The Quest for World Prosperity

"There are in reality two worlds today: One -- rich, industrial, urban, literate, and consumption-oriented. The other -- poor, agrarian, rural, malnourished, largely illiterate, and survival-oriented. The gap between these two worlds should be closing; unfortunately, it is increasing."

Richard Nixon claims he wants to create a “Generation of Peace” -- but so far Mr. Nixon has given our nation four years of war. He is, in fact, the only President who has not had one day of peace during his entire four years of office.

But even when the fighting does stop, a “Generation of Peace” will not arrive automatically. For peace is not just the absence of fighting; a phoenix does not rise out of the ashes of bomb craters or out of the wastelands of want. Peace -- if it is to be lasting -- must be based on economic prosperity coupled with justice.

Prosperity, like justice, liberates creativity. It gives hope and incentive. Men can raise their families decently and plan for the future. Prosperity with justice creates harmony between nations and removes the causes of war.

Today, the economic policy of the United States Government is in disarray. It has little cohesion and less direction. It provides no foundation for economic justice and lasting peace.

We are overwhelmed with war plans. The Joint Chiefs prepare for every military contingency. We have numerous plans for military destruction.

But there is not even one plan for economic reconstruction at home, for economic alliances abroad.

The results of this neglect have been disastrous:

  • Our domestic economy suffers from high unemployment and soaring inflation;
  • Our trade balance is the worst in our history;
  • Free trade is threatened by waves of protectionism;
  • We have become isolated from economically powerful allies; and
  • We face the danger of a world divided into hostile trading blocs.
  • As a consequence, our foreign economic policy needs a rescue operation.

    We must lose no time in developing a comprehensive economic policy -- a policy which must include:

    • The expansion of our trade;
    • Realistic new economic alliances with the European Common Market, Japan and other industrialized countries;
    • Vigorous efforts to narrow the income gap between rich and poor nations;
    • Cooperation in building a strong yet flexible world monetary policy;
    • Most importantly, a full employment domestically, coupled with help to workers and businesses displaced by imports or conversion.

    The need for such a new policy is urgent. It must be drawn up at the highest level.

    To formulate policies like these we need economic Joint Chiefs of Staff just as we have a military Joint Chiefs of Staff.

    The Economic Joint Chiefs of Staff should consist of members appropriate to the task -- the Secretaries of State, Treasury, Agriculture, Commerce, and Labor, the Director of the Office of Management and Budget, and the Chairman of the Council of Economic Advisers.

    And the President, himself, should direct their formulation of our foreign economic policy.

    The policies drawn by the Economic Joint Chiefs of Staff should be carried out primarily by two departments.

    The first is the Department of State, where a new Undersecretary of State for Economic Affairs should be established. This responsibility is now relegated to a Deputy Undersecretary; and Nixon has shown so little concern for our International economic relations that he has permitted even this office to stand vacant for 5 months.

    Second -- but of special importance here -- is the Treasury Department. Alexander Hamilton would feel at home in the Treasury Department today because it has hardly changed since he left it. Reorganizing and refocusing our Treasury Department is long overdue.

    We must avoid any repetition of a John Connally bullying his way through the world’s capitols with a “holler diplomacy.” And we must also avoid the misdirection of a George Schultz whose 5 percent unemployment policy undercuts any trade expansion.

    Reorganization should begin with the creation of a new Undersecretary for International Economic Affairs. He would devote his full time to our international monetary and trade policies. This new Undersecretary of the Treasury would complement the State Department’s Undersecretary for Economic Affairs. Together, they would coordinate the work of all government agencies dealing with foreign economics.

    The restructured Treasury Department would place new emphasis on U.S. participation in multilateral development assistance. The. United States needs to expand its contributions to the World Bank and the Regional Development Banks. These Banks hold a critical key to the economic redevelopment of third world countries.

    Our participation in these agencies should be not as a Scrooge but as a constructive and responsible member of the international community, and our approval of loans made by these institutions should be based on economic development rather than on immediate U.S. political considerations. We should realize that a healthy world economic environment advances our environment too. Additionally, there should be a new Assistant Secretary of the Treasury who can devote full time to strengthening our contributions in these areas.

    This new structure and new people must seek to impart an entirely new philosophy and perspective in our State and Treasury Departments. There must be a new dedication to formulating and executing an economic policy that helps build prosperity around the world.

    George McGovern and I will establish this new structure in our State and Treasury Departments and use it to repair the neglect of the past four years, and to build an international economic policy for prosperity and peace.

    To achieve these objectives we need not only new organization and new people; we must begin with the repair of our domestic economic policy.

