Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

120. Memorandum From the Under Secretary of State (Bowles) to the Administrator of the Agency for International Development (Hamilton)⁰

Washington, October 7, 1961.

SUBJECT

• Criteria for Aid

Following our discussion the other day, I thought it might be useful to put down briefly my views on aid criteria. I do this hesitantly knowing what a difficult problem this is and well aware that my ideas are still very tentative. I hope, however, that in some measure they will be helpful to you.

My own experience in OPA during the war convinced me that standards can be made to work if they are reasonably devised and intelligently applied. I think the same lesson can be drawn from our experience with aid to the Philippines after World War II where the Bell mission set down rather rigid criteria and insisted on them.¹ The subsequent emergence of Magsaysay was strengthened probably by this insistence.

If we do not have firm criteria, we will surely be in trouble on the Hill next year. And in our administration of funds we will be subject to intense pressures without the guidelines we need to discriminate among them.

Congress was quite explicit in the law. With respect to the development loans and grants, the President is directed to emphasize assistance to “long-range plans and programs” taking into account “the extent to which the country is showing a responsiveness to the vital economic, political and social concerns of its people, and demonstrating a clear determination to take effective self-help measures”.² This injunction is reiterated elsewhere in the act with special reference to Latin America.

These three are the essential elements: good planning, an awareness of popular needs, and efficient use of local resources. All of them clearly imply the need in many countries for major reforms in tax systems, land tenure, exchange controls, public administration, and the like.

In practice this means that now is no time for “business as usual”. Time is short and the prejudices and vested interests of small elites must not be allowed to stand in the way of progress. These are days of real crisis. Those who face up realistically to the urgency of democratic change are those with whom we must work most closely.

This suggests that we may find it most useful in setting our stand-ards to divide countries into several groups, roughly as follows:

1. Countries with highest priority should be those taking with the greatest seriousness the importance of solid planning, maximum mobilization of local resources, and a dedication to social justice, and with programs already under way. For these countries we should take advantage of our five year authorization to give assurances of long-range assistance.

2. A second category would be countries with the right kind of ideas on paper but which have not yet carried them out. I would put these countries on a “short halter”, helping them to get going by setting target dates and pointing to the aid which they might get if they bestirred themselves, but holding off on any major aid until they did so.

3. The third classification would be countries without even paper plans and programs. Here our first effort would be to help them develop the technical competence to take this fundamental step. It may well be that we should bring outside people right into the administrative structure of their government, perhaps through multilateral agencies.

4. The final group would be countries with such over-riding military or political problems that we must give emergency aid without regard to standards. Hopefully these would be only short-term situations.

Insisting on countries meeting our criteria is going to mean that we shall be turning down many requests for aid. The pressure to give in to these requests will often be intense but the answer, I feel, is not to lower our standards but to find additional inexpensive ways to show our goodwill. For instance, a powdered milk program for the school children of the national capital or a new public health clinic attached to an existing American institution would demonstrate our continuing concern. Some technical assistance and training would be possible. We may want to isolate individual projects which meet our standards, providing aid only to them.

In all of this I think we ought to be alert to the importance of publicizing our position. Of course it must be done tactfully but there is enough international agreement now—particularly in Latin America—that it should be easy to quote utterances of the national leaders of recipient countries who have endorsed our views.

During my forthcoming visit to Latin America I intend to discuss these ideas with our people in the field. I hope that in so doing I can help sharpen even more our thinking on this crucial problem.

0. Source: Washington National Records Center, RG 286, AID Administrator Files: FRC 65 A 481, Administration—State, FY 1962. Official Use Only. Drafted by A.E. Rice (U) and transmitted through S/S and EXSEC (AID). The handwritten notation, “Thank you F.H.,” appears on the source text.
1. Reference is to an Economic Survey Mission, headed by Daniel W. Bell, which visited the Philippines July-September 1950 to survey the economic situation there and to recommend self-help measures for the Philippines as well as measures for U.S. assistance.
2. The quotations are from the Foreign Assistance Act of 1961. (75 Stat. 426)