Foreign Affairs: 100 Years
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THE scale of economic assistance granted since the last war is by all odds the greatest single innovation in international diplomacy; it is, in fact, an activity without precedent in the foreign field. It has covered a remarkable variety of purposes, patterns and agencies.
There has been one fully operating international agency, the United Nations Relief and Rehabilitation Administration, which dealt directly with the vast dislocations caused by the war. It was followed by the multifarious activities of the United Nations and of the specialized agencies--in fields such as health, agriculture, child care, the problems of labor, or in specific projects of economic development such as those sponsored by the International Bank for Reconstruction and Development or the Technical Assistance Board. In addition, nations have undertaken economic programs on a multi-national or bilateral basis, the supremely effective example being the Marshall Plan, which completed the postwar restoration of Western Europe. Governments have also supplied aid, in capital and trained manpower, on a government-to-government basis. Britain, France and Belgium have provided loans and grants for colonial development on a much larger scale than before the war. The United States, under a variety of programs, including Point Four, has made assistance available in every quarter of the globe. And in recent years a new donor has appeared, the Soviet Union.
What sort of lessons do the scale and variety of these programs of economic assistance entail for the future policy of the West?
The basis of pre-industrial society is, of course, agriculture. Usually it is a static agriculture based upon unchanging traditional farming methods. An indispensable step in economic development is to introduce new methods of farming which encourage growing productivity. This in turn provides a margin of wealth for transfer to other activities and releases manpower from the countryside. Japan after 1870 is the classic example of a successful agrarian revolution along these lines.
But no other activities will be developed without a second factor--investment in what the French call "infrastructure." This covers such basic needs as ports, transportation, urban housing and power development which are the preconditions of more varied economic advance. And the human infrastructure must also be provided--education, technical training, health and social services which help to supply the trained minds, healthy bodies and stable social conditions needed for an expanding, confident, well-managed community.
This infrastructure will in turn be related to the type of industrialization which local conditions permit. Local processing of materials depends, of course, upon the availability of power. Heavy industry depends upon ores and fuels, but most economies can envisage at least a modest expansion of light industry to provide consumer goods for the expanding local market. Either in hand or in preparation in all but the most underdeveloped countries are facilities for making some textiles, glass, containers, soap, salt, bread, industrial alcohol and cement.
Now these four factors--agricultural transformation, physical infrastructure, basic social services and the beginnings of industry--have one thing in common. They all require capital, and their rate of expansion depends upon the amount of capital that can be allotted to them. Stagnant economies are characterized by low rates of investment; and, although it may be difficult to establish any absolute investment rate which virtually ensures dynamism, it seems safe to say that economies devoting less than, say, 12 to 15 percent of their national income to productive investment are not likely to achieve much advance. Above that figure they have the chance of achieving what might be termed a "national breakthrough"--in other words, the achievement of enough dynamism for the process of high investment to become self-sustaining, simply because, year by year, the resources available to provide savings over and above popular consumption are tending to increase. Capital is thus the key to growth. How are the countries with underdeveloped economies to obtain it?
One source of wealth for emergent economies is, of course, their export of raw materials. Since dependence upon a single export is one of the hallmarks of underdevelopment, a chief concern must be to open new fields of exports in order to diversify a country's export pattern, and meanwhile to achieve as much stability as possible in commodity prices. In the last year, the world commodity index has fallen by nearly 15 percent, certain metals by 25 percent and more. This disturbing decline automatically reduces the margins available for fresh investment in underdeveloped areas. A recent U.N. calculation suggests that falling export incomes about cancelled out foreign aid to free Asia in 1957. A long-term program must bear in mind the degree to which sagging trade counteracts the effectiveness of outside assistance.
In earlier days, capital became available from outside to assist in development. Many in the West still tend to feel that large movements of capital should be automatic, that capital should seek the best areas of investment and respond to opportunities for profit. This would be the "natural" method and governmental activities or action by international agencies are felt to be a disturbing departure from the old free liberal tradition. But we can see today that a number of essential elements in the earlier patterns of international investment are now lacking. In the first place, the world is much less secure. It is not suggested that nineteenth century investors enjoyed--or even sought--perfect security. The very phrase "risk capital" implies the contrary. But today the former prop of "law and order" in large parts of the world--the colonial control exercised by European Powers--has, rightly, vanished. What takes its place is much more uncertain, to say the least.
