Six Principles of Foreign Aid

March 31, 1947

During and since the war our government seems to have assumed that it could solve almost any international problem, economic or diplomatic, by the simple process of lending or giving away American money. However necessary financial aid to Greece or Turkey may now be to prevent the further spread of Communist aggression, it could prove worse than futile unless it is recognized to be only a part of a much broader policy or, it might be better to say, reversal of policy. Regarding foreign aid of every kind, it is time we recognized some elementary facts and principles hitherto flouted or ignored.

1—America cannot feed the whole world. Before the war the United States produced less than 9 percent of the world’s food supply as measured in calories. Today, as a result of increase in our own production and the falling off of Europe’s, we produce nearly 12 percent of the total. Even this is hopelessly inadequate to fill the gap left by the decline in European production. America has 140,000,000 mouths to feed; but Europe has 350,000,000. It should be obvious that the real solution is not to distribute scarcity but to restore production. This is prevented in Europe everywhere today—by Russian looting, by socialism and Communism, by “agrarian reforms” which seize land, break up farms and displace populations, by export and import barriers, by exchange controls, and by price-fixing which makes it unprofitable or impossible to grow, transport, or sell food.

2—Food relief and financial help should be extended only on condition that the country aided discontinues policies that discourage or prevent production. Otherwise the help is worse than futile, and merely prolongs the distress it was designed to relieve. A few weeks ago Yugoslavia “suddenly awakened” to the threat of starvation among 5,000,000 people within its borders. Its new appeal for American aid was properly refused. It is only in planned or Communized economies that such awakenings come so late. In a free economy a prospective shortage would have been made known to everyone long in advance by the movement of prices. The rise in price would have drawn food to the area of shortage, and would have given a greater incentive to every producer to increase his output of food. To send food to Yugoslavia without insisting on reforms would have been not only to subsidize Communism but to perpetuate the very policies that create or intensify the food shortage.

3—Additional help to any country goes eventually to relieve the LEAST urgent need which that country is able to meet. This follows from the ability to divert resources. Those that think that if we do not send food to Yugoslavia we starve its people forget that Yugoslavia conscripts an enormous standing army from men who would otherwise work on farms to produce food. To solve Yugoslavia’s food problem by outside gifts is to release the manpower and financial resources to maintain this military establishment. Such aid without stringent conditions would merely support the military threat against our own interests forcing us, for example, to extend more counteraid to Greece.

4—The function of foreign lending, apart from purely political loans or outright charity, should be restored to private hands. Though our aid is worse than useless unless extended with conditions, it is difficult and dangerous for one government to impose conditions on another. Private lenders, however, can do this without arousing international resentment by simply declining, as in the past, to make a loan unless reforms are made in the borrowing country calculated to make repayment probable.

5—The proposed $400,000,000 aid to Greece and Turkey need not be a net addition to other foreign aid already contemplated. In a score of ways we are subsidizing or planning to subsidize socialism, Communism, and strangling government controls throughout the world. These not only reduce production but constitute a further threat to our own free-enterprise system. We can still save most of the nearly $3,000,000,000 we are planning to throw away in a futile effort to stabilize the overvalued currencies of governments following policies that prevent recovery.

6—Don’t count on gratitude in return for foreign aid. We didn’t get it from Communist Russia even from $11,000,000,000 of Lend-Lease. Gratitude between nations is too apt to mean “the lively expectation of future favors.”