Foreign-Aid Fallacies

August 28, 1961

The Administration’s foreign-aid program disregards nearly every sound principle of constitutional balance, foreign policy, or economics.

Even if we were to grant that a foreign-aid program of the present dimensions is economically necessary or desirable, the request of the President for authority to borrow $8.8 billion from the Treasury over the next five years to finance long-term “development” loans violates sound democratic and constitutional procedure. Congress is asked to give up, to that extent, its essential annual control of Federal expenditures. It is asked, in other words, to vote a lack of confidence in its future self. It is asked to prevent itself from reconsidering the program next year on its merits, and deciding the question in accordance with its judgment of the situation as it exists at that time.

It is also asked, in effect, to limit the freedom of action of the next Congress. If the voters were to return a conservative or a Republican House to power in November 1962, for example, and the new members felt that part of their mandate was to cut down or halt foreign aid, they would be prevented from doing so by an unwarranted “moral commitment” made by the present Congress. This is a denial of democratic principle.

FIVE YEAR PLANS

The President’s request rests, in addition, on unsound economic assumptions. The Rusk-Dillon plea declared: “It will be necessary to free our development lending program from the difficulties of working under the uncertainties inherent in annual requests for funds.” Why can’t foreign governments operate under the same “uncertainties” as our own government departments do? The Administration’s argument apparently assumes that the key to prosperity and economic growth is not free enterprise, but government planning, as typified by the Five Year plans that India and other nations have aped from Russia.

President Kennedy and Secretary Dillon have promised huge sums to Latin American countries in our Alliance for Progress on condition that they institute “reforms.” These reforms are not in the direction of encouraging free enterprise, removing vexatious controls, safeguarding private property, reducing onerous taxation and government extravagance, balancing their budgets, and halting inflation. The money has been offered on the contrary, on the condition that the Latin American countries will undertake “national [i.e., governmental] planning,” “land reform,” and socialized housing—in brief, if they will move still further toward socialism and the welfare state. So-called “land reform” abroad has usually meant a grave infringement of private-property rights. It has more often resulted in a reduction rather than an increase of agricultural output.

WHAT PRICE COFFEE?

Secretary Dillon has promised the Latin American countries “at least $20 billion” in return for such socialistic measures. In addition, he has promised help in pushing up the price of coffee and tin, for example, against American consumers. He has not only endorsed export quotas of these products from Latin American producers, but recommended policing imports into the U.S. He ignores the collapse of all the old Brazilian coffee valorization plans and similar “stabilization” schemes, and the expensive fiasco of our own crop-support programs.

In brief, the Administration does not trust or understand the function of free prices and free markets in adjusting production to consumption and supply to demand. The whole folly of government price-control and production-control is to be launched on a new and international scale.

The result can only be to encourage and prolong all the unsound economic policies of South American governments, and to slow down rather than accelerate sound and continuous South American economic growth.

All this is apart from the economic harm that the foreign-aid program is now doing to the United States itself, in unbalancing our budget, threatening greater inflation and a still greater increase in the tax burden on productive enterprise, increasing the deficit in our balance of payments, and undermining the dollar just when it is most essential for our own stability and world stability to strengthen it.