The Great World Crisis I

I

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If we are to understand what is portentously called the “food and energy crisis”—but what, in reality, is a crisis of prices and money—and if, still more, we are to understand the current political uncertainties and the very real possibility that they may spark off the Third (and last) World War, it is essential to look beyond the immediate issue of Middle East oil and try to place the events of the last twelve months in a wider context. What we are experiencing, in other words, is not a short-term emergency but a last desperate attempt by industrial society, as we have known it since 1950, to climb out of a crisis of its own making. The actions of the oil-producing countries may have been the last straw, but they were not the cause of the problems confronting us today.

No one better expressed the underlying realities of the situation than Giscard d’Estaing when he said that the present crisis is an “enduring crisis” involving a redistribution of the world’s resources. It is the result of many different factors, of which oil is only one, and is “no passing perturbation.” What we are witnessing, he concluded, is “the revenge on Europe for the nineteenth century.” ¹² He might have added (though he did not) that it is also the revenge on the United States for Vietnam and the dislocations it caused.

As the crisis of neo-capitalism comes to a head, nothing would be more self-defeating—unless we wish, like Hitler, to bring the whole world down with us into catastrophe—than to suppose that we can wriggle out of it by “pressures on the oil-exporting countries,” or that all would be well if the price of oil could be reduced to its 1970 level. The real issue, as Ronald Segal says,¹³ is not the price of oil but “the mounting incapacity of the system in general and of the United States in particular to provide the functioning and resources” necessary to make neo-capitalism work. It is only necessary to look at the long, tangled, and sometimes sordid history of oil to see what has gone wrong, and why.

II

When we turn to the so-called “energy crisis,” the essential point to remember—for so accustomed to it have we become that a real effort is required to recall it to mind—is how recent a phenomenon the dependence of industrial society on oil and oil products really is. If, as Lenin is reputed to have said, communism equals Soviet power plus electrification, neo-capitalism equals American power plus oil.

The basic facts about the oil situation are set out briefly and judiciously in Tad Szulc’s new book, and more elaborately in the Ford Foundation report, and there is no need to recapitulate them here. What is evident is that the onward march of postwar neo-capitalism and the ever more prodigal use of oil went hand in hand; they are two sides of the same medal, and without the latter the former would have been almost inconceivable.

In the United States alone oil consumption rose from 2.37 to 6.3 billion barrels a year between 1950 and 1973, and in other industrial countries the rate of increase was more spectacular still. Under 1.5 million barrels a day in 1950, Western European oil imports reached over 15 million barrels in 1973; in Japan, during the same period, they rose from around 100,000 to almost 6 million.

The result, as the Ford Foundation report puts it, was that “the world oil market” became the “artery of Western European, Japanese and American prosperity.” Put more crudely—but not, I think, less correctly—the virtually continuous economic growth among the industrial nations of the West since the early 1950s was subsidized, and probably made possible, by the oil-producing countries. The power that drove the machine was an abundant flow of cheap oil, controlled by an immensely powerful consortium of international oil companies, which shared out the market between them, with the backing of the American and British governments.

The predominance of oil is something entirely new—as new and as fragile as the economic system built upon it. Fifty years ago oil contributed only 14 percent to America’s energy needs, and substantially less elsewhere. Even in 1950 solid fuels accounted for approximately two-thirds of energy consumption; and it was only then, as the postwar economy got into its stride, that the ratio was reversed, until by 1970 petroleum and natural gas supplied more than 60 percent of the vastly inflated total.¹⁴

The reason, of course, was its cheapness and the ease with which the vast Middle East deposits could be extracted. I am no great admirer of the Shah of Persia, but he was surely right when he said that it was “twenty-two years of cheap fuel,” from 1947 to 1969, “that made Europe what it is” and “made Japan what it is.”¹⁵ He might have added that it made the US what it is, as well; for in 1973 it was the US, with only 6 percent of the world’s population, that was consuming one-third of the world’s total energy output, at a cost of only 4 percent of its gross national product.

Buoyed by the apparently inexhaustible supply of cheap and abundant oil flowing from Middle East wells, the industrialized world took off like a runaway horse with the bit between its teeth. It was now that the belief took hold that the cycle of boom and depression had been conquered, together with the heady vision of an era of continuous self-sustaining growth and steadily increasing affluence. It was always a mirage, but while it lasted it did irreparable harm. There is no need to go into the details of the story. The essential point is that there was energy to waste, and everything conceivable was done to ensure that it should be wasted, provided only that the oil-fired industrial machine could be kept going at full speed ahead.

It is not only, as everyone knows, that in fuel consumption the American automobile is the most inefficient in the world, or that millions of dollars are wasted annually, at the expense of the hard-pressed consumer, through inefficient space-heating in homes, stores, schools, and offices. As Tad Szulc points out, it would only be necessary to improve the performance of American cars to European or Japanese standards to save practically 40 percent of American oil consumption and wipe out the need for imports. But these much-publicized inefficiencies are only illustrative, and far more fundamental is the distortion which the entire economy has undergone.