    Full participation in a healthy world economy enhances our own domestic prosperity. A free flow of trade helps our workers have better jobs -- at higher wages -- in high productivity industries. Free trade also helps consumers get lower prices and contributes to reducing inflation.

    Conversely, shielding our industry from the discipline of the world market place, isolates our domestic price level from world taxes, encourages domestic inflation, reduces exports still further and in the long run promotes inefficiency and obsolescence.

    But we will realize the advantages of expanded participation in the world economy -- only if we have both full employment at home and adequate programs to help workers and businessmen adjust to economic change.

    Under Mr. Nixon we have had neither. Moreover, we have had a prolonged period of serious inflation which has priced our goods out of the world market and helped bring a flood of imports into the United States.

    These increased imports have taken away jobs of American workers. The movement of capital abroad has also cost American workers their jobs. It does not have to be this way. And with George McGovern’s economic programs it will not be this way.

    Under the McGovern full employment economy, consumer demand will be higher, and more workers will be employed producing for the domestic market.

    And in a competitive economy, not hampered by inflation, more workers would be employed producing goods for export.

    In such an economy, programs of adjustment assistance could help workers move from old jobs to new and better jobs.

    And restrictions on imports and international movement of capital could be relaxed.

    Now this nation has no program of assistance to help workers find new jobs whenever old jobs are lost. The costs of business adjustment are now borne just by those who lose their jobs. This is unfair and inhumane. Both business and Government have a responsibility to the workers in these cases. And this responsibility must be fulfilled whether the jobs are lost because of defense cutbacks or plant relocations or import competition.

    Job loss is particularly acute today because of the growth of multinational corporations. These corporations can easily move their plants from country to country. Indeed, their size and power invites comparisons with nations themselves. The gross sales of Standard Oil or IBM, for example, is greater than the gross national product of Chile, Ireland, or Israel or Peru. Of course, these companies can and do contribute to a more efficient world economy. But they must be brought under control and prevented from heedlessly destroying the economies of entire communities.

    As a start, I suggest the following measures to bring these corporations under control.

    First, a corporation which relocates a plant, whether the move is to another community or to another country, would be required by law to do the following:

    • It should notify its employees as soon as the decisions to move are made.
    • It should offer employees the first chance at other jobs within the company. This must apply to blue collar as well as white collar employees. And there should be a three- to six-month “cooling off” period after the initial announcement. During that period the move would be stayed while the re-training and relocation efforts were intensively pursued.
    • The corporation should provide the retraining of employees.
    • And the corporation should provide for early retirement for employees nearing retirement age who cannot readily be retrained or re-employed.
    • Finally there must be legislation protecting the pension rights of such employees -- protection not only needed in this context, but generally.

    The responsibility here is not of business alone. Government too must assume more responsibility. Today the Government job training and job placement programs are haphazard and ineffective. And virtually nothing is done to bring new industry into communities.

    We have a multitude of agencies to deal with transportation resources, power resources, communication resources and business resources. Why shouldn’t we also try to preserve human resources?

    We have an Environmental Protection Agency. We require exhaustive studies before a pipeline can be built across Alaska to make sure we do not upset the living, grazing, and breeding habits of the caribou. We should take at least as much interest in the impact on human beings of plant shutdowns, relocations, and other “catastrophes” in the business community.

    I believe we should create a Human Protection Agency. This agency would deal with alleviating job losses from relocation or cutbacks. This agency would see that the relocation measures I set forth are carried out. And it would initiate effective programs for bringing new industries into communities which suffer relocation losses.

    We also need to regulate the multinational corporation through international treaties and conventions. In this way we could prevent allocation of markets by the multinational corporations, which undermines needed competition. We could prevent destructive bidding among countries for corporations. And we could prevent corporate interference in foreign policies.

    These measures therefore: to make multinational corporations responsible and, most important, to secure full employment at home -- are essential underpinnings of an open economy which can move us toward freer trade and the removal of existing restrictions on the export of capital.

    America’s Role in a Changing World EconomyWhen we turn to our foreign policy, we see the results of years of narrow vision and neglected opportunity.

    The world of 1972 is far different from the world of 1950. The world is no longer divided into two monolithic power blocs centering on the United States and the Soviet Union. Now new centers of power have emerged in the common market countries and in Japan -- power based on economic rather than military strength.

    We must understand these new centers of economic power in the context of our free world strategy. Western Europe, Japan and many other nations look upon as [duplication omitted] a basic source of defensive strength against attack.

    This places a heavy burden upon us, but is [duplication omitted] infinitely preferable to the further spread of nuclear weapons and the burgeoning of competitive military establishments. Yet these security arrangements will endure only so long as our allies trust us to use power wisely.