In the second place, much automatic investment has vanished or is vanishing with the end of colonialism. Large parts of the earlier infrastructure--Indian railways, for instance, irrigation, ports, communications--were provided by the old imperial governments. Sometimes, as with Kenya and Uganda, the infrastructure in the shape of the Uganda Railway actually preceded the economy itself. Nor is this simply an historical point. For example, since 1945, Britain has been providing its colonies with some $50,000,000 to $60,000,000 a year in basic development. France's figure for Africa is about $250,000,000 a year. Yet the British effort is diminishing, the future of the French far from secure.
Another vital fact is that the whole outlook for private capital has changed. The prime motive in Britain's export of 7 percent of its national income in investment overseas for long periods before 1914 was the smallness of the domestic base and the wide opportunities overseas for the industrial innovator. In those days, not only raw materials development but railways and harbors, too, brought in good dividends. Private investors erected the infrastructure at the same time that they exploited minerals or agricultural export crops. Today the largest potential investor, the United States, has a vast prosperous internal market and is subject to no automatic pressures to equal Britain's earlier percentage; the equivalent for America today would be an annual export of about $30 billion instead of the combined public and private figure of perhaps $10 billion.
Moreover, basic development no longer earns the dividends. American private investment abroad--which reached about $6 billion in its best postwar year--is overwhelmingly in oil or in mineral development in the secure economy of Canada. For strictly underdeveloped areas, the figure is not much above $1 billion, and it is not devoted to basic development; yet the provision of transportation, ports and power is a precondition of further general growth and for developing private investment in most emergent territories.
The inescapable fact is that the pre-1914 automatic processes of international investment which we would like to take for granted no longer operate fully in 1958. Private investment still has a vital part to play, but the conditions no longer prevail under which it will undertake the whole range of essential development. Simultaneously, most of the governmental agencies of the past are ending or at least reducing their activities.
All this comes at a time when development has become infinitely more than an economic necessity. For underdeveloped lands it has become the test of nationhood, the index of political success, the touchstone of acceptability into the modern community of nation states. In all the states moving out of colonial tutelage into sovereign independence it is the fundamental political issue. Sometimes, indeed, growing to independence amid all the toys of sovereign independence evolved by older states, new governments may insist on types of growth which have more to do with prestige than need. But underneath the superficial desire for modernization lies the deeper political realization that their peoples, too, wish to inherit the modern world and that success in economic development is the touchstone of political survival. And beyond this in many parts of Asia is the even more fundamental fact that the alternative to economic growth is decay, misery and starvation.
Let me now try to draw from these facts some conclusions which could perhaps guide the policies and affect the decisions that we in the West will have to face as the great drama of the world's aspirations and despairs continues to unfold.
It is fair to say that we have never yet fully formulated a lasting or effective policy in this field. One does not criticize the scale of postwar economic aid, particularly the spectacular generosity of the American effort, in questioning the method--or, rather, lack of method--with which so much of it has been carried out. We have acted so much on the basis of expedients. Here an economy has been shored up for strategic reasons, there defense support has been the main element; then we fit into the pattern the disposal of domestic surpluses; or we respond to a particular crisis--a famine in India--or a particular pressure-- the political jeopardy of Jordan. In all this, since the ending of the Marshall Plan, it is sometimes difficult to disentangle the element of development from the perfectly legitimate but sometimes less relevant issue of the defense of Western interests.
It is uncertain what impression the totality of our policies makes upon our own people; probably they are for the most part accepted only grudgingly as essential to the cold war. But the impression they convey to emergent nations, even to recipient nations, is extremely confused. Is this a program, they ask, to keep us on the Western side? Are we being drawn into the great-Power struggle?--and then perhaps they recall the rueful African proverb: "When the bull elephants fight, the grass is beaten down." Or, they ask, has the West any real long-term interest in our future? Are there political strings or imperialist overtones? Are the Communists right to warn us? Whom should we believe? Such uncertainties weaken immeasurably the political impact of what we do. Yet how can we answer the queries until we have first formulated clear answers for ourselves?
The Western world must evolve a definite policy to cover its multifarious efforts and commitments. It must explain frankly both to itself and to others just what it is trying to do.