Two striking examples illustrate its nature. The first is the sabotaging (no other word is adequate) of the railroads and public transport systems, although for shifting freight, as the investigations of the Ford Foundation show, “rail transport is four times as efficient as truck transport and sixtythree times as efficient as air transport.” The second, more significant still, is the running down of the coal industry, for this means that the United States’s richest source of energy is being grossly underused.

The shift from coal is dramatic. In 1920 it supplied 78 percent of American energy needs; by 1973 its share was down to 18 percent. Utilities, in particular, switched from coal to oil. As Szulc points out, in the New York City metropolitan area—“and the same thing was happening all over the country”—the utilities, which used only 22 percent ten years earlier, were by 1970 “relying on oil for 80 percent of their electric output.” As 70 percent of the energy content of the original fuel is lost in the production of electricity, and as electricity accounts for about 54 percent of total energy consumption, it is not difficult to see that this (in Szulc’s words) is “one of the most important elements in the energy crisis of the 1970s.”

Meanwhile, millions of dollars were spent by oil companies, utilities, electrical appliance manufacturers, and the automobile industry to persuade the consumer to squander energy, and the government aided and abetted the waste “through promotional pricing, tax advantages, and other forms of subsidies.” There was nothing necessary or inevitable about these developments. Energy was wasted because, so long as oil was cheap, there was no incentive to save. In the industrial sector—by far the biggest user, accounting for 40 percent of total consumption—managers simply did not bother to economize because, as the Ford Foundation report remarks, energy “accounted for only about 5 percent of value added.”

Two points are commonly made in defense. The first is that, at least until 1973, the energy industries were remarkably successful in keeping prices low. The second is that growth in energy usage and growth in the economy are inextricably linked.

Like most such statements, both are half-truths. No one would deny the simple proposition that, throughout history, the substitution of nonhuman and nonanimal for human and animal energy has been a major factor in economic growth. But this does not mean that the more the energy consumed, the greater the rate of growth will be. On the contrary, as the Ford Foundation report points out, whereas between 1870 and 1950 GNP per capita rose sixfold for a mere doubling of per capita energy use, between 1950 and 1973 energy growth per capita actually exceeded the per capita growth in production.

The abundance of cheap energy, in other words, was detrimental to technological improvement and innovation and probably held back economic progress. Nor was the constantly increasing use of energy necessary. Other industrialized nations achieved enviably high standards of living with a far lower per capita energy consumption than the United States. Switzerland, for example, consumed only one-third and West Germany less than one-half as much. The United States level of energy consumption—six times as high per capita as the world average—to a considerable extent represented sheer waste.

As for the argument that the oil industry and the utilities contributed to economic prosperity by keeping prices low, it may be true that in real terms (i.e., discounting inflation) energy prices decreased between 1950 and 1970, but everyone knows there is another side to the story. I do not wish to discuss the alleged abuses of the oil combines: the extortionate profits which have given rise to such violent denunciation, the widely publicized contributions to Nixon’s election campaigns, the charge heard at every gas station a year ago of artificially withholding supplies to boost prices and wipe out competitors. They are not irrelevant, but they can easily obscure the real issues if they persuade people—as frequently they do—that all will be well if the oil industry is brought under firmer control. Nothing could be further from the truth. The problem is not how the oil industry is run but how neo-capitalist society is run.

Nevertheless, it is perfectly true that the flow of oil has been manipulated for twenty years in ways which, to say the least, do not always coincide with the public, to say nothing of the consumer’s, interest. Apart from depletion allowances, estimated to cost the US taxpayer $3.5 billion a year, and other fiscal advantages, it is notorious that consumers paid about $5 billion more for oil products in 1969 than they would have done if trade had not been restricted by quotas. At a time when the extraction of Middle East oil cost sixteen cents a barrel, the price was set by the oil companies at the American cost of production, i.e., $1.75 a barrel. Not surprisingly, American production was run down, and in 1971, with a rising demand, output fell below the 1970 level. After 1956, according to Szulc, “the number of newly completed wells began to drop catastrophically” and “not a single new refinery was built along the East Coast between 1961 and 1973.”

It would be easy, but it is unnecessary, to add to this catalogue. The basic fact, as Tad Szulc says, is that, given the cheapness of Middle East oil, “investments in overseas ventures were infinitely more profitable.” As far back as 1950 domestic oil production was lagging over 10 percent behind consumption; by 1973 the gap rose to over 35 percent, and the difference was made up by imports from abroad.

In itself, according to all current theories of foreign trade, this situation was unexceptionable; but the reality of everyday life was different. As the United States’s need for oil imports grew, it found itself competing with industrialized Western Europe and Japan, both dependent on the Middle East and North Africa for around 80 percent of their oil. The result was predictable. Oil, as late as 1969 a glut on the market, became a sought-after commodity, and the way was open for the Organization of Petroleum Exporting Countries (OPEC) to intervene effectively.

