge is inevitable. If poor nations are faced with the problem of growth within acceptable environmental limits, the rich nations are clearly caught up in it even more seriously. The evidence is now overwhelming that roughly a century of rapid economic expansion has gradually contributed to a cumulatively monstrous assault on the quality of life in the developed countries. There is a need to ponder the dilemma it poses. That dilemma is this: the achievement of a level of life in accord with fundamental human dignity for the world's two and three-quarter billion poor is simply not possible without the continued economic growth of the developing nations, and the developed nations as well. But economic growth on the pattern of the past and most particularly that in the already highly industrialized wealthy nations-poses an undeniable threat to the environment and to the health of man. There is nothing artificial or contrived about the dilemma. It is very real. Both elements of the dilemma demand the most deliberate attention. The question is not whether there should be continued economic growth. There must be. Nor is the question whether the impact on the environment must be respected. It has to be. Nor-least of all-is it a question of whether these two considerations are interlocked. They are. The solution of the dilemma revolves clearly not about whether, but about how. At its macro level, this dilemma demands a great deal more research than it has yet received. Such research is necessary, not merely to provide us with a better understanding of the over-all resolution of the dilemma, but to amend in a more scholarly manner the alarmist views of some who are deeply persuaded of the problem, but unaware of the full complexity of its elements. Mathematical modeling is useful. But it is only as useful as the validity of its assumptions and the comprehensiveness of its inputs. What is needed in this issue-and what has not yet been achieved-is the close co-operation of economists and ecologists,
of social and physical scientists, of experienced political leaders and development project specialists. The manifest danger in the solution of this dilemma at the macro level is to oversimplify. When that oversimplification suggests the imminent risk of overloadrng the planet's life-support systems, or exhausting its essential resources, the developing peoples of the world are suddenly faced with a fearsome prospect. On top of all their present disadvantages, are they now going to be asked to forego their efforts at development in the name of preserving the already disproportionate (and still rising) patterns of consumption of the rich? The poor are right to be indignant over such a prospect. But in my view that issue need never arise. It need never arise because there is no evidence that the economic growthwhich the developing countries so desperately require-will necessarily involve an unacceptable burden either on their own or on anybody else's environment. It is clear that in environmental matters the developing countries enjoy one of the very few advantages of being late-comers in the development process: they are in a position to avoid some of the more costly and needless mistakes the developed countries made in the past. Now what does that imply? To begin with, what it does not imply is that late-comers to the development process must forego industrialization and technological advance. That would simply mean stagnation. It is easy enough for the wealthy to romanticize about the supposed charm of pretechnological society. But the plain fact is that there was nothing pretty at all about the squalid poverty which the common man-in what are now the affluent nations -had to endure in the pre-technological period. For the vast majority it was a life of destitution and disease. No one wants to go back to that. Anyone in doubt has only to examine poverty in the developing countries today. The deprivation is appalling by any acceptable standards of human decency. It is not surprising, then, that those who call for a slowing down or a complete halt to economic growth tend to be those who are already amply provided with the ad-
ileged countries can adapt these technical advances to their own local conditions. The danger that we will fail to achieve our twin objectives of advancing the development of the less-privileged nations while preserving the environment stems not from technological weaknesses but from potential failures of political will and social responsibility. Ecological considerations have made us vantages which that very growth made all more aware of the interdependencies of possible. What I mean by the environmental ad- our world. We have come to see our planet vantage of the late-comers to the develop- as "spaceship earth." But what we must ment process is that they can far more not forget is that one-quarter of the paseasily and inexpensively build into their sengers on that ship have luxurious firstindustrial infrastructure the practical pre- class accommodations and the remaining ventative measures necessary to avoid the three-quarters are traveling in steerage. ecological damage the developed world has That does not make for a happy ship-in space or anywhere else. All the less so when already suffered. Our experience in the World Bank con- the steerage passengers realize that there firms this. There is an increasingly broad are at hand the means to make the accomvariety of anti-pollution technologies avail- modations more reasonabJe for everyone. Have we the political and social awareable to the poorer countries-technologies the affluent countries have had to develop ness to give more attention to the present at a far later and more difficult stage of living conditions of the overwhelming majority of the travelers? It means, in practheir industrial expansion. Those technologies can work, and tice, making available more development work well. assistance, and removing inequitable trade, The air over London, for example, is tariff, and other discriminatory barriers. substantially cleaner today than it was 15 Those barriers are blocking the mutual years ago. There has been an 8 per cent benefits that can flow from application of reduction in smoke emission, a 40 per cent the principle of comparative advantage. reduction in sulfur dioxide, and a conse- Justice and intelligent self-interest both quent near doubling in the average hours suggest that it is wiser to open a vital bulkof winter sunshine. It is estimated that this head on increased opportunity than to keep dramatic improvement-largely the result it senselessly sealed in the name of some narrow and parochial protectionism. of the enlightened Clean Air Act of 1956There should be no question about has cost Londoners only about 35 cents per annum. What it has saved them in whether the wealthy countries can afdiscomfort and illness is beyond calcula- ford to combine rising domestic environtion, but one need only recall the disastrous mental protection costs with increased and fatal smog of 1952-a smog -that killed development assistance for the developan estimated 4,000 people-to reflect on ing countries. It is clear that they can. the importance of the improvement. There has been a corresponding imThe continued growth of their gross naprovement in the environmental conditions tional product (GNP) will provide them by of many of the rivers in Britain through the end of the decade with an additional intensified sewage management. Ten years one thousand billion dollars per annum. ago there were no fish at all in the Thames The suggestion that the rich countries in a 50-kilometer stretch above and below cannot spare for the poor countries the the city of London. Three years ago more minuscule percentage of that incremental than 40 species were observed. income necessary to raise concessionary As the affluent nations continue to take aid from its present level of 0.35 per cent their environmental problems more seri- of GNP to the UN. target of 0.7 per cent ously, they are going to discover a whole is simply beyond credence. new range of technology to abate and The wealthy nations may not in fact avoid ecological dangers. The less-priv- meet that target. And they may delay dis-
'Our task is not to create an idyllic environment peopled by the poor. Our task is to create a decent environment peopled by the proud.'
