59. Memorandum From Edward K.
Hamilton of the National Security Council Staff to the
President’s Special Assistants (Rostow and Califano) and the President’s Deputy Special Assistant
for National Security Affairs (Bator)1
Washington, December 1, 1966.
Attached, as promised, are my thoughts on new steps in foreign aid—from
program substance to Agency management. I hope they are of use to
you.
If the President is to get a real shot at such proposals as these, it is
clear that he—or you in his name—will have to put real pressure on
Bill Gaud to look at them seriously and
thoroughly. My notion of proper tactics is as follows:
- 1.
-
Rostow and Califano discuss new proposals
with the President at the Ranch this weekend.
- 2.
- President asks Bill Gaud to come to Texas
for brief visit (or sees him in Washington if his return is
imminent. This would be a good idea in any event).
- 3.
- President (a) gently outlines his Congressional problems, (b)
impresses on Gaud the
necessity of immediate steps to establish close
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and continuing contact with new
and old members of Congress, and (c) asks Gaud for a rapid staffing out
of as many ideas as have appealed to him in principle.
I suggest this procedure because I think Gaud is entitled to give the President his case for the
status quo, and because I do not think he will seriously consider major
innovations without direct guidance from the top. I may, as often
happens, be wrong.
Attachment2
Washington, December 1, 1966.
FOR
Francis M. Bator
Walt W. Rostow
Joseph A. Califano
SUBJECT
- Initiatives in Foreign Aid
Let me begin with my own basic convictions on the state of the aid
program:
- 1.
- With some notable exceptions, AID consists of people two cuts above the
average civil servant, but three cuts below what is required
to cope with the development problem—the most complicated
single problem we face.
- 2.
- With all its faults, AID
has managed to put together the conceptual and
administrative basis of an effective program. No radical
change in concept or organization is worth its probable
costs. (We should keep firmly in mind the side effects of
the 1961 reorganization—the Agency did virtually nothing for
a year, and nothing well for three. The 1961 shakeup was
worthwhile because there was a new and superior philosophy
to install. That is not the situation now.)
- 3.
- No substantive or organizational changes in the program
will revolutionize its public image. Except for a few bright
young people in the House, the Congress is largely ignorant
of what is being done and what has been accomplished. This
is doubly true of the electorate. Best
[Page 169]
approaches to the image
problem are: (1) a much fuller flow of information on
present operations, (2) closer and much more personal care
and feeding of key Congressmen and Senators, and (3) a
high-powered attempt to marshal the bread and butter lobbies
in favor of the bill. (The first is within present Agency
capacities; the second would be best served by a short
session between Gaud
and the President; the third we have recommended to the
President elsewhere. Thus, I shan’t dwell on these items
here.) If we do not do these things, no amount of
organizational or program change will have much effect. If
we do, I would bet that the current thrusts are
fundamentally salable.
- 4.
- The need for more money in FY 1968 is real.3
This is no cry of wolf. A stable AID budget will stagnate the program—and cut
the leverage it provides—in our major client countries.
Despite the Congressional problem, this has to be the year
to ease off the downward-sloping plateau we have occupied
for several years.
- 5.
- There are, in my judgment, some options which could be put
before the President as initiatives which would give promise
of major improvements in the Agency and the program while
putting an indelible Johnson stamp on both in ways which would
help on the Hill.
My suggestions follow. Gaud
has seen none of them. At first blush, it is very likely that his
healthy skepticism will produce a negative reaction. Thus, they will
be considered seriously only if suggested from above. My advice on
the tactics of presentation are on the route slip covering this
memorandum.4
Regionalism
We will have an important string to this bow in the economic
integration drive at the Latin American Summit. In addition, we
might:
- I.
-
Propose an African Development Bank
Act. The Bank is in the early stages of formation.
It has $250 million in subscriptions—entirely from
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Africans—a Board
of Directors, a site, and the beginnings of a staff. It is
precisely the kind of spontaneous regional initiative we
want. The Africans have not asked for a subscription from
the United States, but it would be a useful and welcome
gesture if we were to offer a modest contribution to a
special soft-loan fund for projects in health, education,
and agriculture. It would also be cheap—say appropriations
of $10–20 million each year for 3–5 years beginning in
FY 1969. If we could get
a public champion of the Eugene Black
caliber—David Rockefeller might be
willing—we might manage another love feast of the kind
connected with the Asian Bank. Moreover, the hard fact is
that unless we do get involved with the African Bank, its
prospects are meager. It would take some careful diplomacy
beforehand, but with George
Woods’ help it should not be impossible to
work out an arrangement in which we can make a contribution
without threatening the Bank’s independence. This would also
put us in a position to hit the Europeans for matching
funds.
- II.
