CHAPTER 1 Food Power and Free Markets

US Economic Policy and the 1972–1974 World Food Crisis

The 1960s was a decade of promise in food production due to advances in agricultural technology in the North and agricultural modernization in the South. This Green Revolution meant that from 1960 to 1972, the global production of grains—the main food supply for most of the world—increased almost every year, saving millions from hunger but also dramatically reducing crop diversity and increasing dependence on fossil fuels.¹¹

Rising incomes and populations in developing countries buffeted the global demand for grains. Not only did more people need to be fed; as poor people become richer, they tend to eat more dairy, poultry, and meat, which require large amounts of grain to raise.¹² Yet while incomes rose across the world, developing countries took a smaller part of the growing pie. Their share of world trade declined from 31 percent in 1950 to 21.4 percent in 1960 to just 17.2 percent in 1970, by which time the three largest economies—the United States, West Germany, and Japan—together accounted for more than a third.¹³

Overall growth in food supply and world trade masked these asymmetries, but they had serious consequences. Because the demand for food is highly inelastic, even small decreases in food supply can result in large price increases. This effect is exacerbated in poor countries, where most grain is produced for immediate consumption—feeding family and livestock—rather than sold.¹⁴ Nor was the Green Revolution performing as well as its supporters had promised. “Agricultural output has grown so slowly [in developing countries],” the Council of Economic Advisers explained in 1967, “that food output per person in many countries is below pre–World War II levels.” At the same time, “over half” of their annual growth in gross domestic product (GDP)—which, at 4.5 percent, was just shy of the UN’s target for the Development Decade—“has been needed just to maintain their low level of living.”¹⁵

US agricultural and trade policy presented another impediment to increasing food production in the Third World. Due to generous farm subsidies implemented during the Great Depression, by the mid-1960s the United States had become the world’s leading exporter of grain. In response, the US government promoted cheap wheat exports and increased food aid through Public Law (PL) 480, also known as Food for Peace. What was not sold to developing countries, on highly advantageous terms, was stockpiled. Although this brought relatively stable, predictable, and low food prices for those countries, it gave neither farmers nor governments an incentive to invest in domestic production.

For a while, the United States’ Cold War food policy paid considerable domestic dividends. Consistent US government purchases of farmers’ surpluses boosted rural incomes during an unprecedented period of wage and employment growth in manufacturing centers and suburbs, and a powerful farm lobby in Washington grew to ensure that stockpiling was a bilateral commitment. But mounting federal deficits in the late 1960s led some politicians to question whether this commitment was worth the cost. President Richard Nixon complained that the United States was paying for the large majority of a scheme to stabilize world food prices, while the European Community (EC) discriminated against US food exports through its Common Agricultural Policy. The Nixon administration concluded that reducing stockpiles and holding back production would help US farmers by increasing world prices. From mid-1970 to mid-1972, the United States reduced its production of wheat by one-third, bringing down its share of global production from 15 percent to 10 percent.¹⁶

In June 1971 the Nixon administration moved to liberalize trade with the Soviet Union, eastern Europe, and China. The centerpiece of Nixon’s overture was the promise of a massive sale of heavily subsidized grain to the Soviet Union. There was no actual grain shortage in the Soviet bloc. Facing an economic slowdown and short on hard currency, the Soviets planned to use the grain both as animal feed to maintain citizens’ increased meat consumption (and thus loyalty) and as a commodity to sell on global markets for badly needed dollars. The deal also met several goals for the Nixon administration. It promoted détente, pleasing Kissinger; it was relatively cheap, pleasing the Treasury Department; it reduced US stockpiles, pleasing the USDA; and it raised prices, pleasing the farm bloc just in time for the 1972 elections. In what one journalist memorialized as the “Great American Grain Robbery,” the Soviet Union alone absorbed about half of US carryover stocks in 1972 and more than one-quarter of total 1972 production.¹⁷ In 1961 world food reserves—held mostly by the United States—could sustain world needs for 105 days; by 1974, those reserves could sustain needs for only thirty-three days.¹⁸ The combination of lower production and the deliberate liquidation of stockpiles made the United States, and thus the world, ill prepared for any sudden shocks.¹⁹

The first shock came on August 15, 1971, when the Nixon administration ended the Bretton Woods gold exchange standard by allowing the dollar to float. Some countries still played ball, choosing to take more dollars rather than forcing the leader of the world’s monetary system to devalue. But the writing was on the wall: countries such as West Germany and France refused to permit more and more inflation to support the lifestyles of US citizens or the quagmire in Vietnam, and traders in foreign exchange markets, believing the dollar to be overvalued, began to sell them rapidly. In May 1971 West Germany left the Bretton Woods system; in July, Switzerland and France asked for more than $140 million in gold. “I don’t give a shit about the lira,” Nixon insisted in June, and he asked his advisers to come up with a policy that would boost the domestic economy in time for the 1972 elections.²⁰ John Connally, his new noneconomist treasury secretary, was entrusted with pulling together the views of Federal Reserve chairman Arthur Burns, undersecretary for international monetary affairs Paul Volcker, and Office of Management and Budget (OMB) director George Schulz. The administration’s “New Economic Policy,” announced August 15, consisted of the suspension of the dollar’s convertibility into gold, a ninety-day wage and price freeze, a 10 percent cut in foreign aid, and a 10 percent import surcharge.²¹

The dollar’s devaluation might have helped poor countries buy more US grain. In fact, Nixon intended to increase agricultural exports to balance US accounts, a strategy pursued more aggressively by Secretary Butz following the 1972 elections. However, the grain agreements with communist countries depleted the majority of the US surplus; at the same time, a series of bad weather events limited production in other important producers such as Australia, Argentina, India, and Peru.²²

The devaluation also set off a series of events in international energy markets that had serious consequences for food prices. Throughout the 1950s, several Middle Eastern oil producers charged that Western governments were colluding with multinational oil companies (MOCs) to keep prices artificially low. Following the Anglo-Iranian Oil Company’s refusal to cooperate on a new agreement with the Iranian government, prime minister Mohammed Mossadegh nationalized the country’s oil industry. The Anglo-American coup that ousted Mossadegh from power in 1953 served as a powerful example of the limitations of the Third World’s economic and political sovereignty in the postwar era.