In developing a free-world strategy for economic assistance, our first need is to stop pretending that by some happy chance or sudden improvement in the world's economic condition or by an unforeseen cessation of Communist activity we can stop economic aid tomorrow or the day after. The reasons for our adopting a sustained policy are too cogent to be denied. From a negative standpoint, the obvious determination of the Russians to adhere to a world plan makes it impossible for us to isolate ourselves, much as many of us would like to do so. More positively, our economic system always has depended upon expanding markets, high levels of trade and large-scale movements of capital. The old automatic processes have slackened. We must find alternatives, or lose a system which has contributed immeasurably to our own economic well-being. Nor would such a loss simply leave a vacuum of confusion or misery in the emergent territories. In view of their overwhelming political ambition to achieve development and the evident Soviet readiness to supply the means we can have no doubt that the vacuum would be filled--first by their becoming economically dependent upon the Soviet bloc and ultimately by their political subservience. This would occur, moreover, at a time when Western economies--owing to the progressive relative depletion of their resources--would probably be more than ever in need of a world-wide system of supplies and markets.
Thus the passionate desire of emergent territories to develop in fact matches our own economic and political need to see that they do so. Our attitude should not be one of grudging acquiescence or of unwilling acceptance of cold war pressures or--worst of all--a confusion of military with economic objectives. It should be, on the contrary, a determined onslaught upon the world's common problems of low productivity, faulty production, stagnant economies and undeveloped resources. This change of attitude alone could open a new political and economic chapter in our international relations, for we could at last answer squarely the question why we pursue policies for economic development. Our reply would be: because the well-being of the world economy requires it. Every country stands to gain from the preservation and growth of economic and political independence in the less privileged areas; equally so, every country must benefit from healthy and sustained economic development which brings with it better living standards and an expansion in international trade. It is this common purpose and community of interest between all the nations concerned that has never been made clear.
If emphasis on the idea of partnership for development instead of on the rôle of donor and recipient becomes the central theme in Western policies of economic assistance, it is bound to determine in some measure the type of instruments used. Now it is apparent that the sums needed for development are often more easily secured from Western electorates and Western legislatures if the program is placed on a basis of straight national self-interest and administered nationally on a purely bilateral basis. The earlier investments in colonial empires were undertaken for this reason and in this manner. All recent military and cold-war programs have exactly the same basis. Yet the arguments for other aims and other methods are much stronger than we sometimes admit. In particular, the advantages of an International Development Authority have not been sufficiently recognized. It is not suggested that all bilateral arrangements would end, but that a new emphasis should be laid upon international direction and operation of world economic development.
First, let us look at the present system, in which bilateral arrangements predominate. How does the receiving country, passionately concerned for its sovereignty yet equally determined to achieve development, react to offers of aid on a bilateral basis? To generalize from the experience of the last decade, it is either politically embarrassed and goes through considerable internal turmoil, in the course of which the motives and aims of the outside donor are loudly and roundly attacked (a process we have seen in India, for instance, or Ceylon and the Sudan); or it attempts, with some cynicism, to play one donor off against another, thereby bringing itself and the whole region round it into uncertainty and unrest. This is the typical experience of the Middle East.
Against these risks, the Western Powers usually assert that bilateral aid gives them greater control and flexibility of policy. The opposite possibility is rarely considered--that control is, in fact, lessened and flexibility lost. If, for instance, the directing element in the aid available were provided by an International Development Authority, the risk of internal political disagreement and the greater risk of cynical external manœuvre would be greatly reduced.
There would be another subsidiary advantage to the receiving countries as regards the crucial point of flexibility of administration. Of necessity, the process of economic development must vary widely from country to country. Hundreds of millions of people are involved--people with widely different racial and religious backgrounds, holding many shades of political opinion and, as in the West itself, divergent views about economic theory and practice. Climate, history, education, diet--a vast number of factors--influence the attitude of these peoples and their governments towards economic development. No single, precise pattern or specific economic philosophy can be applied. What is needed is a very flexible, pragmatic and common-sense approach.
