FIRST DRAFT OECD SPEECH: THE IMPERATIVE FOR GROWTH

THE DEMOCRACIES WE REPRESENT FACE TWO GREAT CHALLENGES,

WITHIN THE INDUSTRIAL SOCIETIES, DISSATISFACTION WITH
THE WAY IN WHICH OUR ECONOMIES WORK HAS REACHED LEVELS
UNKNOWN SINCE THE GREAT DEPRESSION. THIS HAS BECOME THE
MOST URGENT POLITICAL PROBLEM IN ALL OF OUR COUNTRIES.

BETWEEN THE DEVELOPED AND DEVELOPING COUNTRIES AN
INCREASINGLY ADVERSARY RELATIONSHIP IS DEVELOPING: THIS IS
BECOMING THE MOST URGENT POLITICAL PROBLEM IN THE WORLD.

THERE IS A COMMON ELEMENT BETWEEN THE TWO: A SHARPENING IS CAUSED
STRUGGLE TO CHANGE THE CURRENT DISTRIBUTION OF ECONOMIC
BENEFIT.

WITHIN THE INDUSTRIAL WORLD THE SIGNS OF THIS STRUGGLE
ARE EVERYWHERE. WE SEE IT IN THE INFLATION THAT HAS BECOME
THE HALLMARK OF OUR SOCIETIES; OUR INFLATION IS LARGELY THE
RESULT OF ACCELERATING EFFORTS BY CLASSES AND INTEREST

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GROUPS TO IMPROVE OR DEFEND THEIR SHARE OF AVAILABLE INCOME
BY RAISING PRICES AND WAGES. WE SEE IT IN A DECREASING
WILLINGNESS TO ACCEPT THE BURDENS OF NEEDED EXTERNAL
EXPENDITURE AND ASSISTANCE TO POOR COUNTRIES. WE SEE IT IN
THE DECLINING PORTION OF THEIR INCOME THAT MANY OF THE
INDUSTRIAL DEMOCRACIES ARE WILLING TO SAVE AND INVEST IN
FUTURE GROWTH.

BETWEEN THE DEVELOPING AND THE DEVELOPED COUNTRIES THE
IMAGE IS EVEN SHARPER. MORE AND MORE, DEVELOPING COUNTRIES
ARE INSISTING ON REDISTRIBUTION OF THE WORLD'S WEALTH AND
INCOME NOT ONLY AS THEIR RIGHT BUT AS THE CENTRAL OBJECTIVE
OF THE INTERNATIONAL ECONOMIC SYSTEM. MORE AND MORE, THE
RICH COUNTRIES ARE REACTING DEFENSIVELY.

THE POLITICAL IMPLICATIONS ARE PROFOUND. THE INDUSTRIAL
DEMOCRACIES WILL LOSE THEIR AUTHORITY AND THEIR ABILITY TO
ACT UPON THEIR ENVIRONMENT IF INCREASINGLY THEY ARE INVOLVED
IN INTERNAL AND EXTERNAL CONTESTATIONS OVER THE DISTRIBUTION
OF ECONOMIC BENEFIT. OUR SENSE OF PURPOSE WILL FALTER. OUR

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CONFIDENCE IN OUR BASIC INSTITUTIONS WILL DECAY. THE MORAL BASIS OF OUR POSITION IN THE WORLD WILL ERODE.

WE CANNOT SOLVE THE INTERNAL AND EXTERNAL CHALLENGES FOR REDISTRIBUTION EXCEPT IN AN ENVIRONMENT OF GROWTH. OUR OWN HISTORY CONFIRMS THAT THE PROBLEMS OF GROWTH AND DISTRIBUTION ARE NOT IN TENSION. OUR POLITICAL AND ECONOMIC STRENGTH DERIVES FROM OUR SUCCESS IN MEETING THE PROBLEM OF GROWTH. ONLY AS STRONG, GROWING ECONOMIES AND SELF CONFIDENT SOCIETIES CAN THE COUNTRIES OF THE OECD REALIZE THEIR POTENTIAL FOR CONTRIBUTING TO WORLD SECURITY AND PROSPERITY.

EQUALLY, ECONOMIC EXPANSION IN THE INDUSTRIAL WORLD IS THE NECESSARY COMPLEMENT TO BUILDING A BETTER RELATIONSHIP WITH THE DEVELOPING COUNTRIES. ONLY IN AN EXPANDING ECONOMY IS THERE POTENTIAL FOR AN INCREASED TRANSFER OF RESOURCES THROUGH BILATERAL AND MULTILATERAL AID PROGRAMS. ONLY WITH SUSTAINED GROWTH IN THE INDUSTRIAL WORLD WILL THERE BE THE LONG-TERM RISING MARKET FOR THE RAW MATERIALS, FOR THE MANUFACTURES, FOR THE AGRICULTURAL PRODUCTS ON WHICH THE

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FUTURE PROSPERITY OF THE DEVELOPING COUNTRIES DEPENDS.

