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

129. Memorandum From the Acting Administrator of the Agency for International Development (Gaud) to Secretary of State Rusk⁰

Washington, January 12, 1962.

SUBJECT

• Report of the Military Assistance Steering Group¹

On behalf of AID I wish to support the conclusions of the Military Assistance Steering Group. We particularly endorse their view that “the main thrust of U.S. aid in the next decade should be directed toward re-pelling the more likely Soviet threat of indirect aggression by furthering economic development and national building.” It is increasingly apparent that neither the capability nor the will to resist communist aggression and subversion can exist in the absence of satisfactory rates of economic and social development.

Present plans call for substantial increases in development assist-ance to this group of countries in FY 1963, particularly for Korea, the Republic of China and Turkey. Planned lending would continue at a high level in Pakistan. In these four countries projected development lending levels appear to be near the upper limit of the effective absorptive capacities of their economies at this time. In the case of Greece and Iran, substantial amounts of U.S. development lending are projected. When combined with other free world assistance and more effective utilization of indigenous resources, it should result in satisfactory progress toward the goal of self-sustaining growth.

It is presently planned to reduce supporting assistance levels in FY 1963 in several of these countries. In every case where this is contemplated, however, increases in development lending will help ease the transition from supporting to development assistance. Furthermore, by directing assistance to long-term development, we enhance the ability of these countries to assume a progressively larger share of the joint defense burden from their increased national product.

Our support of the conclusions of the Steering Group Report is thus already reflected in our planning for FY 1963. For the longer term we believe a continuing effort should be made to adapt the size and character of the military forces of these countries to the changing nature of the security threats which they face. The Report points up the advantages of an overall approach to both military and economic aid programs which AID hopes to be able to continue in the future.

William S. Gaud

0. Source: Washington National Records Center,RG 286, AID Administrator Files: FRC 65 A 481, Military Assistance, FY 1962. Confidential. The source text is Tab D to an attached memorandum from Chenery to the Acting Administrator, January 12, which also summarizes the Steering Group Report. The other tabs, not found, were the text of the report, country annexes, and comments on the report by members of the steering group and Department of State and AID officials. Also attached to the source text are a covering memorandum from Chenery to the Acting Administrator, January 12, recommending that Gaud familiarize himself with the Steering Group Report and sign the memorandum to Secretary Rusk, and a memorandum from Carol Carter Moor (S/S-RO) to Easum (AID), January 10, indicating that G/PM wanted AID comments on the report by January 12.
1. See Document 128.