Iran’s Crisis of Legitimacy
An Embattled Regime Faces Mass Protests—and an Ailing Supreme Leader
Anyone who, in these weeks and months of the "oil crisis," is asked to forecast the future development of international economic relations and who looks for fixed data and reliable trends to support his forecast will soon run into serious difficulties. Even after the mid-February Energy Conference in Washington, the impression, disturbing in many respects, remains that the world economy has entered a phase of extraordinary instability and that its future course is absolutely uncertain; it may bring stability, but also still greater instability. More integration, closer coöperation, an improved division of labor may increase the overall prosperity of nations. But the future course may just as well be characterized by disintegration, national isolation and the search for more self-sufficiency, thereby enhancing the contrasts already existing in the world.
It would be wrong, of course, to believe that the oil price explosion was the only cause of instability. But the massive increase in oil prices has clearly revealed the actual fragility of this elaborate system of economic relations among the nations of the world, from the structure of their balance of payments to their trade policy. To use energy nomenclature: just as a high-energy neutron breaks through the electrical shielding which surrounds the atom and penetrates into the nucleus, oil has shaken the very foundations of the present world economic system. And just as the neutron may induce oscillation and shatter the nucleus, oil may shatter the laboriously built structure of the world economy. The oil crisis may touch off a chain reaction of destructive forces, but-if properly harnessed and controlled-it may just as well help to improve international coöperation, if all those concerned join in the efforts to find the common denominator of what is going on these days between the Libyan desert and the Gulf of Maracaibo, and if they build a policy of reason on that common denominator.
At this present stage there can hardly be any doubt that, long before the explosive rise in the prices of almost all raw materials, international economic policy was moving toward a critical phase. It is no longer possible to ignore the fact that difficulties have recently multiplied, bit by bit, and what is astonishing is that this has happened during a period of worldwide new production records. Whereas, on the one hand, the world economy was experiencing a fantastic boom, there was, on the other hand, growing uneasiness about the institutions, particularly the slowness with which they were adapting to changing conditions, to new tasks and objectives, in order to ensure a greater equality of starting conditions among nations and to enable an undistorted exchange of goods and services among them. The crisis toward which the world economy was moving was not so much one of production as a crisis of its institutions in structural respects. In particular, the rules governing the exchange of goods and services were questioned on an increasing scale.
The protracted ill-health of the Bretton Woods system was one of the most significant symptoms of this development. Under the impact of the cumulative effects of inflation and speculative crises, this system finally collapsed and thus ceased to exist as an integrating factor. Ultimately, the system broke down because it failed to provide the framework for an orderly exchange of goods and services. Bretton Woods benefited some countries more than others-particularly the strong more than the weak-and above all it burdened the international monetary system with the payments deficits of the superpower. And thus it is not astonishing that, finally, a system that initially had been so successful should have produced interventionist policies on an increasing scale rather than greater economic freedom.
Even with imagination and expertise, it is difficult to establish a new and better system. It is difficult to create a supranational standard of value which is not at the same time a national currency, like the dollar, or a commodity used for speculative purposes, like gold. The "Special Drawing Right," as an artificial numeraire without a market price, and with official parities only for transactions between central banks, was to be declared a primary currency reserve and to be made so strong that it could win the necessary confidence. There were to be fixed but adjustable exchange rates. In addition, it was intended to ensure that the extent and duration of payments imbalances should be appreciably reduced, that the facilities for financing such imbalances should be limited rather than expanded. All countries were to be obliged to settle payments balances from their own reserves.
The process of evaluating the pros and cons of the proposed monetary rules is still under way. What has so far emerged, after lengthy negotiations in some of the most beautiful cities of the world-including Nairobi, the modern metropolis in East Africa, and Rome, the ancient metropolis of Western civilization-is at least a basic concept. Luckily, there has also been found an interim solution to the important question of the valuation of the Special Drawing Right: the yardstick is to be the average value of a "basket" of major currencies instead of the U.S. dollar. On the other hand, however, there has so far been no decision on the question of how to finance the payments deficits of the less-developed countries; this question, though at first glance it appears to be of secondary importance from the point of view of monetary policy, is actually very important in the light of recent developments. It is certainly true to claim that, despite open flanks, the understanding for the common cause has increased and that therefore the continents have moved closer together in certain fundamental views. But even if all moral accessories are left aside, nobody-including the author of these lines-would be able to say just when the new system can be put into operation. For nobody, in view of the still incalculable effects of the dynamic changes in the terms of trade, can confidently claim to be in a position to determine new fixed parities and afterward defend them against market forces.