ONLY WITH INCREASING INCOME FOR BOTH DEVELOPING AND DEVELOPED COUNTRIES WILL THERE BE A CLIMATE IN WHICH NEGOTIATIONS ON THE HARD ISSUES OF RAW MATERIALS, TRADE AND INVESTMENT CAN SUCCEED.

THUS THIS ORGANIZATION HAS TWO GREAT TASKS:

- TO HELP OUR NATIONS RETURN TO HIGH GROWTH; AND

- TO USE OUR PROSPERITY AND COHESION TO CONSTRUCT A MORE BALANCED AND EQUITABLE WORLD ECONOMIC ORDER.

## GROWTH WITHIN THE OECD

IN THE PAST YEAR, THE COUNTRIES OF THE OECD HAVE RESPONDED COOPERATIVELY AND WITH CONSIDERABLE SUCCESS TO THE UNPRECEDENTED CHALLENGE OF SIMULTANEOUS RECESSION, INFLATION

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CVD

AND ENERGY CRISIS. THE RECORD IS ENCOURAGING:

-- WE CONSULTED CLOSELY ON DOMESTIC POLICY CHANGES IN TAKING ACTION AGAINST THIS RECESSION.

-- WE AVOIDED THE TEMPTATION OF UNILATERAL TRADE OR EXCHANGE RATE MEASURES THAT CAN ONLY BE SELF-DEFEATING. THE OECD TRADE PLEDGE HAS PLAYED A CENTRAL ROLE IN THIS PROCESS AND I FULLY SUPPORT ITS EXTENSION FOR ANOTHER YEAR.

-- WE EVOLVED IMAGINATIVE NEW FORMS OF INTERNATIONAL COOPERATION IN RESPONSE TO THE ENERGY CRISIS.

IT IS NOW CRITICAL TO RETURN TO STABLE, LONG-TERM GROWTH -- A CHALLENGE TO WHICH WE MUST ALSO RESPOND COOPERATIVELY AND HOPEFULLY WITH EQUAL SUCCESS. THE BASIS FOR AN UPSWING IN THE REMAINDER OF THIS YEAR IS SET AND OUR EFFORTS AT SHORT-TERM POLICY COORDINATION SHOULD NOW TURN TO MANAGING THE RECOVERY IN A WAY THAT WILL KEEP IT BALANCED. THE FINANCE MINISTERS WILL DISCUSS THIS TASK TOMORROW, AND I

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KNOW SECRETARY SIMON WILL HAVE PROPOSALS TO MAKE.

YET THERE ARE SERIOUS CONCERNS RELATING TO OUR ABILITY
TO DESIGN OUR LONGER-TERM APPROACH TO THE PROBLEM OF SUSTAINED,
STABLE GROWTH. WE HAVE AS YET NO CLEAR RESPONSE TO THESE
CONCERNS.

HOW CAN THE INDUSTRIAL SOCIETIES CREATE THE CONDITIONS
NECESSARY FOR THE MASSIVE CAPITAL FORMATION REQUIRED OVER
THE NEXT DECADE, NOT ONLY FOR AN ADEQUATE RATE OF GROWTH, BUT
FOR A NEW QUALITY OF GROWTH? REALISTICALLY, OUR PEOPLE'S
REQUIREMENT FOR A BETTER STANDARD OF LIVING, AN EQUITABLE
DISTRIBUTION OF INCOME AND HIGHER QUALITY OF LIFE IN TERMS
OF HEALTH, SAFETY, CLEAN AIR, WATER AND BETTER USE OF SPACE
CAN BE MET ONLY BY A PARTICULARLY CAPITAL INTENSIVE GROWTH--
NOT A CESSATION OF GROWTH. WHAT POLICIES ARE NEEDED TO MEET
THIS CHALLENGE?

HOW CAN WE RESTORE THE NON-INFLATIONARY ENVIRONMENT
ESSENTIAL FOR SUSTAINED GROWTH? NO FACTOR IS MORE DESTRUCTIVE

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OF THE ESSENTIAL ELEMENT OF GROWTH, CAPITAL FORMATION, THAN
INFLATION.

HOW CAN WE FACILITATE A RESTRUCTURING OF OUR SECTORAL PATTERN OF GROWTH IF SOME OF THE LEADING SECTORS OF THE PAST, SUCH AS VEHICLES AND RESIDENTIAL CONSTRUCTION, ARE TO BE LESS CENTRAL IN THE FUTURE?

THESE ARE FUNDAMENTAL QUESTIONS THAT TRANSCEND OUR NATIONAL ECONOMIES. OUR VISION, OUR ANALYTIC CAPACITY, OUR PROBLEM-SOLVING HAS NOT SO FAR BEEN EQUAL TO THESE CHALLENGES.