Determined to increase their share of profits from the MOCs’ exploitation of their reserves, the governments of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela met in Baghdad in 1960 to announce the formation of the Organization of the Petroleum Exporting Countries. Through most of the 1960s, OPEC was essentially an informal bargaining group, confining its activities to negotiating better profit-sharing agreements with MOCs. But because oil was priced in dollars, the US devaluation caused a major drop in OPEC members’ real revenues—at the same time that prices were rising for just about everything else.

At first, OPEC pledged to price a barrel of oil against gold to maintain price stability, to little effect. But on October 17, 1973, citing the US decision to resupply the Israeli military during the Arab-Israeli war, six Arab OPEC members announced that they would stop oil exports to the United States and other supporters of Israel, including the Netherlands, Portugal, and South Africa.²³ At the same time, OPEC leaders who did not join the boycott defended production cuts and high prices as long overdue. “Of course [the price of oil] is going to rise,” the shah of Iran told Italian journalist Oriana Fallaci in November. “Certainly! And how!” The shah did not participate in the Arab countries’ boycott, but he defended it with the clear economic logic of dependency theory: “You’ve increased the price of wheat you sell us by 300 per cent, and the same for sugar and cement. You’ve sent petrochemical prices skyrocketing. You buy our crude oil and sell it back to us, refined as petrochemicals, at a hundred times the price you’ve paid us. You make us pay more, scandalously more, for everything, and it’s only fair that, from now on, you should pay more for oil.”²⁴ Algeria’s minister of oil agreed. The US decision to resupply Israel “at most played the role of a catalyst, in taking a decision which was already well prepared and well justified on the economic level.”²⁵ By the end of the embargo in March 1974, the price of oil had quadrupled from about $3 per barrel to $12.

The 1971 devaluation had already increased the price of grain by as much as 15 percent; after the 1972 wheat sale to the Soviet Union, grain prices quadrupled.²⁶ Better harvests and weather in early 1973 were promising, but the oil shock dashed any hope of falling food prices. The growth of US agriculture was in large part the result of new fuel-intensive farming practices; the same was true for the more modest gains in food production by developing countries. The United States and EC responded by restricting food exports to control domestic prices, but poor countries had no such defense against skyrocketing prices for the petroleum-based inputs required by modern agriculture. For decades, the Third World had lived off of cheap food imports from the United States, Canada, and Europe, and the modernization packages promoted by both West and East prioritized industrialization over agricultural development. Now, poor countries would pay the price for their dependence on the rich world’s charity and misguided development schemes.

Western intellectuals pondered the morality of inaction but offered little guidance. Some even came down on the side of inaction in order to wean chronically dependent countries such as Bangladesh; others saw an application of medical-type triage—where rich countries decided which “patients” were worth trying to save—as the most humane option. “Cruel as it may sound,” the president of the US National Academy of Sciences explained, “if the developed and affluent nations do not intend the colossal, all-out effort commensurate with this task, then it may be wiser to let nature take its course.”²⁷ In other words, produce, pay, or perish.

Kissinger: Food, Oil, and Interdependence

Historians have argued that the oil crisis initiated a profound transformation in Kissinger’s thinking, pushing him toward an awareness of global interdependence and the consequences of US economic policies for foreign policy objectives.²⁸ Kissinger himself certainly pushed this narrative. In a flattering January 1975 interview, Business Week concluded that “the outbreak of the October war in 1973, with the resultant oil embargo in the U.S.,” had led Kissinger to undertake a “radical shift” in focus away from Southeast Asia and East-West relations and toward “international economics,” where he had “taken over the lead role” in both the US government and abroad.²⁹

This was both true and incomplete. Kissinger’s reconsideration of international economics and national security came first from the world food crisis, though the significance of his response would soon be transformed by the energy question. On September 5, 1973, Kissinger sent out a National Security Council (NSC) memorandum outlining Nixon’s growing concern about the food shortage’s effects on allies. US agricultural policy had “long been a source of irritation in our relations with Europe,” Kissinger summarized Nixon as saying, but “the recent emergency of protein and grain shortages has brought a new dimension … causing problems for many developing countries and for us in our relations with them.”³⁰ Kissinger then asked the NSC to produce a study on the issue, and in response, it endorsed the idea of a “world food security system” involving an “international food stockpile agreement” to “ensure that in times of shortage, those with the least ability to pay would not be the first to suffer.”³¹

Concern over the costs and consequences of US food policy was not new. In 1958, four years after its establishment, senator Hubert Humphrey wrote a scathing review of the PL 480 program and called for major reorganization and reform. Nor was the idea of a global food reserve new. Sir John Boyd Orr, the first director-general of the UN Food and Agriculture Organization (FAO), included such a reserve as part of his failed 1946 proposal for a World Food Board.³² In 1959 George McGovern suggested the idea again in a letter to his Senate colleagues, and both Nixon and John F. Kennedy publicly supported a “multilateral surplus food distribution system” during the 1960 presidential campaign.³³

