800.50 T.A./3–1449

The Secretary of State to President Truman

confidential

Memorandum for the President

Subject: Progress Report on Point IV

A. Policy Definition

I. A general policy paper entitled “Objectives and Nature of the Point IV Program” has been prepared in close collaboration with an Interdepartmental Advisory Committee and the twenty-six agencies active in the field. It is attached for your approval.

II. Detailed policy statements are being prepared and reviewed on the following additional problems:

1)
Measures to foster the international flow of investment capital. The National Advisory Council has been asked to develop recommendations on this subject. A paper pointing up the relationship of capital investment to technical cooperation is attached for your information.1
2)
Geographic scope of the program: definition of “underdeveloped” and “peace-loving”.
3)
Choice of bilateral, regional or United Nations arrangements, and methods of coordinating all programs supported by this Government or by other governments.
4)
Commitments to be required before undertaking technical cooperation activities or measures to foster the flow of capital investment.
5)
Relationship of governmental and private activities in the technical cooperation field.
6)
Procedure for expanding work of United Nations and Specialized Agencies in technical cooperation field.

B. Detailed Program of Technical Cooperation

I. With the cooperation of the other agencies and departments experienced in this field, we are preparing the detailed proposal for technical cooperation activities to be submitted for your approval and for transmittal to Congress. This proposal will be based on:

1)
Study of programs now in operation.
2)
Study of programs which the various agencies believe can be readily expanded.
3)
Study of needs and potentialities for economic development of various countries.

It is not planned to ask foreign governments or the United Nations and its related agencies to submit formal requests for support of technical cooperation programs before presenting a proposal to Congress. The program presented to Congress, therefore, will be illustrative of the needs and possibilities of technical cooperation activities, rather than a final program whose detailed projects Congress would be asked to approve.

II. At the same time, a study is being made of private activities in the international interchange of technical knowledge and skills; of the methods whereby governmental measures can encourage and facilitate private activities, and of the methods of obtaining coordination and mutual reinforcement of private and governmental activities in this field.

C. Organization

A plan of organization will shortly be submitted for your approval, along the following lines:

1)
The organization would be granted broad powers to carry out programs of technical cooperation, and would be authorized to use the facilities of the Government agencies as required. It would be responsible for central planning and management of the program and for its coordination and integration with other programs, and it would be accountable for the success of the program.
2)
Funds would be appropriated to the President to be allocated through this organization to the various United States and multilateral program activities.
3)
This central management organization would have available to it interdepartmental machinery for periodic high-level review and evaluation of the administration of the program.

D. Legislative Action

Review is under way of (1) existing legislative authority, pursuant to which existing technical, scientific and cultural exchange programs are being carried out and can be expanded; and (2) the necessity for new legislative authority to carry out an integrated and expanded program of technical cooperation for economic development. A draft of proposed legislation is being prepared.

E. Consultation with Private Groups

Advice in the development of the program is being obtained from private groups in the following ways:

1)
A series of conferences with individuals and organizations having special experience and competence in this field is being carried out.
2)
A general conference of interested private individuals is being held on March 19.
3)
The appointment of an Advisory Committee on Technical Cooperation, of from eight to twelve members, is being actively considered.2

F. Consultations with Congressional Leaders

The Department of State proposes to initiate consultations with Congressional leaders on this technical cooperation program as soon as the present memorandum receives the President’s approval.3

Dean Acheson
[Enclosure]

Objectives and Nature of the Point IV Program4

(This paper is intended to state the purposes of the Point IV Program and some of the major results to be expected from it. It is intended for the use of Government personnel in formulating answers to specific policy and programming problems and not for publication.)

objectives

The Point IV Program, like the other three related courses of action outlined in the President’s inaugural address, has the broad objective of promoting peace by “strengthening the free world”, and thus “helping create the conditions that will lead eventually to personal freedom and happiness for all mankind”.