WE CANNOT, THEREFORE, WAIT TO SEPARATELY EXPERIENCE THE RESULTS OF OUR FAILURE TO RESOLVE THESE ISSUES. THIS WOULD BE BOTH A FAILURE OF POLITICAL LEADERSHIP AND OF THE INTERNA-TIONAL SYSTEM. WE MUST ACT NOW TO INFLUENCE EVENTS OR FACE THE RISK OF BEING DEFEATED BY THEM.

THIS ORGANIZATION IS THE RIGHT PLACE TO BRING TOGETHER OUR BEST GOVERNMENTAL AND PRIVATE TALENT TO EXAMINE THESE PROBLEMS OF LONG TERM, BALANCED GROWTH AND TO DEVELOP

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STRATEGIES THAT WOULD HELP ALL OUR EFFORTS IN MEETING THEM.

I ENVISAGE A HIGH-LEVEL, TEMPORARY GROUP--NOT NECESSARILY A COMMITTEE OF THE WHOLE--THAT WOULD WORK CLOSELY WITH THE ECONOMIC POLICY COMMITTEE, WHICH HAS UNDERTAKEN TO DEVELOP A FIVE-YEAR PROBLEM-ORIENTED PROJECTION OF OECD ECONOMIES, INCLUDING GROWTH PROSPECTS, INVESTMENT REQUIREMENTS, CHANGING TRADE PATTERNS AND THE EFFECTS OF INFLATION. ITS CHARGE WOULD BE NO LESS THAN TO DEVELOP A STRATEGY FOR HIGH GROWTH AND A NEW QUALITY OF GROWTH -- FOR THE LATE 1970S AND EARLY 1980S. IT SHOULD REPORT WITHIN A YEAR TO THE NEXT MINISTERIAL MEETING.

**THE CHALLENGE OF COOPERATION WITH THE DEVELOPING WORLD**

FOR THE DEVELOPING COUNTRIES, GROWTH IS NOT JUST AN OBJECTIVE OF POLICY, HOWEVER CRITICAL TO NATIONAL PURPOSE; IT IS A UNIFYING POLITICAL EXPERIENCE. DESPITE THEIR EXTRAORDINARY DIVERSITY, DESPITE THEIR WIDE VARIATIONS OF ECONOMIC ATTAINMENT AND POTENTIAL, THE SOLIDARITY OF THE DEVELOPING COUNTRIES IN THEIR ASPIRATION FOR GROWTH IS A CENTRAL

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POLITICAL FACT OF THIS ERA.

YET THE ECONOMIC MECHANISMS BY WHICH GROWTH CAN BE REALIZED AND TRANSMITTED CANNOT BE GROUPED UNDER A SINGLE UNIFYING PRINCIPLE OR INSTITUTION. FOR THE POOREST COUNTRIES, LARGE-SCALE CAPITAL TRANSFERS ARE THE MOST URGENT NEED. FOR RAW MATERIAL PRODUCERS, IT IS MORE STABLE MARKETS WITH HIGHER GROWTH. FOR THE RAPIDLY INDUSTRIALIZING, IT IS ACCESS TO CAPITAL MARKETS AND TRADE OPPORTUNITIES. FOR THE OIL PRODUCERS, IT IS TRANSFER OF TECHNOLOGY AND SKILLS. FOR A WIDE RANGE OF DEVELOPING COUNTRIES, IT IS INCREASED AGRICULTURAL PRODUCTIVITY.

THE **POLITICAL IMPERATIVE** FOR US NOW IS TO MAKE KNOWN TO THE DEVELOPING COUNTRIES THAT WE HAVE UNDERSTOOD THEIR ASPIRATIONS AND THAT WE RESPECT THEIR UNITY IN PURSUING THEM.

IN OVER A CENTURY OF SOCIAL REFORM SINCE THE CLOSE OF THE INDUSTRIAL REVOLUTION, THE GREAT INDUSTRIAL DEMOCRACIES HAVE PROVED THEIR DEDICATION TO THE MISSION OF RAISING THE

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STANDARD OF LIFE FOR PEOPLE LIVING IN POVERTY. DURING THREE DECADES OF INTERNATIONAL DEVELOPMENT COOPERATION WE HAVE ESTABLISHED THAT COMBATTING POVERTY IS OUR OBJECTIVE ABROAD AS WELL AS AT HOME.

VARYING VIEWS BETWEEN INDUSTRIALIZED AND DEVELOPING NATIONS ON THE MEANS FOR PURSUING THIS OBJECTIVE SHOULD NOT BE ALLOWED TO OBSCURE OUR IDENTITY OF PURPOSE. WERE THIS TO HAPPEN IT WOULD BE BOTH A POLITICAL TRAGEDY IN OUR RELATIONSHIPS AND A FAILURE OF OUR OWN HUMANITARIAN TRADITION. THIS MUST NOT BE ALLOWED TO HAPPEN.

