Foreign Aid Run Riot

March 28, 1960

A subcommittee of the House, in reporting on a 40,000 mile study mission around the world has concluded that the U.S. foreign-aid program is attempting to underwrite too many projects, some of them grandiose and too costly, and that money spent on foreign aid is a growing strain on this country. Many previous committees and observers have come to the same conclusions. Yet it is significant that this latest report, like its predecessors, accepts as a matter of course the principle of government-to-government foreign economic aid. This is why such aid not only continues but grows, under ever-different names, with no stopping point in sight. In Newsweek of Nov. 16 last I discussed the proliferation of agencies and of postwar foreign loans and grants totaling some $70 billion.

For the next fiscal year the President has asked Congress to provide $4.2 billion in foreign aid, of which $2 billion would be military and the rest “economic” assistance. It is proper that the request should be divided in this way. Military aid can be justified in principle. It is clearly needed in Korea and Taiwan, which have demonstrated their own willingness to resist aggression. But this does not mean that any aid called military should be immune from challenge. Much of it becomes extremely dubious when 50 recipients are involved.

DO WE GET DEFENSE?

Moreover, American aid that goes to make up a budget deficit ostensibly caused by military expenditures of the recipient may in fact be paying for larger nondefense expenditures than otherwise. When American taxpayers pay for any category of Ruritania’s expenditures, Ruritanians have that much more of their own resources left to spend on something else. This substitutability of resources (unless we undertake to control every item of a foreign government’s expenditures and taxes!) is ignored by the administrators of foreign aid, “military” or “economic,” when they solemnly approve hundreds of special “projects.”

Though the President’s foreign-aid message of Feb. 16 contained some 5,000 words, he did not find space to specify there how many nations and governments the American taxpayer was aiding or being asked to aid, how much we had already spent on this program, how much it was going to cost in future, and when it was going to stop, if ever. Instead, Congress was told in sweeping generalities that it is somehow the duty of the American taxpayer “to raise the standards of living of millions of human beings” all over the world, and that government economic aid is the way to do it.

SUPPORTING SOCIALISM

Both propositions are doubtful. To undertake to lift the living standards in every backward nation, especially with no control over the policies of that nation, is to assume a bottomless and endless responsibility. And government aid retards, instead of promoting, true economic progress.

The situation was bad enough when we gave aid to a score of nations, on the plea of “no strings attached,” regardless of whether or not they dissipated that aid in “directed” economies and in socialization. We now explicitly endorse socialized planning. We apparently even make it a condition of eligibility for aid. In his message of Feb. 16 Mr. Eisenhower spoke approvingly of “an expanded and accelerated program of economic reform and development” for Nationalist China. In a speech in Puerto Rico on March 4 he said that though “the United States alone” should not develop “a so-called master plan for the raising of living standards through the hemisphere . . . each nation of Latin America . . . must analyze its own human and material resources and develop a program of action with priorities assigned. Then national and international credit agencies should stand ready to be of assistance in making the program a reality.”

The dirigistic and socialistic assumptions underlying the foreign-aid program are daily becoming more unmistakable. The sponsors of the program have completely forgotten, if they ever knew, that the soundest economic growth, either at home or abroad, comes when private capital, protected from arbitrary seizure or harassment, is free to flow to the enterprises that best promise to meet consumer demand.