Leaving aside for the moment the use of the oil embargo as a weapon in the Yom Kippur war, the aims of OPEC were two. The first and almost certainly the main objective—achieved either by nationalization or by participation in foreign consortia—was to ensure control over their own resources. It was, as the Trilateral Commission concedes, a perfectly “legitimate desire,” and though the oil companies reacted (in Tad Szulc’s words) “as if they had been robbed in broad daylight,” it caused, after the first shock, comparatively little excitement in the West. The second aim was to secure a larger share—in fact, the lion’s share—in the profits which had been flowing so freely to the oil companies, and this called down a torrent of abuse. Kissinger spoke of “blackmail” and The New York Times of “extortion,” and both were echoed far and wide.

How justified these charges are is a matter of dispute. As Lester Brown observes, the Arabs are certainly not the first or only country to use their control of natural resources as a political weapon. So far as the increase in and redistribution of profits is concerned, the Arab contention—as expressed, for example, by Abderrahman Khene, the secretary general of the petroleum exporting countries—is that it could have been carried through without so steep a rise in oil prices. When the OPEC countries decided on October 16, 1973, to increase the “take” of the producing governments to $3.40, this still left the oil companies with a profit margin of $.70 a barrel. But instead of absorbing the extra cost, the companies passed it on to the consumer, in the United States and throughout the world, and this—at least according to Abderrahman Khene—was one justification for increasing the “take” to $7.00 or $7.50 a barrel. Szulc even maintains that it can be argued that the companies “welcome the higher payments they must make … because it balloons their profits.” But whatever the rights and wrongs of the argument, one fact is clear and that is that the companies have not suffered. According to Szulc, “the majors’ profit in Middle East operations early in 1974 increased on the average from $.30 to over $1 a barrel” and in the case of Aramco, the biggest of all producing companies, “from $.80 early in 1973 to $4.50 a barrel in March 1974.”¹⁶

The truth, of course, is that the price of oil has always been artificial, based not on cost of production or the market mechanism, but on monopoly power and international politics. All that has happened is that monopoly power has changed hands. Unfortunately, it has not yet shifted to the poorer and more populated countries of the world, and even in the oil-rich countries the poor have not noticeably benefited. In Teheran two-thirds of all families have an income of less than $200 per person a year and their living conditions are at least as bad as this figure indicates.

Ironically, the factor immediately responsible for this transformation was the action of the oil companies themselves in cutting production so as to maintain prices and thus creating a shortage the oil producing countries could exploit. But the change was overdue and would have occurred sooner or later as a result of the profound shift in world political relationships following the Suez War of 1956 and the deterioration in the international position of the United States as a result of Vietnam. “The old international economic order,” as the Institute on Man and Science puts it, “was characterized by unacceptable inequality in the distribution and management of the world’s wealth,” and could not last.

If, as Szulc rightly says, the crisis of October, 1973, had “been in the making for a long time,” what remains to be explained is why it took the world by surprise. The easy answer is to blame the international oil combines, and they certainly were not innocent. But if we look more deeply, we shall be more likely to place the responsibility on the Western governments, particularly the United States and British governments, which backed the companies (in Iran, for example, in 1953, or in Peru in 1966), not merely, as is often alleged because of political pressure from the “oil lobby,” but, more fundamentally, because the prosperity and even the working of the economic system were geared to the flow of cheap oil.

For this reason they were prepared to condone and tolerate the vast profits and fiscal privileges of the companies, and it is only in the last few months—roughly since the disappearance of Nixon, who defended them to the last—that the US government, fitfully and ineffectively, has shown signs of turning against them. The reason, quite simply, is that they are no longer providing the cheap oil on which the economic system depends. If the oil companies got away with murder in the past, it was because nothing succeeds like success; if now their days are numbered, it is because nothing fails like failure.

Nevertheless the consequences are irreparable. It is often said that, in absolute terms, there is no immediate shortage of crude oil in the world. That is true enough, if we are prepared to drain the world dry of oil for immediate advantage, and there is little doubt that, given the chance, the oil companies would have exploited the Middle East oil fields to the last drop, with no thought to the future, leaving the Arab and Persian populations not much better off than they found them. But it is also true that the age of fossil fuels is drawing rapidly to a close, and the real charge against government is that, so long as cheap Middle East oil was there for the asking, nothing was done to plan for alternatives to meet a contingency which everyone knew was bound to arise.

This is the fundamental failure of neo-capitalist society over the last quarter of a century, and it is bound to take its revenge. In any realistic view—except the realism of politicians who can’t see beyond the ends of their noses—the fuel crisis confronting us today has little to do with Middle East oil prices and a great deal to do with the depletion of expendable but irreplaceable energy reserves.

Even if Arabs, Persians, Libyans, and other oil-producers can be forced to toe the line—even, in other words, if the immediate crisis is solved—we are still faced with the fact that, at the present galloping rate of fuel consumption, industry is destined to grind to a halt in the first half, at latest, of the twenty-first century, and with it industrial society as we know it in the West. As the victims will be our children born today or yesterday, who will be living, or starving, through the crisis, this is not a prospect most people will regard with the detachment they feel when confronted by harrowing pictures of starving babies in Bangladesh. It cannot be fobbed off with a tax-deductible donation to Oxfam.