Just weeks after his NSC memorandum, Kissinger would tell the UN General Assembly of his own support for such a system, which would be negotiated at a global conference on food the following year. Kissinger could not take sole credit for the idea; nor were his reasons entirely geostrategic. As D. John Shaw tells it, the idea for a global conference originated in discussions between Pakistani economist and FAO official Sartaj Aziz and former US Agency for International Development (USAID) official and president of the Overseas Development Council (ODC) James Grant, both of whom would play important intellectual and policy roles in North-South dialogue discussions in the 1970s and 1980s.³⁴ After their meeting, Grant persuaded Senator Humphrey, who frequently sought the ODC’s advice on development policy, to take the idea to Kissinger, whose August 22 nomination for secretary of state still faced considerable opposition in the Senate. In exchange for Humphrey’s support, the two decided that Kissinger would propose a global conference to address the world food crisis.³⁵

On September 21, 1973, Kissinger’s nomination passed the Senate; on September 23 he was sworn in. The next day, introducing himself as “the world’s most junior Foreign Minister,” Kissinger told the UN General Assembly of his proposal for a food conference to be held in November 1974 under FAO auspices (Aziz would act as undersecretary-general). “We will participate without preconditions, with a conciliatory attitude and a cooperative commitment,” he insisted. “We ask only that others adopt the same approach.” In tentative recognition of the Third World’s larger complaints against the global economic system, Kissinger promised in the next sentence to “examine seriously” the Group of 77’s Charter of Economic Rights and Duties of States (CERDS).³⁶

In October 1973 OPEC initiated its blockade. By January 1974, the posted global price of oil had quadrupled, from $3 to $12 a barrel. Just a few months later, the Group of 77 (G-77) bloc of developing countries presented the NIEO at the UN’s Sixth Special Session (and first on development). Heralded by Julius Nyerere of Tanzania as a “trade union for the poor nations,” the NIEO called for a world order “based on equity [and] sovereign equality” and designed to “correct inequalities and redress existing injustices” through global redistribution and new international institutions responsive to Third World needs.³⁷

OPEC members played key roles in developing and advancing the NIEO program. As chair of the Non-Aligned Movement, Algeria’s Houari Boumediene was ideally positioned to lead the charge for economic decolonization. At home, Boumediene plastered Algiers with posters proclaiming OPEC “the shield of the Third World.”³⁸ When he later refused to discuss oil prices with the rich countries unless they also agreed to address raw materials, it was the United States, not Algeria, that caved.

Venezuela was a second important link. President Carlos Andrés Pérez championed the NIEO from its inception, and the fact that he declined to participate in the Arab countries’ boycott gave him more credibility in Western countries. On September 25, 1974, he took out a full-page ad in the New York Times defending OPEC against Ford’s accusations at the UN and declaring his hope for an “equitable” grand bargain between North and South, brokered by OPEC. Like Boudmedienne, Pérez insisted that neither food nor energy could be separated from the larger problem of an existing international economic order designed to reinforce earlier patterns of inequality and dependence. “The World Food Conference [in November] will not be able to achieve its lofty objectives,” Pérez warned, “if developing countries do not succeed in guaranteeing remunerative prices for the raw materials we produce, prices that are in the necessary and fitting balance with the prices of the manufactured goods we import.”³⁹

For US foreign policy, OPEC’s advocacy for the NIEO upgraded the world food situation from a nuisance to a crisis. It also upgraded the US dominance in global food production from a burden to a powerful tool, at a time when traditional levers of US power were either ineffective or, as in the case of military intervention, potentially catastrophic. These two facts conditioned Kissinger’s initial response to the NIEO and food’s leading role in it. Just as Nixon did not “give a shit about the lira,” Kissinger did not “give a damn about Bangladesh on humanitarian grounds. I want it [food] for foreign policy.” The United States had used food as a foreign policy tool for decades, but it had scarcely considered the long-term consequences for global food security. For Kissinger, committing to funding agricultural development in the Third World and taking the lead on an international reserve system would force OPEC to put its money where its mouth was. “This [food] is one of the few weapons we have to deal with oil prices,” he insisted to newly installed president Gerald Ford in a September 1974 cabinet meeting on US participation at the World Food Conference. The United States could point out that OPEC’s actions hit poor countries disproportionately, but food prices had begun their sharp rise in 1971, two years before the oil shock. At the same time, in 1973, 60 percent of PL 480 concessional aid went to just three strategic US allies: South Korea, South Vietnam, and Cambodia. “The President is scolding everyone at the United Nations for being miserly on energy, and the less we say we’ll do on food, the less effect it has,” Kissinger explained to Butz and Greenspan. “We are trying to tell the Third World they must be cooperative, and in turn we will try to cooperate.”⁴⁰

Butz: Food Power and the American Farmer

Kissinger’s proposals for intergovernmental cooperation on food aligned him more with the liberal establishment than with other Ford cabinet members. “An internationally agreed system of food reserves is now in the self-interest of all nations,” the ODC’s Grant told Congress in 1973.⁴¹ In June 1974 McGovern chaired hearings held by the Senate Select Committee on Nutrition on global food issues, at which he too called for an international system of food reserves. Five months later, senators McGovern, Humphrey, and Richard Clark joined Kissinger and Butz at the World Food Conference as members of an unofficial congressional delegation.⁴²

