Where We Are Now

November 16, 1959

On Oct. 19, the U.S. Development Loan Fund announced that in future its loans must normally be used to buy goods in the United States.

I must begin by admitting that I share some of the misgivings expressed by Senator Fulbright concerning the wisdom of this policy. On its face, it doesn’t look like a step toward freer multilateral world trade. It tends to defeat part of the ostensible purpose of the loans by obliging the borrowing nation to pay more for the goods it wants than it otherwise would. Under normal conditions the proceeds of dollar loans would have to be spent, anyhow, directly or indirectly, in this country.

FRUITS OF GIVEAWAY

But Senator Fulbright seems to live in an ivory tower that shuts off part of his view of actual conditions today. Among these are (1) a deficit of about $4 billion this year in our balance of payments; (2) a heavy gold outflow over the last two years which has brought our gold stocks to a nineteen year low; (3) a discount on the dollar in European exchanges; and (4) continuing foreign discriminations against American goods. As the President said at a press conference on Oct. 28, our aid policy has been “merely . . . increasing the gold reserves of somebody else while we have to make good the resulting balance of deficit in our own receipts from abroad. . . .”

The remedy, however, is not to tie our loans to a “Buy American” policy, but to halt our giveaway and most of our government-agency loans.

The Wall Street Journal succinctly recapitulated some of the facts in an editorial of Aug. 19:

“Once upon a time there was established the International Bank for Reconstruction and Development and the International Monetary Fund.

“This was during World War II and the idea, in case you have forgotten, was to provide a capital fund for economic development loans and for currency loans to the war-torn countries and the underdeveloped countries of the world.

“But this did not prove sufficient, and so we had the U.S. loan to Britain, and U.S. loans and grants under the Marshall Plan, and the U.S. loans and grants under the many names of what is now the International Cooperation Administration.

“But this was not sufficient, and so we increased the resources of the U.S. Export-Import Bank.

“But this was not sufficient, and so we set up the U.S. Development Loan Fund to make ‘easy’ loans repayable in local currencies.

“But this was not sufficient, and so the World Bank was broadened to include an International Finance Corp. to invest in special enterprises in underdeveloped countries.

“But this was not sufficient, and so we are now organizing a Latin American Bank and we have proposed a similar Middle Eastern Fund.

“But this was not sufficient, and so this week the U.S. launched a campaign to establish a $1 billion world agency to be called the International Development Association. It will be used to spur economic development in underdeveloped countries on easier terms than those poor countries can get from the World Bank, the Monetary Fund, the Export-Import Bank, the U.S. Development Loan Fund, the Latin American Bank or the Middle Eastern Fund or the International Finance Corp. or from the International Cooperation Administration. . . .”

$69 BILLION

If, now, we tabulate, we find (see A. Wilfred May in The Commercial and Financial Chronicle of Oct. 29) that our postwar overall foreign aid to date totals approximately $57 billion in net grants and $12 billion in net credits. This brings the grand total to $69 billion.

The present $4 billion deficit in our balance of payments can be wholly accounted for by our foreign-aid outflow at an annual rate of $4.4 billion. Therefore the first remedy, as I have already said, is to start drastically tapering off our foreign-aid program, which rests chiefly on dubious socialistic assumptions.

Our global spenders have yet to learn that the most important contribution we can make to international economic stability and growth is to keep our own economy strong and solvent, and to put the integrity of the dollar beyond question.