The Program aims to help attain the “nonmaterial ends” of peace and freedom through “material means”, i.e., through improved living [Page 777]conditions. In the words of the inaugural address, the aim is “to help the free peoples of the world, through their own efforts, to produce more food, more clothing, more materials for housing, and more mechanical power to lighten their burdens. … This Program can greatly increase the industrial activity in other nations and can raise substantially their standards of living”.

The Program is broadly economic. It seeks the advancement of peoples of underdeveloped areas through a continuing and balanced expansion of their production and distribution of goods and services essential to meeting their needs. Its emphasis is on helping the “peace-loving” peoples of those great areas that have benefitted only indirectly from our post-war programs of economic aid to Western Europe. It recognizes, however, that by far the greatest impetus and contribution to their economic development must come from the people themselves in those areas.

The United States has had much experience, over many years, in many kinds of cooperative action to foster economic development. It has learned what great benefits it and all other cooperating nations can derive from greatly expanded activities of these kinds. The President’s program is “bold and new” in elevating this instrument of national policy to a position of major importance, in coordinating these activities into a vigorous and integrated program of action, and in seeking much greater participation in such a program by the other countries of the world—by countries supplying technology and capital, by countries receiving them, and by countries cooperating in the technical assistance activities of the United Nations and other international organizations, even though they themselves be neither important suppliers nor recipients.

The Point IV Program may be expected to contribute, and should be administered so as to contribute, to the achievement of the following general objectives of United States national policy:

a)
Contributing to domestic economic stability and productivity, by expanding international trade and avoiding some of the readjustments in the domestic economy that might result from a contraction of international trade. In the absence of capital exports or continuing gifts from the United States, such a contraction would appear inevitable, because United States imports are unlikely to increase sufficiently to maintain present export levels. Although an export surplus of commodities is not considered necessary for the maintenance of full employment, it is important in certain sectors of the economy where decreasing exports would necessitate difficult adjustments in domestic production. If capital flows abroad, such adjustments can be avoided, at the same time that sources of supply for materials needed in the United States are developed. Productivity both at home and abroad can be expected to increase as production is expanded along lines allowing the greatest benefit to be derived from natural advantages.
b)
Strengthening our national security, by building good will throughout the world and by strengthening “freedom-loving” nations. Good will toward the Usnited States and recognition of mutual interest can lessen greatly the effectiveness of sabotage and subversion by unfriendly nations and can unify our friends and make them more effective. Good will will be greatly strengthened if concrete actions are taken that nullify charges of “imperialism”, and if, in carrying out programs in dependent territories their peoples’ aspirations for national independence are kept in mind. Good will is particularly important in areas of strategic economic or military significance.
c)
Achieving a better balance in the world economy. Most recent increases in production have taken place in areas already well developed, without adequate attention to the need to move ahead along the whole production front. This Program helps fill that need. Increased production in underdeveloped areas would not only benefit them, however, but would also benefit other areas. The flow of capital to underdeveloped areas would enable them to buy capital equipment and other manufactured goods from both the United States and Europe. Expanded purchases from Europe would increase Europe’s income and hence her ability to pay for imports, from whatever source. As underdeveloped countries increase production of raw and semi-finished materials for export, Europe will be able to import larger quantities from non-dollar sources of supply, while United States raw material shortages will also be eased. A better balance of export possibilities and sales opportunities throughout the world would reduce pressures for autarchic solutions of economic problems.
d)
Strengthening the United Nations system, by supporting constructive international action for economic development where this will help achieve the objectives of the Point IV Program. Under the United Nations auspices underdeveloped countries may be readier to undertake necessary self-discipline and self-help measures and to adapt their development programs to world needs; countries having technological and capital resources would participate more generally in coordinated technical cooperation activities; and the cry of “imperialism” would find little response. The prestige and effectiveness of the United Nations and related agencies will grow, in turn, with the importance of the tasks successfully carried out by them.
e)
Strengthening political democracy, by giving the peoples of underdeveloped countries hope in a better future, and quickening that hope by providing concrete evidences of progress toward better levels of living.
f)
Promoting peace, by strengthening political democracy, strengthening the United Nations, building good will and strengthening our friends, helping Europe support itself, developing sources of needed raw materials, expanding international trade, and, finally, by showing that world development can take place peacefully and with increasing personal freedom, as the energies of the masses of the people are released into channels of constructive effort aimed at greater production, greater exchange, and greater consumption. If international tensions are eased in this way, defense expenditures should decrease, and both current living standards and further economic development would then be able to benefit from the additional resources thus made available.