In these conditions, the administering organization must be able to adopt sharply different policies in different countries, sometimes even within a single country. Anyone with real operating experience will know this. This does not mean that waste and inefficiency are inevitable. It is often the insistence of a contributing country on "doing it our own way" (especially in agriculture) that leads most directly to waste and inefficiency. Again, economic assistance given on a national basis almost inevitably and understandably has strings attached, not political strings in the strict sense of the words, but the administrative and operating conditions which a national administration feels it must impose in order to protect its taxpayers' money. More often than not (and perhaps unconsciously) it requires the recipient to follow, or attempt to follow, administrative procedures and economic policies which appear reasonable in the West, but are quite unsuitable in the receiving country. Thus the original operating strings are frequently interpreted as political strings. At best, this leads to political resentment; at worst, it may bring the whole operation to an end and lead, as in Burma, to the refusal of further Western assistance.
On the other hand, a receiving nation is likely to be far more ready to accept guidance and in some cases tolerate even direct pressure from an international administration. Such pressure can be more straightforwardly explained and justified to easily aroused national electorates. Contrary to an often advanced argument, international administration can be less, not more, wasteful than direct bilateral control. Admittedly, this assumes that a future International Development Authority would itself be firmly administered and efficient, which means that governments would have to lend it men and women of proven efficiency and stature. But (to give only one instance) the record of the International Bank for Reconstruction and Development in its own sphere has proven beyond doubt that large operating international agencies can achieve levels of efficiency fully equivalent to those of governments or large private corporations.
The majority of governments needing assistance do not want to become anybody's satellite. They want passionately to preserve their new independence. In other words, they want for themselves what we want for them. But for them to receive help directly from individual Western nations creates internal friction; and to rely more and more upon the Communists increases the risk that they will become satellites. The best hope of combining growth with independence would lie in being able to count upon impartial international help. Thus, the Western aim for the emergent nations--which is freedom and independence--can probably best be served not by direct national aid but by international operations. In the same measure, it would frustrate the Communist aim of Soviet domination.
We in the West have not realized the full scope of the new Soviet economic drive. No budgetary or electoral considerations hold the Soviets back in offering aid, ostensibly without strings, in all the world's strategic areas. They have a ruthlessness and a freedom to manœuvre which far surpass anything in Western countries with electoral commitments and long legislative debates. In favoring bilateral methods, we may thus be supporting a principle and a method which help Communism more than they help us. The Soviet bloc will always employ such methods more daringly and flamboyantly than we--for no one asks who foots the bill. It may well be that the international method, in this field as in so many others, offers our last best chance of establishing some sort of rational, objective control over Russia's operations and purposes. In addition, we shall be doing so with the full support of the emergent nations who, if they can find a way, want to be beholden to neither side.
It will be said that the Russians could not be relied upon to abide by the principles and limitations of a joint operating international agency, that their participation would riddle it with intrigue and sabotage and make it quite unable to pursue its general purpose of securing growth in freedom and independence. The risk cannot be denied; but personal experience in working with the Russians in a large operating international enterprise indicates that it can be practically eliminated on two conditions. The first is that the most careful and detailed articles of agreement must be drawn up before the agency is established. Such an agreement must contain the sanction of exclusion from the agency because of failure to observe its basic constitution, and on past experience this is something the Russians would respect. However much they sought to exploit every advantage, the operation would at least proceed within a manageable framework. The second condition is that there must be a thoroughly efficient and tough administration at the top of the agency. If the Russians refused to participate, the Western Powers should go forward to establish a multi-national agency with as many participants as could be secured. The Russians would then be in the position of having turned their backs upon the common enterprises of mankind.
If the case for an International Development Authority is accepted, we face the question how it should operate, on what scale and with what objectives. Based on the experience of the last decade, the aim of economic policy should be to create the possibility of the "national breakthrough"--in other words, to create conditions of self-sustaining growth. As we have seen, there are various possible prime movers in this process. Among them, the development of materials and commodities for export and the expansion of domestic medium and light industry are likely to remain the field of private enterprise, local or foreign. This means that the chief fields for development coming within the scope of inter-governmental policy are agricultural improvement, the creation of infrastructure, and the provision of basic social services.
Some of this area is already covered by existing international agencies. In particular, the World Bank has a ten-year record of highly effective work in the field of infrastructure, particularly in transportation and power development. Any new agency would naturally need to coordinate its activities carefully with other bodies and might very often work through them in developing particular programs. Actually, I believe that the effectiveness of these existing agencies would thereby be enhanced. It would be a tremendous improvement, for example, if all U.N. bodies in each of the underdeveloped countries could be administered locally under one representation, giving each national program more shape and pattern.