WE MUST USE THIS MEETING TO ASSERT OUR DEDICATION WITHOUT RESERVATION TO HELPING DEVELOPING COUNTRIES MEET THEIR PEOPLE'S ASPIRATIONS FOR A BETTER LIFE. BY MAKING SUCH A SOLEMN POLITICAL DECLARATION NOW, WE SHOW THAT THIS MORAL OBLIGATION IS FREELY RECOGNIZED--NOT A RESPONSE TO CONFRONTATION.

THE ECONOMIC IMPERATIVE FOR US NOW IS TO ESTABLISH NEW LINKAGES BETWEEN THE GROWTH WE HOPE TO ACHIEVE IN OUR OWN

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SOCIETIES, AND THE GROWTH DEVELOPING COUNTRIES MUST ACHIEVE IN THEIRS. FOR THE GREATEST CONTRIBUTION THAT WE CAN MAKE TO SOLVING THE PROBLEM OF POVERTY IN THE WORLD IS/MAKE IT POSSIBLE FOR A WIDENING CIRCLE OF COUNTRIES TO ENGAGE, ON TERMS ACCEPTABLE TO BOTH SIDES, IN THE GROWTH OF THE INDUSTRIAL COUNTRIES.

FOR THIS WE NEED NOT JUST A BASIC COMMITMENT, BUT A PROGRAM OF ACTION.

## A PROGRAM OF ACTION

A PROGRAM OF ACTION SHOULD CONSIST NOT ONLY OF RECOGNIZING WHAT CAN BE ACHIEVED NOW--BUT IN DOING IT. IT IS THE SUCCESSION OF SPECIFIC ACCOMPLISHMENTS WHICH HAS SUSTAINED AND DEEPENED COOPERATION AMONG OECD COUNTRIES. IT IS THE INTERRUPTION OF SUCH A RECORD OF ACCOMPLISHMENTS WHICH THREATENS TO WEAKEN THE DIALOGUE BETWEEN INDUSTRIAL AND DEVELOPING COUNTRIES.

AN EFFECTIVE PROGRAM OF ACTION SHOULD REFLECT THE DIVERSITY OF THE PROBLEMS FACED BY DEVELOPING COUNTRIES. IT SHOULD BUILD ON THE MANY COMMUNITIES OF INTEREST THAT LINK

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SOME OR ALL OECD COUNTRIES WITH VARYING GROUPS OF DEVELOPING COUNTRIES--THE COMMUNITY OF INTEREST OF RAW MATERIAL PRODUCERS AND CONSUMERS, FOOD SURPLUS AND FOOD DEFICIT COUNTRIES, EXPORTERS OF TECHNOLOGY AND PRIVATE CAPITAL AND IMPORTERS OF BOTH.

## THE RAPIDLY-INDUSTRIALIZING COUNTRIES

THOSE DEVELOPING COUNTRIES WITH LARGE AND GROWING INDUSTRIAL SECTORS, PARTICULARLY IN EAST ASIA AND LATIN AMERICA, REQUIRE ABOVE ALL EXPANDING MARKETS FOR THEIR MANUFACTURED GOODS. THE EFFECT ON THEM OF HIGH GROWTH IN THE OECD IS IMMEDIATE AND MASSIVE. TO AMPLIFY THAT EFFECT, WE MUST MAKE THE TOKYO DECLARATION'S PLEDGE ON TRADE OPPORTUNITIES FOR DEVELOPING COUNTRIES A REALITY. INDEED, THE CURRENT ROUND OF TRADE NEGOTIATIONS, WHICH IS SO SIGNIFICANT FOR FURTHER COOPERATION AMONG OECD COUNTRIES, MAY BE VITAL TO THE FUTURE TRADE PROSPECTS OF THESE DEVELOPING COUNTRIES. THEY WILL BE THE MAJOR LOSERS IF WE CANNOT RESIST THE TEMPTATION TO

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TO CONTINUE PROTECTION FOR TRADITIONAL LABOR-INTENSIVE MANUFACTURES SUBJECT TO INCREASING COMPETITION FROM IMPORTS.
SIMULTANEOUSLY, OECD COUNTRIES CAN MOVE FORWARD WITH THEIR SYSTEMS OF GENERALIZED PREFERENCES.

ACCESS TO CAPITAL MARKETS AND TECHNOLOGY IS EQUALLY ESSENTIAL. HERE THE GROWTH LINK IS REVERSED: EXPANSION IN THE DEVELOPING COUNTRIES PROVIDES NEW MARKETS FOR THE INDUSTRIAL COUNTRIES. WITH THEIR HIGH PROSPECTS, THESE COUNTRIES ARE AMONG THE WORLD'S GREAT BORROWERS. WITH THEIR HIGH GROWTH RATES, THEY HAVE AN UNMATCHED CAPACITY FOR TECHNOLOGICAL TRANSFORMATION. FOR THESE COUNTRIES WE MUST BE SURE THAT THE FULL ARRAY OF BORROWING OPPORTUNITIES IS KEPT OPEN: PRIVATE MARKETS, THE WORLD BANK, THE REGIONAL BANKS. WE MUST ALSO SUPPLEMENT PRIVATE TECHNOLOGICAL TRANSFERS WITH INNOVATIVE WAYS OF COMBINING OUTSIDE TECHNICAL SKILLS AND MANAGEMENT WITH NATIONAL OWNERSHIP.