Something, of course, can be achieved by strict policies of conservation. That is the burden of the message conveyed in the Ford Foundation report. The danger of this approach is that it may delude people into thinking that conservation is enough. Nothing could be further from the truth. Conservation may buy time, but it leaves untouched the problem of the exhaustion of the current sources of energy.

What is needed, in other words, is a planned policy for the development not only of coal and shale but of basically new resources: solar energy, geothermal power, breeder reactors, controlled nuclear fusion, and hydrogen. Considering the rapid approach of the year 2000 AD and the long “time lead” (from a minimum of ten to an average of twenty-five years) before the initial research can be expected to produce practical results, this is the most urgent question confronting the world today. For the future of industrial societies, such as the United States, it is absolutely vital.

Nevertheless, for twenty-five years it has been brushed aside as a remote, hypothetical contingency which can be left to the future. Given the character and motivations of neo-capitalism, it could hardly have been otherwise. Although the exhaustion of fossil-fuel reserves and the end of the hydrocarbon age could easily be foreseen, the only non-fossil source of energy to which any attention was paid—and that not very successfully for industrial purposes—was nuclear fission, and this, of course, was because of its military potential, and not on account of any peaceful side uses it might have.

In other cases, development was deliberately stifled. Methyl alcohol (“methanol”) is described by the Swedish International Peace Research Institute as “an especially attractive alternative fuel to gasoline”; but production has been suppressed, as the institute discreetly says, for “politicoeconomic” reasons, or in reality for fear lest it would compete with petroleum.¹⁷ The only conclusion that can be drawn—a conclusion to which we shall return—is that the real energy crisis, which is not identical with the “crisis” arising from increased oil prices, can only be solved by a radical change in the whole existing economic system.

The future of mankind, to put it bluntly, can no longer be left to what the Ford Foundation report calls “the so-called marketplace.” And since nothing less than the future of mankind is at stake, and no government anywhere is going to stand aside and watch its people starve, we can be sure that, as the crisis comes to a head, fundamental changes will take place. They may not be what you or I would wish; but the days of neo-capitalism are numbered. An economic system based, as Ronald Segal puts it, on “the control of society by the relationships of money, rather than the control of money relationships by society,” can only, in today’s circumstances, lead to disaster.

III

The only conclusion to be drawn from a survey of the history of oil since 1945 is that the West was hoist with its own petard. Even without the intervention of OPEC the writing was on the wall. When we turn from oil to food, the situation is not essentially different. Here again, the world is faced by a crisis which is not accidental or unforeseen, but is the direct result of the way neo-capitalism functions.

Most of the facts about the food situation are assembled in Lester Brown’s new book. Two seem to me to be particularly illuminating. The first, cited also in the useful report from the Management Institute for National Development,¹⁸ is that it was only in 1974 that the US government ceased to pay farmers not to grow crops (in 1973 the bill was over $3 billion), thus bringing about 50 million unproductive acres back into use. The second, reported by the Transnational Institute in Washington,¹⁹ is that in the Sahelian region of Africa, where drought and famine are rampant, thousands of the best acres and a large share of the scarce water resources are assigned by “multinational agribusiness corporations” to the production not of foodstuffs for the native population but of raw materials and other products for marketing in the developed world.

What this can mean in practice is shown by the World Bank report on Mali, one of the Sahelian countries worst affected by the drought. In Mali, the World Bank tells us, “production of food for domestic consumption … has declined steadily”—from 60,000 tons handled by official marketing channels in 1967 to a current 15,000 tons—but “export crops—notably peanuts—have increased during the same period, despite the ravages of the recent drought.”

Add one further fact, again from the Transnational Institute, and the real dimensions of the food question become apparent. During the famine of 1965-1966 in India, we are told, food aid was withheld until the Indian government agreed to “the penetration of US capital”—in other words, of the petrochemical industries headed by the Rockefeller group—“into the field of fertilizers.”

What this means in practice scarcely needs underlining. “Modern fertilizer,” Henry Kissinger told the Rome food conference, is “the most critical single input for increasing crop yields,” but its production and marketing are controlled by international corporations which have no interest in eliminating shortages and reducing prices and no evident incentive to help the developing countries when they can unload their products at good prices at home. In addition, as Lester Brown points out, they have shown great reluctance to invest in new plant in the underdeveloped world or to “provide technical assistance for plant management and repair.” When we are told that fertilizer plants in developing countries are inefficient and “many are now producing at below two-thirds their capacity,” we have every right to ask whether one reason may not be what the World Bank disarmingly calls “the structure of the international fertilizer market.”

The first necessity, in discussing the food question, is to get rid of the misconceptions in which it is currently bogged down. If the energy crisis has been deliberately misrepresented, the misrepresentations in regard to food are immeasurably worse. Two myths, in particular, have befogged the whole issue. The first is the persistent legend that food shortages are the consequence of inexorable population pressures. The second is that there is an over-all shortage of foodstuffs. Neither will bear serious scrutiny. The problem, in the words of the Management Institute, “is not simply a shortage of food” but “inequity of distribution”; or, as the Transnational Institute more trenchantly puts it, at the conclusion of its impressive report: “hunger is caused by plunder and not by scarcity.”

