Nation: THE PROBLEMS OF SUCCESS

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When McGeorge Bundy left Washington last year to become head of the Ford Foundation, Lyndon Johnson lost a compelling voice for his policies of broadened foreign trade, a more realistic international monetary system, and wider, more willing U.S. investment abroad. Last week, addressing the International Chamber of Commerce in Manhattan, Bundy raised that voice again, arguing "The Case for Self-Confident Generosity in Trade, Money and Management." Excerpts:

The Protectionist Error

One does not know whether to be more startled by the arrogance of those who have sought [protection by means of import quotas] or by their intellectual flexibility. Steel and textile men, for example, have preached the virtues of competitive enterprise for many years. Yet we have found them seeking special privilege in Washington this year because of something they call foreign competition. They have gone to the wrong place to attack the wrong enemy: In this situation, their own relative efficiency is decreasing, and they are in fields where outsiders can compete. It is certainly reasonable for a foundation executive to believe that all this would never have happened to steel if Andrew Carnegie were alive. But as a general proposition, it is inescapable that as we get richer there should be some things—and important things—that we are too rich to do cheaply. We must believe in progress—and we must never suppose that it hurts no one. Quotas and tariffs are not the answer.

The Dated Devotion to Gold

It was important—and not only to the U.S.—not to let the pound go down until influential people had got it through their heads that the American dollar would not follow sterling. Historians may well see it as a curious case, moreover, that the very "weakening" of the dollar in conventional balance of payments terms may have been a necessary part of the process by which its underlying strength has gradually been revealed. The strength of the dollar is not to be measured by conventional tests. The moves by speculators do not reflect a real threat to the dollar. What they reflect is only a continuing Treasury policy that sets a floor to the price of gold—that $35 an ounce is a tactical tribute to tradition—and so permits risk-free speculation against currencies.

The problem of the U.S. dollar, indeed, would not exist today if it were not for the problem of gold, and the problem of gold can be controlled by the United States Government. The belief of country folk and Frenchmen in gold is not likely to change overnight, but the serious world is learning that the dollar is more important than gold, and that in the present relation between the two it is gold which is the dependent variable. To put it another way, the question before the world money market today is whether the total economic strength of the United States is greater than the historic affection for gold of the greedy and the frightened. The answer to that question is not in doubt. If the U.S. dollar and gold ever fight to a finish, it is not the dollar that will be devalued.