mantling the discriminatory barriers to a more just and mutually advantageous flow of trade. But if the rich do refuse greater trade and aid to the poor, it will have nothing to do with a disinterested and universal reverence for the environment. It will be because of a provincial response to the pres- , sures of special interests. What, then, must be done. to reconcile our mandate to assist in the economic advance of the developing countries with our responsibility to preserve and enhance the environment? In my view there are five essential requirements. We must: Recognize that economic growth in the developing countries is essential if they are to deal with their human problems. Act on the evidence that such growth, if properly planned, need not cause unacceptable ecological penalties. Assist the developing countries in their choice of a pattern of growth which will yield a combination of high economic gain with low environmental risk. Provide the external support required for that economic advance by moving more rapidly toward meeting the United Nations concessionary aid target of 0.7 per cent of GNP, and by dismantling and discarding inequitable trade barriers which restrict exports from poorer countries. And, above all, realize that human degradation is the most dangerous pollutant there is. In the end, it is respect for man-and his home-that ... can and must be translated into practical action. The leading edge of that action must be to protect man from the one hazard which can injure not only his health-but his spirit as well. Poverty. Cruel, senseless, curable poverty. Our task is not to create an idyllic environment peopled by the poor. Our task is to create a decent environment peopled by the proud. D About the Author: A former president of the Ford Motor Company, Robert S. McNamara served as U.S. Secretary of Defense from 1961 until 1968. He is now president of the World Bank. This article is adapted from an address he gave last year at the United Nations Conference on the Human Environment in Stockholm.
The other part is servicing which-in America-is vital to many products sold. Whether it is a television set, a washing machine or an electric shaver, Americans expect that behind it will be a qualified dealer to keep it working well throughout its life. This is particularly true with cars. Servicing ranges from simple maintenance such as lubrication, to putting in new transmissions. As an example of a successful automobile dealer, we are introduced (overleaf) to Deets Warfield, Jr., whose firm has been selling and servicing cars in Maryland for 55 years. His business is booming. Why? Because his servicing is so good that contented customers keep coming back. TEXT BY DANIEL B. MOSKOWiTZ PHOTOGRAPHS
BY THOMAS B. POWELL, III
BEHIND THE
SALES ROOM The Damascus Motor Company has a well-run service /acility which includes the firm's mechanical shop where all servicing is done/rom repairing a rear axle bearing (far right) to diagnosing problems in the engine or electrical system (above). When new parts are needed, they are obtained/rom an inventory 0/ about 7,000 items (right). The Warfields (le/t) take great pride in their firm's ability to handle any repairs that become necessary on an automobile sold by them or on one brought in by a stranger.
"E
xcept for American women," observes A.H. Barr, Jr., director of New York City's Museum of Modern Art, "nothing interests the eye of the American man more than the automobile." Americans are so involved psychologically with their automobiles that writers frequently speak of the "love affair" between the driver and his vehicle. People rely on their cars not just as a way of carrying them to work, to shopping, and away on visits and vacations, but almost as a symbol of freedom, a palpable proof that they can roam at will through their continent-wide country. There are more cars than families in the United States, but if Americans love their cars, they are not loyal to them: They are constantly exchanging them for newer vehicles that are bigger or faster or sleeker or more feature-packed. In 1971, some 25 million cars were bought, close to 40 per cent of them fresh from the factories. Almost all of those cars were made by three giant manufacturing corporations, but they were sold by more than 30,000 automobile dealers across the country, independent, relatively small businessmen who are the vital link between the big factories and the American drivers. These 30,000 dealers-some three per cent of all retail outlets in the United States-take in a solid 15 per cent of all the money Americans spend for retail goods and services. Not only do they sell new cars, but also the older ones that the buyers of the new autos turn in, and they sell parts and repair and maintenance service on all of them. There is no official connection among the
dealers, but they co-operate with each other-trading cars and parts and technical insights. Any driver can get his car worked on by any dealer specializing in his particular brand. The business of selling cars is a distinctive blend of mechanical know-how and financial acumen-a blend likely to make the dealer an important man in his community. But for few dealers has the career been so preordained as it has for Deets Warfield, Jr., whose father began selling cars in the small farming community of Damascus, Maryland, 55 years ago, just as the first hardtop road was being built through the area. Cars have always been part of Warfield's way of life. From the showroom of the Damascus Motor Company, Warfield and his staff sell between 500 and 600 cars a year-about twice the national per-dealer average-and as many used cars. In 1917, Warfield, Sr., was the Damascus representative ofwhat was then the Chevrolet Motor Company. At that time the company insisted that each dealer stock $50 worth of spare parts, and Warfield's father simply could not believe that he would ever have need for them. Now, the dealership keeps an average inventory of $40,000 worth of parts on hand, buying them from hundreds of different suppliers. For over the years, there has been a shift in emphasis that puts more and more importance on a dealer's ability not only to sell cars, but to service and repair them for their owners in the years after the sale.
As automobiles have become increasingly complex, both dealers and auto makers have come to see that service is the vital necessity to turn a one-time customer into a repeater. Dealers must be able to do literally everything. Their tasks range from such simple maintenance as lubrication and oil filter replacement to putting in new transmissions. Recently, General Motors Corporation, which long ago absorbed Chevrolet company as one of its divisions, changed the make-up of the five-year contracts it signs with its dealers, adding details about the kind of service facilities the outlet must have. What was previously merely a sales agreement now spells out the square meters of space the dealer must have available for servicing autos, the equipment that must be on hand, and the kind of training the mechanics should receive. Warfield's well-run operation had easily surpassed those minimums, but he does recognize the new clauses as "important because they show a¡ change of attitude by Chevrolet." Twenty-three of the 32 full-time employees of Damascus Motor Company work in the service area, and the company has some S35,000 worth of equipment for them to work with. The major items: front-end alignment equipment, and electronic equipment to gauge performance levels of auto transmissions and other major components. The typical dealer, according to the U.S. National Automobile Dealers Association, earns only about 15 per cent of his gross
income on service. That does little more than cover his costs in the area, Warfield says, but he explains in his slightly rural drawl why it's worth the effort: "The happier we can keep a customer with his present one, the more chance we have of selling him his next car or truck." Some of the service costs the customer nothing at all: The manufacturer guarantees that a new car will be fault-free, and arranges with the dealer to fix up any minor troubles that show up in the first three months of driving and any major problems during the first year. Most of this repair work is done by the dealer who services the car, but the owner can take it to any dealer, and Warfield, because his town is located near a major superhighway, says "hardly a day goes by" without some new car owner from elsewhere in the country coming in for free minor adjustments. Chevrolet reimburses the dealer for the repairs done during the period in which it has warranted the car as trouble-free, but often that payment doesn't begin to cover the dealer's actual cost of making the repair. The problem is that the payments are geared to the time and parts it takes to fix the trouble; there's no payment for the time it takes the mechanic to figure out where the trouble is. And yet, tracking down a part that came defective from the factory is the hardest task you can give a mechanic because, Warfield explains, "they are the weird things, the things that don't normally go wrong."