There are more symptoms of this struggle for new and better rules-e.g., in commercial policy. Last year we witnessed a peculiar, and largely unnoticed, formalistic dispute both within the European Community (EEC) and between the latter and the United States as to whether and in what form a connection was to be established between the reform of the international monetary system and the new multilateral trade negotiations (GATT) in Tokyo. France had initially requested that the new GATT Round should not begin until fixed parities had been reintroduced. The other European countries advocated concurrent efforts toward further liberalization of trade and monetary stabilization. The United States, on its part, was ready to support this formula of concurrent efforts only if it was clearly expressed that an efficient monetary system also called for a commercial policy prone to adjustments.
All this looked like a dispute on formal issues only. But, at the same time, it was the expression of fundamentally different positions: monetary matters first and trade afterward; or monetary matters and trade at the same time; or trade promoting monetary matters-these are concepts which may call for different approaches on the part of the nations concerned, and possibly the acceptance of economic disadvantages or sacrifices. Meanwhile, this dispute has taken on a purely academic character.
The Conference held last September in the Japanese capital was an example of the above-mentioned concurrency and its ultimate results are still largely incalculable. The opening declaration of Tokyo is by no means the Magna Carta of an open world economy based on division of labor, although any reasonable person will accept the objective that the new GATT Round should promote the further liberalization of international trade in order to raise the standard of living and increase the prosperity of nations. He will likewise endorse the general claim that existing customs barriers should be lowered further and other trade barriers reduced or removed.
But the bureaucratic infighting behind these fine words is still going on, as is the struggle over the prices of raw materials. The wrangling is about tariff headings, preferences and counter-preferences, the purpose and extent of protectionist measures. Here, too, as in monetary matters, national interests play a prominent role. Not all countries, for instance, are as vitally interested in the largest possible degree of freedom for world trade as the Federal Republic of Germany. Thus, countries which have only just begun to build up industries at enormous social cost will not be too eager to enter into free competition with the powerful combines of industrialized countries. On the other hand, even in highly developed countries there are certain sectors whose competitiveness is limited; a case in point is the German clothing industry, which is complaining about low-priced shirts being imported from Formosa and Hong Kong. Such sectors cannot stand up to international competition and genuine social problems are created in the countries concerned when economic activity is running at a low ebb.
Agriculture will probably continue to be a further reservation in the system of a free exchange of goods and services. Agriculture is the spoiled child of protectionism, not only because governments vie for farmers' votes, but also because-understandably-every country is anxious to preserve its own minimum basis for feeding its people. This statement can be proved by hard-and-fast figures if one looks behind the scenes of European as well as U.S. agricultural policy. To the outside observer, the policy of European integration appears to be a puzzling tug-of-war over egg prices or wine quotas. Both in Europe and in the United States, the baffled consumer will often have the impression that relationships between the two are determined exclusively by soybeans and Arkansas chickens. Those who resent the economic power of the United States speak of the American challenge, and there may even be such strange excesses as the claim that the consumption of American chickens results in impotence.
Nor can we be certain that free capital movements are welcomed everywhere. Did not American newspapers, for instance, publish malicious reports on an allegedly unlimited stream of German capital into the West? Some people already saw the place swarming with Teutonic roughriders lassoing American cattle. And was not the United States somewhat vexed about the association policy of the EEC, which was even alleged to be striving for hegemony over the United States? Someone even invented the malicious quip that the Sixth Fleet in the Mediterranean would probably soon have to file an application for association.
Meanwhile, however, it will have been realized from New York to San Francisco how difficult it still is for Europeans to translate their dream of a political union into reality. It is not without protracted and painful labors that the Regional Fund is being created, which so far is the latest of the instruments of European unification, following the Agricultural Fund, the Social Fund and the somewhat ill-fated monetary "snake." And it is conceivable that Europe's failure to tackle the oil crisis by pursuing a common policy will have an impact on the further process of unification.
What is the reason for this state of affairs? Why is it that 30 years after Bretton Woods the urgently needed reform of the international monetary system makes so little headway? Why is it that nations find it so hard to soften their protectionist trade systems and to give their trade policies a new, open and equal structure? Why is it that after almost two decades of effort toward European unification, European political union is still unfinished? What is the reason for these disputes about quotas, customs tariffs and posted prices? And the oil problem which now creates new and very strong tensions, is its nature not basically the same?
