126. Summary Minutes of Meeting of the Interdepartmental Committee of Under Secretaries on Foreign Economic Policy0
[Here follows a list of participants (19).]
THE AID PROGRAM
Administrator’s Statement.
Mr. Fowler Hamilton, Administrator of the Agency for International Development, first outlined the dimensions of the aid program. The total aid program provides about $6 billion for this fiscal year. The $6 billion includes (1) about $2 billion for military aid ($1.6 billion for hardware and $400 million for supporting assistance); (2) agricultural aid between $1.5 and $2 billion; (3) development assistance, with development loans comprising $1.1 billion and development grants $400 million; a contingency fund of $275 million, and $153 million for aid through international organizations. For the 1,500,000,000 people in the non-Communist underdeveloped countries, the non-military aid of about $4 billion amounts to about $2.70 per capita. Much of this is committed to programs already underway. Hence, the amount available is limited.
Mr. Hamilton then indicated the kinds of questions which have been put to him since he came on duty. Most of them relate to standards for making grants or loans. How to decide how much is to go to whom for what? The motif of the new program is economic development. Whatever other purposes are expected to be served are supposed to be served as by-products of the process of aid-dispensing and the economic development that takes place.
At the hearings before Congress, there were many comments that the program had been confused as to purpose and poorly administered. One reason for confusion is that the purposes of the program have been constantly changing: first, lend lease; then, post-war relief and European reconstruction; next, Point IV technical assistance to underdeveloped countries and defense support in selected places; large agricultural aid starting in 1954; more emphasis on development loans in 1958; and now, a new period when we are to support, on a fairly long-term basis, not just specific projects but also political and social reforms which will contribute to economic progress. It is understandable, with the constant change, that people are confused about the aid program. Even those who understand [Page 277] the different kinds of funds are confused as to what they are supposed to accomplish.
Mr. Hamilton said that we have to have some standards—both in order to do a useful job and in order to keep the program going (by articulating it to Congress and the public).
Mr. Hamilton said that his discussion with Mr. Jagan of British Guiana had provided the occasion to apply one sound procedural rule, namely, that we don’t discuss money until we have seen a good plan. Mr. Jagan realized he was the victim of a principle—a procedural principle which he didn’t like but which he understood—and therefore we didn’t get into a discussion of the merits of his case.
But suppose there are satisfactory plans. What standard should we use in choosing among countries? Among projects? One person may say we should teach the blind to read Braille; another will argue that instead we should devote our funds to curing glaucoma. Mr. Hamilton asked for comments on what he should use as standards.
DISCUSSION
The discussion brought out the great diversity of views that prevail regarding the way the aid program should be handled. In view of the diffuse character of the discussion only selected points are enumerated here.
- 1.
- Danger of Ritual. There is the danger that countries will develop fairly respectable plans, send a high official to Washington, arrange some kind of a political threat or pressure, and extract an aid commitment.
- 2.
- Broad Character of Basic Objectives. The basic objectives—political independence (not necessarily an alliance with the United States), political stability, more democratic political institutions, non-Communist orientation, and economic improvement—are too general to provide much help in evaluating aid requests.
- 3.
- Exclusion of Countries Difficult. Countries that do not receive aid feel that they are discriminated against and the threat to reduce aid drastically elicits talk of a political upset which might turn the country toward the Communists or provide an economic setback. Poor, relatively stable non-Communist countries are likely to be particularly bitter about not receiving aid.
- 4.
- Development Plans. Countries should usually be required to have development plans. These plans tend to be projections which provide part of the window-dressing required for a grant. Granted the desirability of some kind of plan or projection, at least for Congressional appropriation purposes, refinement of a plan can be carried to useless extremes.
- 5.
- Project vs. Program Aid. It is often helpful in terms of efficiency to have the aid money directed toward a specific project and it is always [Page 278] helpful politically to have a project as a symbol of American aid, but a strong case can be made for aid which is not related to a specific project, particularly in connection with a consortium program.
- 6.
- Economic Productivity of Aid A Difficult Criterion to Apply. It is frequently said that the money should be put in those countries and in those projects or programs where it will yield the greatest return in terms of increased national output. There is so much uncertainty, however, as to the yields of various outlays, even in strictly economic terms, that this criterion provides no sure guide. Moreover, there are the claims on funds represented by projects or programs already started, unanticipated emergency needs, and the political necessity of making some funds available simply to help keep a sympathetic government in power.
- 7.
- Self-Help. One thing the Administrator can do, mainly through the field missions, is to determine whether countries are serious about their plans for improvement and whether they are prepared to do some extra things themselves. The word will get around very fast if countries have only to give lip-service toreform in order to get aid.
- 8.
- Absorptive Capacity. New and continuing studies should be made of the capacity of less developed countries to absorb productive resources from the outside. It may be that we grossly exaggerate the absorptive capacity of many countries.
- 9.
- Burden Sharing. The economic capacity of the United States and other relatively developed countries to supply development aid to the less developed countries is probably not the limiting factor at the present time. Arrangements can be made so that aid need not have serious adverse balance of payments effects. The consortium approach provides a device for coordinating aid to particular countries; its effect on the total volume of aid is hard to estimate.
- 10.
- Specific Short-Term Objectives for Particular Countries. It would be desirable for the AID Administrator to have quite specific concrete short-term objectives for the aid program in particular countries so that he, the Congress, and the public could have a reasonably firm basis for judging the usefulness of the aid expenditures.
The Role of Agricultural Commodities in the Aid Program.
Mr. Murphy noted the difficult time the Administration had in getting appropriations for aid. On the other hand, authorization for disposal of agricultural surpluses can be obtained without the Administration turning a hand. This brings up the question of what we can do with commodities instead of money in the aid program. He felt that to date the role of commodities has not been integrated very well with country aid plans and thought it would be useful for Agriculture and AID people to get together early in the planning stage.
[Page 279]Agriculture’s part in the aid program is not merely disposing of surpluses. Some commodities will have to be purchased as they are not really in surplus. On cotton, for example, we now have the carry-over that we think there should be. If we want more cotton for PL-480 programs, the acreage allotment will have to be increased and the cotton bought for the aid program! Wheat is the principal commodity in surplus.
- Source: Department of State, E Files: Lot 65 D 68, Interdepartmental Committee of Under Secretaries on Foreign Economic Policy. Official Use Only. Presumably drafted by Ruth S. Donahue, who is listed as Recording Secretary. Regarding the formation and functions of the ICFEP, see Document 5.↩
- Printed from a copy that bears this typed signature.↩