FAISAL AND OIL Driving Toward a New World Order

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Oil-endowed Venezuela at midyear trebled its national budget, to almost $10 billion, to take account of rising revenues. The Venezuelans are expanding their state-owned steel industry in the Orinoco backlands, paying to educate thousands of future leaders at U.S. universities and gaining great influence among Central American republics by promising them loans. Says Venezuela's President Carlos Andres Pérez: "This is our opportunity to create a new international economic order."

A new order is the ultimate goal of the petrocrats. Their aim is to lead many of the Third World nations in an economic revolution that is already bringing a radical redistribution of the world's wealth and political power. The transfer of riches to the oil producers has helped slow or stop the rise of living standards in many other countries—a development that has potentially grave social consequences. The steep economic growth that the industrial nations have enjoyed since World War II tended to soften social and economic inequalities because even the poor and deprived made visible progress year by year and could discern a brighter future. Now, if there is slow growth or no growth, demands for social justice will be more urgent—and harder to fulfill. Democratic governments will have to find ways to redistribute the existing wealth, or else face dissension and perhaps chaos.

The Shah of Iran laid it on the line: "The era of terrific progress and even more terrific income and wealth based on cheap oil is finished." Henry Kissinger sees it another way. If high energy prices persist, he warns, "the great achievements of this generation in preserving our institutions and constructing an international order will be imperiled."

Inflaming Problems and Inflating Prices

The sudden, sharp rise in oil prices inflamed all sorts of problems, increasing government controls, intensifying nationalism and calling into question the future of free economies. People were gripped with the fear that events had overtaken their ability—or their government's ability—to cope. Otherwise sober men spoke of extreme solutions: repudiation of international debts, massive currency devaluations, the suspension of parliamentary government, even military intervention in the producing countries.

It was possible to blame too much of this malaise on oil. Many countries have long suffered from high inflation because they were living beyond their means for years. Particularly in the West's mass-consumer societies, the poor wanted to live like the middle class, and the middle class wanted to live like the rich. Demands piled up—for more goods, fatter wages, higher social welfare—and prices soared. Still, by best estimates, the rise in energy prices caused one-quarter to one-third of the world's inflation last year. As the price of oil increased, it kicked up the prices of countless oil-based products, including fertilizers, petrochemicals and synthetic textiles. To battle inflation, all Western nations clamped on restrictive budget and credit policies, causing their economies to slow down simultaneously for the first time since the 1930s.

The danger of a global recession grew because, as people spent more for oil, they had less money left over to spend on other things. The overall decline in demand reduced production and jobs.