Created: 1/21/1965

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I. Introduction

It isruism to say that foreign aid has always been aneconomic instrument of foreign policy. old war context, however, the instruient haseapon- oviet propagandists never tire of reminding us, iS fariscontinuation of the revolutionary class strussls. On the contrary, it is viewed, andovietasealistic plantruggle against imperialism by methods which do not threaten mankind withwarlan which at the same time inevitably brings nearer the full triumph of Communism." If foreign aid has become the weapon of this new Soviet strategy, certainly the newly independent countries of Africa and Asia have become the places d'arnes.

During the last years of Stalin's rule Westernajor Free World strongholdrime Coinnunist target, had provedto subversion, intimidation end threats of force. Eis successors realized that any effort to take it by frontal attack would almost certainly haveajor nuclear war whose consequences threatened to destroy not only capitalism but *i0 years of Soviet accomplishment as well. They sought instead, to outflank the West by moving the focus of their attention to the two thirds of_the world's population Just emerging into political and economic awareness and where,killful exploitation of theturbulence and change, "hey hoped to shift the precarious stability of the East-West balance in their favor.

Thus Vae nuclei stale^iahe Western policy of have helped confine the East-Heat conflict largely tohcr^ls- But -hey have also loft the shape and resolution o* the conflict open to raanlpuietior. by all means shortwar. Em Osmajntst threat to ouris not only

cut involves every urea of human endeavorit is political, ideological, economic, scientific and it even extends into thesphere. II.

tirn thinking about foreign aid rests on the assumption that thehreat has two diriensioas: irect military dimensionolitical dimension. The less developed countries can be lost

to CciTETonisn not only by Soviet Bloc military intervention, either direct or by proxy as in the Congo, but nlso by the loss ofamong newly emerging countries that adherence to democratic processes are compatible with their continued economic progress.

olicy of deterrence againsc the Soviet miUtary threatitally necessary keystone of Western foreign policy. Deterrence requires that we muster all means at our disposal to convince the Soviet 3loc that neither overt nor "fuzzy" aggression will pay- In particular, it requires that weapability

Lo respond to local and limited pressure, if we so choose, by local and limited means - US forward defense military aid to eleven nations stretching along the southern and eastern perimeters of the

c and theillion men under arias supported by these countries, represent an increment of defensive strength which iso the security cf the Free World. For by eliminating any hopeuick, easy and cheap victory, it reducesolumnist attack.

r-ajor tas'n of foreign aid is totableof military power between Sast and West. Economic aid can contribute to this task insofar as it bolsters military strength and the will to resist Communist aggression. But above and beyond this task of deterrence, our collective national interestositive policy toward the less developed and basically uncommitted nations- Specifically, Western aid strategy callsrogram of economic assistance to prooote the self-sustaining growth of the less developed world. An effectively designed program of aid for economic development is the best instrument for encouraging the growth of politically mature, democratic societies;orld in which such societies predominate is our best hope for peaee-

Since the end of the Marshall Plan there have been recurrent waves of skepticism in the West that It would ever be feasible for foreign aid to do its work and come to on end in the less developed countries. But there is byarge body of evidence to suggestroperly designed program of economic aid can serve tolf-sustaining economic growth in most, if not all, of the less developed countries. The question at issue, both for the

Free World as veil as the Soviet Bloc, is not whether growth will occur, but what political forms it will give rise to. Free World and Communist aid programs tear ample testimony to cor mutual conviction that economicnd militaryid, if effectively used, cor.onstructive effect on political behavior. It is our hope that if emergen- rations achieve economic growth on the basis of expanding democratic institutions, their interests and those of the Free World will become increasingly identified. If the Soviet Elcc prov^es more effective in convincing recipient nations of the efficacy of Communist economic and socialthen we will have, in effect, lost the economic cold war.