COMMODITIES

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HERE THE GROWTH LINK ALSO WORKS TWO WAYS. SUSTAINED EXPANSION IN THE INDUSTRIAL ECONOMIES IS CRITICAL TO PROVIDING THE LONG TERM GROWTH IN EARNINGS RAW MATERIAL PRODUCERS NEED FOR INDUSTRIALIZATION. AND, AS WE SAW IN 1973/74, EXPANSION IN THE INDUSTRIAL ECONOMIES CANNOT BE MAINTAINED WITHOUT INCREASING SUPPLIES OF RAW MATERIALS.

THERE ARE OTHER COMMUNITIES OF INTEREST AMONG RAW MATERIALS PRODUCERS AND CONSUMERS. EXCESSIVE SWINGS IN COMMODITY MARKETS ENTAIL HEAVY, PERHAPS GROWING COSTS ON BOTH SIDES OF THE SLOPE FOR PRODUCERS AND CONSUMERS ALIKE.

SKYROCKETING PRICES AND SCARCITY ENTAIL COSTLY ADJUSTMENTS FOR INDUSTRIES AND EXACERBATE OUR PROBLEM OF STABLE GROWTH. SEVERELY DEPRESSED PRICES CAN LEAD TO INADEQUATE INVESTMENT AND THUS INADEQUATE SUPPLIES IN THE FUTURE.

ONE OF THE DIFFICULTIES ARISING FROM THE LINKAGE OF ENERGY AND RAW MATERIALS PROBLEMS IS THAT IT HAS PROMPTED

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CONSUMING COUNTRIES TO REACT DEFENSIVELY. IN FACT, THE RISKS WE FACE FROM DEVELOPING COUNTRY PRODUCERS ARE LIMITED, BUT THE OPPORTUNITIES FOR EFFECTIVE COOPERATION ARE SIGNIFICANT. WE NEED HAVE ONLY THE SELF-CONFIDENCE TO GRASP THEM.

THE UNITED STATES IS PREPARED TO APPROACH RAW-MATERIALS ISSUES IN AN ATMOSPHERE OF ECONOMIC REALISM AND UNDERSTANDING FOR THE CONCERNS OF DEVELOPING COUNTRY PRODUCERS. WE ARE PREPARED TO DISCUSS NEW ARRANGEMENTS FOR INDIVIDUAL COMMUNITIES ON A CASE BY CASE BASIS. WE HAVE ALREADY MADE INNOVATIVE PROPOSALS FOR A NEW INTERNATIONAL COFFEE AGREEMENT. WE ARE PARTICIPATING IN DISCUSSIONS WITH THE MEMBERS OF THE INTERNATIONAL TIN COUNCIL. WE ARE PREPARED TO JOIN OTHER PRODUCERS AND CONSUMERS OF COPPER IN AN EXPLORATION OF POSSIBLE NEW ARRANGEMENTS.

I HAVE ALREADY SUGGESTED THAT THE WORLD BANK CAN EXPAND ITS FINANCING OF RESOURCE DEVELOPMENT AND EXPLORE NEW WAYS OF COMBINING ITS FINANCING WITH PRIVATE MANAGEMENT, TECHNOLOGY,

AND CAPITAL. THE WORLD BANK AND THE INTERNATIONAL MONETARY FUND COULD ALSO PROVIDE IMPROVED FACILITIES FOR FINANCING COUNTER-CYCLICAL STOCKHOLDING WITHIN A FRAMEWORK OF PRODUCER/ CONSUMER COOPERATION.

IN ADDITION, WE SHOULD RECOGNIZE THE REASONABLENESS OF THE DESIRE OF DEVELOPING COUNTRY PRODUCERS FOR RELIABLE, LONG-TERM STABILITY IN THEIR COMMODITY EXPORT EARNINGS. THE TIME HAS COME TO REVIEW EXISTING FACILITIES FOR EARNINGS STABILIZATION, SUCH AS THE IMF'S, AND TO SEE WHAT MORE IS NEEDED TO INSURE THE NEEDIEST DEVELOPING COUNTRIES AGAINST EXCESSIVE FLUCTUATION IN THEIR EXPORT INCOME.

IN THIS NEW SPIRIT OF COLLABORATION ON COMMODITIES AND OUR LONG-STANDING SUPPORT OF INTERNATIONAL DEVELOPMENT COOPERATION, THE UNITED STATES WILL TAKE FULL PART IN THE OECD'S HIGH LEVEL GROUP ON COMMODITIES. WE ALSO SUPPORT THE SECRETARY GENERAL'S PROPOSAL FOR AN OVERALL REVIEW OF ECONOMIC RELATIONS WITH DEVELOPING COUNTRIES.

