The Capitalist Challenge: THE VALIANT VENTURE

NEVER in the history of man has so vast a gulf divided the haves and havenots. The free world’s industrial nations, with only one-third of the population and a quarter of its land area, produce 86% of its manufactured goods. On the other side of the chasm are the restless two-thirds of mankind who occupy 75% of the free world, produce less than 15% of its goods.

Closing the gap of production is not only a huge task but an urgent one. From the first luncheon in the Fairmont’s ornate Gold Room, speaker after speaker at the San Francisco conference traced the irresistible upsurge of world population and the revolution of rising expectations that has grown from its hunger for a better life (see The Population Explosion). Even for the massive reservoirs of entrepreneurial brains and money represented on Nob Hill, the immensity of the opportunity often paled beside the complexity of the challenge.

Bankers and businessmen ticked off the practical problems of tapping new resources in a world already pinched for capital and squeezed by inflation. Managers warned that trained consultants and technicians were in critically short supply. Westerners emphasized the need to protect investors in new lands seething with nationalism. Asians warned that impatient peoples cannot depend on private capital alone to finance the basic developments of industrial society (see Paths of Progress).

It was through this kind of give and take that the haves and have-nots would understand and meet the problems of progress, said World Bank President Eugene Black, in a cards-on-the-table keynote speech, for they can not be solved by dogma. Said he: “I am as impatient with those theologians of capitalism who preach that private capital can meet all the world’s development needs as I am with those theologians of socialism who preach that only state enterprise can satisfy demands.”

An Affirmative Good. World Banker Black, who has lent $3.1 billion to 45 nations since World War II, admitted that the boom has left the free world “short of breath” (see The Shortage of Money). Yet, he declared, “today it is broadly true that the opportunity to attract foreign private capital is there for those nations which have the will and courage to grasp it.”

“People,” said he, “must come to accept private enterprise, not as a necessary evil, but as an affirmative good. Governments must cease just tolerating private business; they must welcome its contribution and go out of their way to attract it and even to woo it. And there must be a fundamental reversal of the traditionally hostile attitude, by governments and peoples alike, toward the profit motive.”

Turning to the free world’s businessmen, Black urged: “Your responsibility is a heavy one, for if the private entrepreneur does not come forward when he is given a fair chance, governments will act−and who can then blame them?”

Untainted Money. The urgency of the challenge was underscored by Vice President Nixon in a major policy speech that went well beyond any previous statement of foreign economic objectives by the Eisenhower Administration. For the black-tied delegates who live by business and were resigned to political oratory, Nixon’s brass-tacks address at the main banquet of the conference was a rare surprise. Said Nixon: “The private initiative, the private responsibility and private capital which you represent are the motors of economic progress. The economic growth which you generate is vital to the future of the whole free world. In many nations, the pattern of economic development is being shaped for a century ahead. If this pattern is statist, then human freedom will be the loser.”

Private capital, said the Vice President, is uniquely able to close the gap because, “in the old Roman phrase, ‘it has no smell,’ ” i.e., it is not tainted with any ideology beyond the expectation of profit. Said Nixon: “It is not unreasonable to set as our goal doubling or tripling American investment abroad in the next ten years.” To supplement the outflow of U.S. capital (current rate: $4 billion yearly), Nixon urged:

¶Strengthening the economic sections of U.S. embassies.

¶Reduction of corporate taxes on the profits from foreign investments as soon as “feasible.”

¶Channeling “more of our government financial operations abroad through private investors and enterprises,” e.g., by requiring that at least 25% of foreign currency paid for U.S. agricultural aid in any country should be lent to U.S. businesses operating there.

¶Deferment of taxes on foreign income and profits until they return to the U.S. as dividends.

¶Use of the U.S. Government’s new $300 million overseas development fund to aid enterprises that do not qualify for loans from other agencies such as the Export-Import Bank.

¶Extension “for at least five years” of the tariff-lowering Reciprocal Trade Agreements Act (expiration date: June), which is under hot congressional fire.

¶Full U.S. membership in the Organization for Trade Cooperation, international clearinghouse for tariff agreements.

¶Consideration of a privately operated international investment guarantee fund to protect foreign investments.

To world-minded businessmen, apprehensive over a U.S. drift to protectionism, Nixon’s proposals were a heartening reaffirmation of official intent to work for freer trade, a vital contribution to economic betterment of under-developed nations. In conference rooms and hotel corridors, businessmen vigorously debated a host of other issues that ranged from new investment incentives (see New Ideas for Investment) to German Banker Herman Abs’s call for a Magna Carta of investors’ rights (see The Capitalist Magna Carta).

But while the conferees differed hotly on ways and means of boosting productivity, there was general agreement, even by delegates from socialist-minded nations, that private enterprise should and could shoulder an increasing share of the burden. The most dramatic evidence of renewed faith in free enterprise came from Reserve Bank of India Governor H. V. R. Iengar, close friend and adviser to Prime Minister Nehru. Disavowing the tepid brand of socialism long preached by Nehru, Iengar emphasized that India is looking to private capital and free enterprise to develop its resources and industrialize the nation.

Good Will & Good Sense. Face to face with Westerners over San Francisco’s famed food, many a dark-skinned delegate discovered that the capitalist is not the bogeyman pictured by the anti-capitalists (see The Anti-Capitalist Attitude) but a fellow businessman of good will and good sense. Many foreign delegates happily closed deals between conference sessions (see Capital Opportunities).

The conference was so successful that Brazilian delegates urged a return engagement in their new capital city Brasilia, when it is finished. Belgium, Germany, and Italy suggested a 1959 conference in Europe with a preliminary meeting next year. For the week’s discussion had demonstrated that capitalism has more to offer the world than cash. Its message: through technology, efficient management, research and the brand of valor that McGill University’s Dr. David McCord Wright called the “energy to venture into uncertainty,” competitive business can widen the distribution of goods, realize new sources of profit and do both in such fashion as to fortify free societies.