Soviot interest in lass developed countries and theiramalgamation with world Communism have always been accorded hijh priority in Communist strategic thinking. The eurrent Soviet interest in less developed countries la unique only in relation to Stalin's postwar policies; itoctrinal anccotry which dates back to an early Communist perspective that envisaged the growth of the world revolution asentripetalprocess inrowing federation of "socialist"draws newly "liberated" countries Into its orbit largely, although not exclusively, by force of "economic attraction." What is new is that Soviet leaders apparently believe current conditions enable the USSR to proceedolicy objective which, when it was first formulated, must have seemed far out of reach.

Communist theoreticians have visualized the trans format ion of lesa developed countries to socialismwo-stage process. In the first stage, socialist countries and local Communists support "nationalist" elements in their fight to achieve politicalfree colonial powers; in the second stage. Communists activelyrogressive polarisation of class forces within thesecountries with the expectationilitant proletarian-peasant based alliance will ultimately assume control.

While politicalhe first stage, in the national liberation process is regoried as "an accomplished fact"

for many less developed countries, Soviet policy makers much to the chagrin of their Chinese comrades, seem reluctant to press on with the more militant efforts implicit in the second stage. Instead, Soviet ideologists have accused the West of neo-colonlalisa and have given greater priority to encouraging the economicof new states without which, they assert, politicalwouldiction. Consequently, in the Soviet view, the nationalist leaders of new states "have not yet exhausted" their 'progressive" role and it ia both practically and theoretically correct for such "revolutionary democrats" as Ben Bella or Nasser, with Communist material aupport, to guide their countries along the road of economic independence from their former "exploiters."

That the USSR envisages this cooperation with non-Comunist regimes in less developed countriesengthy one is reflected in its steadfast insistencenational democracy" andull fledged "peoples democrat" is the most likely transitional form for most countries traversing the road to socialism. Moscow's conceptational democratovernment, briefly, is toa "nationaluling coalition embracing elements of the working class, the peasantry and the so-called national Significantly national democracy does not pose as its immediate goal the liquidation of all exploiting classes or the construction of Soviet-style socialism. Collectiviration and other mere refined aspects of Sovietre emitted In an apparent cttexpt torogri.'. pallid enough to be acceptable to

a number of non- "scientific" but "socialist" parties in the less developed world. To date no "national democratic" states have been recognized as such but Soviet spokesmen have consistently pointed to Guinea, Ghana and Mali as the most promising candidates.

This more gradualist formula foi-the transition of less devjiopad countriesnon-capitalist" path of economicwas invented by the USS3 largely with Cuba in mind- However, Castro's excessive revolutionary zeal and his haste to proceedocialist stage led to Cuba's evident rejection of the formula and to Moscow's reluctant acknowledgement of the regime as in the process of "building socialism'.' Castro's self-proclaimed adherence to the Communist community of nations and his increasing dependence on the USSR for economic and military support may have proved toixed blessing for Moscow. The victory of Ccmmunlsm In Cuba, paradoxically, may have impelled Moscow's repeated admonitions against precipitate haste to those seeking more immediateof Communist regimes in countries where the "objective conditions"and by implication, Soviet resourcesare not yet adequate for such transformations.

For some time Kremlin theoreticians have been uncomfortably perched on the horns of the dilemma created by Moscow's support for anti-Communist regimes in less developed countries and by its need to champion the intereets of local Communist parties in these countries. Undoubtedly, Feipings growing challenge to Soviet


and Sehru's successors will Continue to be -be beneficiaries of Soviet largesse as long as India remains an effective political counterweight to Chinese ambitions in Asia. Moreover, the Soviata seem to be acting on tho conviction that well conceived andimplemented Soviet old programs in the developing countries will serve to bolster economically the newly achieved political Independence of new states; sever or disrupt their economic ties with the West; encourage cxiating socialist predispositions toward more Soviet-oriccted forms of economic and social organization; promote the development of the state sector to the eventualof private enterprise; enhance the growthlass conscious proletariat; and more generally, to help create the social and material conditions and the cadres deemed essential prerequisitesater, more activist, stage of Soviet policy. So conceived, Soviet foreign aid to "transitory" bourgeois governments in loss developed countries is viewed over the long run as helping to build up economic systems which ultimately will become the legacies of Communist regimes.

