power and decision, in ways of which the current moves to increase OPEC voting rights in the Bank and the Fund are only the leading edge.

But the obverse of the same point is that because our relative power has been rather suddenly diminished, we by no means have become suddenly powerless. Our challenge is not to fall into a funk or settle for the role of a point-scoring opposition. It is to find worthwhile positive measures around which, as still the most influential single actor on the development policy scene, we can help organize cooperative consent.

No. 3, we will do well to be pragmatic. In a generally welcome speech at Kansas City the other day, the Secretary of State remarked that we nevertheless will continue to resist demands of developing countries for a “*** new economic order founded on ideology Fair enough, if he meant exclusively or unreasonably founded on ideology. But then let us also see that we are not mousetrapped by our own stereotypes, as in the case, for example, when we reject all exercises of market power by developing countries on grounds of high principle or let the whole complex of our policies toward a developing country become dominated by the single-important but usually not transcendent-issues of its government's treatment of American companies.

No. 4, to play the constructive role in the new development policy arena that our own long-term self-interest requires we shall need for some time a fairly thick skin. We can confidently expect a fair amount of abuse, for in the dependencia scenario now so widely accepted in all three developing continents, we are the heavy in the piece. We certainly do not need to concur in, or fail to dispute, such assessments. But, by understanding their origins better, we do need to become less distracted by them.

No. 5, the best way to minimize this kind of rhetorical punishment and establish our credentials as constructive builders of the new order will be as quickly and as much as possible to shift debate from the general to the specific-and out of such general and inherently rhetorical bodies as the General Assembly into smaller more technically competent forums.

In those forums, the United States should seek the image, not of the occasional, reluctant acquiescer to others' initiatives, but of a resourceful advocate of whatever policy improvements it finds accept

able.

Next, by way of illustration, a few of the kinds of specific policies that it seems to me a U.S. Government seriously striving to help implement a workable version of the new economic order might attempt to support.

My sixth point, therefore, is that the best beginning we yet have made in the new order vein is happily in the most urgent field of all, namely, in the areas of food and agricultural development at last November's World Food Conference and the new ventures growing out of it.

This is a field in which the United States can and should maintain a strong initiative. Both we and the developing countries know much. better now than we did 15 years ago how to guard against food aids becoming a crutch deterring indigenous agricultural development in the poor countries.

Given this assurance, considerable food aid, both for building buffer stocks and for supporting additive labor intensive activity in the neediest countries can be a powerful and appropriate agent of development for some years yet.

The United States has a comparative advantage in the field that is not unlike that of the oil exporters. It is one whose use, if carefully and systematically planned, need not have disruptive domestic inflationary effect. Skillfully employed, it has the potential for stimulating additional OPEC and other OECD financial transfers into the interrelated food-energy-water-fertilizer sectors. Plainly, food aid is a segment of American policy that invites redesign and reinforcement. No. 7, a great deal, of course, could be said about general trade policies. But in this opening round I will leave that to my colleagues. What does seem evident is that if the United States is indeed interested in making a forthcoming response to the developing countries, it is time to set aside our pro forma opposition to commodity policy proposals.

In a context of greater worries about raw materials, scarcities and cyclical upshoots in import prices, commodity stabilization schemes clearly can benefit buyers as well as sellers.

Indeed, from a U.S. anti-inflationary viewpoint, it probably is more important to avoid the cyclical price surges than it is to avoid the advance in average prices that most LDC commodity schemes would

cause.

Nor is it clear that systems of multicommodity stocks or of modified indexing would need prevent reasonable flexibility of relative prices.

Thus, without prejudging the results of a closer examination, there would be great merit, it seems to me, in the U.S. Government giving the most sympathetic consideration it can to the package of commodity proposals that UNCTAD recently has projected. Tactically, moreover, such a move would be salutary.

If the choice as to market power contests is between frontal confrontations with one-sided producers' associations and structured negotiations and rules making in an organization to which both buyers and sellers belong, there is much to be said for the latter.

Further, the UNCTAD secretariat, which has the confidence of its LDC constituents, is unusually competent and is exceptionally well led; it is one with which the U.S. Government would do well to develop improved report.

No. 8, in the realm of transfers the base line of a new U.S. position must entail recognition that, as tough as traditional foreign aid has become to sell in this country, nothing, including the OPEC phenomenon, has greatly diluted the obligation of the advanced economies, especially with regard to the poorest countries. Ability to provide concessional transfers still is primarily a function of per capita income and wealth, and that capacity still lies overwhelmingly with the OECD countries, secondarily with a number of the Socialist countries. Aside from the special role of food aid in the U.S. case, the first priority, surely, is to provide continued American support for IDA.