Kissinger’s biggest challenge before the conference was internal. Ford’s economic advisers opposed Kissinger on both ideological (free market) and bureaucratic grounds. The Council of Economic Advisers conducted its analysis independently and was responsible to the president only. The treasury secretary was tasked with managing the country’s overall financial stability, which in theory meant that they were responsible to all Americans but which in practice meant, in addition to the president, a few dozen powerful Wall Street investors and firms (nearly all holders of the office were alums). Not so for the secretary of agriculture, whose constituents in 1970 were spread across the country on some two-and-a-half million farms—down from three-and-a-half million ten years prior.⁴³ Earl Lauer Butz was the most consequential USDA head since Henry Wallace in the 1930s. In fact, his mission was to dismantle the system of price supports enacted during the New Deal to stabilize farm incomes. Under this arrangement, which continued into the postwar era, the government paid some farmers to keep land fallow and also bought farmers’ excess grain. By buying and storing grain during times of surplus, releasing grain during droughts, and paying farmers to not plant too much, the US government could manage supply and guarantee that prices did not go too high, thereby hurting consumers, or too low, thereby hurting producers, while also ensuring that the land would be kept productive in the long term. Like Kissinger, Butz saw a major role for food in US foreign policy, and his disruptive approach to American agricultural production threatened Kissinger’s entire North-South strategy.

Despite having a PhD in agricultural economics from Purdue University, where he eventually served as president, Butz was a controversial choice for secretary of agriculture. The first red flag for farmers was his service under (and outspoken praise for) Eisenhower’s USDA head Ezra Taft Benson, “the most hated agriculture secretary ever” due to his strong antipathy toward New Deal reforms.⁴⁴ The second was his close ties to large US agribusiness conglomerates such as Ralston-Purina, where Butz’s predecessor, Clifford M. Hardin, had already lined up a vice presidency at the time of his resignation as secretary. “He [Butz] is the worst possible choice I could imagine,” the head of the National Farmers Organization stated, “one of those land-grant college educators who was supposed to assist all farmers in America, but who identified with giant agri-business corporations.”⁴⁵ During his confirmation hearings, a coalition of liberal northern Democrats, conservative southern Democrats, and Farm Belt Republicans grilled Butz on his past statements predicting the end of the family farm and urging small farmers to “adapt or die” through “vertical integration.”⁴⁶

Not everyone in the Farm Belt opposed Butz’s nomination. “The family farm has been in desperate straits for many years,” the Salt Lake City Tribune explained in his defense. “Rising costs and declining farm prices have combined to clamp the small farmer in an increasingly untenable price squeeze.”⁴⁷ Halfway through the hearings, the American Farm Bureau Federation, which claimed to represent two million “member families,” became the first farm group to endorse Butz.⁴⁸ Still, his approval in the Senate by a vote of fifty-one to forty-four came only after Butz pledged, in writing, to take immediate action to increase farm incomes by raising corn prices. “You said you wanted an aggressive, articulate Secretary of Agriculture,” he insisted at his swearing in. “You’ve got one. It may be that I’m more vigorous than you want.”⁴⁹

Butz moved fast. Less than twenty-four hours after taking office, he announced that the USDA would begin buying up corn in the open market “to firm up farm prices,” thereby encouraging farmers to take advantage of a 1970 Farm Bill provision that removed many restrictions on planting quotas.⁵⁰ Butz was eager to defend higher domestic food prices, telling consumers they had never had it so good: Americans were eating more calories, and more red meat, and spending a smaller percentage of their incomes than ever before.⁵¹

Despite the religious fervor with which he condemned government spending and handouts—his negative comments on the widely popular food stamp program had dogged him during his confirmation hearings—in practice, Butz was no budget puritan. He earned the ire of treasury secretary George Shultz for siphoning a total of $700 million in “miscellaneous raids on the Treasury” for the corn buyback and other programs, but because “there is no one on the White House staff who knows much about agriculture,” the New York Times Magazine reported, “he is relatively free of second-guessing.”⁵² Nixon wanted to win the Farm Belt in 1972, and with Butz’s support—farm incomes for 1972 were a record $19.2 billion—he overwhelmingly did.⁵³

Unlike his predecessors, Butz had no plans to sit on that surplus until a shortage struck. He instructed farmers to unleash their productive potential by planting corn and soybeans “fencerow to fencerow,” assuring them that world markets would absorb what domestic markets could not. The 1971 Soviet wheat deal was the first move, accounting for one-third of the overall increase in agricultural exports in 1972; exports also increased substantially to eastern Europe, Latin America, Japan, and, for the first time in two decades, China.⁵⁴ In April 1973, at the height of the world food crisis, Butz announced to Nixon “[with] a great deal of pleasure … the virtual liquidation of farm products from the Commodity Credit Corporation,” the linchpin of the New Deal system of managed farm prices. “This marks the first time in more than two decades that American agriculture can enjoy a market as free from the stifling effects of government stocks as it now can.”⁵⁵

This was only the beginning of the American farmer’s new frontier. “This is a ‘hinge point’ in history,” Butz told an audience in Chicago. “Agriculture is taking a dominant position in America’s export trade.” Indeed, US exports were down across the map except in agriculture, which Butz positioned as the cure for the US payments deficit. The result, he predicted, would be a virtuous circle comprising a hungry world, a cash-strapped US government, and US farmers with the “daring” and “imagination” to expand their farms and maybe get rich in the process: “Agriculture is already making a major contribution to America’s trade balance. We have the potential to do even better. Overseas markets are growing. We can supply those markets, increase our exports, and strengthen our farm income.”⁵⁶

