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Salient: Victoria University Students' Paper. Vol. 25. No. 11. 1962

Foreign Exchange?

Foreign Exchange?

With or without concentration of effort, more must be given by rich countries, such as New Zealand. In this country it is burbled in answer that this involves questions of foreign exchange (apparently one should use foreign exchange only to enrich oneself, not to help others). Why foreign exchange? To buy machinery for the poor countries, it is said, because this is all they need for their development,

This idea is so far from the truth that its adoption as a firm article of faith can only be due to that pervasive xenophilia which constantly expels originality to make room for remedies tried and inappropriate. Economic aid schemes are fathered by industrial nations; manufacturing is naturally emphasised. But it does not follow that New Zealand's most effective contribution is in doing likewise.

As an indication of the contrary one would point to the feet that probably the single most important factor in making for success in India's current phase of development is a gift of American food. In addition, the underdeveloped countries of most interest, lying in the tropics, can produce meat and dairy products only with difficulty. These consequently use up foreign exchange; were they provided free, the money now spent on them could be used directly for development. But here, of course, the objection is made that if one feeds the hungry, this lowers the price of food and the incomes' of farmers in rich countries. One's heart bleeds for them.

But even a large increase of economic aid will probably not be enough. For the pattern of trade between rich countries and poor shows the prices of industrial products following a rising trend, while those of primary produce trace out a long-term decline, with frequent sharp falls, and the losses of income so incurred far exceed all the economic aid provided.

The gap in living standards between rich and poor is therefore widening, and in the international field the Marxian vision of the rich getting richer, and the poor falling ever Further behind, is being fulfilled more than it ever was in the rich countries.

What poor countries need is both Long-term stability and higher prices for the tropical producers. It is doubtful if they will get these as a result of economic aid, except insofar as their industrialisation improves their bargaining power. The working classes in rich countries gained their present affluence not through education and training, but in consequence of organisation. So also the terms of trade will only cease moving against the poor countries when they evolve organisations able to stand up to the world-wide virtual monopolies which industry seems naturally to breed.

Not surprisingly, however, all attempts by the poor countries to set up such associations, whether through the United Nations or otherwise, have been frustrated by the rich countries. The fact remains that the bargaining position of the poorer nations must be improved if we are to avoid conflict between rich and poor. There is no more urgent task in the world today.