U.S. auto makers offer training courses for dealers, including seminars in managerial techniques.
His most expert shop men were driven nearly crazy last spring with a new truck which would act up when the brakes were stepped on: sometimes the windshield wipers would begin to work, sometimes the dashboard lights would go on. It took them days of poking and pondering to trace the trouble to a defective bulb in the taillight that is supposed to go on when the brakes are applied. The bulb was feeding current back into the car's electrical system, and that current worked its way out in odd outlets. All Chevrolet paid is a few cents for the new bulb. Some dealers have complained bitterly about having to absorb such costs, but Warfield looks at it as simply an expense that he has to make up out of profits on other operations. "That's part of our responsibility," he says. The biggest problem dealers have in the service area is getting good workers-mechanics who understand what makes a car tick and are conscientious about keeping customers' cars in tip-top shape. Warfield's solution is to train his own; all but three of his 23 service workers were trained at Damascus Motor Company, and two of the other three are men who "worked for my father from way back." The initial training of young mechanics is done in co-operation with their secondary schools. The public schools in nearby Howard County teach automotive mechanics, and Warfield takes on the advanced students to show them things they can't learn in the school shop. The local Damascus high school has no such course, but it instead arranges on-the-job training. Warfield generally has four such students working 'fo,{ him. The training consists of a lot more than know-how passed on informally by the more experienced mechanics. Chevrolet keeps a service manager on the road visiting dealers; he comes to Damascus about once a week, and can help the mechanics out with new or especially tough problems, or pass on some new trick that is working well at another dealer's. Damascus Motor Company also frequently sets up classrooms right in the shop. General Motors puts together training kits that serve as the basis of most of these sessions. Each is devoted to a particular problem, and will include slide films, phonograph records, individual textbooks for each mechanic, and even tests to see how well the lesson has been learned. General Motors also maintains training centers around the country, at which more intensive courses are given. Each autumn, when the company introduces its annual style changes, Warfield sends some of his 10 senior mechanics to GM courses at a special school in Fairfax, Virginia (just 65 kilometers away), to be briefed on what is mechanically new in the latest models. The manufacturer offers similar training aids for dealers such as Warfield, too, including university-level seminars in managerial techniques at a permanent corporate campus in Flint, Michigan. Warfield offers his customers such a bewildering array of automobile models, features and colors that it takes real executive skill to keep on hand the items that the shoppers want to buy. Chevrolet has given him a 585-square-kilometer territory as his exclusive
sales area: He can sell cars to drivers living elsewhere, but he is guaranteed that there will be no other Chevrolet dealer in that home base. With just the one brand, Damascus Motor Company is selling everything from small economy cars to big luxury sedans. Chevrolet makes 38 different basic cars, a line that stretches from the 432centimeter-long Vega two-door coupe to the 566-centimeter-Iong Kingswood Estate Wagon that carries nine passengers and enough luggage for them all to the little Corvette sports car with a 425-hp engine. On each car, the buyer can pick among dozens of options, ranging from a lock on the gas cap to two-band stereophonic radios to electric defrosters for the rear windows. Most buyers choose cars with automatic transmission, and many want power-assisted steering and brakes; also more than 60 per cent of the new cars now have air conditioning. Even the color of the car can be an important consideration, especially to women. Damascus Motor Company has on its wall a chart showing the 28 exterior colors, eight interior colors and five roof colors that Chevrolet lets its customers choose from. The customer can select just what he wants from among all these options and, in effect, have his automobile manufactured especially for him-but on the most popular models he may have to wait as long as two months to get his car. Most Americans are too impatient to get their new car to wait that long, so Warfield tries to have already in stock the cars they want. "You can sell more cars if you can deliver them quicker. And if you have the car a customer wants right in the showroom and can sell it on the spot, you can make a more satisfactory deal, too, because the wait for a car to be made at the factory diminishes the value of the trade-in." But it takes a sharp eye on consumer trends to guess what sorts of cars the buyers are going to 'go for in what Warfield calls "this constantly changing business." Color tastes, for instance, "run in trends. Now, most any shade of green is going very well, and light blue is popular. A few years ago, it seemed everybody wanted white, but now you see virtually none of it. Right now I see a little glimmer of black coming back, on our bigger, more sophisticated-looking cars." In his spare time away from the business Warfield keeps the books and writes the checks for the local volunteer fire department, and is involved in the Boy Scouts and town business and service organizations (Chamber of Commerce and Lions). His obligations to the town, the business, and his family "sometimes get overwhelming," Warfield admits, but it's all part of the way automobiles are sold in small-town America. "If they think of me at other times," he explains, "they'll think of me when they're in D the market for a new car." About the Author: Daniel B. Moskowitz has reported the U.S. business scene for McGraw-Hill publications for 17 years, serving in Toronto, Philadelphia, New York and Washington. His articles have often appeared in Business Week.
SCIBNCB, LBARNING ANDTIB CLAIMS OF NATIONALISM Today, in a world marred by barriers to intellectual exchange, the author feels we can learn a lesson from the past. He cites the 'philosophes' of the Enlightenment who-like scientists and scholars over the centuries-knew that 'the commonwealth of learning was older than the commonwealth of political nations,' that the claims of culture transcend the claims of nationalism. It was a belief echoed by Gandhi when he said: 'I want the cultures of all lands to be blown about my house as freely as possible.' We think of our own time as an Age of Enlightenment, but it flouts and even repudiates two essential principles of the Enlightenment: first the priority of the claims of science and culture over those of politics, and second the cosmopolitan and even universal nature of science and culture. The philosophes of the 18th century-it is a word that embraces not only philosophers but scientists and statesmen, men of letters and critics-did not worship at the altar of nationalism; they were a fellowship bound together by common devotion .to Reason in all of its manifestations, and .they were sure that its primary and its most pervasive manifestation was in the Reprinted with permission from American Heritage. Copyright Publishing Company. Incorporated. This article is abridged from an essay written by Professor Commager for Thoughts from the Lake of Time, published in 1971 by the Josiah Macy. Jr.. Foundation.