Butz was also quick to stress a second foreign policy benefit of his market reforms. “We are learning in this country, perhaps belatedly, how to use food as a positive factor in world diplomacy,” he told a meeting of advertising executives in June 1974. This would not be like the “so-called ‘Food for Peace’ program” of the 1950s and 1960s, in which the US surplus was simply given away to improve the nation’s image in the Third World. Instead, Butz cited the role of food exports in opening China, achieving détente with the Soviet Union, and reaching “peace and reconciliation” in Vietnam and the Middle East as proof that “food has become a major force for [international] negotiations.” The United States’ “food power” was indeed “a major weapon.”⁵⁷

The question in the middle of 1974 was how that weapon would be used toward OPEC and the Third World: was it a carrot, or was it a stick? There was a fine line between food power and food punishment. In late 1973 the White House rejected Butz’s suggestion for a food embargo against OPEC members. As a State Department official remarked, food power was “power over people who are hungry—people we don’t want to push around anyway.”⁵⁸ Kissinger’s proposal for a World Food Conference and promise to negotiate some sort of international reserve system indicated a more cooperative approach, but Butz was adamant that the United States avoid anything that might suggest a return to government intervention at home or a new system of intergovernmental management abroad.⁵⁹ Kissinger, State, and the NSC disagreed. From their perspective, private markets were inadequate for both the political and economic dimensions of the food issue.⁶⁰ Government-held stocks were a necessary part of any proposal—at least one that would be taken seriously by developing countries. Kissinger would not fall on his sword at the World Food Conference because of Butz’s ideological opposition. “I am perfectly willing to take it to the President,” he insisted.⁶¹

President Ford’s chief economic advisers were no less skeptical of Kissinger’s approach. One month before the World Food Conference convened in Rome, Kissinger shared a draft of his keynote address with Ford’s EPB, consisting of treasury secretary William Simon, Ford’s economic assistant William Seidman, Alan Greenspan, and OMB director Roy Ash. The opposition was unanimous. All backed Butz in objecting to Kissinger’s insistence on including specific aid commitments, arguing that the United States should speak only broadly about its responsibility for ending the food crisis. This approach was exactly what Kissinger wanted to avoid. “Can we really say that ‘all countries have responsibilities,’ when we know that Bangladesh and the Sahel can’t do anything, and that some others can do greater and still others lesser?” Such rhetoric would be roundly mocked by the Third World, negating the whole point of US leadership at the conference. “We should set forth a philosophy, try to convince people, not give an old-maidish lecture to others about what they should do,” Kissinger insisted, and not for the last time. “We should be less schoolmasterish.”⁶²

Ford’s economic advisers also objected to the implications of a globally coordinated system of food reserves. “All too frequently,” the Treasury Department complained, high food prices were used “as a way of justifying, and among some developing countries excusing, the oil price increase.” Did not Kissinger’s plan for an international system of food reserves to regulate supply and price to some extent endorse this logic? The shah’s analogy—if the price of wheat can triple in one year, why not the price of oil?—was misleading, given the effects of natural phenomena such as weather and poor crops on the global food supply. But Treasury’s argument ignored several important decisions—the 1971 devaluation of the dollar, the 1972 grain sales to the Soviet Union, the 1973 decision to restrict food exports, and the lack of a meaningful response to famines in South Asia and Africa—implicating US policy in the food crisis.

Regardless of the economics, developing countries continued to see OPEC’s actions as a legitimate response to decades of selfish and unfair treatment by the industrial countries. Algeria’s and Venezuela’s self-appointed leadership of the NIEO, announced barely a month after the Arab states ended their embargo against the United States, suggested the emergence of a new political economy for the energy and food crises defined primarily in North-South terms. Both the United States and OPEC had promised to aid oil-importing developing countries hurt by higher energy and food prices, but the World Food Conference was an opportunity for the United States to take the lead. As the State Department explained, “the US must demonstrate its willingness to use its food resources constructively if its position in trying to get OPEC countries to use oil responsibly is to have any credibility.” Credibility on food would translate into credibility on oil, Kissinger reasoned. OPEC, not the United States, would be seen as the inflexible one, prolonging the Third World’s food and energy deficits to line its own pockets.⁶³

The 1974 World Food Conference

More than five thousand delegates and observers from 131 countries attended the World Food Conference, held in Rome’s Palazzo dei Congressi on November 5–16, 1974.⁶⁴ Hundreds of journalists stalked the palace halls, which also contained representatives from 161 nongovernmental organizations (NGOs). More than two dozen influential social scientists and business leaders signed a declaration drafted before the conference by Barbara Ward (Lady Jackson), arguably the most important development expert of the decade.⁶⁵ The New York Times covered the conference extensively and published a series of explanatory articles on world hunger in the months before.⁶⁶

Kissinger, whose keynote was expected to set the terms of the discussion, was not involved in conference preparation, which was carried out largely by the FAO. However, the State Department invited more than twenty members of Congress, including Senators Humphrey and McGovern, to accompany the US delegation.⁶⁷ Also present was the World Hunger Action Coalition, representing more than seventy civic and church groups; its US-based chairman would act as a liaison between the US delegation and the various NGOs.⁶⁸ All this suggested a new visibility for world hunger among Americans and a political base for more aid and global cooperation. “If a public relations opportunity like this won’t get results,” the conference’s official newspaper wondered, “what will?”⁶⁹

