Papers Relating to the Foreign Relations of the United States, 1927, Volume III
891.51A/415a
The Secretary of State to the Minister in Persia (Philip)
Sir: Adverting to the Department’s telegram No. 51 of September 19, 1927, 7 p.m.22 with regard to a statement to the Press made in [Page 564] Washington on September 17th by Dr. A. C. Millspaugh, formerly Administrator General of the Finances of Persia, concerning his work in that country and the circumstances of his withdrawal, there is enclosed herewith for your information and guidance a copy of the statement under reference.
I am [etc.]
Statement Made to the Press by Dr. A. C. Millspaugh, September 17, 1927
Dr. A. C. Millspaugh, Administrator General of the Finances of Persia has arrived in Washington after terminating five years of work in that country as head of the American Financial Mission.
Dr. Millspaugh left America in the Fall of 1922 with eleven assistants, having entered into a contract with the Persian Government which gave him complete charge of the finances, including the control of the personnel of the financial administration and an absolute power of veto over expenditures and financial obligations. The contracts of several members of the Mission having expired, the Majless (Persian Parliament) in 1925 authorized the employment of twelve additional Americans for the finances, including an agricultural expert, bringing the total of the Mission to sixteen. Soon after, an American director of highways, Mr. A. F. Morris, was engaged; and, following the decision of the Government and Majless to construct a railroad, Mr. W. B. Poland was appointed director of railroad construction and was provided with a staff of eleven American engineers. More recently, Mr. F. C. Clapp of New York has been engaged to study and report on the petroleum resources of the country. The Majless also authorized the establishment of a National Bank and the engagement of an American as Director.
At the time of the departure of Dr. Millspaugh from Persia in August of this year, there were fourteen Americans in the Ministry of Finance and thirteen in the Ministry of Public Works.
The work of the Americans in Persia coincided with the rise of Reza Shah-in-Shah Pahlevi, the remarkable strong man of Persia, who by a coup d’etat in 1921 became Minister of War and Commander-in-Chief of the Army, organized an efficient military force, suppressed tribal uprisings, created unprecedented conditions of unity, order and security in the country, dictated the appointment and dismissal of prime-ministers, finally in 1923 became himself Prime-Minister, and, in the Spring of 1926, was crowned Shah-in-Shah, establishing the new Pahlevi dynasty and retaining command of the military forces of the Empire.
[Page 565]Dr. Millspaugh’s contract as Administrator General of the Finances expires officially on September 30 next; but, for more than a year, the renewal of his contract has been the chief topic of discussion in Persia. Finally, in June of this year, the Persian Government invited him to remain for another period of three years; but, because certain of the Government proposals would have substantially altered the conditions and greatly reduced the powers under which he had previously worked, Dr. Millspaugh declined the Government’s offer, and immediately availed himself of his right to leave of absence.
The Government thereupon proposed to the Majless that Mr. McCaskey, senior member of the Mission, should act as Administrator General until September 30. This proposal was rejected by the deputies and instead, the Prime-Minister, Mr. Hedayat, was appointed Acting Administrator General.
Following these events, the members of the Financial Mission, whose contracts run until the Summer of 1928 and who had been engaged in 1925 to serve under the orders of the Administrator General of the Finances, unanimously charged a violation of their legal rights, on the ground that the office of Administrator General had been in effect abolished, and requested a settlement and termination of their contracts.
As Administrator General of the Finances of Persia, Dr. Millspaugh, who had previously been Economic Adviser of the Department of State, had no official connection with the Department or with the American Government, and the Department made it clear to the Persian authorities at the time of his appointment that this Government assumed no responsibility for his actions as an employee of the Persian Government.
Dr. Millspaugh said:
“At the time of the arrival of the American Mission in Persia in November, 1922, the civil administrations of the country, particularly the Ministry of Finance, were in a state of demoralization, corruption and chaos. The Persian people, while ancient in their history and traditions, were young in the experience of popular government, and, with rudimentary standards of public honesty and duty, were unable to separate finance and administration from the wasting and corrupting influences of internal and foreign politics.
“Huge sums in taxes remained uncollected and arrears of salaries and claims against the Government had accumulated to an amount of over fifteen million dollars. In the fiscal year 1922–23 the deficit was over $2,500,00[0] in a budget of approximately twenty million. The funds applied to productive purposes were negligible and judicial, educational, and sanitary institutions were practically nonexistent. The hopeful factors in the situation were: the achievements of Reza Khan Pahlevi in establishing order and security; the decision of the Government and Majless to obtain the effective assistance [Page 566] of foreign experts; the universal genuine desire in the country for reform and progress; the general sentiment of sound nationalism; and the characteristics of the people—quick, intelligent, adaptable, and industrious.
“During its almost five years of work, the American Mission made encouraging progress in reorganizing the tax system; revenues increased from twenty million to thirty-one million dollars; expenditures were placed on a budgetary basis and accounting was established in all departments except the Ministry of War; the budget was balanced and in the last two fiscal years a substantial surplus was created; the funded debt was reduced and the payment of claims begun; $1,500,000 was being devoted annually to the construction and maintenance of highways; a fund of over ten million dollars, increasing at the rate of six million dollars a year, was established for railroad construction; appropriations for agricultural development were increased; telegraph lines were extended, wireless stations were erected and are working, commercial air transport is in operation over three main routes; mail transport has been largely motorized; steps were taken to encourage domestic industry and to promote exports, the Government adopted a program of curtailing opium cultivation, which is now being discussed at Geneva, sufficient revenues were allocated to public instruction to render possible the establishment in a few years of universal elementary education; sanitation facilities were extended. Just before my leaving, the Majless passed a law for a national bank and I had proposed appropriations for irrigation works, for the settlement of the tribes on the land, and for the encouragement of the rug industry.
“There was convincing evidence at the time of my departure that a large majority of all the influential classes of the people, such as the merchants, clericals, landed proprietors, and office-holders, a majority of the deputies of the Parliament, a majority of the ex-prime ministers and ex-ministers who had held office during the period of our work, even a majority of the Council of Ministers at the time of my departure, were in favor of the renewal of my contract without essential change. The Government proposed, however, that any dispute in the future between the Minister of Finance and myself should be decided according to the nature of the dispute, by the Council of Ministers, by an ex-officio commission of high Persian officials, or by the Majless. My counter-proposal that disputes over the interpretation of my contract should be decided by the Majless was not accepted by the Government. My feeling was, that the Government proposal, if accepted by me, would have deprived me of all effective control over expenditures and would have prevented the Mission from continuing to serve the real needs of the Persian people.
“One must view with keen regret the decision of the Shah which may interrupt an undertaking which had become internationally known as a unique and useful service by a devoted group of Americans to an ancient and awakened, but still undeveloped, Oriental nation. On account of the present situation, however, we must not lose confidence in the capacity of the Persian people for self-government or in their possibilities for progress. Other nations have had their temporary set-backs. Other peoples have moved forward by fits and starts. Other governments have made erroneous decisions and later corrected them. It is my hope and belief that the Persian [Page 567] Government will again understand, as it clearly perceived in 1922, that its financial administration, placed for a term of years in the charge of honest, competent and politically disinterested foreign experts, is the surest means of progress, and, until the Persian governmental system is stabilized to insure financial soundness, probably the best practicable instrumentality for fulfilling the sane nationalistic aspirations of the country”.
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