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substance of the program

The possible international contribution to economic development has two aspects: sharing knowledge and skills, and fostering their utilization by encouraging investment in facilities and equipment.

Among the many ways in which knowledge and skills can be shared, the following have been extensively and successfully used: basic studies of economic problems, needs, and potential lines of development; expert advisers or missions to advise governments, private organizations or business enterprises; joint financing and administration of foreign government operations (servicios) in particular fields; research and experimental centers and laboratories; demonstration projects; operations of business enterprises; on-the-job training; provision and instruction in the use of sample materials and equipment; consultation and advising with foreign visitors; publication and translation of specialized reports; financial assistance to schools and universities in this country and abroad; exchange of students and teachers; conferences and seminars; United States libraries and film services; and special technical staffs attached to diplomatic establishments abroad.

To be really productive, improved techniques must be put to use. Furthermore, the introduction of new techniques can advance economic development most if capital investment is taking place at the same time. The President therefore proposed that, “in cooperation with other nations, we should foster capital investment in areas needing development”. Most of the capital needed for economic development must come from domestic sources; and measures to promote domestic capital formation are needed if the Point IV Program is to be fully effective. Important means of fostering capital investment, where foreign capital is desired, would be the creation of political, social and economic conditions favoring such investment, and the establishment of mutual guarantees of fair treatment. Sources of foreign investment funds are private, intergovernmental and governmental. It is particularly important that agreements—either bilateral or multilateral—be sought that would encourage the international flow of private investment capital. It is contemplated that steps will be considered, as conditions warrant, to increase the availability of foreign investment funds.

It is important, however, that neither technical cooperation activities nor measures to foster capital investment be allowed to give an impression that the United States Government thereby becomes obligated to supply the funds needed to finance economic development. The US cannot accept the ultimate responsibility for seeing that economic development really takes place. This responsibility must continue to rest unmistakably on the nations desiring development.

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Economic development means the development of productive resources, whether these be natural resources, human resources or capital resources. Improved practices and policies may be needed in both public and business administration, and might include such diverse techniques as fiscal practices and methods of handling materials. Specific areas where the widespread improvement of techniques would be expected to contribute importantly to the productivity of these resources include the following:

(a)
Natural resources: soil conservation and utilization; plant and animal husbandry; forest and fisheries management; water control and use, including water supply, irrigation and reclamation, waterways and power development; mining and fuels.
(b)
Human resources: health, including sanitation and nutrition; welfare, including social services and social insurance; education, particularly fundamental, rural and vocational; manpower training and utilization.
(c)
Capital resources: industrial technology, facilities and equipment; organization of business and finance; housing; transportation; marketing and distribution.

emphasis in the program

Culture patterns may affect the rate of economic development, for changes in habits of thought and methods of work do not come about quickly. Furthermore, the amounts of capital needed can only be accumulated over long periods of years. Substantial changes in applied techniques and in production in underdeveloped countries may take many years, and living standards in those countries can therefore only rise slowly, especially if a community chooses more capital investment at the cost of present sacrifices in consumption or if production does not increase faster than population. It is important to emphasize that this is a long-term program in which spectacular results cannot be expected immediately. Cooperation in such a program should be thought of as continuing for many years, and long-range projects necessary for the most beneficial development of each country’s resources must be included.

On the other hand, today’s needs are urgent. Without prejudice to the long-range development aspirations of other peoples, top priority should be given to requests for cooperation in connection with economic development projects that can be undertaken promptly and that will make the greatest net contribution to the national product within a reasonable time period.