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# THE LOW-INCOME DEVELOPING COUNTRIES

THE MORAL IMPERATIVE OF ACTION IS POSED MOST STARKLY IN THE CASE OF THE LOWEST-INCOME DEVELOPING COUNTRIES. NO COUNTRY, INDUSTRIAL OR DEVELOPING, CAN MAKE CREDIBLE ITS COMPASSION FOR THE POOR WITHOUT MEETING THE PLIGHT OF THOSE COUNTRIES LEAST ABLE TO BEAR THE BURDEN OF HIGH PRICES FOR IMPORTED ENERGY, FOOD AND FERTILIZER AND RECESSION IN EXPORT MARKETS. IN THESE COUNTRIES THE PROVISION OF ADDITIONAL RESOURCES MEANS NOT ONLY THE DIFFERENCE BETWEEN STAGNATION AND GROWTH BUT THE DIFFERENCE BETWEEN STUNTED, SHADOW-LIVES AND THE OPPORTUNITY TO REALIZE THE POTENTIAL OF LIFE ITSELF.

TO RESPOND TO THE IMMEDIATE NEED FOR FOOD, THE UNITED STATES HAS DOUBLED ITS FOOD AID PROGRAM THIS YEAR, WITH FOUR FIFTHS OF THE TOTAL DESTINED FOR THE MOST SEVERELY AFFECTED DEVELOPING COUNTRIES. OTHERS HAVE CONTRIBUTED TO THE UN EMERGENCY PROGRAM OR PROVIDED RELIEF IN OTHER WAYS. THE GAPING SHORTFALL IN THE ABILITY OF THE LOW INCOME COUNTRIES

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TO FINANCE THEIR IMPORT REQUIREMENTS WILL PERSIST FOR AT LEAST SEVERAL YEARS, HOWEVER.

FOR THIS REASON, WE CONSIDER IT A MATTER OF URGENCY THAT A SPECIAL TRUST FUND OF UP TO $2 BILLION BE ESTABLISHED UNDER THE IMF BY 1976. WE HAVE PROPOSED THAT GOLD NOW HELD BY THE IMF BE USED TO PROVIDE RESOURCES FOR HALF THIS TOTAL, TO BE SUPPLEMENTED BY OTHER CONTRIBUTIONS, ESPECIALLY FROM OIL PRODUCERS. WE BELIEVE THE INDUSTRIAL COUNTRIES COULD BE FLEXIBLE IN MEETING THE DESIRES OF CONTRIBUTING COUNTRIES REGARDING MANAGEMENT AND OTHER ARRANGEMENTS FOR A TRUST FUND.

I WOULD HOPE THAT THE COUNTRIES OF THE OECD COULD PUT THIS PROPOSAL FORWARD FOR ACTION AT THE MEETINGS OF THE IMF INTERIM COMMITTEE AND IMF/IBRD DEVELOPMENT COMMITTEE IN TWO WEEKS TIME.

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FOOD

BUT NO CHALLENGE IS MORE BASIC THAN FOOD. IF WE FAIL
TO RESPOND TO THE NEEDS OF THE HUNGRY AND MALNOURISHED,
NOTHING ELSE WE DO CAN HAVE MEANING.

IT IS IN FOOD THAT OUR ABILITY TO CREATE THE CONDITIONS
FOR GROWTH IS MOST CRITICAL. WE EXPECT A GOOD HARVEST THIS
YEAR, BUT THE LONG-TERM OUTLOOK IS FOR A GROWING DISPARITY
BETWEEN WHAT THE FOOD DEFICIT COUNTRIES CAN GROW AND WHAT THEY
REQUIRE. THE FOOD DEFICIT COUNTRIES IN THE DEVELOPING WORLD
NOW IMPORT 25 MILLION TONS OF GRAIN A YEAR. IF THEY MAINTAIN
THEIR PRESENT GROWTH OF AGRICULTURAL PRODUCTION--AN AVERAGE
RATE OF 2-1/2 PERCENT A YEAR--THAT REQUIREMENT WILL DOUBLE
OR TRIPLE BY 1985. BUT 50 TO 75 MILLION TONS OF GRAIN A YEAR
IS BEYOND THE CAPACITY OF THE FOOD EXPORT NATIONS TO FINANCE
AND TRANSPORT. TO KEEP THE GAP CONSTANT AT 25 MILLION TONS
A YEAR, FARM PRODUCTION IN THE DEVELOPING WORLD MUST GROW
BY AN UNPRECEDENTED 3-1/2 PERCENT A YEAR.