This is not a proposal to make outside aid perpetual. The concept of a "breakthrough" implies that the aided economy reaches the point where the processes of saving become largely self-sustaining. The pattern to achieve it would vary from economy to economy, with different degrees of emphasis upon agricultural, pastoral and industrial components. But in each case the aim would be to achieve an economic margin, economic elbowroom, an annual average saving of at least 15 percent of national income; and this would be the aim for which the Development Authority and the local governments would prepare their plans.
To undertake this program with a chance of success would entail commitments stretching over a number of years. The supreme disadvantage of on-again, off-again aid, voted each year in annual appropriations with the half-hope of ending them next year, is that all aid tends to be ad hoc and cannot be related to the longer processes of sustained growth. In economies as in human beings, this is a matter not of years but of decades. The United States has recognized this fact in its Export-Import Bank lending and in the Development Loan Fund set up under the I.C.A. But the main effort is still on an annual and hence provisional basis.
This is enough to ensure that the expert manpower needed to put the aid to best effect is also unavailable. Efficient operators, trained officials, men of energy and vision can be spared from their work at home for only a few years at the most. Usually they cannot serve long enough to be fully effective. A core of full-time international officials exists, but the number is small and there are far more technical experts than administrators and organizers among them. For this reason the need for an International Civil Service has been stressed by the Secretary-General of the United Nations. Certainly, a consistent and coherent longterm policy of international economic development will require some such corps d'élite. In the past, the old colonial civil services were made up of devoted and selfless servants who would spend their lives in underdeveloped areas, providing the framework of order and giving the spin of energy to local effort. They have gone or are going. For decades to come, the emergent nations will need men without colonial affiliations but with equal devotion to take their place.
No charter, however flexible, no structure, however workmanlike, will enable the Authority to act unless it also commands an outstanding staff. National governments would be unwise to establish an Authority unless they were ready--as they have not been in the past--to provide enough of their own outstanding officials to administer the organization. Length of service is of paramount importance. As a general principle it would be essential for key men in the Authority--particularly those working in the regional or local missions--to serve for at least five years and the Authority would also require a solid core of officials working in the international field for life. Experience has shown that only in exceptional cases has it been possible for a head of a mission to influence the thinking of local ministers in less than three years. The first couple of years are normally required to develop the personal relationship which is essential to the success of any of the operations contemplated for the International Development Authority.
It is not enough to staff the headquarters and field missions of the Development Authority. Much of its work will be wasted if the new governments cannot also secure trained men and women to work inside their own civil services. The present systems for providing staff to emergent governments--some by means of international recruitment and others under bilateral arrangements--could clearly be improved. Inevitably there is some degree of competition between the United Nations and its specialized agencies; further competition arises with regional organizations, and still more competition exists between individual nations. This does not always make it easy for a country in need of staff to obtain the men it requires.
It would be better if this staff could come almost entirely--although one does not want to suggest an unrealistically ideal solution--from international sources. An International Development Authority would be the logical coördinating body for the provision of staff needed in individual countries to ensure the effective administration of programs and projects.
The Western Powers must start in time. As a legacy of the old colonial régimes, most of the political and commercial contacts of the emergent nations are at present with the West. The new countries are not committed ideologically; they can still choose their help where it seems most natural. But this phase of what one might call unconscious and unplanned Western orientation will not last indefinitely. It will end abruptly--as it has in China--if the emergent nations come within the Soviet orbit as a result of faltering policies in the Western world. One wonders whether the absorption of Eastern Europe into the Soviet sphere would have been so complete if international economic assistance programs under UNRRA had not come to a stop in 1947.
What must be the scale of operations of the proposed International Development Authority to ensure that in the next decades the world does not go down under a freight of misery, hunger and despair? Only a very general answer is possible, simply because of the variety of economies involved and the immense number of projects entailed in the effective modernization of the emergent nations. Eight years ago, an expert group of international economists put the gap between available and needed capital for the emergent nations at $19 billion. Today, it would be reasonable to think of the original capital that must be available to a Development Authority as in the neighborhood of $25 billion. This sum would be used gradually over the years and loans when made would be at interest rates geared to the low margins and productivity of underdeveloped areas. It might also provide a reserve for disaster, and for various special emergencies such as sudden violent fluctuations in commodity prices. It could be replenished by annual contributions from nations with more than a certain per capita annual income (say, $750). One percent of the national income of the Atlantic nations today would provide about $5 billion a year. In addition, the less wealthy nations should be urged to make contributions proportionate to their resources. In other words, it would probably be possible to base a long-term policy of peaceful world-wide development upon a capital sum equivalent to less than half the arms budget of the Western Powers for one single year and to sustain it with not much more money than Britain spends each year on drinking, gambling and smoking.