There were other reasons for optimism. According to the same paper, a “crude conjunction” of factors had propelled this crisis (as opposed to past ones) to the forefront of developed countries’ agendas. Not only was this food crisis “the biggest ever”; its connection to the energy crisis and the NIEO had forced leaders in the United States and other rich countries to confront the national security implications of global inequality. The food crisis “has provoked in the massive industrial powers a kind of geopolitical change of life, for its logic is that a shared world must share resources, and the rich have the most to give,” the author explained.⁷⁰

Kissinger’s keynote, the result of several months of interdepartmental wrangling and conflict, was a combination of high rhetoric, misleading accusations, and ambitious but vague proposals. As planned, he took aim at OPEC, naming “a political embargo and then abruptly raised prices for oil” as the reason for lower industrial and farm production in 1973–74 and for “accelerat[ing] a global inflation that was already at the margin of governments’ ability to control.” When producers’ cartels restrict the supply of vital commodities to force political change, he explained, it is not the rich nations but “the poorest and weakest nations [that] suffer most.” Citing the “special responsibility” of oil producers, he challenged OPEC members to use their dollar surpluses to fund long-term efforts for Third World agricultural development and to help at-risk countries meet current needs. After avoiding US responsibility for the current food crisis, Kissinger then assumed US leadership in preventing another. His five-point, twenty-five-year program included increasing food production in exporting countries, accelerating production in importing countries, improving the means of food distribution and financing, enhancing food quality, and ensuring security against food emergencies.⁷¹

There were important ironies in Kissinger’s approach. For one, by blaming OPEC for all the global economy’s problems, Kissinger effectively admitted that an organization of commodity producers from the South had single-handedly brought the global economy to its knees—and that the developed countries had been powerless to stop it. And while Kissinger held up the oil crisis as proof that producers’ cartels hurt poor countries even more than rich ones, did not US monetary, trade, and agricultural policies produce the same effect for food—an even more vital resource? Most oil-importing developing countries said yes and continued to see OPEC as the necessary muscle behind the NIEO project. “These nations tend to speak of food as a matter of human rights,” a US diplomat observed before the conference, “but they have applied practically no pressure on the oil producers to lower prices. Instead … they tend to applaud [OPEC’s actions as a] redistribution of wealth.”⁷²

The good news was that Kissinger’s proposals for reform were not much different from those of the FAO.⁷³ His vow that “within ten years no child [would] go to bed hungry” appeared in the final conference document and inspired the Universal Declaration on the Eradication of World Hunger, passed the following month by the UN General Assembly. Kissinger also endorsed the creation of a “reserve coordinating group to negotiate a detailed agreement on an international system of nationally-held grain reserves” of up to sixty million tons of food “above present levels.” Though Kissinger commended FAO director-general Boerma’s proposal for a reserve system, he made no mention of the fact that Boerma’s plan involved the creation of a new UN body subject to the Security Council. At the same time, Kissinger nodded to the NIEO’s call for global negotiations when he added, “This group’s work should be carried out in close cooperation with other international efforts to improve the world trading system.”⁷⁴

OPEC members completely rejected Kissinger’s line of reasoning. First, they denied that they were now wealthy nations with a “special responsibility” to fund development commensurate with the United States and other developed countries. “We are not rich,” explained the deputy chief of the Saudi Arabian delegation. “Richness comes from structures, which we don’t have. We import everything from needles and thread to automobiles at inflated prices.”⁷⁵ Second, they dismissed the implication that they were to blame for the food crisis. “The food crisis has its roots in unfair policies of the developed countries, the enormous grain purchases of the Soviet Union, and the population explosion,” said Iranian interior minister Jamshid Amouzegar. In any case, the delegates insisted, they were already giving between 6 and 8 percent of their GDP in aid, in contrast to the “old rich” countries in the North that gave well under 1 percent. “We have contributed more than our fair share [to ending the food crisis],” said a delegate from Kuwait’s foreign ministry. “That is not talk but a fact. We were acting even before this conference was organized.” Iran was “prepared to give—and give more,” Amouzegar insisted, “provided we do not replace the traditional [Western] donors’ contributions.”⁷⁶

Third, in response to Kissinger’s challenge, eleven OPEC members proposed the establishment of a new multilateral institution to finance long-term Third World agricultural development. The proposal for an International Fund for Agricultural Development (IFAD), funded half by OPEC and half by the Organization for Economic Cooperation and Development (OECD), had thirty-four sponsors, including major European donors such as the Netherlands, as well as Australia and New Zealand, both rich food exporters.⁷⁷ On November 14 the proposal passed in committee.⁷⁸ “I am absolutely certain [OPEC members] will contribute millions, no hundreds of millions of dollars [to the fund],” secretary-general Sayed Marei announced a few days later.⁷⁹

Some saw hope in this effort. Jan Pronk, Dutch minister of development coordination in the 1970s and an active participant in several critical North-South forums, believed at the time that the “oil for food” concept was “brilliant.” Pronk, one of the fund’s cosponsors, insisted that it was not “an anti-Western resolution, because it was OPEC plus the Netherlands.”⁸⁰ Given the much higher GDPs of OECD countries, the fifty-fifty split meant that OPEC was promising to give much more than its fair share to long-term agricultural development. However, it also meant that the rich countries could be outvoted by an OPEC–G-77 coalition, as the proposal divided voting power into thirds among the two donors (OECD and OPEC) and the recipients (other developing countries). Unprepared for this outcome, the US delegation publicly welcomed the IFAD while working behind the scenes to undermine it. In another committee, US officials proposed the “establishment of a less-rigid, more informal coordinating structure” for organizing development aid through bilateral channels and private investment, rather than government guarantees to a new fund shared with OPEC.⁸¹