-
Announce a major effort to assure Safe
Conduct for Development in Africa. The arms race in
Africa is growing, ridiculous from a great-power security
standpoint, very dangerous to fragile African politics and a
waste of scarce African resources. We know this; we have a
number of indications that the Soviets agree; and African
leaders from Nyerere to Bourguiba to Selassie have indicated
they agree in principle. The guts of our initiative would be
an unconditional offer to stop sales of sophisticated arms
to African countries if the Soviets, the French, and others
will agree. We could also announce that our economic aid
policies in Africa will be very sensitive to the amounts of
local resources being wasted in large military
establishments. We would encourage the Africans to band
together to develop means of controlling arms traffic and to
establish regulations on size and equipment of standing
armies. We might offer to consider helping to finance the
administrative costs of such regional or subregional
organizations. We could urge the OAU to take leadership—giving that
semi-moribund group a new lease on life. Meanwhile, we
should try to work out with the Soviets the specific rules
each of us would follow, with or without a formal agreement.
(The Soviets have already made one informal feeler on this
score.) If we were able to work something out, it would be
(1) a major arms control triumph in the tradition of the
Test Ban Treaty and the Non-Proliferation Treaty, and (2) a
model for the rest of the developing world. Again, it would
take a good deal of diplomatic work beforehand. But it is
very much worth a try.
- III.
-
Propose a study of South Asian economic
cooperation. In large part, the major development
problems of the day—political, economic, and public
relations—boil down to visible progress in India and
Pakistan, particularly joint
progress. It is just possible that we could, after careful
diplomatic preparation in which the President’s name were
mentioned, convince the Indians and the Paks to join in a
study of possible constructive
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steps on the economic front, beginning
with the lowering of tariff barriers. Since food is the
overwhelming immediate problem for both countries and most
of their trade with each other is agricultural, we might be
able to peg our suggestion to their common war on hunger. We
might even use broad hints of the value of such movement in
connection with our Food for Freedom programs to both
countries. The proposal might also be appropriate for
presentation to the Second UN
Conference on Trade and Development in the Spring—where we
will be hard-pressed for other constructive suggestions.
(This should not be done before the Indian elections in
February.)
Self Help
I firmly believe that the major problem here is publicizing the
current facts. We do insist on self help. We do cut off aid where it
doesn’t happen (e.g., Brazil, Colombia, India). We are the principal
cause of major advances in economic policy (e.g., India, Pakistan,
Colombia, etc.). But few people know it. The job is to structure the
system so that they have more chances to find out—and to testify to
what they learn:
- I.
-
Establish by law a National Committee on
Overseas Self-Help. This group should consist of
12–15 prominent people, perhaps two each selected by the
Foreign Relations and Foreign Affairs Committees, the
Business Council, the AFL/CIO, the
American Association of Universities, and the Council on
Foreign Relations. It should be chaired by the AID Administrator. Its function
should be to review and advise the Secretary of State and
the President concerning our proposed program in each of the
nine countries which, together, receive 85% of our aid. The
Committee reports should be classified, but fully available
to interested members of Congress. In addition, it should
make an annual unclassified report to
the Congress. It should receive as much publicity as
possible. The selecting organizations should be leaned on to
produce people who have the time to do a serious job. With
luck, the Committee could become a considerable help on the
Hill, as well as a fount of public information and
confidence. There is a case that its existence would
restrict the flexibility of the President and the Secretary
in the conduct of foreign affairs, but that restriction is
minor compared to the alternative—a major reduction in the
resources available for the principal instrument of that
foreign policy in the developing world.
- II.
-
Make an informal offer to provide full
briefings on EVERY proposed program loan to the
appropriate regional subcommittee of the Foreign Affairs
and Foreign Relations Committees. These people
should be told that their permission will not be asked, but
that their views will be solicited and carefully reported to
the President. Of course, we must make it clear that we
often have to move quickly and cannot allow this step unduly
to delay the process.
- III.
-
Make it known informally that the
President has passed the word that every AID project loan must be
matched by equal contributions to the cost of that
project from the recipient. This is not a great
change from the present practice. But we have not succeeded
in getting it through to the Congress that this is present
practice. Thus, we can make some points by putting it this
way. We can also offer to give any doubter chapter and verse
in the countries in which he is interested.
Multilateralism
Our largest initiative in this area will be the Korry Report push in
Africa,5 where the World Bank will get
increasingly involved as we bow out of bilateral aid to 25 countries
(except for a small ambassador’s self-help fund). This is discussed
in the Task Force report. In addition, we might consider the
following:
- I.
-
Propose a legal requirement that no less
than 85% of AID’s money
must be used in a multilateral framework—where
“multilateral” means any grouping of donors from an ad
hoc consortium to a formal organization such as the
Bank. Again, this is no great change in the present
situation, but it will dramatize a little-known fact.
- II.
-
Make a real push for transformation of the
unused European Monetary Fund into a source of financing
for private ventures (fertilizer
plants, etc.) in the War on
Hunger. This is a $350 million pot of money (into
which only the U.S. has actually paid its share—$123
million) originally designed to tide European countries over
short-term monetary problems, but now almost totally unused.