    Trade is important to our allies. Our allies see our mistakes in trade or monetary policy as major shortcomings of our foreign policy. When we use our economic power to extract shortrun gains for ourselves, when we disregard the views of other nations, we face the danger that the free flow of world trade will suffer and the world will divide into hostile trading blocs.

    We also face the even greater danger that our mutual security arrangements will break down because our allies no longer trust in our leadership and our wise use of power.

    Mr. Nixon’s policies have not reflected comprehension of these facts. Pursuit of accommodations with Russia and China, is welcome, but we cannot afford to do this in ways which damage relations with allies with whom we had close ties, some economic and commerical [sic, “commercial”], some rooted in similar concepts of democracy and freedom.

    Europe is a case in point. Mr. Nixon has badly neglected our economic relations with Europe.

    Robert Schaetzel, our long-time American Ambassador to the European Communities, who retired last week, felt compelled to speak out on this. “There has been a steady deterioration of relations between the United States and Europe,” he said. And he called our practice of negotiation by confrontation “madness.”

    Another error was our failure to consult with the Japanese in advance of Mr. Nixon’s trip to China. We had been pressing Japan to have as little as possible to do with China, whom Mr. Nixon called “our mutual enemy.” We opened Premier Eisaku Sato to domestic attack for placing U.S. interests above those of Japan. Then, without consultation, we made an about face in our own policy. Since then we have put great pressure on the Japanese to undertake politically difficult actions such as the revaluation of the yen and the limitation of their textile exports.

    We ask the Japanese to understand our domestic problems, yet show little understanding of theirs.

    Not surprisingly [sic, “surprisingly”], Japanese willingness to coordinate its policy with ours has now been greatly diminished. On February 25, 1971, Mr. Nixon said, “Japan is our most important ally.” But, Mr. Nixon policies have estranged that ally.

    Another serious estrangement has been India. We ended our 25-year friendship with India apparently in our effort to please China, whose protege, Pakistan, was engaged in bloody repression and suicidal genocide in Bangladesh. Mr. Nixon cut off aid to India and adopted an unfriendly political attitude which has alienated the largest democratic country in Asia.

    In Africa, too, Mr. Nixon has estranged African countries by favoring the racist Government of Rhodesia at the behest of big chrome and special steel interests. And, even our relationship with our neighbor, Canada, has been strained by Mr. Nixon. The Canadians have bitterly resented the protectionist measures Nixon sought to impose to make Canada help pay for Nixon’s inflationary war.

    Progress toward better relations with Russia and China could have been made in a context of mutual consultation and strengthened trust among our long-standing allies. But that was not the Nixon way. Mr. Nixon has treated friends like adversaries without being able to turn adversaries into friends. He has created distrust and suspicion and missed the opportunity to strengthen ties with existing allies and forge new ones with the developing nations of the world.

    No wonder that Hamilton Fish Armstrong in the current issue of “Foreign Affairs” says that America has never been so isolated.

    George McGovern and I will work to rebuild our ties both with the industrialized nations of Europe and Japan and with the less developed countries. We will seek to repair the damage Nixon has created. We will work for expanded trade with the markets of the world. The Kennedy Round, negotiated during the 1960’s provided important reductions in tariffs on manufactured goods. We must now seek similar progress in removing non-tariff barriers, in reducing restrictions on trade in agricultural products and in removing barriers to our agricultural exports. Here, too, are areas too long neglected by Mr. Nixon.

    While building our trade with other wealthy nations, we must also find new approaches to our relations with less developed countries.

    There are in reality two worlds today: One -- rich, industrial, urban, literate, and consumption-oriented. The other -- poor, agrarian, rural, malnourished, largely illiterate, and survival-oriented. The gap between these two worlds should be closing; unfortunately, it is increasing.

    The Nixon administration promised a new approach to foreign assistance. Mr. Nixon said he would seek a “new conception foundation that made sense.” He promised a program of security assistance, humanitarian assistance, and development assistance. But, here again, he broke his promise.

    Instead of humanitarian assistance and economic development, Mr. Nixon has promoted military power in countries of no real importance to our national defense. His humanitarian assistance provided too little or too late in Biafra, Burundi and Bangladesh. Economic development assistance has been emasculated.

    The consequences of this neglect are grave. A world in which no progress is being made toward eliminating the vast inequalities between nations cannot be a secure or peaceful world. The harvest of inaction is political instability, militance, civil war, anarchy and aggression. Addressing ourselves to this problem, therefore, is not only the pursuit of social justice, but a matter of our deepest self-interest and self-respect.