The argument that hunger is the result of a burgeoning world population is particularly pernicious, because it is only too likely to breed a spirit of defeatism. There is, indeed, already a vociferous lunatic fringe, led by MIT professor Jay Forrester, which argues that “no matter how much food you have, population will overrun it,” and advocates a policy of “directing aid to those countries with the greatest chance of survival, while abandoning others to famine.”²⁰

This, not to mince matters, is unsavory rubbish, with about as much theoretical justification as the Nazi Final Solution. As Paul Demeny has pointed out, the constantly reiterated references to “soaring birth rates” in the underdeveloped world “have little factual basis and in many instances no basis at all.”²¹ In any case, every reputable demographer knows that the only historically proven way of reducing population growth is to improve living standards, beginning with adequate feeding, and that it is the hungry, indigent, and despondent who have large families. No one is going to practice birth control if he expects five out of six of his children to die of starvation before the age of three.

The other fashionable remedy for the food crisis, for those too squeamish to advocate starvation, is birth control. In itself, this is common sense, though as Lester Brown, a powerful advocate of contraception, freely admits, “there will be little chance of bringing birth rates down rapidly enough to avert disaster” without “a more equitable distribution of income and social services.” It would, in other words, be disastrous if the view took hold that population control, in itself, was a sufficient answer. As the Transnational Institute points out, “population could decrease and production increase, but if the great majority of the population lacked purchasing power to pay for its food,” the only result would be that “the minority will continue to live in luxury while the great masses of the people live in misery, as the case of Brazil demonstrates today.”

The simple fact is that, contrary to popular preconceptions, there is ample land available to provide food for a burgeoning world population. Properly used, according to Roger Revelle’s calculations, the world area of potential arable land (about 2.3 times the currently cultivated area) could support between 38 and 48 billion people—that is, between ten and thirteen times the present population of the earth. “The limiting factors,” he concludes, “are not natural resources but economic, institutional and sociopolitical restraints.” ²² This is a polite way of saying that what is at fault is the economic system and the political system it underpins.

When we are told—by Robert McNamara among others—that the troubles of Latin America are due to overpopulation and that the only remedy is birth control, the answer is that Latin America, with a population of only 265 million, covers an area three times as large as the United States, and has a far lower population density. It has also the largest amount of arable land of any continent, and yet it imports most of its food and 60 percent of the arable lies fallow, largely because the landowners find it more profitable to grow cash crops, such as sugar and coffee, for export than subsistence crops to feed their own people.

Not surprisingly, therefore, the developing countries view the current campaign for contraception with a certain skepticism. Even if we leave out of the picture the United States, the great consumer and leading advocate of birth control for blacks, browns, and yellows, it is only necessary to look at France, a country with a population density nine times that of Brazil, one-third more than Nigeria, and greater even than that of Indonesia, and with a ratio of arable land to population not greatly different from that of India, to see the anomalies; for France not only satisfies the food needs of its population but also produces considerable surpluses for export.

There are, it is true, great discrepancies from country to country and from continent to continent in the availability of agricultural land. Argentina, with 7.69 hectares per capita, can absorb a substantial population growth; Haiti, with only 0.16, evidently cannot. But the question is not simply the availability of land. The phenomenal increase in French productivity between 1955 and 1967—corn up from 11 to 41 million tons, for example, and barley from 27 to 97—was achieved virtually without increasing the area under cultivation.

If France, with 0.34 hectares of arable per person, can do this in only twelve years, it is hard to think of any good economic reason why India, with an equivalent ratio of arable land to population, should not be able to do likewise, if it is provided with adequate supplies of fertilizer and modern machinery. We should not, in short, be surprised if the underdeveloped countries see the population-control proposals put forward by the developed countries of the West as “selfinterested substitutes for confronting the real issues” or even as “instruments … to preserve their political and economic supremacy.”²³ They may well be right.

The truth, of course, is that the so-called food crisis is due not to population growth but to affluence; it is, in other words, a side product of the artificial prosperity which the industrial West whipped up in the 1950s and 1960s by lavishly squandering Middle East oil. Although world population increased by less than 50 percent between 1951 and 1971, world production of cereals doubled, but the bulk of the surplus went not to the poor but to the rich.

At least one-third of the increased demand for food reflected increases not in population but in the diet of the affluent countries. In North America alone consumption of cereals per head rose from 1,000 pounds a year to nearly 1,900 pounds. This formidable increase was due, as is now well known, to the emergence of meat-eating as one of the symbols of affluence—an ironic development when we recollect that the English soldiers sent to conquer Wales at the close of the thirteenth century mutinied when, instead of their customary bread and ale, they were given meat and milk, food in their view only fit for savage Welshmen.