3ut foreign aid for the tttOGj no less than for the West, la atalculated risk. ra is cumulative evidence to suggest that despite its modest levelJ, foreign aid, when viewed against the backdrop of increasing domestic problems over the allocation of resources and the absence of any clearly demonstrable political pay-offs in the less developed countries, has generated anvoce! "anti-give-away" sentiment among Communist party elements at come and


Always vociferous claimantsubstantial share of Soviet econedc largesse, several Bloc countries have expressed some resentment over the increasingly proportion of Soviet foreign aid resources which is being directed to non-Communist regimes. The Chinese Communists, cf course, have registered the strongest objections to Soviet policies in less developed countries,its foreign aid program. Yet the small but rapidly increasing Chinese effort would seen togsst that its objections to Soviet aid policies center more On thr ouesticn cf which regimes are to be aided and to what degree rauhsr than on the issue of whether or not to extend aid. Peiping obviously has been influenced by what it believes to be its own regions! and national needs when it loudly denounces large-scale Soviet aid to India, but actively seeks to compete with Soviet aid efforts, for example in Africa.

As economic stroins have increased in the USSR, the Soviet leadership has been obliged to explain their foreign aidore effective fashion. For if Soviet foreign aid expenditures themselves do not cut deeply in the aggregate, the broad front of Soviet activities in less developed countries may now increasingly compete, if only at the psychologically important margin, with many other clalJn&nts for available Soviet resources, both human and material. Soviet planners are now obliged to program the export of goods on creditlargely machinery and equipment for complete plantsf5 Billion annually,upply of Investment goods stretched tight by competing demands of military and space technology and the needs of the Soviet consumer. Toousar.

of specialized and highly trained technicians, designers and engineers leave each year for work on Soviet cons traction projects abroad, amid increasing competition at hone for such critically needed skills in missile and space programs and to improveend quality of product in industry and agriculture. And amid increasing friction with the local population, sizable numbers of students from less developed countries are studying on scholarships in Soviet universities, whose academic facilities and housing accccciodations arc already heavily taxed and where cany ccpeble Soviet teenagers, directed into the labor force byeducational policies, are denied admission.

Within this context it is intereotlng to note the persistent reports from Moscow that one of the many charges levelled against . ehev was his lavlshness with foreign aid, particularly aid to the UAH. In hia television speech to the nation on hia return from the UAR in the spring of last year, Khrushchev admitted that "when the Soviet Union helps the young developing countries, givingortico of the wealth amassed by its ownt is limiting its own possibilitiesertain period of time." But he added that "we would be poor Communists, poor internationalists, if we thought only of ourselves." Moreover, he assured his listeners that "the assistance we are giving to the peoples of the developing countries will be repaid aand that "each of us veil understands the meaning ofpres.-ion: 'Bettar toundred friend3undred rubles.

Khrushchev's efforts to rationalize Soviet foreign aid shouldesponsive chord in any American Congressman who has tried to explain to his own constituents the need for the US old program. IV. Congo and Vietnamho 3attle Lines

Che world's trouble opotche Congo andnd probably will continue to dominate, the headlinea for some tine zo come. These areas bear test irony to the fact that the Communists, while rejecting global nuclear wars and even local wars, fully support when the risks seemhe so-called wars of national liberation which we know frees bitter experienceerriUa wars tad insurrections. The Chinese Communists are even more la their support of armed aggression as an instrument of foreign policy. Indeed, one of the major differences in outlook between these two Communist powers is the degree of risk which each believes should be taken in pressing their expansionist policies.

Our assistance to tho Congoital element in theof Free World policy objectives In Central Africa. The overall long term Western foreign policy objective remains the establishment,oderate central government,nified and viable independent nation, capable of maintaining political

stability, internaleasonable rate of economic and social development and of resisting Soviet Bloc and Communist Chinese influences.

If les3ear ago cautious optimism could be found in the economic and military outlook, now the Congo seems to be rapidly deterioratingondition far from optimistic In terras of the future. In the waning weeksfc, several radical African states (Algeria, Ghana and the UAH) began supplying arms to the Congo rcbela. Co date noreons of Soviet and Chinese manufactured supplies have been shipped to Juba In southern Sudan for transit across the Congo border, an undetermined quantity of which has already reached rebel hands.