I do not think these comparisons are unfair or loaded. The figure of $25 billion may seem vast when measured by our normal reactions to foreign spending. But we have accepted far higher arms figures in our still vain search for security. It must always be a source of amazement that our governments are so ready to face the vast financial requirements of a fantastic defense effort and yet still fail to realize that positive economic policies which could secure peace in great areas of the world cannot be purchased at bargain rates.
The countries of the Atlantic community are able to spend over $50 billion each year on arms, and their governments have obtained the support of their people in doing so. One-tenth of that annual expenditure could set alight a new revolution throughout Asia and Africa and in less developed areas of Latin America--and it would be a revolution soundly based on the preservation of political independence and the provision of reasonable economic and social conditions for hundreds of millions of people who today have little or no hope for the future.
I should like to end on a personal note. Many of us who spend our working lives dealing with these problems, in one part of the world or another, are at last being driven to fear that the West, in its preoccupation with the hydrogen bomb and sputniks, may well be inviting a world tragedy of another kind. This equally vital and urgent problem of the less developed areas has so far never been faced honestly and realistically by the West.
It is a heartbreaking experience to live with people who so clearly need assistance, and at the same time to know that the great mass of people in the West would respond immediately if they, too, could have the same first-hand knowledge. Here is a great tragedy in the failure of human communications, and increasingly clear evidence that our political institutions have so far shown themselves incapable of dealing effectively with one of the basic problems of our age.
Must one be driven to believe that we have lost our sense of reality, and that we can no longer recognize the obvious? Can we visualize only the inhuman outline of the hydrogen bomb, and not see the obvious needs of hundreds of millions of people all over the world who ask nothing more than that we should give them a hand in time so that they can become persons with a future and so help to evolve a better world?
We talk mostly of these problems in international terms and in terms of national policies and governments. But never let us forget that the ultimate objective is the individual--the ordinary man and woman and child the world over--who asks only that we should preserve life and give hope for the future.
This is a problem from which none of us can escape. Most of us know, in our heart of hearts, that we are failing in our responsibilities. Quite apart from the dictates of our conscience--and I believe that there is a public conscience--the scientists and technologists have now made the world too small for the voices of millions of people in Africa and Asia and elsewhere to be stifled simply because they are half-starved and underprivileged.
The governments of the West know the essential needs of the less developed countries. It is evident that we in the West--by ourselves if necessary--have the resources which could satisfy those needs: resources which would not only secure our own survival but also provide fresh hope and new security for the people in these less fortunate lands. Yet we fail to mobilize them. Here is a great tragedy.
It is difficult to emphasize sufficiently the urgency of this problem. Clearly, the West does not regard it as a vital issue affecting national security and as a potential threat to the preservation of peace. People in the West still talk of "uncommitted areas" but fail to provide the resources to maintain them in that position of independence. As each day goes by, and still the West fails to respond, the attitude of governments and people in the less developed countries changes--perhaps imperceptibly, but it changes. At present, it seems to me, it is moving slowly, but as relentlessly as lava from a volcano, away from the West. If that process continues, the uncommitted areas will not long remain uncommitted and the doors of Asia and Africa will be closed to the West.
I make no apology for speaking so personally. It is not only an expression of belief, but the conviction that it is a duty to report the ominous signs of an impending disaster to those who still have the power to prevent it from happening.
In the last analysis, and when all is said, one is left with the belief that this problem will never be resolved until the majority of people in the West are ready to answer strongly and affirmatively when that most fundamental of all questions is asked, "Am I my brother's keeper?" Here is the test of our faith, of our conscience, of our innermost belief in the usefulness and purpose of our own lives. Today we still have the opportunity to act in a way which would do much to achieve peace and security for a large part of the world, and justify our own existence. Will we accept that challenge or will we prove once more that "where there is no vision the people perish"?