In addition, a forthcoming U.S. position will be prepared to look more systematically and ambitiously than we have recently at major debt rescheduling exercises. The United States should concentrate

this and other forms of bilateral concessional assistance more heavily on the poorest countries.

As a participant in the multilateral institutions and otherwise, the United States should facilitate the channeling of OPEC capital to the developing countries on terms differentiated by the neediness of the recipients. For the sake of the record, in my judgment, the United States should reverse its quite indefensible refusal to accept the socalled SDR link.

However, as a practical matter, that issue has been shelved indefinitely by the lack of liquidity needs for SDR's. Meanwhile, the United States should follow up its at least formally quite positive initiative to put a portion of the value of new IMF gold holdings to the service of development.

There is, for instance, the possibility that an interest subsidy on some of the OPEC capital being cycled to the poorest countries could be financed from this source.

I have concentrated on a variety of the contributions the United State should make to the New International Economic Order that is struggling into being. But I do not by any means see us as only a compliant contributor.

As fast as our credentials as a positive yet power-sharing proponent are established, I would see us weighing in quite forthrightly to challenge fallacies in the new order rhetoric and to hold other participants to account. Here, again, three very abbreviated illustrations:

The first becomes any ninth point. It is that we should, I should think, dismiss as rubbish the idea that the new order can be simply or mainly redistributive in a static sense. It does not posit that the world's use of scarce resources has reached an outer limit or call upon the advanced economies to stop growing.

On the contrary, the worst immediate problem for the developing countries just now is that the advanced economies are not growing enough; they are in recession. Over time, narrowing the welfare gap between the rich and poor countries does indeed mean that the latter must strive and be assisted to grow more rapidly than the former. But this has a much better chance of happening in a context of rich country expansion..

No. 10, a further proposition that American development policymakers should be expected emphatically to press is the insistence that, although a new international economic order is and can be important, it never will be more than the lesser half of effective development policy.

The greater need is for a new internal economic order in many developing countries. In particular, there is a danger that the leadership elites in some poor countries will get mesmerized by their own rhetoric into believing that a surge of new international redistributive justice is about to lessen their need for internal reforms, for example, in agriculture, and with respect to mass poverty and unemployment and internal distributive justice. This is most certainly not the case. Finally, No. 11, it will be most appropriate, once we have weighed in with our inputs, for the United States to raise pointed questions about the scale and quality of the Socialist countries' contributions to the development effort. Too often, because they have not fitted

into the established framework of poor-rich country relations, the Socialists have done comparatively little.

In recent years, while the rest of the world has been caught up in great turbulence, their capacity to meet the poor countries' trade, aid, and other needs has been greatly enhanced. It is time greater demands were placed upon them.

Taken as a whole, the foregoing is not a very palatable prescription for American policy to put to a congressional committee just now. And yet, if a policy pattern of this sort is what genuinely responsible U.S. participation in these new circumstances require, it would not, I would ordinarily think, be beyond the capacities of the Executive and the Congress jointly to begin to lead the country in this direction. Frankly, under the extraordinary conditions of the past year or two, I have been very bearish about our ability in the near term to do anything of the kind I have suggested. But hope springs eternal, and Secretary Kissinger's Kansas City speech last week was moderately encouraging.

Mr. FRASER. Thank you very much, Dr. Lewis. [Dr. Lewis' prepared statement follows:]

PREPARED STATEMENT OF DR. JOHN P. LEWIS, PROFESSOR OF ECONOMICS AND INTERNATIONAL AFFAIRS, PRINCETON UNIVERSITY

I am very pleased to participate in these particular hearings. While I do so, of course, only in my personal capacity, it may be worth noting that my view of the subject has been influenced by membership on the United Nations Committee for Development Planning. The Committee, which is a standing group of two dozen developing-country, Socialist-country, and advanced-market economy economists who serve as individuals, not as national representatives, addressed itself in a 10-day session last month to much the same array of topics that will be discussed here. Indeed, it seems to me that the report drafted on that occasion-the Eleventh (annual) Session of the U.N. Committee for Development Planning-which reflects a strong, essentially unanimous consensus of the 18 members present and which has just been released, might well be of interest to this Subcommittee.

These hearings together with the stirrings of preparatory activity that one senses in the Executive Branch are encouraging evidence that the United States means to do a workmanlike job of getting ready for a happening-the General Assembly's September Special Session on development-that probably most Americans at this point, if they are aware of it at all, regard with a mixture of uneasiness and distaste.

