159. Memorandum From the Under Secretary of State for Political
Affairs (McGhee) to
Secretary of State Rusk0
Washington,
March 15,
1963.
SUBJECTS
- Economic Aid: Diffusion vs Concentration of AID Programs
At your Staff Meeting of January 21,1 you expressed
concern with the diffusion of our aid potential and asked that I study
possibilities of further concentrating available resources on key
countries or regions in concert with other DAC donor countries.
The regional bureaus, INR and AID have participated with me in this
study. Because of difficulties in obtaining statistics, the inquiry was
restricted to economic aid (normally defined as excluding 1-5 year
commercial credits) and broken into two parts: 1) Motivations of the
DAC countries (excluding US) in
extending aid, together with patterns thereof and possibilities of
augmentation and greater concentration; and 2) attitudes of the
recipient countries toward bilateral and multilateral aid, together with
possibilities of developing a greater accent on “spheres of primary aid
responsibility”.
The attached memorandum (Tab A) summarizes the available data and the
responses of the bureaus and AID and
draws conclusions and certain operational implications.
The summary of conclusions reached are that the
present pattern of diffusion and bilateralism generally serves US
(DAC) interests, although strict US
interests might in some countries (particularly the emergent African
states) be served adequately by smaller US aid programs and decreased
administrative costs; that although there is a tendency toward diffusion
on the part of the new aid donor countries with the most rapid rate of
aid expansion (Germany and Japan), possibilities of increasing and
concentrating aid outlays by these and other DAC countries (excluding US) exist within available
mechanisms and can be exploited where a strong case of advancing
national interests is established; that the coordinating group and
consortia approaches of the DAC-OECD-IBRD
are the preferred ones to critical key countries; and that there are no
new or promising “spheres of dominant aid responsibility” other than
those which now exist (e.g., the dominant roles of the present and
former metropoles in Africa and the remaining colonial areas, and of the
United
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States in Latin America
and certain of the peripheral states of the Far East, Middle East and
South Asia).
Recommendations:
- 1.
- That no drastic change be made in present aid policy affecting
the diffusion of aid among recipient countries.
- 2.
- That a more effective concentration of aid should be sought
through a continuing and closer analysis of US security and
developmental priorities among countries and projects, and the
correlation between AID programs
and these priorities, rather than through eliminating programs
in certain countries to augment programs in others.
- 3.
- That in countries where no high priority interests exist,
AID programs be carefully
screened toward possible reduction but not necessarily
elimination.
- 4.
- That increased administrative savings be sought in the
administration of minor aid programs through the consolidation
of aid missions in delegated posts, as is now done with 10
countries in Africa.
- 5.
- That we continue to urge other members of DAC to adopt policies consistent
with ours and respect to diffusion, insofar as this is practical
in the light of their national interests and
capabilities.
- 6.
- That the attached memorandum be discussed, against the
backdrop of these recommendations, at an early meeting chaired
by you or the Under Secretary.2
Attachment
THE DISTRIBUTION OF DAC
AID:DIFFUSION versus CONCENTRATION
Overall Conclusions
- 1.
-
The principal considerations bearing on the US (DAC) distribution pattern of
economic assistance are:
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- a)
- Effect on maximization of aid extended by
others;
- b)
- Effectiveness of aid extended in achieving high
priority US security and developmental
objectives;
- c)
- Impact on such contributory factors as more
efficient planning, use and decreased administrative
costs;
- d)
- Immediate and longer-range political effects
including encouragement of regionalism, improved
relations between developed and undeveloped
countries, and the non-Communist “community of free
nations” (the North-South axis).
The overriding consideration is to assure allocation of
scarce aid resources, both by ourselves and others, in a
pattern designed to maximize returns through greatest
possible concentration on high priority countries and
projects.
- 2.
-
Aid on an extensive scale ($200 million annually or more)
is restricted to five Free World countries: The US, France,
Germany, the UK and Japan (in
that order of magnitude). Although the US aid effort is
tending to level out, the Western European and Japanese
efforts are increasing and now constitute almost half of
total DAC aid.