Kissinger was confident that shaming the oil producers would drive a wedge between OPEC and the G-77, forcing them to choose between high oil prices and Third World solidarity. However, this strategy could work only if the United States backed up its rhetoric with commitments. On the one hand, the United States supported the creation of a World Food Council as a “high-level, limited-member UN organization” to oversee the enforcement of conference resolutions, including the creation of the IFAD. Kissinger’s reserve system proposal also passed, as did a US resolution “urging major grain importers and exporters to begin urgent talks” through a “reserve coordination group.” On the other hand, the US delegation worked to neuter any new institutions that might share US power or make specific resource commitments. Although the United States voted for the resolution, the World Food Council “would have no authority beyond moral suasion to force action on the part of governments or UN bodies,” the US delegation reported. As for the IFAD, “the United States supported the proposal in hopes that it would be a vehicle for promoting development by the countries with surplus oil revenues, but the U.S. has no present intention of contributing to the Fund, and will continue directing its substantial multilateral contributions through existing institutions.”⁸²

Kissinger’s lack of specificity on US commitments was glaring, and the reason why was obvious. “The Kissinger speech was vague and tentative because Washington really [has] no policy on food,” a Ford administration “food expert” told the New York Times. “My great concern is that he has come up with watered-down proposals emerging out of interdepartmental battles.”⁸³

Those interdepartmental battles were on display on November 6 when Butz, chair of the US delegation, took the stage for his address. (Kissinger was already en route to the Middle East to continue his shuttle diplomacy.) While Butz reiterated the US commitment to negotiating a reserve system, he laid down new market-based conditions absent in the Kissinger draft. “We do not favor food reserves of a magnitude that would perpetually depress prices, destroy farmer incentives, mask the deficiencies in national production efforts, or substitute government subsidies for commercial trade,” Butz declared. Food aid and food reserves were “issues that arrive after food is produced, not before. The conference’s “number one responsibility is to move the world toward a higher level of food production,” he insisted, and the way to do that was not more government, but less. Butz held up his own free market reforms, such as removing production controls and limits on land use, as examples of how the United States was set to grow more food than ever next year. Developing country governments simply needed to allow their farmers to harness the same entrepreneurial spirit. “In my country, farmers respond to the incentive of profit.… In modern societies, these incentives are closely related to the ability to earn a fair return from one’s investment—a decent reward for one’s labor. I strongly suspect that this is true in other countries as well as my own.”⁸⁴

Butz’s lecture on markets and self-reliance was exactly what Kissinger had warned against. “I want to avoid the Protestant missionary approach. I don’t want to preach,” he explained to Butz in an October White House meeting on US strategy. “What I want to do is convince the political leadership of these countries [the G-77] that we mean it when we call for cooperation.”⁸⁵ More embarrassing, Butz’s speech contradicted his own agency’s analysis and public statements. In reports distributed at the conference, USDA officials blamed the root of the “current world food situation” on “government policies and basic human conditions (such as income distribution and poverty).”⁸⁶ Another report, prepared in December 1973 for the US Council for Agricultural Science and Technology and made public by Senator McGovern, determined that an international emergency food bank “would have little effect on United States farm prices and incomes. That little effect, however, would be positive.”⁸⁷

There was an even more glaring problem that both speeches shared: they said nothing new about what the United States was prepared to do about starvation now. Experts estimated that the thirty-three poor MSA countries needed to import sixteen to seventeen million tons of grain between the summers of 1974 and 1975; in Rome, those countries were short some seven million tons, at a cost of about $1.4 billion.⁸⁸ To put it simply: half a billion people across the Third World faced starvation if they did not receive food aid within the next eight months.⁸⁹

Since June, US officials had been promising more aid, but the reality was much different. In fact, in the months before the conference, Bangladesh actually purchased more food from the United States than it received as aid. (The EC had also promised additional food aid, but none arrived before the conference.) Time was running out for the MSA countries: whether as aid or trade, food still needed to be moved from North American ports to cities in Africa and South Asia, which could take weeks if not months.⁹⁰

A few days before the conference, Kissinger had raised expectations when he promised India, Pakistan, and Bangladesh extra food aid during visits to those countries. However, per Butz’s advice and Ford’s decision, both secretaries’ speeches only restated Ford’s promise at the September UN General Assembly to increase food assistance above present levels.

The food aid controversy had far-reaching effects on the conference. For one, delegates from MSA countries understandably focused their efforts on gaining a promise from rich countries on short-term aid and avoiding imminent starvation, rather than the long-term proposals being negotiated over their heads by the rich countries and OPEC. One official recalled a late-night session in the “hot, almost empty [plenary] hall,” where the minister of agriculture of Rwanda described how the food situation in his country was “deteriorating from day to day.… Rwanda spoke, and nobody paid attention.” Others acted more directly. On one occasion, delegates from Bangladesh arrived in Marei’s office minutes before a press conference on the IFAD and “asked him to speak about how many people might die in Bangladesh in the next few weeks.” After Butz’s speech, Canada and Australia, the second and third largest wheat exporters, announced emergency aid increases; West Germany and Sweden followed suit, but the US position remained the same.⁹¹