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THIS MUST BE OUR GOAL. THREE ELEMENTS ARE NEEDED TO REACH IT:

**FIRST**, HIGH PRIORITY MUST BE GIVEN TO AGRICULTURE IN DEVELOPING COUNTRIES. MANY SUCH COUNTRIES HAVE NEGLECTED IT IN FAVOR OF INDUSTRIALIZATION. SOME WITH AS MUCH AS 70 PER-CENT RURAL POPULATION HAVE INVESTED LESS THAN 25 PERCENT OF THEIR DEVELOPMENT BUDGET IN AGRICULTURE.

**SECOND**, INCREASED OUTSIDE INVESTMENT IS NEEDED. LESS THAN 15 PERCENT OF ALL CURRENT COMMERCIAL DEVELOPMENT ASSISTANCE IS DEVOTED TO AGRICULTURE.

**THIRD**, THERE IS A VITAL NEED TO LINKING OUTSIDE ASSIST-ANCE TO THE AGRICULTURAL DEVELOPMENT STRATEGY AND PERFORMANCE OF FOOD-DEFICIT COUNTRIES.

WE MUST WORK WITH, AND THROUGH, TWO INTERNATIONAL GROUPS:

- THE INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT, AN INITIATIVE OF THE OIL-PRODUCING NATIONS; AND

- THE CONSULTATIVE GROUP ON FOOD PRODUCTION AND

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INVESTMENT, ORGANIZED BY THE WORLD BANK, UNDP AND THE FAO.

THE FUND SHOULD BRING TOGETHER ALL DONORS WHO ARE PREPARED TO CONTRIBUTE ADDITIONAL RESOURCES, OVER SOME AGREED BASE YEAR, TO AGRICULTURAL DEVELOPMENT. FOR MANY COUNTRIES, THIS MAY REQUIRE THE INSTITUTION OF NEW ASSISTANCE PROGRAMS. FOR OTHERS, IT WILL REQUIRE A COMMITMENT TO SUSTAIN CURRENT AND FUTURE AGRICULTURAL ASSISTANCE EFFORTS AT LEVELS IN EXCESS OF THOSE IN THE RECENT PAST. PRESIDENT FORD HAS ASKED TO INFORM YOU ME/TODAY THAT THE U.S. WILL PARTICIPATE IN THE FUND, WHOSE RESOURCES, WE BELIEVE, SHOULD REACH $1 BILLION A YEAR.

THE LINK BETWEEN FUNDING AND DEVELOPMENT STRATEGY CAN BE PROVIDED BY THE CONSULTATIVE GROUP ON FOOD PRODUCTION AND INVESTMENT. THE GROUP, WHICH PLANS ITS FIRST MEETING IN JULY, SHOULD BE THE MECHANISM FOR COOPERATION AMONG TRADITIONAL DONOR NATIONS, NEW DONORS--THE OIL EXPORTING COUNTRIES--AND THE DEVELOPING COUNTRIES THEMSELVES. SUCH COOPERATION SHOULD

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AIM AT A GLOBAL FOOD PRODUCTION PLAN WHICH:

- SETS NATIONAL STANDARDS OF ACHIEVEMENT FOR KEY COUNTRIES;

- DETERMINES WHETHER NATIONAL AGRICULTURAL DEVELOPMENT PLANS ARE ADEQUATE TO MEET THOSE STANDARDS, WITH SPECIAL REGARD TO FARM PRICE INCENTIVES, INCOME DISTRIBUTION AND CREDIT AVAILABILITY; AND

- MATCHES AVAILABLE FINANCIAL RESOURCES--DOMESTIC AND EXTERNAL-- WITH NATIONAL DEVELOPMENT PROGRAMS.

A COOPERATIVE, SUSTAINED EFFORT TO CREATE A NEW GLOBAL FOOD EQUILIBRIUM MUST BE UNDERTAKEN NOW. WE NO LONGER CAN AFFORD TO ATTACK THE PROBLEM OF HUNGER ON A PIECEMEAL, CASE-BY-CASE BASIS WHICH BRINGS ACTION IN TIMES OF CRISIS AND COMPLACENCY IN TIMES OF WELL-BEING.

IF WE FAIL TO ACT NOW, THE THREAT OF FAMINE WILL RISE AGAIN, THE DEPENDENCY OF THE FOOD-IMPORTING REGIONS OF THE WORLD WILL GROW. THE HUMAN SUFFERING, THE MENTAL INCAPACITATION,

[Y]

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THE POLITICAL INSTABILITY, THE MORAL BURDEN WILL TOUCH ALL NATIONS, RICH OR POOR, DEVELOPED OR DEVELOPING. NO SOCIETY, NO COMMUNITY OF PRINCIPLE AND JUSTICE COULD TOLERATE SUCH A WORLD.

## CONCLUSION

OUR MODERN ERA HAS BEEN CREATED AND SHAPED BY THE INDUSTRIAL REVOLUTION AND THE PROGRESSIVE ECONOMIC GROWTH IT BROUGHT. ITS IMPACT HAS BEEN RAPID, ITS RESULTS PRODIGIOUS, ITS EFFECTS UNPRECEDENTED. IT NOT ONLY HAS CREATED INDUSTRIAL SOCIETY, IT HAS ALSO PROVIDED THE MEANS BY WHICH INDUSTRIALIZATION, CONFINED TO WESTERN EUROPE AND THE UNITED STATES A CENTURY AGO, HAS BEEN EXPANDED INTO EVERY QUARTER OF THE GLOBE.