    I have already stressed the need to enlarge our participation in multilateral assistance programs. In regard to our bilateral aid efforts, the United States needs to return to doing in deed what Mr. Nixon now pretends to do in rhetoric. Our foreign aid today is not for development, as is proclaimed; it is for maintaining the political status quo. We promote counter-revolution.

    This year’s total aid budget, for instance, tells this tale. The total comes to more than $11 billion, of which $9-1/2 billion is programmed to be spent in various forms of military aid. Only $1.5 billion is for direct economic grants and loans to friends and allies.

    Our policies toward the third world have been dominated by the fallacy that our national interests there are identical to our interests in Europe, that revolutions there somehow endanger our national security, and that any move on the part of those countries toward closer relations with Russia or China threatens the United States.

    On the basis of this fallacious reasoning, we fuel regional conflicts, underwrite and become involved in political factions of all sorts and disburse munitions and weaponry wholesale. Most of the world has become a dumping ground for U.S. ships, tanks and planes, which we label as excess to our needs.

    Half of the recipients of our aid are governed by the military or permit no internal opposition or dissent. Yet, we are the prop of these governments.

    As scholar Richard Barnett succinctly put it, “As long as the United States views the successes of revolutionary governments as foreign policy defeats, we will continue to be an enemy of development.”

    Our aid policy must be a reflection of the original values of our society. We must revive traditional values of fairness, generosity and justice. Then we shall be able to really help the struggling poor of the world. And we would, in turn, help ourselves by strengthening more countries to participate in the world economy.

    Our long-term bilateral loans made in the name of promoting economic development should be passed over entirely to the World Bank, the Asian Development Bank, the Inter-American Development Bank, and other multilateral lending agencies which were set up for this purpose. By ensuring substantial U.S. contributions to these agencies, we could set a worthy example of international responsibility and beckon other rich nations to share the lead with us.

    There are also other approaches. The current negotiations on international monetary reform provide an opportunity to link a portion of new internationally created reserves to development assistance. This would be an important new source of assistance for the less developed countries and would give them an important additional stake in monetary reform.

    Multinational aid is important, but free trade could provide even more valuable assistance. Our consumers, too, would benefit. Our failure to open opportunities for trade with less developed countries damages both their economic well-being and ours. In the last five years our imports from other industrial countries have grown $16 billion. Imports from the less developed world have grown only $4 billion. These countries want to help themselves. They want to overcome their dependence on aid. They can do so only if world markets are opened to their exports.

    The international monetary system with the strength and flexibility needed to support world trade and productive flows of investment must also be rebuilt.

    It has long been recognized that the international monetary system established at Bretton Woods in 1944 is not adequate to the world of 1972. Prosperous trading relations require that currencies be exchanged for one another at values reflecting the real worth of those currencies for purchasing goods and services. Basic changes in the economic circumstances of nations must be reflected in changes in the respective value of their currencies.

    The Nixon administration waited far too long before acknowledging that the international value of the dollar required adjustment. This delay permitted a crisis situation to develop.

    Having waited until the monetary crisis was upon it, the administration had little choice but to suspend convertibility of the dollar in August 1971. But the months of highly publicized bullying by Secretary Connally which followed were hardly necessary in order to reach agreement on an interim set of exchange rates.

    The realities of the situation included the necessity of devaluing the dollar. This was made clear to Secretary Connally by Pierre-Paul Schweitzer, the capable Managing Director of the International Monetary Fund. Even though Mr. Schweitzer’s advice was entirely correct and eventually had to be adopted, John Connally and other Nixon officials did not like being told the truth. Today, the Nixon administration is still pursuing a personal vendetta against Schweitzer by opposing his reappointment as Managing Director.

    In recent weeks, the administration has at last put forward some constructive proposals for international monetary reform. One can only welcome these long-delayed proposals. But this is only the beginning. We face a long period of difficult and complicated negotiations. Surely these negotiations would proceed more smoothly if we called off the petty personal vendetta against Schweitzer and conducted our negotiations in a mature and professional fashion.

    The matters I have touched on today demonstrate the failures of our foreign economic policy. They illustrate also the vast range of opportunities before the United States. They underscore the need for change.

    Too long we have planned for war. Too long we have carried out war.

    The job that needs to be done is to win the peace. The economic plans I have talked about today are plans to win the peace -- plans to advance world prosperity.

    I believe we still have the opportunity to create a world in which trade moves more freely, a world in which barriers against both people and goods are struck down -- a world of interchange and movement, a world of harmony and enterprise and of the satisfaction of men’s needs.

    This is the vision that George McGovern and I have.

    This is what our world can be. And in that quest, we ask your help.

Peace requires the simple but powerful recognition that what we have in common as human beings is more important and crucial than what divides us.
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Sargent Shriver
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