David Ricardo would certainly not like this state of the world economy and its institutions if he saw it. But he might congratulate himself on the skepticism and foresight he showed in discussing the consequences of the free trade thesis of his teacher, Adam Smith. Admittedly specialization, division of labor and free trade across national boundaries have increased the wealth of nations and caused an immense supply of goods in the same way as the division of labor increased production within a single nation. But the main problem then is to define the laws which determine the distribution of this enormous output; it might be added: which determine the "fair" distribution, the "equitable" price, the "proper" value.
Even today, these "laws" have not yet been defined. The most ingenious theories of distribution in most cases explain only parts of the problem or are infeasible in actual practice. What remains are resourceful bickerings over the results of the joint efforts, a game full of ruses and little tricks, with strategies of threats, attrition and fatigue, of overnight conferences and dissolved meetings, a game of coalitions and cartels. What we are witnessing today in the field of international economic relations-in the monetary field and now in the field of oil and raw material prices-is virtually the same as what is going on between trade unions and employers' associations on the national level. It is a struggle for the distribution and use of the national product, a struggle for the world product.
But whereas the struggle for distribution has hitherto been fought within the framework of monetary and commercial rules, it has now become a struggle over prices as well and has thus taken on a new and in many respects dangerous dimension. The struggle over oil prices may be followed tomorrow by a similar struggle over the prices of other important raw materials. And since what is at stake is not just pawns on a chessboard, but the peaceful evolution of the world economy and the prosperity of the nations of this world, we need a politically sound philosophy if we are to win this dangerous fight.
It would be a mistake to approach the oil problem with illusions, with a swashbuckling rattle of the sword in the manner of a past century's gunboat diplomacy or in an egotistical overbearing manner. This is no way in which to conduct the distribution combat! Each side, the oil-producing and the oil-consuming countries, must learn to understand and appreciate the other's interests, means and possibilities, since there is no other way of avoiding abortive actions and corresponding reactions. The hectic events of the past nine months appear to indicate that this point has by no means been fully grasped.
Oil consumers would be well advised to examine the oil producers' motives impartially. It is true that, in the Middle East, current political issues have a bearing and that, to this extent, oil is considered a political weapon. But, in essence, the oil price issue is not one of a clash over the Suez Canal, the West Bank or Jerusalem. What the oil producers, and not only the Arab ones, have in mind is to increase their share in that portion of the world product which is created with the aid of oil, the most important raw material for years to come. And they are able to do so to the extent that increased oil prices push up the import figures of oil-consuming countries at a rate higher than that at which the latter are able to step up their prices of exports.
The oil consumers would do well to grasp that this is exactly what is intended and not to allow certain facts to be repressed into the subconscious mind, especially the present distribution of wealth between industrialized countries on the one hand and oil-producing countries on the other. If, for instance, U.S. per capita income in 1971, i.e., a year prior to the start of the present price measures of the OPEC countries, were taken to be 100, the latter countries' figures for 1971 would be as follows: Kuwait 75, Abu Dhabi 49, Qatar 45, Libya 28, Venezuela 21, Saudi Arabia 11, Iran 9, Iraq 7, Nigeria 3, Indonesia 2.
And these figures are by no means a true reflection of the actual level of wealth attained in those countries; the disparity, in real terms, for the bulk of the population can well be assumed to be greater than these figures reveal. And it is this gap in incomes or wealth that alone should be taken to motivate the oil countries' policies.
Seen from this angle, the Western industrialized countries, including Japan, being oil consumers, can hardly avoid acknowledging the merits of the oil countries' claim, seeing that cheap oil was in the past a major factor in the former countries' growth. They should not blind themselves to the fact that the times of cheap oil are past and gone. A posted price of $1.80 per barrel of Arabian oil from the Persian Gulf, as it prevailed in January 1970, will not recur. It will not do so because oil producers, following ten years of systematic OPEC policies and aided by 20 years of careless energy policies on the part of the consumer countries, now have the power-in the form of the OPEC cartel-to achieve by increasing their prices the distribution pattern they desire. They have the power of those who control resources in short supply, resources which are of importance, in limitative respects, to a multitude of production lines in industrialized countries. There is so far absolutely no substitute for oil and its derivatives available at short notice; at the most, a sort of fringe substitution might be possible in alternative fuel power stations. Certain economies in quantities consumed are, however, possible at short notice and that alone would involve considerable changes in consumer habits. In other words: as a short-term proposition, the elasticity of demand for oil and its derivatives is very slight, and thus the conditions are right for an independent price policy.