Š 1972 by the American Heritage
realm of science, art, and learning. They believed in the universality of morals and of art. When they wrote history it was world history, as with Voltaire; when they studied religion it tended to be comparative religion, as with Christian Wolff; when they celebrated law it was the Spirit of the Laws, as with Montesquieu; when they contemplated art they sought the Universal in art, as with Winckelmann or Sir Joshua Reynolds; and their most characteristic poem was called quite simply An Essay on Man. Their scientists and men of learning were cosmopolitan, at home in every country, and moving easily from country to country and from university to university-or more often than not, from academy to academy, for the universities of that day were, most of them, in the doldrums. They knew that the commor.-
wealth of learning was older than the commonwealth of political nations. We have come a long way from this philosophy of the Enlightenment ... and it is increasingly clear that our shift in position represents a retreat rather than an advance. Consider some of the characteristics of that world where "the sciences were never at war," not even in time of war. It was an age when the United States speaking through Benjamin Franklin, and the French Government speaking through Jacques Necker, could proclaim immunity in time of war for Captain Cook because he was "engaged in work beneficial to humanity;" when a Hessian officer about to put to flame the house of Francis Hopkinson-one of the signers of the American Declaration of Independence-was so impressed by the library and scientific apparatus that he ordered the flames extinguished, wrjting in the flyleaf of a book: "This man is clearly a traitor but he is a man of learning and science and must be protected." It was a time when-again in the midst of the American Revolutionary War-the Royal Society could present Harvard College with a volume of Astronomical Observations and when a British officer could permit Professor Williams of Harvard College to conduct astronomical observations on a British-held island in Penobscot Bay. It was a time when Frederick the Great could retain French as the language of his Court while fighting France; when Napoleon's mother could safely put her money into British consols; when Goethe could receive the retreating general of the Allied armies, after Leipzig, with his French Legion of Honor insignia across his chest; when in time of war the British Royal Society could confer its gold medal on Benjamin Franklin, and the Institute in Paris could give its gold medal to Sir Humphrey Davy. The same Napoleon who arranged that, arranged to spare the university city of G6ttingen out of respect for the great classical scholar Heyne; it was fitting that Sir Charles Blagden should recommend in 1808 that the Emperor be made a member of the Royal Society. The world of art, like the world of science, was cosmopolitan, and how fortunate that was for the rising Republic of the United States. There is no more charming chapter in the history of American art than that which recounts how George III, even in time of war, patronized young
painters from America. A group of benefactors had sent the young Pennsylvanian Benjamin West over to Rome to study painting; he served his apprenticeship there and went on to London, where one of his paintings, typically a scene from the classical past, caught the fancy of George III. In 1772 West was appointed painter to the Court, a position he held with George's friendship throughout the Revolution and long after. It was during the years when the American colonies were fighting for independence that West received in his studio a succession of American apprentices-among them Charles Willson Peale, John Trumbull, and Gilbert Stuart-all of whom were allowed to return to America, though Trumbull did manage to get himself imprisoned for six months.
A loyalist officer saved an American Revolutionary's library from fire, saying: 'This man is clearly a traitor, but he is a man of learning and must be protected.' The new United States in turn drew upon European artists and architects for her needs. Consider the creation of the national Capitol, and indeed of the capital city itself. Was there ever a more cosmopolitan enterprise? The particular name of the city was Washington, but the generic name was Latin, and, as it turned out, the architecture was Roman and the art almost entirely Italian. The work of laying out the capital was originally entrusted to a Frenchman, Major L'Enfant, who had come to America with Lafayette and made himself part of the New World even while remaining French. Soon L'Enfant was joined by James Hoban, who was born and trained in Ireland. He was chiefly responsible for the White House, for he rebuilt it after the disastrous fire of 1814. Next, Stephen Hallet took over. He was born and raised in France and had come to America in 1789 to set up a school of art in Richmond; alas, it never materialized, but some of his other plans did. More valuable was William Thornton-the architect most responsible for the original design of the Capitol, with all its drawbacks. Born in the Virgin Islands-
his father had been governor of Tortolahe studied medicine at Edinburgh and architecture in Paris; then, ever restless, he traveled on the Continent with the naturalist Count Audriani. Only after this varied career did he come to America, where he joined forces with poor John Fitch in making the first steamboats to float on American rivers; one of Fitch's steamboats was named The Thornton. It was while he was on his honeymoon in the West Indies that he submitted the winning design for the national Capitol; not content with that (and after the original decision, few were), he also designed the Octagon House, which still stands, and probably Homewood in Baltimore. One of his coworkers on the Capitol was Gemge Hadfield from England. He was actually born in Italy, had studied painting with the American Benjamin West, and was brotherin-law to Maria Cosway, who had so charmed Thomas Jefferson. Most colorful of all was Benjamin Latrobe, a product of Huguenot France and Moravian Germany, though born in England. Trained to the ministry in Germany, he had happily turned to art, practiced briefly in England, and then migrated to Virginia, where he was an instant success. He designed a penitentiary, surprised that the New World should need one; he helped with the construction of the state capital in Richmond, which won him Jefferson's esteem; he helped improve the navigation of the James River; he designed a new city water system for Philadelphiawhat did he not do? Jefferson brought him to Washington and soon he was in charge of almost everything, for he was a man of cascading energy and endless resourcefulness. With the aid of Thornton-and of Jefferson's old friend Philip Mazzei-he imported a small army of sculptors and decorators from Italy. Or consider those two remarkable presidents of the Royal Society, itself dedicated to the pursuit of science and learning for the benefit of all mankind: Sir Hans Sloane and Sir Joseph Banks. What an international figure was the first great president, Hans Sloane. Born in Ireland, he studied medicine under the German Nicolaus Staphorst; then off to France for his formal training at Paris and Montpellier and, just to even things up, at the long-defunct Protestant University of Orange. He sailed for the West Indies and botanized there, and the whole scientific world rejoiced when he brought back a cargo of botanical
