Does Foreign Aid Aid?

November 25, 1963

It remained for Senator Morse, of all people, to blurt out the truth: “If foreign aid were submitted to a referendum of the American people, it would be overwhelmingly defeated.” Certainly it would be defeated in its present prodigal and promiscuous form.

But whenever Congress grows restive and attempts to curb at least some of the more flagrant items in the program, the executive branch shouts that it is “threatening world security.” President Kennedy even questions the good faith of opponents of the program. They “find it politically convenient,” he says, “to denounce foreign aid with one breath and the Communist menace with another.”

This begs the whole question. Has foreign aid reduced the Communist menace (especially as compared with alternative programs)?

The military assistance program, in such places as Formosa and Vietnam, has prevented or slowed up direct Communism aggression or conquest. But has our economic aid, scattered over nearly a hundred countries, done anything appreciably to arrest the spread of Communism? The argument that it has done so rests on the assumption that all these countries live in “poverty and despair,” and will turn in desperation to Communism unless their standard of living is substantially raised.

POVERTY, OR IDEAS?

There is in fact no evidence that the Communist ideology increases in proportion to poverty. Hungary and Rumania, Poland and East Germany are Communist today not because they were poor but because they conquered. Cuba is Communist, not because it was any poorer than other Latin American lands, but because armed revolutionists seized power. Italy is more prosperous—and more people vote Communist—than at any time in the past.

In brief, if countries voluntarily go socialist or Communist, it is because of ideology, not because of their economic level. If people are led to believe that socialism or Communism is the quickest way to raise their economic condition, they will adopt it. If they recognize, however, that the surest way to improve their economic condition is by adopting the principles of capitalism and free enterprise, that is what they will do.

The Administration has ignored this. Czarist Russia chronically exported a surplus of grain; Communist Russia cannot even feed its own people. Yet instead of exploiting this fact, our government rushes to relieve the Communist plight. It does not point to the failure of Khrushchev’s production boasts, because it accepted them. Lastly, Secretary Freeman was praising the “real progress” achieved by the Russians in the last five years in the production of grain.

NO CORRELATION

Has foreign aid appreciably raised income and living standards in the recipient countries? In the last fifteen years, of course, living standards have improved in nearly all countries. But no correlation is detectable between the rate of growth in each country and the amount or percentage of American foreign aid. The President belittles its cost to us. It is only “seven-tenths of 1 percent of our gross national output.” But then it must be similarly minute percentage of the total GNP of the hundred or so nations among which it has been scattered. How, then, could it substantially increase their living levels? Especially as it is offered to Latin American countries on condition that they embark on “national planning” and “land reform”—i.e., on still more socialism and welfare-statism.

Has our foreign aid improved our own economic conditions? The President contends that it has. “A cut of $1 billion in our total foreign-aid program may save $100 million in our balance of payments—but it costs us $900 million in exports.” He forgets that such “exports” are given away. They are paid for by our own taxpayers, who would otherwise have had the $900 million to buy things for themselves. The $100 billion total we have paid out in foreign aid set back our own capital development, our own economic growth, by $100 billion.

If our foreign aid finally destroys the dollar as the world’s anchor currency, whom will it have helped?