Vhlle Moscow has not directly supplied arms to Congolese insurgents, it has encouraged African states to provide weapons and other support and quite probably agreed to replace UAR and Algerian stocks. In contrast, Peiping has dealt directly with the rebels mainly through the Chinese Comnunlat embassies in Brazzaville and Bujumbura. To date they have given modest sums of money and offered guerrilla warfare advice and propaganda. Despite numerous reports, there is no firm evidence that Chinese advisors are operating In the Congo. The fear persists, however, that if the rebels succeed inajor portion of Eastern and northeastern Congo, official recognition will be hastily extended to toil government by leftist African countries as well as Com-rzmist powers. This recognition would then open the doorajor incursion ofrom China and other Communist countries.

US military aid to the Congo has been substantialboutillion for the fiscal Allillion, however, has been channeledN. In addition, Belgium supplies Cms and military ad . . .Ualy is now trainingpilots; and Israel gives raining to the Congolese Army.

major source of economic assistance. During the fiscalI-SI, US economic and technical assistance totaled0 million. This aid is almost exclusively tied to the economic stabilization program and is closely coordinated with other donors and the UK. Aid from other Western sources has also beenBelgium providesillion and the UNillion annually in economic aid. Belgium also servicesillion of the Congolese debt.

In Vietnam where the sheer survivalountry is at stake, the US economic aid program directly supports tlie military effort. We are putting first things first and for the time beingmust be subordinated to the immediate problem of supporting the war effort.

If we have learned any lessons from Vietnam it isar against insurgency is so different in characterational war against an external enemy oreid warountry that static traditional concepts of conventional warfare or foreign aid are of little value in dealing with problers as vast, complex end fluid as thoses in Vietnam- Voile the cougar ins urgency

task currently receives paramount attention in Vietnam, the longer-term elements Of Western foreign policyis this country, and indeed the success of counterinsurgency itself, callustained and production effort of nation building. Given the importance of psychological factors in the present struggleto pacify on area isrelude to commanding popular support through programs of inproved governmental administration and econORic and social developmentlus the hard economic facts of national existence, tlie need to strengthen the economic foundation of the country cannot long he laid aside as of lesser significance, even while the counter1nsurgency measures are being expanded and reinforced. Indeed, it is this very duality of task that confronts both the government of Vietnam and the West at the present time.

The US has carried the principal burden of economic andassistance to South Vietnam- he US has supplied2 billion in economic aid, almostillion in military assistance. Recently, the President has asked Congress for more0 million for6 for military and supporting assistance to meet the frontal attack in Vietnam and Laos. More0 million in economic aid has been extended by other Free World countries, primarily by Frar.ce_and Japan. Since the appeals by President Johnson and GeneraV Khanh to "show more flags" in Vietnam, most of the present aid donor countries have offered to increase their aid and several other countries will make- Amons th*se are Taiwan, the Philippines, Iran, Thailand, Italy and Austria-

role ts not as amenable to quantification- There is little doubt, however, that most of the regular Viet Cong units were trainee! and supplied with their initial weapons, clothing and money by North Vietnam and then infiltrated into South Vietnam. It is estimated that0 Viet Cong regulars have entered from North Vietnammall, but continuous supply of essential weapons and materiel is coming from the North- As you know. North Vietnam, in turn, is heavily dependent on other Communist countries for economic and military support. During the past decade, the Soviet Bloc and Communist China have delivered more0 million in economic aid to Northnd tho North Vietnamese military establishment has been equipped primarily through Chinese and Soviet military assistance programs.

V. Magnitudes of Western and Communist Assistance Programs

Perhaps at .this.point we might pauseoment to review the magnitude of the East-West economic and military aidin the less developed sentries.