specimens from Jamaica. At his handsome mansion in London, Sloane kept open house, just as his successor, Sir Joseph Banks, was to do .... Sloane corresponded with botanists everywhere in the Western world, not least with Americans, who sent over thousands of specimens to the royal gardens; with William Byrd of Dividing Line; with Mark Catesby, who wrote A Natural History of Carolina, Florida, and the Bahama Islands, duly printed in English and French, in German and Latin; and with the elder Bartram, who presided over the most famous botanical garden in English America. But Dr. Sloane did not confine himself to America; he had his agents everywhere. He acquired the Cunningham botanical collection from China, the Kamel collection from the Philippines, the Herman collection from South Africa, and from Engelbert Kaempfer a collection of specimens and of manuscripts on Japanese medicine and history. How well that story illuminates the workings of the community of science in the 18th century. Here is young Dr. Kaempfer, with nothing to do in the little town of Lemgo, in Westphalia. He had studied at Danzig and at Cracow and at Konigsberg; he was a man of learning, and he was restless. He betook him to Uppsala, where 01of Rudbeck-he had "proved" that Plato's Atlantis was located in Sweden-had created the first botanical garden in the Kingdom. Soon he was secretary to the Swedish embassy in Persia; then on to Arabia Felix, to Ceylon, to Batavia, where he took service with the Dutch East India Company and was thereby able to get to Japan. He learned Japanese; he ~tudied Japanese medicine, with due attention to acupuncture and moxabustion (a medical treatment based on cauterizing the skin with burning leaves of Chinese wormwood); he collected botanical specimens and manuscripts and books. He returned to Germany with his collection, and a 16-year-old bride, and settled down to write a voluminous history of Japan. One of Dr. Sloane's agents bought the manuscript and the specimens for 80 pounds; a scholar from Zurich translated the history into English; it was published in London and soon in a dozen other places; and it all went, eventually, to Sloane's creation, the British Museum. It was during the presidency of Hans Sloane that the stirring drama of the baby elephant was played out. "Un elephant en mignature" had been sent to the great
Reaumur of Paris-his six-volume History of Insects was one of the capital works of its day-but was captured by a British man-of-war and brought to Portsmouth as a prize. Reaumur pleaded for his elephant, in vain it seemed, until Abraham Trembley of the Royal Society intervened. Trembley appealed to Fox, and eventually got permission to ship the baby elephant on to its destination. Meantime the creature had died. No matter. Trembley had him stuffed, the passports arrived, and in
Said Sir Joseph Banks, who was head of the Royal Society for 40 years: 'The Science of two Nations may be at peace, while their Politics are at war.' due time the baby elephant was delivered to Reaumur. What a triumph for science and for the baby elephant, who achieved immortality in the pages of Buffon's great Histoire Naturelle. Sir Joseph Banks continued the Sloane traditions and enlarged upon them: for 40 years as head of the Royal Society he never permitted war or revolution to interfere with the beneficent role of science. As a youth he had sailed with Captain Cook, and it was he who had introduced the famous Tahitian, Omai, to England. He had botanized in Iceland, too, and later on, when the British were at war with Denmark, and Iceland was cut off from food and on the verge of starvation, he enlisted the sympathy of William Pitt and saved the island. It was Banks who arranged that gold medal for Franklin; it was he who intervened, again and again, during the war with France to enable the work of science to go forward.. .. "That the Science of two Nations may be at peace, while their Politics are at war," he wrote George III, "is an axiom we have learned from your protection to Captain Cook, and surely nothing is so likely to abate the Rancour that Politicians frequently entertain against each other as to see Harmony and good will prevail among Brethren who cultivate science." He enlisted the aid of Lord Nelson and Lady Hamilton, and finally even of Napoleon himself, to obtain the release of Deodat de Dolomieu (the Dolomites bear his name)
from the dungeon in Messina into which the Neapolitans had consigned him. At a time when Napoleon was threatening to invade England, Banks saw to it that the nautical almanacs, upon which safety at sea depended, were shipped over to France as usual. Edward Jenner, he who had discovered inoculation against smallpox, was no less cosmopolitan than his colleague Banks. So great was his fame that he was almost a sovereign: a letter from him was more valuable than a passport; monarchs everywhere respected it. And it was Jenner who, in appealing for the release of the young Lord Yarmouth from captivity, penned the memorable phrase: "The sciences are never at war. Peace must always preside in those bosoms whose object is the augmentation of human happiness." Almost two centuries ago Jefferson, who had himself given the whole of his energies to the struggle for American independence and the creation of American commonwealths, wrote from Virginia to his friend David Rittenhouse, then president of the Council of Safety of Pennsylvania: Your time, for two years past has, J believe, been principally employed in the civil government of your country. Tho' J have been aware of the authority our cause would acquire with the world from its being known that yourself and Doctor Franklin were zealous friends to it, and am myself impressed with a sense of the arduousness of government and the obligation those are under who are able to conduct it, yet I am also satisfied there is an order of geniuses above that obligation, and therefore exempted from it. Nobody can conceive that nature ever intended to throwaway a Newton upon the occupations of a crown. It would have been a prodigality for which even the conduct of providence might have been arraigned, had he been by birth annexed to what was so far below him. Co-operating with nature in her ordinary economy, we should dispose of and employ the geniuses of men according to their several orders and degrees. I doubt not there are in your country many persons equal to the task of conducting government: but you should consider that the world has but one Ryttenhouse, and that it never had one before.
Here is the authentic note of the Enlightenment, and of the community of culture. D One of America's most distinguished educators, historians and men of letters, Henry Steele Gommager is a professor of history at Amherst Gollege. Dr. Gommager's many books include The American Mind; Freedom, Loyalty, Dissent; The Blue and the Gray ; and The Nature and Problems of History.
About the Author:
Light on the
of India
anda K. Coomaraswamy, one of the greatest art scholars of odem times, interpreted the painting, sculpture, music and dance of dia to America. He showed how ancient Indian culture is alive oday in the arts of Southeast Asia. A new film on Coomaraswamy, roduced by Chidananda Dasgupta for the U.S. Information Service, ill be premiered later this year; it sheds light on the man ho, perhaps"more than any other, shed light on the art of India.
POSTSCRIPT TO A FILM WHILE MAKING THE MOVIE, THE PRODUCER BECAME CONVINCED THAT COOMARASWAMY IS IMPORTANT TO THE WORLD NOT ONLY AS AN ART SCHOLAR BUT AS A SOCIAL PHILOSOPHER.