The fact remains that consumption of beef per person doubled in the United States between 1940 and 1972. And in other industrial countries the increase was steeper and quicker. In West Germany, according to figures quoted by Lester Brown, meat consumption rose by one-third per person between 1960 and 1972; in Italy it almost doubled and in Japan it increased over three and a half times. Dazzled by the rising prices, cattle raisers in the United States, Canada, Australia, Argentina, Ireland, and New Zealand hastened to cash in on the growing demand. The ironic result, by the end of 1974, was a “beef glut,” while elsewhere in the world people were dying of starvation.

This depressing situation has obviously nothing to do with food shortage and a great deal to do with the way commercial agriculture operates in a capitalist economy. What has happened, quite simply, is that grain surpluses that were once available for consumption in the poorer countries are now sold to farmers in rich countries, at prices which poor countries cannot afford, to feed their livestock. Meat is notoriously the most wasteful of all foodstuffs, requiring an input of four to seven pounds of cattle feed for every pound of meat produced, and the consequence is that over 60 percent of US grain output—or something like 140 million tons a year—is consumed entirely by cattle sheep, pigs, and poultry.

We have only to recall that the total world shortfall of cereals in 1972-1973 amounted to no more than 60 million tons to see the significance of this in relation to what Kissinger has called “the desperate struggle for sustenance.” According to one calculation, the livestock population of the United States alone (leaving out dogs and cats) consumes enough food material to feed 1.3 billion people.

Since 1965, Barbara Ward tells us, Americans have added 350 pounds per head to their annual diet, largely in the form of beef and poultry—an amount very nearly equivalent to an Indian’s entire diet for a whole year.²⁴ Whether it has done them anything but harm from a health point of view may be open to debate; but no one in his right mind would suggest that most Americans, or the peoples of other industrialized states, were seriously undernourished in 1965.

Once again, as in the squandering of energy, it is a case of that conspicuous consumption which has become a status symbol of affluent society. But the reason why it has become a status symbol, as John K. Galbraith long ago pointed out, is that it is sold to the public as a status symbol through lavish, incessant advertising campaigns paid for by corporations which can think of no other way of keeping the wheels of business profitably turning. It is worth remembering, as we gloomily inspect the soaring prices in the supermarket, that over 90 percent of the rise is due not to increases in the price of the food itself but to the elaborate system of processing, packaging, advertising, and distribution, which is where the lion’s share of the profit lies.

All of this goes far to explain why the underdeveloped countries are unable to import the food they require; but it does not explain why they need to. Thirty years ago the underdeveloped countries as a whole had a large surplus of food. “Net grain exports from Latin America,” Lester Brown tells us, “were substantially higher than those from North America.” Today the developing countries are net importers. How has this reversal come about?

The reasons, needless to say, are complicated and controversial, but at the risk of simplification it can be said that, in the last resort, the failure of agriculture in the tropical, underdeveloped world to provide adequate supplies of food for domestic consumption is the result of its subordination to the needs of the developed world. It responded, in the economist’s more neutral language, to “impulses generated by temperate industrial production.”²⁵

For some eighty years, in other words, the tropical countries put practically all their research and effort into export crops like cocoa, tea, and rubber, and virtually no effort into food production. This was, of course, originally a consequence of colonial rule, and the historian can easily trace the way in which the colonial powers—the British, for example, in Burma or Malaya—fostered these developments. Moreover, there is little doubt that for forty or fifty years they were beneficial. But what was true in 1910 was no longer true in 1960. The reason, essentially, was the immense advance in agricultural productivity, through the use of fertilizers, mechanization, and the introduction of improved strains of coffee, rubber, and other plants. As a result, the underdeveloped countries found themselves saddled with increased crops of tea, cocoa, coffee, which they could not sell at a profit, and at the same time with the need to import foodstuffs which had been sacrificed to the production of these, and other, cash crops.

It would be absurd to suggest that the governments of the newly emancipated ex-colonial countries were innocent victims of these developments. Nothing compelled them, as their terms of trade got worse, to try to compensate by increasing their output of commercial crops. In theory, at least, they could have switched over to a policy of raising domestic food productivity. If they didn’t (and for the most part they didn’t), it was for two reasons. First, they swallowed lock, stock, and barrel the old dogma, so dear to Western economists, and to multinational corporations, that the prosperity of underdeveloped countries depends upon what they can sell to industrial countries. Secondly, and more practically, they were faced from the 1950s onward by the huge American grain surpluses, which the United States was prepared to unload at prices that deterred them from embarking on expensive programs for building up home production.

It is scarcely an exaggeration to say that, until the shortages of 1972, the underdeveloped world served as a regulator enabling the United States to keep its agricultural production more or less in balance. There were also a number of secondary consequences resulting from colonialism and from lopsided development subordinated to the purposes of the industrial world. Among the more notorious are the stranglehold established by foreign financial institutions—American, British, French, and now Japanese—which, by granting or withholding loans and credit, largely determine the economic climate of most underdeveloped countries; the power wielded by the socalled multinational agribusiness corporations; and the role in all developing countries of the sector of wealthy hangers-on of foreign business, usually not more than 5 percent of the population, who have done exceedingly well out of the existing disparities and have no intention of surrendering their privileges.