As our challenges haveso has oar assistance program. Ten years ago, most of our iiid was military assistance: 0 percent of the US aid program went for military equipment and training. Today the great bulk of our aid is economic: nearlyercent of the total for

r major chance that has tal-:en place overtesrhas been theransformation of Free World aid

recipients into aid donors who share with us the burden and the challenge of helping the poorer countries develop. Eleven of these other donors (ten of whom once received US economic aid) are members, with the US, ir. the Development Assistance Committee of the OECD and now conduct aid programs of their own. Theseountries account for aboutercent of the bilateral aid from sources other than the United States.

he total flow of long-term, financial resources from EAC to less developed countries added up to the rather impressive figure of more thanillion. 6 suchinvested moreillion in less developed countries, of which nearlyillion was publicillion privatewhich although not foreign aid in the strictest sense certainly have contributed to economic development. (See Chart 2)

A decade ago, what assistance the European countries were able to provide went exclusively to colonies. Today lessoes, although, of course, much French, British, 3elgium, Dutch, and Italian aid does go to former colonies that are now independent states. Indeed some two-thirds of all development assistance in Africa today is now provided by the Westernnations - Three of the major donorsGermany, Canada, and Japanave no colonial connections. Nevertheless, Germanyorld wide program and in theears has made loan plages toess developed countries and provided technical assistance

The disproportionately olitlcal impact of the Soviet Bloc aid program has been more r. ,ribute to the skill with which its jropaganda value haa been exploited than to its size, which is, on the whole, still extremely modest comparod to Western axandarda. U the Soviet Bloc has extended6 billion In economic aid to less developed countries. But as you kaavj there haside gap between Soviet Bloc aid pledges and actual aid disbursements. In terms of aid disbursements, the Sovic- Bloc has expv led, little more thanillion, or aboutercent, of its promised aid and almost two-thirds ofeen concentratedew key sectors of the strategic landscape, namely India, Afghanistan and the UAR. (See Chart l) Actual Soviet Bloc aid then has amounted to only one-twentieth of free World public transfers, and. If we include Western private transfers, one-thirtieth. (Sec Chart 2)

million of which was extended6 The major category of US military aidhe so-called "Forward

The discrepancy between Western and Soviet Bloc military aid programs In less developedas not been aa great. The US has extended moreillion in military aid to these

Defense" category comprises the grant aid military assistance pro-

grams forations stretching along the southern and eastern perimeters of the Communist Blocrom Greece and Turkey In the Eastern Mediterranean tc Korea in the Western Pacific. Theseountrieareece, Turkey, Iran, Pakistan, India, Thailand,

CLaos, the Philippines, the Republic of China and Korea

account for about two-thirds of our5 militaryprogram..

omparison,e Soviet Bloc has agreed to supply aboutbillion worth of military hardware to Ik less developed countries, on* credit and often at substantial discounts. The USSR has accounted for almostpercent of the total Indonesia, the UAH, Syria, Iraq, and Afghanistan have been among the largest recipients. (See Chart 3)

The Comminists have been well aware that aid programsan all-important access to leaders and local elites in the developing countries. Sheer access, while it does not ensure control, is indispensable for the Communists as for the Westeans of extending the influence of the doner nation. The number of Bloc economic technicians in les3 developed countries has grown along with the increase in aid drawings- 6 there werec technicians present in less developed countries;0 therendore Since the inception of the program the Bloc has sent moreCO0 economic technicians abroadonth or more; moref then came from the USSR. In addition, more0 Soviet military technicians ami advisors have trained indigenous forces in less developed cCu:i andCO0 militaryhave undergone similarining in the USSR-

Although skeptics within the Soviet Bloc who raisewell as Ideological objections toforeign aidat tines,oapellins caoe, foreign aid cennot havetotallyr unpro_"itable venture for the USSR. la true that, despite sutstc itiml outlays in aid, thenot succeeded in definitively aligning new countries withBloc (Cubaecipient of aid only after itsaffiliation with thet ia unlikely that theever anticipated Chat economic assistance alonethe relatively brief span of ten years, exert anyon the economic and social order of developingthe aid mechanism, however, the USSR has introducedand ideas into less developed countries, thusthmWestern political aad ccooonlc

preserve. By its willingness to undertake such major impact projects aa the Aswan High Dam in the UAB and the Bhilai Steel Hill in India, it hes enhanced its prestige not only In tho recipient countries but more generally in the less developed areas. It has sought, and not without some success, to convince the new states that it would be safe and advantageous for them to Invest their economic future with the USSR along with other highlysocieties, bothource of industrial equipment andmodel" for economic development. Through military aid and--rojrtma for middle-grade officers, the Soviets nowrtant relationshipsutler of military eatablishme