In the course of an interview for the film, Dr. Sherman E. Lee, director of the Cleveland Museum of Art, said: "If Coomaraswamy had been alive today, he would have become a culture hero for the younger generation." Indeed, I made my rediscovery of Coomaraswamy not through his writings on art, but through some of his essays on the state of the modern industrial civilization. Years ago, I had read his History of Indian and Indonesian Art and the essays in The Dance of Shiva. I had known vaguely that he had been associated with the cultural reawakening in this region, but over the years my image of him had narrowed down to that of a scholar whose work had become somewhat mildewed milestones in the study of Indian art. It was when I came across a paperback reprint of his Christian and Oriental Philosophy of Art that, turning its pages, some fragments caught my eye: "One of the most obvious characteristics of our culture is a class division of artists from workmen .... We have come to think of art and work as incompatible ... and have for the first time in history created an industry without art." He went on to speak, in this address at Harvard University in 1937, of today's "exaggerated standards of living and depreciated standards of life .... It is one of the greatest counts against our civilization that the pleasures [italics mine] afforded by art, whether in the making or of subsequent appreciation, are not enjoyed or even supposed to be enjoyed by the workmen at work. It is taken for granted that while at work we are doing what we like least, and while at play what we should wish to be doing all the time .... The craftsman likes talking of his handicraft, but the factory worker likes talking of the ball game .... An industry without art provides a necessary apparatus of existence-an apparatus lacking the essential characteristics of things made by art, the characteristics, viz., of beauty and significance." I began to read more of Coomaraswamy and discovered that this Harvard address "Is Art a Superstition or a Way of Life?" elaborated on a theme that had begun in his early writings in Ceylon around 1904. I also found that I had not been alone in my ignorance of the larger social significance of his work and in regarding him merely as a great art scholar and pundit. More than a generation had lost touch with his social philosophy and its relevance to our times. At the time that he frequented India in the 1910s and '20s he had been regarded as a vital part of the cult,ural resurgence of that era, and not just as an art scholar. But in later years, he became increasingly to most people a scholar of Indian art living in the United States. His work became more and more confined to the world of scholarship, more particularly scholarship in Indian art. And that cloistered world, while acknowledging him as a master in the interpretation of art, paid scant attention to his idea of society which arose from his idea of art. It is only recently that his work has begun reaching a wider public through paperbacks; as a social philosopher, he is coming into his own. A rediscovery of Coomaraswamy has become imminent.
I was therefore not surprised at Dr. Lee's comment about Coomaraswamy and the younger generation. I had rediscovered him from that angle anyway, and had already resolved someday to make a film on the man. The true significance of his work had been forgotten, and had to be held up to the world and especially to India once again. Perhaps a film could contribute something to this task. No wonder then that the question my colleague B.D. Garga and I had to answer most frequently wherever we went was: Who is this Ananda K. Coomaraswamy? Through frequent repetition, our answer reached a telegraphic leanness of form: "He was a Ceylonese of Indian origin born of an English mother, brought up in England and trained in geology. But he wrote more than 500 publications on Indian and Asian art most of them in his 30 years at the Boston Museum, and be~ came its greatest single interpreter and also a social philosopher of significance." I was in Boston in 1968, and went to see Donna Luisa Coomaraswamy, Ananda's fourth, and last, wife. She was then working on a definitive edition of his works sponsored by the Bollingen Foundation. A common friend, Robert Steele, professor of film at Boston University, took me to see her. When I announced my plans for making a film on her husband, she fell silent. I waited anxiously to know if she was going to cooperate. All Coomaraswamy's photographs, manuscripts, records and other memorabilia were with her and without her help it would be virtually impossible to make the film. She had herself taken numerous photographs of him, having been a well-known photographer. In fact, it was as a photographer that she had first made Coomaraswamy's acquaintance. After a while she looked up and asked me: "Have you had any education, young man?" There have been numerous occasions in my life when I have been at a loss for words. This was certainly one of them. But Donna Luisa was not going to give up. She looked on, and waited. Suddenly intelligence dawned on me. I managed to remember and recite a verse in Sanskrit from the Mahabharata. My rusty Sanskrit saved the day. She said: "All right, I will help you. What do you want?" I said money, because I had not yet found a sponsor. She did not have any, nor did she have any ideas on where I could find some. But we became friends. It was a sad moment for me when a year later Robert Steele wrote to say that she had died. Talking about sponsors reminds me of my poor effort to convince someone in authority of the worthiness of my project. This person was knowledgeable on art, so I had high hopes of him. But after hearing me out he said something that shattered me and once again left me speechless: "How can you make a film on him? He was so dull." My intelligence did not make even a late start; too dumbfounded to reply, I lost a potential sponsor. Years later, the
Nandalal Bose's ink sketch (ahove) depicts the artist and Coomaraswamy visiting the ancestral home of the Tagores in Calcutta. At right: This classic photo of Coomaraswamy was taken by his wife in the late 1930s.