Criticism from both foreign delegations and US congressional observers eventually proved too much, even for Butz. Halfway through the conference he signed and sent to Ford a letter drafted by the World Hunger Action Coalition “urgently requesting a minimum volume increase of 1 million tons of food aid for the 1975 fiscal year.”⁹² On the penultimate day of the conference, Ford announced that he could not approve the increase; further food aid, US officials explained, would be reviewed on a quarterly basis to avoid any sudden shocks to grain prices. To make matters worse, in the middle of the conference Butz flew to Egypt and Syria, where he announced new commercial grain sales to those countries.⁹³ The secretary made no secret of his displeasure at having his hand forced, “angrily criticizing” the politicians (led by McGovern and Humphrey) who had called for the increase. “Let me ask you a question,” he barked at a CBS Evening News reporter questioning Ford’s decision. “Does your wife have any—does your wife have any poor relation that you’ve got to help support.… Do you ever give them enough to satisfy them?”⁹⁴

Kissinger’s strategy for the World Food Conference—confronting OPEC while courting the G-77—was a failure. “The pressure was … on the members of OPEC right from the beginning,” wrote one conference observer of Kissinger’s strategy. “Put your money on the table … and we [the United States] will respond by doing something about immediate problems of world starvation by releasing more food aid.”⁹⁵ Yet when OPEC did just that, the US delegation wilted. Interdepartmental battles prevented the food aid increase and isolated the United States from developing and developed countries alike. “We stuck out like a sore thumb,” US delegation coordinator Edwin M. Martin lamented to Congress upon his return. “We have a long row to hoe in that respect.”⁹⁶

Instead, OPEC and G-77 leaders were emboldened and identified both food and energy even more strongly with the NIEO. The US delegation reported that, rather than expressing enthusiasm for Kissinger’s reserve system or other proposals, the G-77 “called for radical adjustments in the current economic order and for reparations from developed to developing countries.”⁹⁷ Venezuelan president Pérez denounced “the high prices the developed nations are charging us for the farming and industrial machines and other inputs that are essential to agriculture and the growth of our economies.… Unless the issue of international trade is faced squarely, it will not be possible to detect [the food crisis’s] causes.”⁹⁸ Algeria’s Boumediene went further, listing the creation of a special fund for developing countries in the International Monetary Fund, reductions in developed country tariffs, renegotiation of international commodity agreements, greater regulation of multinational corporations, and the establishment of new international institutions as necessary to carry out the conference’s program of action—in other words, the NIEO. The State Department telegram summarized, “DCs [Developed Countries] have great responsibility [for the crisis] and nonaligned will see that New [International] Economic Order prevails.”⁹⁹

In a fortuitous but nevertheless unsatisfying turn of events, widespread predictions of a weak 1974 harvest in major food producers proved false. Global grain prices plummeted in December and January, and in February 1975 the White House announced an increase of some two million tons over 1974 levels.¹⁰⁰ In theory, this meant that the conference’s target of seven to eight million tons would be met, and for the next few years, the global price of wheat stabilized at around $3.50 a bushel—down almost half from its peak in February 1973, at the height of the oil crisis, but still almost double precrisis levels.¹⁰¹ While images of starving children with distended bellies disappeared from televisions and newspapers, uncounted millions were still dependent on the West’s charity for their next meal, and many were forever scarred by the wrenching long-term physical consequences of chronic malnutrition. One development expert told Congress a year later: “there has been no significant improvement in the precarious situation of the 460 million people whom the 1974 World Food Conference recognized to be malnourished or facing starvation.”¹⁰²

Also in February 1973, at the United States’ request, the International Wheat Council (IWC) met to work out the implementation of Kissinger’s reserve proposal. The White House was no closer to a unified strategy. The NSC reported in May 1975, around the time of the IWC’s second meeting: “State and Agriculture, and to a lesser extent other agencies, have spent most of their time [since the conference] arguing about how the U.S. should implement [the reserve system proposal].” The difference was “fundamental, and the inflexible positions taken so far threaten to make a meaningful U.S. initiative possible.” The disagreement was between State’s “tight” system—according to the OMB, “essentially a price-fixing, international commodity agreement with nationally held buffer stocks and export controls in time of shortage”¹⁰³—and Agriculture’s “loose” system, “in which the agreement would be to consult on further action [in the event of a crisis] under pre-negotiated supply positions.”¹⁰⁴ Butz won the battle, and at the IWC’s third meeting in September, “representatives of the US agencies concerned” killed State’s proposal.¹⁰⁵

Kissinger’s attempt to use US food power to shame OPEC was also unsuccessful. Not only did Kissinger endorse OPEC’s proposal for an IFAD.¹⁰⁶ Throughout 1975 several OPEC countries announced numerous development funds and banks of their own with the stated goal of reinvesting oil profits to diversify Third World economies, mainly in the Middle East and Africa.¹⁰⁷ Although these efforts received neither adequate funding nor sustained focus, they shored up the South’s solidarity through the energy and food crises. Kissinger underestimated not only OPEC’s willingness to continue high oil prices at the expense of non–oil-importing developing countries but also the power of OPEC’s example for other commodity producers. They were unwilling to ignore the role played by the developed countries, and the United States in particular, in their declining growth, export prices, and share of world trade during the North’s age of affluence.

Throughout 1975–76 Kissinger expanded his conciliatory strategy in different forums. The United States’ North-South policy evolved in the context of US-European-Japanese trilateral relations through the establishment of yearly summits. Once again, Kissinger took the lead in promoting these engagements, seeing them as a way to increase coordination among developed countries on a number of economic and security-related issues and to renew the West’s sense of confidence and cohesion in the face of mounting energy, monetary, and fiscal challenges. Again, he fought with the EPB over how to present US economic policy—both North-South and North-North—in these meetings, but the results would begin to reveal more clearly the successes and failures of his NIEO containment strategy.