Thus AfghaniStan's armed forces are completely dependent or. the USSR for military equipment and training. In addition, the Soviets, by strengthening the amed forces of such countries as the UAR and Indonesia, have disruptedalances, of forces andtly simulated tensions with neighboring countries and the West. Pivrhos -ore importantly, the Kremlin has created the basis forrupport and contact which, it is hoped, will facilitate its efforts to influence at shape, at itr, own pace, the developing economic and political orientation of the newly emergent nations.

It is nonetheless true, however, that as Kremlin policymakers assess the returns from moreecade of investment in foreign aid, they can reckon their dividends in most part only in the soft currency of enhanced prestige. If the novel venture of planning and executing foreign aid programs has notiscouraging experience, it must certainly haveobering one. With few notable exceptions, Soviet foreign aid administrators havefrustrating delays in implementing their aid projects, often as much from their own ineptitude and inexperience as from the administrative inefficiency of aid recipients in marshallingresources and financing local costs- Many leaders of new states haveisconcerting lack of gratitude for Soviet aid by preserving their nonaligned status and accepting aid from both Eastst; and even those leaders who are sympathetic to the USSRharp distinction between the Soviet Unionenefactor

;;id local Communists who threater, party or governmental :hority.

Respite some misgivings or this kind, wc believe that theintend toigorous policy in the less developed

areas- They alrx>st certainly believe that thesefrica, the Middle East and Asiaaio ir; the contest with the West is well as withfrom China alone requires the most effective use ofpropaganda, economic and political instruments of Even those Soviet leaders most skeptical of foreignnow have been persuaded that the USSR really has little alter-

Any drastic curtailment of new aid extensions would not

forfeit advantages already won, but wouldoss of

Soviet international prestige. ove vould also seriously damage what has been one of Moscow's most effective weapons in the struggle to counter Peiplng's bid for influence in Asia and Africa.

In some cases, where the risks appear manageable, theexploit revolutionary situations more intensely, especially

proxies as in the Congo- Relations with existing nation-

regimes will be tightened whenever possible, and ideological

gaps are likely to be bridged by further revisions in Soviet Finally we believe that military aid will continue toortant levers of policy, thuigh their expensive disappointments

ir, Cuba ana Indonesia will pre'.-ably recommend caution. Present trends suggest that the USSR will expand the list of advanced anas and weapons systems evailabie to non-Bloc customers and vill providetechnical support and training programs which such complext^xes necessery. The Soviets probably hope that thisarticular influence ov. militarys in the recipient COunt. ies and that such influence Will promote Soviet aims, especially where the military is likely toubstantial influence on the orientation of existing governments and on the choice of their successors.

years orssistance has not relieved us of the need to make difficult v. ;igt: -oiicy choices, the need to maintain our defenses, or the need, to work out new patterns ofand international order. the worldifficult .lac-.

sic an instruri of foreign policy is at best c. calculated risk. at times it is difficult not to faelthat economic development, contrary to ourntentions,ct been paralleled by diffusion of power and freedom. hue

isi'-st take the long view that what we are doing, if successfully pursued, willorld environment conducive not merely to the free world's continued survival but to its continued evolutionree society. wc must be patient enough to exclude as measures of success such short term political objectives asfriendship and the unqualified acceptance of the current gede of western foreign policy. hink thisesson the communists have learned well. the soviets have learned that they are most likely to blunder when they try to get too many results too fast, as they did in syria and guinea.

finally, there seems no alternative to continued relianceaid as an integralf western foreign policy. atter of choicelternative tools. foreign ey tool in achieving several majorp the challenge of foreign aid

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