~eply occurred to me. No man who had had four wives and numerous admirers among beautiful women could be called dull. He was more than six feet tall, handsome and distinguished. Mrs. Margaret Marcus, herself an art expert who lives in Cleveland, remembered him vividly. "He had the lanky grace of a cowboy," she said. "He loved fishing and was a very good cook. Also a good photographer. He once cooked me a curry that was so hot the top of my head hit the ceiling." "All his wives had to do something," Mrs. Marcus continued, "Ethel translated Ceylonese classics. Alice, whom he renamed Ratan Devi, sang Indian classical music-:-to the satisfaction of Rabindranath Tagore. Stella danced Indonesian dances.Zlada, who called herself Donna Luisa or something, was a professional photographer." Mrs. Marcus showed us exquisite drawings of Stella made by Coomaraswamy-and also some photographs taken by him. The drawings were nudes, 28 of which were published, and had nothing to do with Indian tradition. They were nearer, rather, to sketches
made by Rodin or Maillol before sculpting a figure. All of them in the book were not equally successful. But the ones collected by Mrs. Marcus, with her own unerring judgment, were exquisite. The photographs my cameraman Purnendu Bose enthusiastically approved of were wintry landscapes. Mountains dimly discernible in the mist seemed to exercise a fascination for him. . To the suggestion that Coomaraswamy was a dull man, Mrs. Marcus shook her wiry old head violently, and for a long time. Ananda's son (by Donna Luisa) Rama, heart surgeon at a hospital in Greenwich, Connecticut, revealed to me Coomaraswamy the film maker. I cursed myself as I carried the heavy 16mm projector across the overbridge at the Greenwich railway station. It was so heavy that I could hardly walk. Rama was busy throughout the day and yet so anxious to help that he had given mean appointment for the night. After dinner at the beautifully sited local club, his wife Bernadette took leave of us, and Rama and I settled down to an all-night session of talking, identifying and dating innumerable photographs and seeing Ananda K. Coomaraswamy's films. The first one was on a bullfight in Spain, shot sometime in the late ¡'twenties. I sat up. There was nothing amateurish about the tones, or about the way the camera was moved. Everything had been shot from one point of view-the spectator's fixed seat-but the excitement of the event had been captured so well that one did not feel the sameness. Another was on the geishas of Japan. This one had detailed subtitles describing the function of the geisha and explaining the meaning of her actions. There was another which Coomaraswamy had shot in South India, in which aged devdasis demonstrated mudras from Bharata Natyam. And then there were many of Ananda himself vacationing in Maine, where he went every year. Some of these showed a fine feeling for landscape. I particularly remember a long-lasting beautiful shot of a horse swimming. After the films we talked till five in the morning. Rama and his wife are ardent Catholics, but he did not see any real difference between his father's beliefs and his own. We agreed on many things, disagreed on others. Finally I went to bed. "At ten, Francis will wake you, and Bernadette will drive you to the station at quarter to eleven when she takes the children to school." Francis, who looks like an angel, shyly woke me in time. As Bernadette waited in the car, I was hauling the projector down the stairs, fell and sprained my ankle. I limped to the car and decided not to say anything about it. At Grand Central Station in New York, I took the risk of leaving the projector on the platform and went to find a porter. When we came back, the projector was still there. I limped throughout the rest of my stay in the United States. But the discovery of the films had been beyond my wildest dreams. No, Ananda Coomaraswamy was not a dull man.
One ofCoomaraswamy's oldest and most consistent admirers is Dorai Raja Singham, a schoolteacher who lived in Ceylon for a long time but later set up home in Kuala Lumpur in Malaysia. In fact "KL" was my first port of call and the object was solely to meet him. Some years ago Dorai Raja Singham had published two volumes of homage to his guru, containing tributes from scholars all over the world. All through his life he has collected each scrap of paper he could get on Coomaraswamy, corresponded with him
and practically everyone who had known him. At present he is getting ready for publication a volume of Coomaraswamy's letters. We pored over his collect,ionin his peaceful home miles away from the hubbub of Kuala Lumpur, photographed letters and sketches, and listened to his account of the man whose commemoration has become the mission of Dorai Raja's life. It was he who first introduced me to the manuscript of Roger Lipsey's voluminous book on Coomaraswamy to be published soon by Princeton University. It is not only a biography but a detailed assessment of his work, written after a great deal of research. Lipsey had sent his manuscript over to Dorai Raja Singham for him to check the facts and in turn checked the facts I was to narrate in the film. I pored over his manuscript before finalizing the narration. But more than that I was glad to find at last an authoritative biography written of a man who hated biographies as far as he himself was concerned and always refused to give details of his personal life, extoling invariably the anonymity of the Indian traditional artist as his ideal.
I
suppose making a film about a man is a little like writing his biography. Although the film is more of a documentary on his work than on his life, in finding out about him, in trying to understand him, I had to take the attitude of a biographer. You begin to understand your man only when you begin to see the contradictions he tried all his life to resolve or perhaps to ignore. Many writers and great men emerge to us all of a piece, adding up to a consistent "image." When you know all or most of his aspects, including the hidden ones, you begin to feel a special relationship with him. Your knowledge of his weaknesses not only does not diminish, but actually enhances the warmth of your feeling for him. One of the contradictions of Coomaraswamy's life arose, I feel, from the distance between him and the home of the art he loved. In his salad days he was an ardent social reformer, a man committed to the cause of his country's regeneration. "I thought how different it might be if we Ceylonese were ... not ashamed of our own nationalities," he had said. India was his spiritual home. Writing in his Essays on National Idealism he had said: "I do not believe in any regeneration of the Indian people which cannot find expression in art; any reawakening worth the name must so express itself." He was studying the traditions of a culture with whose present reality he was deeply concerned and closely connected. Over the years, however, India and Ceylon became more than memories; they became idealized in his mind and unrelated to the struggles, the agonies, and the compulsions of these countries. He did not live to see the growth of independent India. He would have disapproved of much of what we are doing today. He would probably have said, as he had said in 1910, that it will matter much whether the great ideals of Indian culture have been carried forward or allowed to die. It is with these that Indian nationalism is essentially concerned, and upon these that India's fate as a nation depends. He would no doubt have hated the advent of the plastic bucket. Yet he would.have been a part of the struggle, trying to make his voice heard with a sense of urgency and immediacy which distance eventually removed. He lived in America's present and India's past ..That is why toward
Dear Mr Durai Singam, In reply to your various letters I enclose some information. I must explain that I am not at all, interested in biographical matter relating to myself and that I consider the modern practise of pUblishing details about the lives and personalities of ,well known men is nothing but a vulgar vatering to illegitimimate curiosity. So 1 could not think of spending my time, 1'1 hich is very much occupied with more important tasks, in hunting up such matter, most of which I have long forgotten; and shall be grateful if you will publish nothing but the barest facts about myself. What you should deal with is the nature and tendency of my work, and your book should be 95 per cent on this. 1wish to remain in the background, and shall .!!21 be grateful or flattered by any details about my self or my life; all that is anicca, and, as the ~isdom of India" should.have taught you, Jeortraiture of human beings is asvargya". All this is not a matter of ~odesty but one of principle. For statements about the nature and value of my work you might ask the Secretary of the Bhand â&#x20AC;˘â&#x20AC;˘kar Uriental ttesearch ~ociet1. Poona 4, and Dr Murray Fowler, c/o G.and C. ~erriam eo., Spr1nfield. Mass., USA to make same statement, as both are familiar with it. I would not mind sending you press reviews of my books, but it would take more time than I have to hunt them up; I have no secretary who would do this sort of thing for mel Very sincerely ~~