There is no doubt that the existence of these deeply entrenched vested interests makes any radical attack on the basic causes of world hunger extremely difficult. Only wide-ranging social reforms, involving land tenure, income distribution, and marketing, will enable the miserable, poverty-stricken peasantry, scratching a bare living from inadequate plots of land, to abandon a hapless subsistence agriculture and turn to production for the market. But such reforms are bound to impinge on the privileged position of powerful interest groups, which are unlikely to accept them without fighting back. One has only to recall the fate of Arbenz in Guatemala or of Allende in Chile to see what can happen to a political leader who takes agrarian reform seriously.

This is probably one of the reasons why, so far, there is little evidence that the world is coming to grips with the deep, underlying causes of the food crisis. There is, it is true, now a wide measure of agreement that only a radical increase in food production in the developing countries can provide a real solution to the world food problem, and that this will not occur until, in the words of the director-general of the Food and Agriculture Organization, they “get rid of antiquated and often oppressive agrarian structures.”²⁶ But how this is to be achieved is left tantalizingly vague. It is easier, and politically less explosive, to concentrate on measures to alleviate the worst consequences.

In countries where, as the Indian minister of agriculture and food alleged in 1969, the large landowners, representing no more than 3 or 4 percent of the farming population, “exert all political power” and “make all the decisions,” reform is easier to advocate than to accomplish. The World Bank has announced that, in future, it will “give priority” to countries putting through land reform policies, but in almost the same breath it admits that “where the political will for reform is lacking, the Bank can do no more than offer advice.” The United Nations, also, agrees that “profound transformations of the present socio-economic structures” are necessary, but concludes resignedly that this is “a very complex long-term process,” which is tantamount to saying that it expects little or nothing to be done.

In fact, if we look in detail at current proposals, the most striking thing about them is that even those which correctly identify the essential problem immediately proceed, in practice, to give it the lowest priority or no priority at all. The points emphasized are population control, increased food production by the industrialized countries, technical improvements in agriculture in the developing world, and the rebuilding of food stocks to meet future contingencies; but the question of fundamental land reform (“more aid in changing agricultural institutions and practices that presently impede productivity,” as the report sponsored by the Institute on Man and Science cautiously puts it) figures only as an afterthought. The result, as the Transnational Institute caustically observes, is that “the only priorities which could trigger a steady growth in food production are excluded.”

This tendency to evade the fundamental issues is strikingly evident in the proposals submitted by Henry Kissinger at the Rome food conference on November 5.²⁷ Here again, the highest priority was given to increasing the output of the agriculturally advanced industrialized countries. So far as the developing countries are concerned, all the emphasis falls on technical improvements—“new technologies … to increase yields and reduce costs,” expanded fertilizer production, improved storage—and on investment, but the social and political problems impeding productivity are simply ignored. Kissinger notes, it is true, that “farmers have no incentive to make the investment required for increased production”; but this is attributed not to poverty, insecurity, uneconomic smallholdings of two or three acres, and the other disadvantages which afflict the peasants of backward countries, but to unremunerative prices, shortage of credit, and inadequate transportation and distribution facilities.

Kissinger’s proposals—which are fairly representative of current high-level thinking—not only fall short of immediate requirements but, taken alone, could make the long-term situation worse rather than better. To give priority to stepping up the export surplus of the United States and other advanced countries could only perpetuate the dependence of the underdeveloped upon the industrial world and ensure that the poor countries will remain, as at present, beggars at the rich man’s table. Naturally, it will help if more productive strains of rice and wheat can be raised, or if losses through inefficient storage can be eliminated. There is no dispute about that. The mistake is to suppose that technical improvement alone is the answer. As the Transnational Institute observes, “Anyone who knows anything about the agrarian problem in the underdeveloped countries knows that there are structural factors which would prevent success, even if they possessed the knowledge of a thousand encyclopedias, a legion of experts and unlimited quantities of tractors, fertilizers and pesticides.”

This is also the reason why the much-publicized “Green Revolution” has disappointed expectations. On a technical level it has achieved much. In India alone it made possible an expansion of wheat production from 11 million to 27 million tons between 1965 and 1972, an increase “unmatched by any other country in history.” But instead of producing a general improvement of living standards, it is generally agreed, the benefits have flowed to a privileged minority. It is the rich farmers who can afford chemical fertilizers, agricultural machinery, and the rest, not the 70 percent of poor peasants with less than an acre of land each. Moreover, it is much easier for rich landowners than it is for small farmers to get bank credit with which to carry out irrigation programs and build up large mechanized agricultural estates.