Cooperation in development efforts, to be most successful, must utilize the operating techiniques best adapted to existing development needs. Advisory groups are effective in some situations; in others demonstration projects are necessary; in still others a wide training program must be undertaken. To be most effective in achieving the [Page 781]several objectives of the Point IV Program, operating techniques should be utilized that (1) reach as many people as possible, and (2) get those people actually doing something in a demonstration or training situation. Broad participation is by far the most successful way of getting improved techniques adopted, in most underdeveloped areas.

In considering possible directions of economic development, it is important not to overlook inter-relationships. From the standpoint of long-term development, it is not enough to help increase agricultural production in an area if that area’s transportation facilities remain inadequate to carry larger crops to suitable markets. Economic development may be wasteful, in other words, if it takes place in bits and pieces. There must be close integration of development projects, both in the planning stage and in administration, and both within and among different countries.

It should be borne in mind that there are no stereotyped patterns of economic development, applicable to all or even to many countries; and that this is not a “program of economic development”, which suggests planned stages and time periods, but a “program of cooperation” while economic development takes place. Different countries have different needs and different possibilities, and the stages necessary for their development may be quite dissimiliar. Proposed development projects must take into account and, so far as possible, be adapted to local resources, attitudes, social and legal structures, customs and practices, and national aspirations. In general, however, in those areas where “economic life is primitive and stagnant”, a basic improvement in health and education may well be prerequisite to increased production and improved standards of living. It is also likely that, among the less developed countries, now predominantly agricultural, programs should stress the improvement of techniques in agriculture, local credit facilities, food and fiber processing, rural and small scale industry and transportation, power, and mining where appropriate. Encouragement of trading and entrepreneurial activities may be important both for the economic and for the democratic development of such countries. For the somewhat further developed areas, priorities are likely to be quite different, with emphasis on governmental and industrial techniques, for example, as the situation requires.

The Point IV Program’s emphasis on early and greater production in underdeveloped countries should not be understood to imply that other and sometimes competing objectives of these countries need be ignored. Increases in production should be balanced, integrated, and tailored to individual country needs and potentialities. Development activities should attempt to harmonize the basic objectives of conserving natural resources, of long-run improvement, of social welfare and current living standards, of the economic benefits of international economic [Page 782]specialization, and the other mutual long-run economic interests of all cooperating nations. Finally, there should be a positive and cooperative effort to increase production of commodities that are short throughout the world, which will contribute to the flow of international trade and thus to the economic well-being of all cooperating nations.

relationship to other programs

Many of the programs now conducted and the institutions supported by the United States, such as the ITO and the Reciprocal Trade Agreements Program, the ERP, WHO, FAO, ILO, The International Bank for Reconstruction and Development, and transportation agreements and conventions, have among their several objectives the fostering of economic development and the raising of standards of living. The Point IV Program must be coordinated with the economic development aspects of these programs. At the same time, many programs of educational, cultural, scientific, and informational exchange, while not focused so directly on economic development, utilize similar techniques and help achieve some of the same general objectives. Similarly, existing programs of financial aid for the relief or economic recovery of war-devastated or war-disrupted economies are in part directly related to the Point IV Program, insofar as they stress new development and improved living standards.

Furthermore, economic development requires much more than governmental action. It would be very limited without the cooperation of private institutions and other organizations, of business, finance, agriculture, labor, scientific, educational and other groups and individuals both at home and abroad, in improving the effectiveness of governmental methods of helping get new techniques adopted and encouraging capital investment, and in expanding their own many private activities that will complement and reinforce the governmental program.

cooperative nature of the program

The United States will work with those nations who want its cooperation. This program is not unilateral. Thus, cooperation in spreading better techniques and in encouraging international capital investment is available in response to the requests of other countries, under mutually acceptable conditions. As the President said, “The old imperialism—exploitation for foreign profit—has no place in our plan. What we envisage is a program of development based on the concepts of democratic fair dealing”. “New economic developments must be devised and controlled to benefit the peoples of the areas in which they are established”. Of course, international capital investment should not be expected to flow without assurances both to the investor and to the recipient. “Guarantees to the investor must be [Page 783]balanced by guarantees in the interest of the people whose resources and whose labor go into these developments.”