is later life, his statements on the future of uncontrolled indusrial materialism rang true, being close to the living reality. His pirit remained universal whether he spoke of the dangers of the roliferation of human wants instead of the refinement of their uality or of the dangers of imitative materialism overwhelming ndia's special message to the world. But his understanding of resent-day India became too dim for his statements to retain uch relevance. Similarly his glorification of India's past became 'ncreasingly uncritical and unrelated to historical fact. Not only ndia's present but India's past grew more and more mythicalore of a state of mind than a statement of history. In this transition there must have been a secret agony which orne of the photographs of him in the late 'thirties betray. Another contradiction lay in his opposition to industrialism nd his enthusiasm for medieval craft society. Coming years after iIliam Morris, the scientist in him must have known the imossibility of actually reviving the medieval structure of society. s early as 1904 he had sought a way of life for' our land which ould remember the .old wisdom and yet not despise the new. ven in urging India to remain true to her heritage, he had ever specifically asked her to shun industry, But he never faced p to the basic contradiction in his medievalist posture, and if he
did attempt to resolve it, he never spoke of it in his work. He showed no way to a new synthesis between science and tradition. In his early years in Ceylon and in India there is some suggestion of his acceptance of the Tagorean ideals of synthesis; but in his later years, probably because he was so far removed from the realities of these newly independent countries, his accent is solely on medievalism on the one hand and condemnation of industrial society on the other. Where he did say something valid for the younger generation in America was in his criticism of the state of society rather than in prescriptions for a way out of its impasse. In this he is no different from other critics of a society in danger of being swept off its feet by an accelerating rate of change in science and technology. The value of his social philosophy lies more in the acuteness of his analysis of what industrial society does to the individualan analysis made in the early 'thirties. In regard to the future, he had no particular vision of what was likely to come about, but held up the values which higher social organization must provide. Reading' his poems, looking at his drawings of nudes, his photographs, his motion picture photography of bullfighting in Spain or of himself fishing in the Maine woods, the photographs of his wives-German, English, American and Argentinian-one
can conjure up an image of Coomaraswamy totally opposed to the well-known image of him as a sort of bearded Oriental savant. It is as if these images were two sides of a coin with East printed on one and West on the other. It was always the Eastern side that was more visible to the world. The metaphor should not be pushed too far, because his writings show indeed a fusion of an Oriental intuition with the scientific discipline of the West; but behind the surface unity of his life and work it is impossible not to detect a core of unresolved contradictions. If Coomaraswamy did not project these contradictions in his writings, it was not merely in order to present a unified image. It was due more to his dislike of the glorification of the individual. He never wanted to analyze the artist as a special kind of man; his ideal was man, anonymous, yet always "a special kind of artist."
I
am no expert on art, but I had to try to understand what made Coomaraswamy unique among art scholars. It was, I think, the totality of his vision. He was able, unlike many scholars, to relate art to language, literature, history, philosophy and religion. Not only to so relate it consciously, but simply to see it as an integral part of human endeavor at the given time and in the given' society. He did not believe in art for art's sake; his theory of art was utilitarian. An image of God is an aid to contemplation just as a water pot is an aid to the job of carrying water. To all who believed in this, it was impossible to separate the beauty of art from the inner harmony of the society that produced it. It was thus essential to explore the relationship of art to the other functions of society. In this lay his great advantage over many Western scholars of Indian and Eastern art who, basically unable to penetrate the other disciplines, have to confine themselves largely to a discussion of art in isolation from the totality of the culture. Where he scored over Indian scholars was in his knowledge of the West and in his scientific training. The reports he wrote as the director of mineralogy in Ceylon have the same precision in the marshaling of facts and the logic of conclusion that his work on art shows. An example of this is his classic History of Indian and Indonesian Art. In less than 300 pages he wrote the most effective survey of all phases and aspects of Indian and Southeast Asian art ever brought into a single work. The wide range of his knowledge across East and West enabled him, in his own words, to "use one tradition in order to illuminate another." He began as a nationalist seeking to re-establish the glory of the Indian tradition. His means were as scientific as his expressions were controlled; yet in proving to the conference of 400 Orientalists assembled in Copenhagen in 1908 that the Buddha image had originated in India and had not been imported from Hellenistic sources, there must have been a quiet sense of national pride. But when he spoke at the celebration of India's Independence in Boston in August 1947, he said: "Indian culture is of value to us not so much because it is Indian as because it is culture." He had risen above all national chauvinism. The student of art must cease to be a provincial; he must universalize himself. Human individuality is not an end in itself, but only the means. A good part of Coomaraswamy's work was obsessed with the differentiation of Indian art from art in the West, and much
of what he said seems self-evident today. In his early years, the individuality of Indian art could be brought out only by that differentiation. Scholars of Indian art were at that time invariably European and mostly British; they saw it peopled by manyarmed and hydra-headed monsters with the little that was good in it such as the Buddha image, derived from second-rate Hellenistic models. Coomaraswamy had to strive to show not only the worth of Indian art but its individual identity as an expression of a distinct civilization. To the marked change that came about in the world's knowledge and understanding of Indian culture over the years, no single man had contributed more than Ananda K. Coomaraswamy. Yet, having made this monumental achievement, he sawall cultures as "dialects of the same language." This is unlike so many later scholars who built on foundations laid by him but never got rid of their regional chauvinism. But the rediscovery of Coomaraswamy is no longer as important to India in the area of art as it is in the understanding of art as an index of social organization. It is as a social philosopher that his work can provide a cultural leadership to an India that is in danger oflosing the important values of Indian tradition and may be hurtling, by a combination of choice and necessity, toward the ills that beset industrialized societies. Ananda Coomaraswamy should thus become a culture hero for the younger generation in India as much as in America or anywhere else. 0
About the Author: Chidananda Dasgupta is a film critic turned film maker. He has written for newspapers and film journals in India and abroad including Sight and Sound (United Kingdom), Film Quarterly (U.S.), Filmkritik (West Germany) and Camera (Switzerland), and has been a critic at a number of international film festivals, including those at Cannes and Venice. Founder of the Federation of Film Societies (1959), he had earlier been a co~founder-with Satyajit Ray-of the Calcutta Film Society (1947). Among the films Dasgupta has made are the documentary Across the River-which was shown at New York's Museum of Modern Art in 1968-and the 1972 Bengali feature film Biletpherat.
The Coomaraswamy film takes the viewer to such sites as the palace at Bundi (right) which inspired a series of paintings like the one at right above. Its historical panorama covers other geographical areas and art styles, such as the Kangra school (far right}. Andfinally, it shows how Americans, old and young (above), appreciate Indian art.