The Soviet Challenge in Underdeveloped Areas

...The West, therefore, faces a double task—to set Asia an example of economic growth more impressive than that of Russia, and to help Asia to follow that example...

...Moreover, such agreements can always be wrecked by an outsider...

...Only this year she wrecked the International Tin Agreement and dealt a crippling blow at the Malayan economy by selling tin to Britain below the world price...

...But in practice this is appallingly difficult...

...Economic growth in Asia depends above all on economic growth in the developed industrial countries which provide a market for Asia's raw materials...

...Economic history proves that, contrary to popular fears, the industrialization of foreign countries increases international demand far more than it damages existing industries by creating new competition...

...But what is most striking about this Soviet aid is that it does not seem to have brought Russia any permanent political gains...

...The Soviet challenge must be overcome in the field of domestic policy before it can be met in the field of foreign economic policy as a whole...

...Nothing which the West may do by way of aid can make up for the loss of Asian earnings when the West goes through a slump...

...Not only Britain and other members of the Organization of European Economic Cooperation are worried about this danger in the six-country European Common Market...

...THE SOVIET CHALLENGE IN UNDERDEVELOPED AREAS LONDON IN THE LAST FEW YEARS, Soviet Premier Nikita Khrushchev has begun a new policy of economic intervention in Asia and the Middle East, both by trade and aid...

...There has been much talk in the West of the danger that Russia may outflank the military defenses built by NATO in Europe through economic penetration of the uncommitted areas...

...But there is a grave danger that the West will let itself in for a new series of disappointments if it approaches the problem of aid to the underdeveloped areas in this spirit...

...Colonel Nasser banned the Communist party in Syria KHRUSHCHEV: ONE-WAY TRADER the moment the country joined the United Arab Republic...

...Moreover, many of Russia's trade agreements with Asia have turned out badly for the countries concerned...

...The conditions which attracted private capital overseas a century ago cannot be recreated today, however hard lawyers work on drafting investment treaties...

...December 22, 1958 5 The plain fact is that Russia has no interest at all in helping non-Communist countries, whether in Asia or anywhere else, to solve their economic problems...

...Khrushchev took Burmese rice, for example, in return for Russian cement which was delivered during the rainy season so that it was solid rock by the time the Burmese wanted to use it...

...She may occasionally offer economic aid in the hope of shortterm political advantage, as for example in her recent offer to help Egypt in building the Aswan Dam...

...The U.S., for example, has given a great deal more money to Vietnam than to India...

...What can be done to reverse this dismal trend...

...Moreover, though the Communist world does present the West with a real economic challenge in Asia, the sort of trade and aid agreements recently made by Russia are not the main problem...

...He bought the entire Egyptian cotton crop one year and dumped it on the world market the next, at a lower price, in competition with Egypt's new crop...

...The real Communist challenge in the underdeveloped areas can only be met if the West, like the Russians, is able to see the world as a whole and is ready to develop a global economic response to it...

...On the other hand, growth in the Asian economies can be a valuable stimulus to growth in the West...

...A large-scale export of capital by the West to Asia and Africa would, even in the short run, create invaluable new markets for Western exports...

...In Europe, there is at present an exceptional interest in the creation of bigger markets as a means of stimulating economic growth...

...Soviet aid has been concentrated on these uncommitted peoples which appear most important in the cold war—95 per cent of it went to only six countries: Yugoslavia, Egypt, Afghanistan, India, Indonesia and Syria...

...In theory, it is possible to avoid such disastrous fluctuations in the earnings of Asia and Africa by stabilizing commodity prices through international agreements...

...The fact is that Russia is learning—if she needed the lesson —what the U.S...

...But there is a real danger that by building such markets on a limited regional basis, the West may actually damage the prospects of growth in the free world as a whole...

...Finally, experience has taught us that the West cannot maintain that high and steady rate of economic growth on which this whole operation depends unless its governments are prepared to plan for it, and to assume the necessary powers of intervention and control in the working of its economy...

...Inside Asia itself, economic growth is bound to be mainly the responsibility of governments, since private industry simply does not exist on the required scale...

...And aid to Asia is bound to depend also> mainly on government action in the West...

...Many of the Asian countries depend to a dangerous extent on the export of primary commodities like oil, rice, tin, or rubber, which the Communist bloc itself exports...

...recession cost the underdeveloped countries three billion dollars—50 per cent more than they have received from Russia and the West together in the last three years...

...Asia's primary economic problem is to find the capital on which to base expansion...

...But there is no real substitute for maintaining a high, and rising, level of demand in the West as a whole by keeping up a steady rate of growth in the Western economies...

...And at the recent Afro-Asian Economic Congress in Cairo, the Indonesian delegate said the Soviet delegation had no right to be there...

...But it would be fatal to see the issue primarily in terms of winning votes in the cold war...

...There is no evidence that Russia would prefer the possibility of political goodwill to the certainty of foreign currency if she can undercut her Asian competitors...

...Russia has already shown her ability and will to do so in the case of tin this year...

...What is worse, its failure appears to justify the Communist critique of capitalism as a system which can stave off economic crisis only by arms expenditure or imperialist adventures...

...The ten-per-cent fall in commodity prices which last year followed the U.S...

...Both Russia and the West have given economic aid mainly to countries which are already committed to their respective military alliances...

...The key to a solution lies in the fact that the two tasks are indissolubly connected with one another...

...But it must be admitted that an adequate response will require the abandonment of dearly cherished economic dogmas...

...I f within the next generation the new Asian and African nations fail to achieve a satisfactory rate of growth by other means, they may well adopt the methods which seem to have succeeded in Russia and China—especially as they have no tradition of democracy to hold them back...

...Anything which makes it easier for the uncommitted countries to raise their standard of living without turning to Communism is of long-term advantage to the West, whatever its short-term advantages to Russia...

...The motives behind this suggestion are of course impeccable...

...At the other extreme, we have Professor John Kenneth Galbraith arguing the devil's case for a restriction of production in the U.S., because the effects of a market economy on a purely national basis can be socially undesirable...

...At present, the West is demonstrably failing in both these tasks...

...But if the help is genuine, the West can only welcome it...

...If her SevenYear Plan reaches its targets, Russia will soon be a large-scale exporter of oil in competition with the Arab Middle East...

...It is true that Asia's minimum capital needs represent only one per cent of the product of the Western economies as a whole...

...There are indeed overwhelming moral, economic and political arguments for Western assistance to the emerging nations of Africa and Asia...

...So far as the genuinely By Denis Healey uncommitted countries are concerned, Russia and the West have offered roughly equal amounts in the last three years...

...Marshal Tito stood up to Khrushchev this year in spite of the risk of losing substantial Russian credits...

...It was also the main subject of discussion at the Afro-Asian Conference in Cairo...

...For the real economic challenge in the uncommitted areas lies in the example offered by Russia, and even more by China, of rapid economic growth from a level of poverty much closer to that of Asia than that of America or Western Europe...

...has already learnt, that economic aid does not automatically bring political friendship...

...But their combined assistance^— which totals just over two billion dollars—falls hopelessly short of what these countries need...

...Indeed in many countries the choice may appear as one between a military dictatorship which cannot meet the people's needs and a Communist dictatorship which does...

...Belgium's Paul-Henry Spaak has suggested that NATO itself should organize collective action by the West to meet this new Soviet challenge...

...Long-term bulk purchase agreements with the primary producers have more chance of success, as the British Labor Government proved in the years following the war...

...But it will be impossible to obtain even that one per cent, particularly in the fields where it is required, unless the Western governments assume the responsibility for finding it...