On the other hand, oil producers would do well not to regard the new independence and power they have in pricing to be a device which is devoid of all limitations and consequences, especially in view of the effects this may have on the very existence of the developing countries. They should proceed with care when marking out their field of action. In doing so they should above all not allow this newly grown consciousness to mislead them when assessing the industrialized countries' economic possibilities. For although there is only a very slight possibility of substitution for oil at short notice, there is a limit to the price that can be charged. In the short run there is at least a point beyond which economic stability would be in jeopardy. And that point is reached whenever the industrialized countries are confronted with intolerable adaptation and reorganization problems incapable of being solved at short notice and are thus driven into employment crises or toward an even higher rate of inflation. In this context, I do not wish even to contemplate a point-at least theoretically conceivable-beyond which the irrational use of force might ensue.
But if we think in terms of five to ten years, the elasticity of the demand for oil will rapidly increase. Oil used for heat-producing purposes will become substitutable as soon as the price of oil equals or exceeds that of alternative sources of energy. However, scope for substitution is smaller in certain sectors of transportation and of the petrochemical industry. In the long run, though, oil could be replaced by electricity even in the field of transportation, for instance if nuclear energy were available to a greater extent, and long before that coal will have been assigned a larger role as a basic material in the chemical industries.
For these reasons, oil-producing countries would not only be gravely misjudging the power they wield but also be jeopardizing their own interests if they were to try to attain maximum absorption on a short-term basis. It would run counter to their own long-term interests if oil-producing countries were to pursue a price policy that would drive Western industrialized countries onto the verge of, or even right into, crises: you do not kill the goose that lays the golden egg. Extreme, supermonopolistic absorptions simply are no sensible strategy if the object is to narrow the income gap between the group of industrialized countries and the group of oil-producing countries. But the most important aspect is that such a policy would force the industrialized countries to resort to sweeping crash programs designed to direct their entire resources, their entire sophisticated technology to the substitution of oil or to the exploitation of unused oil reserves (sands, shales). Consequently, in the long run the effect for the OPEC countries might well be reversed. As far as the interests of the oil-producing countries are concerned, the optimum solution would therefore not lie in a short-term maximum absorption but rather in an absorption that is achievable and tolerable on a long-term basis.
With this in mind, a major question mark remains over the present oil-price policy. Price increases have been so exorbitant that, as a result of changes in incomes and demand, serious repercussions, particularly on employment, cannot be ruled out. In addition, the oil-producing countries have obviously been unaware of the strain which they impose on a fragile monetary system through their sudden withdrawal of purchasing power.
Therefore, even if one recognizes-as I do-that producer countries have a good case for claiming a greater share, there will have to be negotiations on the size and terms, because a new equilibrium cannot be the result of monopolistic practices and mechanisms, but will have to be brought about by balanced judgment and advance planning. Producer and consumer countries will have to sit down at the same conference table. In those talks, the oil-consuming industrialized and developing countries should not be forced at short notice to lower their standard of prosperity at the expense of their social stability. It should on the contrary be in the interest of the oil-producing countries, as well, to ensure that they can satisfy their requirements by being able to draw upon industrialized countries' national products that are in a process of growth and possibly even undergoing structural changes for the better.
At the same time, the problem of the use of the enormous monetary purchasing power now accruing to the oil-producing countries should be discussed, since this will have repercussions on the employment situation in the industrialized countries and on the extent of unavoidable structural changes. The search for solutions will certainly not be facilitated by the fact that there is no homogeneity of interests in either group. Some of the oil-producing countries such as Iran and Venezuela will-at least on a medium-term basis-be in a position to utilize the accruing purchasing power for, say, internal investment projects destined to expand their own production capacity. To this extent they will become importers of industrial goods and consequently trigger off a corresponding demand for export goods in the industrialized countries. Here lie welcome chances for economic and technological coöperation aiming at an accelerated industrialization of the oil-producing countries; this approach will require the development of coördinated programs. Other countries such as the sheikdoms of the Persian Gulf, Saudi Arabia and possibly Libya will-even on a medium-term basis-not be able to absorb the additional purchasing power within their own frontiers. They will, in other words, not increase their imports and consequently not bring about an increase in demand for export goods; they will invest their monetary capital in other countries rather than spend it. This will result at first in the accumulation of huge, readily disposable amounts running in billions, which could well flow back to the industrialized countries as capital imports. Such amounts might also be made available to countries of the Third World which in turn could use them for buying export goods from industrialized countries.