This is a program of working with other people who are trying to make the most of their own resources. This is not doing something for others. Outside participation makes it possible for underdeveloped countries to do more for themselves. It is a “selp-help” program, in which the peoples wishing economic advancement must expect to provide the principal effort.

The cooperation is invited of other nations who are willing to pool their technological resources or who have capital to invest abroad. The United States has no monopoly of either technology or exportable capital, and welcomes participation, by other nations in this joint effort. It is anticipated that this cooperative endeavor will bring important direct benefits to all participants, including the United States.

It is a special objective to work together with other nations through the United Nations and its specialized agencies, in close coordination with the Organization of American States and its specialized agencies, wherever this will contribute to the success of the Program. This does not preclude working through other international organizations having objectives in common with those of the United Nations nor does it mean abandoning successful bilateral projects or refusing to initiate new ones. It does, however, mean planning and carrying out technical cooperation activities through international organizations in preference to bilateral arrangements, wherever the latter do not have special advantages, and it means planning bilateral, regional and more broadly international programs so that, insofar as possible, they complement and mutually support each other.

conclusion

The Point IV Program, besides recognizing the desirability of economic development aimed at higher levels of living as an end in itself, grows out of a recognition that the instruments being used to accomplish the objectives of national policy prior to the President’s inaugural address were incomplete. The Program does not imply a redefinition of United States policy objectives. Rather it means that cooperation in economic development is now raised to a major role among the instruments for the accomplishment of existing objectives.

Of even broader significance is Point IV’s new emphasis on the close relation between popular aspirations and the will to freedom. This new emphasis must be brought to bear on existing programs as well as new programs, to ensure they are conceived and administered with full awareness of this relation and in the light of the President’s statement that “Democracy alone can supply the vitalizing force to stir the peoples of the world.…”

  1. Not attached to file copy. Drafts of this and other papers named here are found in the unindexed lot files of the Department of State, Lot 122, Box 34 (15585). President Truman’s message of approval cited in footnote 3, p. 776, suggests that only one paper was attached to this memorandum.
  2. Not to be confused with the interdepartmental committee ACTA.
  3. Approved by President Truman on April 21, 1949, in a memorandum of that date in which he wrote to the Secretary of State as follows: “I have your memorandum of March 14, 1949, enclosing the policy paper ‘Objectives and Nature of the Point IV Program.’ [New Paragraph] The policies enunciated therein are in accordance with my concept of the program and I herewith give my approval to same.” (800.50 T.A./4–2149)
  4. The attached policy paper was first considered and approved by the Advisory Committee on Technical Assistance (ACTA), after several revisions, and then submitted to the Executive Committee on Economic Foreign Policy. There was preliminary discussion by the ECEFP on February 18 with more discussion and final approval as ECEFP Doc. D–21/49 on March 1; minutes of the ECEFP meetings are found in Lot 122, Box 22 (15572). After approval by President Truman on April 21, 1949, the paper was transmitted by the Secretary of State on April 27 to the following cabinet officers and agency and commission heads: the Secretary of Defense; the Attorney General; the Secretaries of Agriculture, Commerce, Interior, and Labor; the Chairman of the U.S. Tariff Commission; the Director of the Bureau of the Budget; the Chairmen of the Securities and Exchange Commission; the Federal Reserve Board; the Export-Import Bank; the National Security Resources Board; the Interstate Commerce Commission; the Administrator of the Federal Works Agency; the Chairman of the U.S. Maritime Commission; the Administrator of the Housing and Home Finance Agency; the Chairmen of the Federal Communications Commission and the Civil Aeronautics Board; the Administrator of the Federal Security Agency; the Chairman of the Council of Economic Advisers; the Administrator of the Economic Cooperation Administration; the President of the Institute of Inter-American Affairs; the Administrator of the Civil Aeronautics Administration.