I must start, therefore, with the confession that I am atypical: I look forward to the Special Session with a great deal of on-balance enthusiasm. This is because I am one of that small minority of Westerners who, as an accident of their interests and/or careers, have been preoccupied with the cause of overseas development for many years. For such people, as well as the many more in the developing countries themselves who seriously have been working on development, the past dozen years or so have been pretty frustrating. Much in fact has been accomplished. But many of our theories and models have turned out to be overly simplistic. Development has proved to be a far more difficult, complex, error-prone, bottlenecks-ridden, organizationally tricky, country-specific business than most of its earlier enthusiasts imagined. It turns out that much of the time the indigenous development promoters as well as their foreign assisters have pursued the wrong goals or at least an insufficient set of goals. In the poor countries themselves most governing elites have done little to implement their reformist rhetoric and spread the benefits of growth to the low-end poor. The so-called donor countries, especially this one, have grown weary of foreign aid. Administrations have carried too many different, expedient, partially conflicting briefs for aid to their parliaments, including this one. Fairly or not, in this country Vietnam has served particularly to contaminate perceptions of the development-promoting endeavor.

Worst of all from the viewpoint of partisans of development, in the first years of the '70s the subject simply got pushed off the table. We have been preoccupied with everything else but-some of it, like new accommodations among the major powers, not directly related to development, much of it, like our new transcedent concerns over environment, scarcities, and population as well as the recent disruptions of international monetary and trading arrangements, vitally related to overseas development. But even in the latter cases in the early '70s, the development dimensions were given short shrift. For a time, as our UN committee bemoaned in its report two years ago, the subject lost standing internationally. What I like most about the September Special Assembly, therefore, is simply the demonstration that the cause of development has recovered position on the global agenda. Secondly, I am encouraged because this renewal of attention comes at a time when, it seems to me, in many poor countries there is a wider awareness than ever before of the need for genuine internal reform-for example, for according a higher priority to agriculture and broad-based rural development, for launching effective direct attacks on mass poverty and unemployment, and for promoting efficient labor-intensive modes of production. Third, I am encouraged because the renewal of attention comes under conditions which, via the mechanism of OPEC, may, for a limited period, involve the greatest incremental deployment of fresh external resources into the poor countries (including even some of the poorest) that we have seen for some time.

Thus on balance, although some of the new rhetoric is hard to take and although the Special Session itself could well be a bad scene, I view the forces that have occasioned the Special Session expectantly and hopefully. But, as I say, this is not yet the standard American perception. Therefore, let me try to explain a little more systematically what I think a responsible general approach on the part of the U.S. Government to the so-called New International Economic Order might be.

The first need is to accept the paradox that in the realm of international development policy things are at once very much the same and quite radically different than they were a couple of years ago. It is perfectly true that the policy content-the variety of suggested measures-that is being read into the New International Economic Order consists mostly of the same old proposals that we have been talking about (and doing less about) for years. But to leap to the conclusion that therefore all that is new about the "new" international economic order is its level of rhetoric is to miss the main point-which is that a fairly profound realignment of power in the world has occurred in the past two years.

Superficially this can be seen in the concerning of third-world majorities in the General Assembly and other UN bodies. Practically, of course, the realignment pivots on the phenomenon of OPEC. To recognize the historical significance of the oil-price revolution is not to argue that the move necessarily was just, or that present oil prices have no give in them, or that major transfers of resources to oil exporters via the price mechanism can or will persist for more than a few years, or that the oil exporters will never break ranks. But during a critical time being, the OPEC phenomenon has revolutionized the behavior of the less developed countries in ways that probably are irreversible.

For one thing, certainly, OPEC has taught the other developing countries the potentialities of market power. Probably it has over-taught them. But in any event it is clear that all kinds of particular commodity groupings have been sensitized to the possibilities of exercising power and transferring resources through the price mechanism. A second OPEC effect is less certain but more interesting and potentially important. This is the likelihood that the oil-price revolution, instead of fragmenting the politico-economic solidarity of the third world, has caused it to solidify further.

This last is not what most of us Western devotees of development expected 15 months ago. However, at that time-even though meanwhile the World Bank and the International Monetary Fund, the two major multilateral agencies that are dominated by the advanced economies, have been imaginative and resourceful in their responses to the cruel impact of the oil, food, and fertilizer price crises on the poorest, "most seriously affected" countries-we overestimated the degree to which governments like our own, amidst all of their domestic and other distractions, would find the will to lead a response to the emergency problems of the poorest countries. We badly undergauged the quickness and scale on which the new oil-rich OPEC countries would address the needs of their third-world colleagues, including the most seriously affected countries. We did not allow for