The situation on the part of the oil-consuming countries is equally differentiated. Some of the industrialized countries are more seriously affected than others, the degree varying primarily according to the extent to which they are dependent upon oil imports and according to the previous position of their current account and their balance of payments in general, and finally, according to their export capacity. Countries with a current account surplus, i.e., countries which have so far not used their entire national product internally for consumption and investment, but have made part of it available to other countries, thereby acquiring monetary claims, are hardly expected to run into difficulties. This applies, for instance, to the Federal Republic of Germany, whose current account surplus is quite substantial. For the Federal Republic, even the increase in oil prices will presumably not result in a current account deficit. German export industries enjoy a high reputation in potential purchasing countries. In addition, the Deutsche Mark is backed by a very large monetary reserve so that any lean period could easily be overcome. The effects of the increases in oil prices on income will of course also be felt by countries with a strong monetary position.
Other countries whose balance of payments have hitherto been in equilibrium or have already shown a deficit, particularly a number of less-developed countries, may well run up such huge deficits on current account that they might very shortly be facing enormous financial gaps resulting in an immediate and urgent necessity either to step up exports or to reduce imports. Such a situation is extremely dangerous for the future of the whole world economy. But it would be a great mistake if each individual country within the group of oil consumers were now selfishly to try to solve its payments and employment problems by pursuing beggar-my-neighbor policies at the expense of its trading partners. Any relapse into largely bilateral bartering would be just as dangerous as any reintroduction of trade restrictions. Nor should there be any competitive devaluation. After the Washington Conference, we can only hope that, however justified the concern about specific national problems may be, the common interest will not be forgotten. Otherwise, an arrival at the point of no return cannot be ruled out.
The present flexibility of exchange rates may well facilitate the adjustment process, but it should not be allowed to lead to excessive downward floating. Any current account deficits that would remain if a compensatory increase in exports cannot be achieved at short notice might well be financed from the surpluses of oil-producing countries. The point would be to release capital flows of more or less the same size as the various current account deficits of oil-consuming countries. A large-scale concentration of investments in a few individual countries would create well-nigh insurmountable difficulties both for the latter countries and for those which fail to balance their current accounts for lack of capital imports. Should the earnings of the oil-producing countries, rather than being invested on a long-term basis, remain "mobile" as a whole and be capable of being moved at short notice out of one currency into another and from one investment outlet to the next, there would furthermore be new serious risks for the monetary situation.
Of course, a certain portion of the investment-seeking oil funds will find its way to consumer countries automatically: in the form of direct investments, investments in securities, credits and bank deposits, either direct or via existing or new Euromarkets. Countries which would not automatically obtain an adequate share of these monies might remedy the situation by offering investment incentives or possibly by issuing foreign currency bonds, though there should be no free-for-all in the field of foreign bonds.
If, in the choice of countries in which to invest oil funds, preference were to be given to those with strong currencies, the latters' private sector investment outlets might prove insufficient. If so, it might be advisable to examine whether public investment outlets could be expanded. Above all, the countries concerned would have to ask themselves whether they were in a position to act as "marshalling yards" for international capital flows. They would have to try to offset inflowing liquidity by capital exports and this might entail the willingness to accept financial risks. Two countries that might be capable of undertaking this very difficult task could, for instance, be the United States or even the Federal Republic of Germany. Such a "marshalling yard" could help to direct the capital outflow selectively into those countries which-as a result of the oil crisis-are faced with major balance-of-payments problems. In the first place, however, this task would be a matter to be tackled by multinational institutions.
No matter what action the industrialized countries may take to wipe out balance-of-payments current-account deficits, the fundamental problem as such will remain unsolved. A process of shifts in patterns of income has been set in motion on a huge scale. The questions facing the industrialized countries are what strategy they should reasonably pursue and whether they are well advised to rely on capital imports in attempting to come to a long-term solution of their internal employment and financial problems. During a transitional phase this surely should be possible and might even be necessary in order to give the industrialized countries concerned time to adapt.