FOR THE NATIONS WHICH HAVE ALREADY REACHED INDUSTRIALIZATION, IT PROMOTES SECURITY, SUSTAINS PROSPERITY AND NURTURES CHERISHED VALUES.

FOR THOSE STILL STRIVING TO INDUSTRIALIZE, IT REPRESENTS

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THE BEST HOPE FOR A BETTER LIFE--THE CHANCE TO SHARE IN THE WORLD'S GROWING WEALTH AND THE SOLE GENERATING SOURCE OF NEW AND WIDELY DISPERSED PRODUCTIVE ENTERPRISES.

FOR THE NEW ERA OF CHALLENGE WE FACE, A VITAL INDUSTRIAL SYSTEM PROVIDES THE ONLY MEANS FOR MASSING THE RESOURCES REQUIRED FOR CREATIVE AND SUSTAINED SOLUTIONS TO THE PROBLEMS OF FOOD, ENERGY, ENVIRONMENT AND OTHER GREAT GLOBAL IMPERATIVES OF OUR TIME.

AND A VITAL AND GROWING INDUSTRIAL SYSTEM CONTRIBUTES TO THE ATMOSPHERE OF REASON ESSENTIAL TO A STABLE AND EQUITABLE INTERNATIONAL ORDER.

THE LIFE BLOOD OF THE INDUSTRIAL SYSTEM IS GROWTH. IT IS THE SUBSTANCE WITHOUT WHICH COHERENCE AND COOPERATION ARE POINTLESS. FOR THERE ARE NO PLATEAUS IN THE AFFAIRS OF MANKIND. WHAT IS NOT A STEP FORWARD IS AT BEST STAGNATION; BUT OFTEN, IT IS A PAUSE BEFORE REGRESSION. THERE IS NO NEED TO BE DISMAYED OR DISTRAUGHT BY THE PROBLEMS WE FACE, FOR PROGRESS IMPLIES PROBLEMS. BY SURMOUNTING THEM WE WILL

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IMPEL OUR PROGRESS. THERE IS NO MORE URGENT TASK BEFORE US THAN TO RESTORE OUR ECONOMIES TO THE HIGH GROWTH UPON WHICH MODERN MAN'S ACHIEVEMENTS HAVE BEEN BUILT AND ALL MAN-KIND'S WELL-BEING DEPENDS.

MAY 17, 1975

Sir:

I talked to Brent about the OECD speech. He takes full blame for the fact that a screw-up resulted in the speech text getting around. He simply failed to follow up. I suggested that in any case Hormats should have had the sense to know that the text itself should not be distributed.

Brent says the "basic differences" that Simon et al have on the New Economic Order relate to their concerns about drift away from free enterprise toward a state-controlled international economic order. Their concern is most salient in the commodities area. They say that some of the proposals (Brent mentioned the "copper dialogue" for one) prejudge policy decisions that the government has yet to make.

According to Brent there is a good chance that this will not have to be taken to the President at all. He thinks that some of the "basic differences" will evaporate if specific proposals can be reworded. Whatever Enders and Seidman fail to get through their antagonists this afternoon can probably be worked out when you see Simon tomorrow. On the whole, Brent is optimistic -- though only "barely" so at this stage.

I told Brent that Monday morning would be too late to take this to the President. He said that you could always go in and thrash the whole thing out before the President tomorrow morning; however, he recommends against this since by then we will still not know which differences are otherwise irreconcilable. In any case, if you want to take it to the President tomorrow morning he said to just let him know.

David

DEPARTMENT OF STATE

Washington, D.C. 20520

May 17, 1975

MEMORANDUM FOR THE SECRETARY

First Draft OECD Speech

Here is an entirely new draft of the OECD speech.
Like the IEA draft, it has not been to the speech
writers, and is no more than a first walk-through.

Its theme is that the industrial economy is
challenged from within and from without by demands
for redistribution. These can be met only in the frame-
work of sustained high growth. The draft:

-- Proposes special high-level OECD committees
to design a growth strategy for the industrialized
countries (I can sell this idea to Greenspan;
don't know about Simon);

-- Details needs of LDC relationship for rapidly
industrializing countries (access to trade,
capital market and technology); for raw material
processors (here I add income stabilization
and buffer stocks to your Kansas City speech;
don't know if they will fly); for poorest; for
food sector (here I emphasize production and
assurance U.S. will participate in new Fund for
Agricultural Development proposed at the World
Food Conference).

This needs a lot of work. Will cable revision in
mid week.

Thomas O. Enders

EB:TOEnders/psk

X20396