This proposal is approved in the State Department. It was
briefly mentioned in Paris recently by Eugene Rostow, but was
buried in the press. It won’t be easily negotiable—the other
countries will need new
appropriations. But it is the only sizeable source of
critical foreign exchange for the War on Hunger which does
not involve the political costs of a new appropriation. The
key to success will be escalating the issue—at least
initially—from the Finance/Foreign Ministers to heads of
government.
Private Enterprise
Convene a White House Conference on Private
Enterprise and Overseas Development. The accent should be a
search for imaginative answers to the two questions critical to a
new Government understanding of the precise factors which influence
private behavior in this realm:
- 1.
- What public policy would induce significant amounts of new
U.S. private investment to flow to each region of the
less-developed world?
- 2.
- What incentives would be required to induce private U.S.
managerial talent to get involved with publicly-financed
projects abroad?
It is possible that this would yield nothing but the same old Watson
Committee brand of cardboard prose.6 If so, we have lost nothing and
gained a useful gesture. But—particularly if some operating-level
people can be roped in—it might yield some real breakthrough in an
area where our best efforts have produced nothing of much
consequence.
Management
- I.
-
Announce a three-year program to turn AID into a team of crack
development specialists. At a minimum, it should
include:
- 1.
- A Peace Corps-type entrance examination system which,
among other things, would insure that each entrant knows
enough elementary economics to pass a Freshman final
exam—or agrees to begin the requisite course
immediately.
- 2.
- A training program to insure that every professional
employee overseas has a working knowledge of the local
language when he arrives.
- 3.
- Special incentives to continue with part-time graduate
work leading to advanced degrees, particularly in
economics. We might shoot for a 25% increase in the
number of employees with advanced degrees by the end of
the period.
- 4.
- Working agreements with a wide variety of corporations
and universities through which a steady stream of people
with special skills serve temporary tours with AID with the understanding
that such experience will be counted as a plus in the
promotional scales in their home institutions.
- 5.
- Encouragement of regional specialties.
- 6.
- Elevation of the Directors of the AID Missions in the nine
largest recipient countries to the rank of Deputy
Ambassador.
- 7.
- A personal review and out-placing of low-quality staff
as ruthless as can be managed short of complete
severance of relations with the employee unions. As a
token of good faith, we might promise a 10% cut in
non-Viet Nam employment in fiscal ’68. (This should be
possible as a result of the new aid policy in
Africa.)
Congress should be given a definite schedule for these moves
and progress reports at least annually. The AID recruiting drive should get
as much publicity as possible, particularly at the
universities. In particular, the Secretary of State should
be asked to lend his personal and institutional prestige to
the campaign for applicants.
- II.
-
Set up a small general staff to the
Administrator—with systems analysis capacity—headed by a new
Special Assistant.
AID has two kinds of problems
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made to order for
an energetic, fast-moving group of “whiz-kid” analysts of the
type McNamara has used
to such advantage: (1) standard bureaucratic sprawl and
constipation, and (2) a great gap between the number of problems
susceptible to systematic quantitative analysis and the number
where it is used. (ADP is a
virtual stranger to AID, though
it should be applicable to everything from development plan
analysis to keeping track of procurement benefits to
Congressmen.) Such a group would probably earn its keep in terms
of pure economy and efficiency—identifying duplication, excess
paper work, and inferior staffing. Such people are also often
useful in keeping the Administrator well armed for trips to the
Hill, developing vivid and imaginative methods of presenting the
Agency story. (Indeed, their first task might be the redesign of
the AID Congressional
presentation.) But their real task would be to provide the
Administrator with a needling, trouble-shooting, innovating,
internal intelligence-collecting, supervisory tool he does not
now have and badly needs. I can think of no better cure for the
aid of stodgy lassitude that now pervades many parts of the
Agency.
- III.
-
Merge the State and AID African bureaus on the
model of the Linc Gordon operation
for Latin America. This could be announced as the
next step in the “speak with one voice” philosophy which
underlay the Latin America move. In my view, the Latin
America experiment has worked well and is worth trying
elsewhere. The time is opportune—the AID Assistant Administrator for Africa is
leaving next month and a replacement has not been recruited.
The African bureaus in both State and AID are far and away the
weakest units in their respective agencies; a merger might
provide enough good people to start rebuilding. It would be
difficult to avoid making Joe
Palmer the head of the combined operation—not
a very exciting choice for a brave new era. But a good
deputy on the AID side could
probably get the job started. (Gaud would oppose this, as would all
opponents of eventual AID-State amalgamation. I think that issue was
largely foreclosed with the Latin America merger.)
If the President decides to do some new things—or perhaps
even if he doesn’t—he should give thought to a personal
presentation of the Foreign Aid message this year. If he
proposes enough change, it could be as historic an occasion
as the Marshall speech in Harvard Yard. It certainly would
be the most auspicious possible start for the new bill.
Obviously, the President must weigh his priorities—and I am
aware that there are many other claimants. Nevertheless, I
believe the bleak prospects now facing the program make an
appearance before a joint session to lay out his own vision
and plans in the proper ballpark [sic]. In my judgment, it would be a net plus, in the
Congress, in the international arena, and in terms of its
effect on our Viet Nam posture.