What will probably be unavoidable in the long run is a process of structural changes which would, among other things, increase the export capacity of those industrialized countries whose exports now flow at a low level. This results from the pressure of the Third World's dire needs. These would increase if the now-beginning process of transfers of purchasing power were to be strictly confined to industrialized countries on the one hand and oil countries on the other, especially if the released investment-seeking oil billions flow back in the opposite direction. The developing countries are in danger of being left high and dry. Their very existence is threatened by increasing oil prices because they do not have as high a net product as the industrialized countries to draw upon. For those who view the prosperity gap between the rich and the poor of this world with concern, every effort must be made to see that the oil producers place that portion of their additional purchasing power which they are unable to absorb at home directly at the disposal of developing countries to make effective the latter's demand for imports from industrialized countries.
The international organizations, too, will have to join in the efforts to channel the investment-seeking funds of oil countries to where they are needed to lessen the differences between levels of income. The International Monetary Fund (IMF), the World Bank, the International Development Agency and the regional development banks will in the future have to rely on those countries much more than before when seeking to obtain lending funds, even if-as I hope-the industrialized countries do not reduce their development assistance below its present level.
In the long run, therefore, the oil countries will also be facing the problem which now is accompanying development assistance rendered by industrialized countries. Mere financing of credit to developing countries will not be sufficient in the long run. The rate at which most countries of the Third World are accumulating capital resources of their own is so low that it is hardly possible to set in motion an accelerated process of self-development merely by offering them assistance in the form of credit, because most of their gain in productivity is eroded by their commitments to pay interest on, and repay the principal of, loans.
Thus, in the long run, there will have to be more genuine transfers of real resources in order to provide the less-developed nations with a genuine basis for continued self-development and thus also to decrease social and political tension. The oil-producing countries are now successfully making the most of their market position for obtaining a larger share, in real terms, in the world product. This share is considerably larger than all the development aid being provided by industrialized countries. Thus, some of the oil producers are automatically beginning to share in responsibility, a responsibility that they cannot shirk.
Obviously, the developments sparked by the increase in oil prices can hardly be brought under control unless there is a change in consciousness of the matter in public opinion. What is needed is a fundamental change in patterns of behavior both among individuals and among nations. This also applies to the question of a less wasteful use of each country's own resources and its attitude toward economic growth. The richer nations will have to realize that the product of national labor will not invariably be fully available for domestic distribution. It will not be easy to make the general public lastingly conscious of this fact.
Developments along these lines have already started in Europe. Of course, the model of the European Community is not capable of being applied automatically to other parts of the world. European integration is an historically necessary process that must be measured against European criteria. In principle there is already a substantial levelling out of differences in resources between the countries of Western Europe. The huge gap between incomes in the industrial centers on the line from Hamburg via the Rhine to the Rhône, including Northern Italy, on the one hand, and major parts of Southern Italy, Ireland and Scotland on the other, will stand up to a comparison with the corresponding gap between certain industrialized countries and certain developing countries. The United States has a comparable North-South problem. From the very outset of the move toward European unity there was no doubt whatsoever regarding the fact that political integration would have to keep step with a planned and controlled transfer of funds from the stronger to the weaker nations. Up to and including 1973, for instance, the Federal Republic of Germany, the main provider of finance for the European Community, had paid some DM9.5 billion-or approximately $3.5 billion at the current rate of exchange-net to other nations out of tax revenues. My country, whose financial capacity should not be overtaxed in the process, looks upon such payments as the cost of the integration venture.
On a worldwide scale, it will not be possible to reduce the differences in the levels of wealth unless the more advanced industrialized nations develop their own resources in close coördination with one another and with the primary-producing countries. If they fail to do so, the result might be social storms which could even seriously jeopardize world peace. If it can be assumed that most of the developed countries with a high level of prosperity have a great preference for peace, and that most of the less-developed countries have a high preference for increased wealth, there must be a level on which a convergence of preferences would stabilize the international political situation at a higher level of prosperity for both the wealthier and currently poorer countries. It would, therefore, serve the efforts to maintain peace on a worldwide scale if a comprehensive policy of economic coöperation were to be pursued rather than a policy of economic "apartheid."
Seen from this angle, time is short for working out sensible new rules for monetary affairs and trade. And seen from this angle, the cost of the peaceful development of the world economy will now have to be charged and paid.