We should continue to encourage further increases and reduce
our aid correspondingly where this is possible. We must
exert what influence we can on the distribution of aid
extended by others so as to relieve or complement ours and
assure maximum returns. We will be limited, however, in our
ability to so influence others and must not press so far as
to discourage their efforts or disrupt the existing
generally satisfactory DAC
procedures. Germany and Japan, which are increasing their
aid on the largest scale, are trending toward distributing
their aid widely for commercial reasons, just as our aid has
in the past been widely distributed for a variety of reasons
deemed to be in the national interest.
- 3.
- Except in Africa, the trend of aid in recipient countries is
away from predominance by one donor country or metropole. Even
if we wished to, we are doubtless powerless to reverse this
trend. The remaining dominant “spheres of foreign aid
responsibilities” among the donor nations appear to be
relatively fixed for the foreseeable future. No donor nation is
seeking or would appear willing to accept new “spheres of
responsibility” or to relieve others of dominant aid
responsibilities. It is therefore difficult to foresee how major
aid responsibilities which the US now carries can be shifted to
other donor countries or groupings in any significant magnitude,
although this conclusion may be subject to reexamination as the
EEC prospers and Continental
Europe integrates politically.
- 4.
- Bilateral aid has proven to be a valuable instrumentality of
US diplomacy and a primary leverage in influencing countries
toward cooperative activities and sound development programs.
Although we must encourage others to share our burden, we must
take care to assure that this does not result in undue sacrifice
in effectiveness or dilute the
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advantages of our bilateral approaches.
There are also advantages to our continuing small US aid
presences and programs in areas, such as the former colonial
areas, since modest diffusions of aid in these areas make it
easier politically for the recipient country to continue to
accept aid under self-help criteria from a dominant donor.
Similarly, multinational mechanisms may for the same reason
assist us in pressing our objectives in areas of primary US aid
responsibility, i.e., Latin America.
- 5.
- Regionalism among recipient countries can probably be
accelerated more by diffusion of aid than by its concentration,
whether from one or multiple sources, on an individual country.
The position of a dominant donor in a particular country tends
to isolate it from others in the region which receive less aid
from the dominant donor.
- 6.
- Only the US is adversely affected through probable increased
administrative costs involved in aid proliferation, although
even in our case this can be minimized through regional
missions, as is now done in Africa. Aid given by other donor
countries normally does not entail costly aid missions.
- 7.
- A widely diffused US aid pattern probably serves broad US long
range objectives of creating a “community of free nations” more
effectively than would concentration on key countries. A
persuasive case can be made for broader proliferation by other
donor nations and an aid presence by donors in any country where
there is a natural or potential basis for ties of an enduring
and beneficial character, the sum total of which build toward
greater interdependence among a community of free nations. The
search for new markets and sources of raw materials, as well as
political and strategic considerations, lead naturally to
diffusion rather than concentration of aid.
- 8.
- The trend and emphasis of DAC
aid will in the future undoubtedly be in the direction of wider
distribution rather than concentration on exclusive or dominant
spheres of influence. The consortium is a useful way of
promoting such diffusion. Insofar as the consortium results in a
group of donors’ exerting leverages for better planning and
developmental continuity, this mechanism provides some of the
advantages of a dominant donor and none of the disadvantages.
Further, through the consortium approach, small nations with
specializations (i.e., Norway, fishing; Netherlands, flood
control) can weld what might otherwise be scattered bilateral
approaches into the continuum of a coordinated development
program.
- 9.
- In future US studies of diffusion vs. concentration or
“spheres of aid influence”, it is believed the point of
departure should be to preserve the advantages of a wide
distribution of aid through smaller and more efficient programs
and missions (or regional missions) rather than to proceed on an
assumption that US interests will be served by sharply
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curtailing existing US
aid presences, thereby leaving vacuums for others (including the
Bloc) to fill.
- 10.
- In actuality, there exists a purposeful concentration of
DAC (including US) aid in that somewhat more than 70
percent of the total is disbursed to some 20 countries and areas
(see pp. 7-8). The problem of aid diffusion is therefore
narrowed to somewhat less than 30 percent of all DAC contributions and the problem
of its effectiveness revolves not on the question of the
desirability of aid proliferation but on whether the pattern of
aid diffusion effected by donor countries advances national
interests sought to be advanced through aid programs, large or
small.
[Here follows extensive analysis of two major subjects: I. The Aid
Effort of DAC Countries, and II. The
Recipient Countries (Areas).]