NATIONS are like people: no matter how much money they have, they never seem to have enough. Today the world has more capital funds for investment than ever be fore. Yet there is disturbing evidence that capital is not being created fast enough to meet the rising volume of legitimate needs. Capital is scarce and costly almost every where, and the global shortage will worsen unless two basic remedial steps are taken. First, ways must be found to develop more funds. Second, the "flow" or distribution of capital has to be sped up and improved.
Capital—the funds left over from present consumption and used to produce future benefits—is more than the core of the capitalist system. Even the anti-capitalists of Moscow recognize it as the force that corrals human energy and in genuity, transforming it into machines and factories, roads, rail lines, bridges, telegraph nets and power plants. Capital begets capital because it leads to production. That creates jobs and income, which in turn produce more capital and more demand for it. The Atlantic Council of the U.S.—a group of U.S. Government and business leaders—estimates that, in the ten-year span ending in 1976, North America and Western Europe will need $1 trillion to expand pro duction. They will also need the funds to open new and costly programs to assault pollution and slums, exploit the resources of the oceans, and perform other basic tasks to make the civilized world more livable. The needs are great as well in countries that are stepping up toward industrialization. Iran needs $11.8 billion for its current five-year development program, started two weeks ago. In the next five years the Philippines will require $4 billion.
The needs are most conspicuous in the impoverished states, many of them new nations. Almost by definition, an underdeveloped country is an undercapitalized country. Struggling to advance from muscle power to the machine, its people anxiously eye their smokeless horizons in search of capital to build factories, hire managers and export young men to universities from Göttingen to Berkeley. They cast an envious glance at such cities as San Juan and Teheran, which have risen from squalor to considerable splendor in less than a generation. The modern influences of communications—tourists, transistor radios, Hollywood films, advertisements—have carried to every mud hovel in the world the idea that cash and credit can help men build a better life; .that capital can create choices.
Reasons for Squeeze