One result of modernization, therefore, has been to drive large numbers of peasants off the land to swell the ranks of the unemployed living in squalor in the slums around the cities. Examples abound throughout Latin America, Africa, and Asia, from oil-rich Venezuela, with the highest per capita income in Latin America ($1,260 in 1973), where 78 percent of the population lives at starvation level in squalid urban hovels, to booming oil-rich Nigeria, where GNP per capita is still only $130 a year.²⁸ In Persia, some 17,000 Iranian farmers were displaced when the Shah leased hundreds of thousands of acres of newly irrigated land to multinational agribusinesses, such as Shellcott and Hawaiian Agronomics. The productivity of these concerns, it is said, is below that of medium-sized Iranian farms, but it is easier for the government to collect rent from foreigners than to help to put its own small farmers on their feet.²⁹

The position is admirably summed up by the authors of the Transnational Institute report when they write that “no sustained agricultural development can be achieved without social progress, and social progress is impossible without sustained progress in agriculture.” The practical question is whether the industrial world, which calls the tune, wants or is even prepared to contemplate the only sort of social progress which can make a long-term solution of the world food problem possible.

Its feasibility is beyond doubt. In Japan, where the modernization of agriculture reaches back to the early years of the century, the eight-acre farmer, using family labor, has been highly successful in food production, and the agrarian revolution in China, which banished the age-old cycle of famine in twenty years, was based on labor-intensive techniques. Taiwan, also, has employed similar methods with great success; and the Venezuelan minister of finance recently calculated that, given the necessary social reforms, it would require only three years to make the country self-sufficient in agriculture. In Europe, there is the example of Bulgaria, whose 12 million impoverished small farmers were as backward and depressed as any in Asia or Africa. Not only did Bulgaria become self-supporting within a dozen years, but it also produced a surplus for export which is now its major source of foreign exchange earnings.

But these results were only achieved through far-reaching social changes, and here is the rub. Everyone, naturally, would be delighted if the developing countries could become selfsufficient in foodstuffs, and no one objects to limited measures of peasant self-help. But what if the necessary reforms go further and threaten the existing social and economic balance, including the privileged position of the great landowners and foreign concessions? Henry Kissinger’s failure at Rome to mention social reform may have been more than accidental; for a radical program of reform, starting in India or Pakistan, in Venezuela or South Vietnam, may spread like an infectious disease until eventually the mansions of the rich as well as the hovels of the poor are threatened. That is why the West, confronted with the choice, may opt to pay ransom in the form of food shipments and concessionary aid whenever a particularly severe crisis arises, rather than face up to the only sort of measures that can make the developing countries selfsupporting.

Meanwhile, we are left with the current emergency, 400 million people or more “barely surviving” (in Robert McNamara’s words) “on the margin of life.” Common sense, to say nothing of common humanity, would suggest that the first priority would be emergency measures to rescue them from their plight. Instead, to everyone’s consternation, the Rome food conference spent its time discussing measures to obviate food shortages in 1985, not how to forestall the imminent catastrophe, and President Ford refused to sanction an immediate doubling of American assistance. “It’s absurd,” declared Senator Clark of Iowa, “to sit here talking about a problem of hunger ten years from now, and ignore the fact that millions are going to die this winter.” It might have been nearer the truth if he had said “It’s criminal.”

Nevertheless, as McNamara has emphasized, “the world has not suddenly lost its wealth,” the affluent nations have not “suddenly lost their capacity to assist those countries most in need.” Barbara Ward is surely right when she says that “the issue is squarely political.” When, at the time of President Ford’s refusal of increased food shipments, an “Administration source” said there would be “no problem if financing can be obtained,” and another “Washington bureaucrat” promised that the United States would “do its share,” the cat was out of the bag. For the problem, as everyone knows, is that financing cannot be obtained, and when it comes down to defining each country’s share the way is open for interminable haggling and no action. The starving millions of Asia and Africa, in short, have become the playball of international politics.

This is a disagreeable but not, perhaps, a surprising conclusion. I am not, of course, propounding a conspiracy theory of history, still less conducting a witch-hunt for villains and scapegoats. No governments are blameless. If the United States is prepared to play politics with food, the Arab and Iranian governments are equally ready to play politics with oil. And the governments of the developing countries, instead of giving priority to their urgent economic problems, devote a disproportionate part of their resources to military spending, which, according to the Institute for World Order, “has grown more than twice as fast as population and one and one half times as fast as GNP since 1960.”³⁰ As Professor Richard N. Gardner of Columbia observes, no one can be expected to go on donating “endless amounts of food to an Indian government that cuts its family planning budget, mismanages food production and distribution, and invests scarce resources in the testing of nuclear devices.”

Nothing is more certain than that the food and energy crises will get worse, rather than better, if they become the object of political bargaining in which each country seeks its own immediate advantage. They can also no longer be left to take care of themselves, as they have been left to take care of themselves for the last twenty-five years, without a catastrophe in which we shall all be engulfed. The essential question is whether they can be solved within the framework of the existing economic and political system. If the foregoing analysis has demonstrated that they are not self-contained problems, which can be isolated and dealt with separately, but are part of a wider crisis still, it would seem that what we are faced with is the breakdown of the industrial system built up in the West since 1950 and of the international order it created. This does not necessarily mean, as many people assume, the collapse of Western civilization. The resources, accumulated wealth, scientific achievements, and human endowment upon which our civilization is based are still intact. The question—to which I shall return in a further article—is how to achieve alternative social and economic arrangements that will enable us to ride out the crisis and build a better world

(This is the first of two articles.)