On Growth

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53. Alexander Trowbridge

During the years 1967-68 Alexander Trowbridge was President Lyndon B. Johnson's Secretary of Commerce.
Born in Englewood, New Jersey, in 1929, Mr. Trowbridge was educated at Phillips Academy at Andover, Massachusetts, and Princeton University.
He began his career with the California Texas Oil Company in 1954. He was connected with Esso Standard Oil Company from 1959 to 1963. In 1970 he was nominated president of the Conference Board in New York City.

Limits to Growth, sponsored by the Club of Rome, is saying that if uncontrolled growth were to continue, without urgently needed checks and balances, it would be like arguing that the earth is flat. Do you deem it necessary that the technological-industrial world take careful note of a study like Limits to Growth and the studies that are planned following it up?

There is no doubt that this kind of challenge, as seen in Limits to Growth, is important and necessary as a warning signal and as a stimulant to discussion in ever-widening circles. Debate is a better word, since the findings of the study are being seriously argued. The processes by

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which the analysis was carried out, the underplay of technological impact, the silence on pricing mechanisms as determining factors - these aspects of the Club of Rome study have created extensive debate. But no one can deny that we need long-range forecasting and planning, and we need to act now on the critical findings of such forecasts if they are valid.

I happen to be more optimistic over man's ability to solve these problems than we see in the gloomy exponential curves of the Limits to Growth. Man's ability as a rational human being has enabled us to survive similar predictions in the past. While the problems facing us are tougher to solve, we are increasingly better equipped technically to solve them - if we have the will.

I am also impressed by the widening concepts of corporate social responsibility that I see in the business world, and the recognition of the social impact of economic activity. We see it both in the United States and in other countries as we work with major firms associated with the Conference Board. Managerial leadership is increasingly geared to the total social, political and economic context in which they work, recognizing the inextricable ties between political and social stability with economic viability. While the ‘bottom line’ measurements of corporate results will always be read in economic terms, we will also see greater and new sets of criteria which attempt to measure the social value of the organization's activities. I see real hope in the engagement of private sector leadership in seeking ways to stimulate social and political health, as well as economic prosperity.

Sir, why do you think mostly the economists in the United States have so strongly criticized the report of the Club of Rome on price mechanisms and details of the model, while it obviously was a first beginning? Why the sometimes irrational negativism?

Frankly, we shouldn't be surprised that the Limits to Growth has stimulated strong resistance. Our outlook is still heavily economic, geared to the development of new material wealth. When a study portends the ultimate end of that quest and indeed challenges the very rationale that supports it, I think it is understandable that the reaction is strong and the debate lively.

Another factor is that a number of critics, most notably Carl Kaysen¹ in the July, 1972, Foreign Affairs, say that we cannot afford to cry over future wolves when we have numerous tigers on the current scene. He

1 See conversation no. 11.

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fears diversion of attention from such problems as the international monetary system or the gap between developed and developing countries. If we become convinced that the end of the world à la Limits to Growth is in sight and therefore readjust and redirect our efforts and priorities to potential problems more than existing and immediate ones, then we are being misled. This may not be a very long-range perspective, but is certainly an understandable one.

Now, Mr. McNamara made an important speech to the World Bank September 25, 1972. From the point of view of foreign aid, the developing world owes at the moment already seventy-five billion dollars to the rich nations. They have to pay approximately seven billion a year in service charges. How will the Third World ever get out of this trap?

It may well be that these kinds of massive debts will have to be either stretched out or declared dead in some form of moratorium. There are clearly some countries so heavily indebted to international institutions or national governments that they will never get out from under. And yet examples of successful turnarounds do exist, in Brazil or Indonesia, for example. Indonesia still carries huge debt burdens, but it has become a center of interest for new private foreign investment as a result of improved political stability.² Secondly, if the developed countries can ever come to agreement on a system of generalized preferential trade arrangements for developing countries - an admittedly elusive target - their chance to earn more and hence repay more could be improved.

I see another area where hope may be justified. The shift in the developed world is moving towards a greater portion of gross national product and of labor-force utilization in the service sectors of the economy. In the United States over sixty percent of our GNP is generated by service and distribution industries, by government and by education. Over fifty percent of the work force is in the nonmanufacturing, nonindustrial sectors. In Japan and numerous other developed economies, the growth of the service sector is also strong. At the same time, inflationary trends in the developed world have become almost endemic. I would guess that these two factors will lead to ever larger flows of private foreign investment into developing countries, and a consequent increase in their ability to earn through exports of lower-cost finished products to those developed countries where, by choice or by inflation, economical production has decreased.

2 The author protested this statement strongly on the basis of facts and figures, maintaining that the present, highly corrupt Suharto regime has achieved no political stability at all except in carrying out an effective military dictatorship, the classical breeding ground for popular insurrections, as seen earlier, for instance, in China against the Kuomintang clique. At the special request of Mr. Trowbridge, the entire conversation on this subject was later scrapped.

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The SIPRI (Stockholm International Peace Research Institute) has reported that since 1961 the United States used 338,000 tons of napalm alone. The armaments race in the Third World is galloping onwards. And here McNamara reports that none of the rich nations - next to Italy, the United States gives least - reaches even one percent of the GNP in aid to the poor peoples on the planet.³

It is quite true that developed countries do not reach the one percent of GNP target unless you include, as the Japanese do, the total amount of private-sector development going to developing countries. While not part of the national effort, in that it is not a reflection of official commitment or budget, it is still part of the development process.

As to your comment on massive expenditures for war, I again may be excessively optimistic, but I am struck by the rapid and substantial developments in the last two years in big-power relations. The extent of the changes in US-USSR and US-China relations, plus modus vivendi operations in Germany, have indeed been impressive. We would be foolish to assume the millennium has arrived, or that the antagonisms and deep philosophical and political differences have disappeared suddenly. But surely there has been a remarkable reduction in tension - and more will follow once the Vietnamese question is settled. Viewed in terms of 1945-70, developments in 1971 and 1972 have been astounding, and if handled wisely our future relations do offer serious opportunities to reduce arms expenditures. The SALT talks plus the balanced reduction of conventional weapons - all hold promise for ultimate release of official resources for positive application to the developing countries and for closing the gap between have and have-not nations.

The prime question revolves around our will. Do the developed nations, and does the United States, still believe as we did during the Marshall Plan and the '50s and '60s that our long-term interests will be served by closing that gap? We cannot overlook the strength of economic nationalism in the US, or the EEC, or Japan or Canada, It could overflow its boundaries and send us all back to the days of isolationism and economic stagnation. We are weary, in many ways, of the burdens of leadership. It will take the best kind of political and business leadership, in all countries, to avoid succumbing to this weariness. But this gap really must be closed on a steady, consistent basis, in the interest of survival of us all.

3 James Reston summed up in the February 4, 1973, New York Times: ‘World military spending has increased by 82 percent in the last ten years, from 119 billion dollars (in current prices) to 216 billion (US) dollars in 1971.’