Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

890.00/8–2550

Memorandum by the Assistant Secretary of State for Near Eastern, Smith Asian and African Affairs (McGhee) to the President ¹

secret

Washington, August 28, 1950.

Subject: Possible Aid to South Asia and the Near East.

A prime object of policy, now and for the next few years, must be to create situations of political and economic strength in critical areas. An exceedingly critical area is that which includes the subcontinent of South Asia and the Near Eastern states. The viability of a non-Communist Asia hinges upon the chance of maintaining, in this area, free institutions, stable governments, and the right orientation of men’s minds. These things cannot be maintained—indeed they are gravely threatened now—if the countries in question are unable to grapple effectively with hunger and a general deterioration of economic conditions. They are unable to do so without external assistance.

This area, with the exception of Turkey, is getting no assistance. We have had no economic aid program of any kind except extremely limited loan assistance from the Export-Import Bank, a limited relief and public works program for Palestine refugees, and, prospectively, a few million dollars of Point IV funds.

It is therefore proposed that necessary first steps be taken immediately to develop a constructive and practical assistance program for South Asia, the Arab States, and Iran. The purposes of the program would be: a) to arrest a process of economic deterioration which, if not checked, would produce the unavoidable defection of these countries and their hundreds of millions of people; and b) to build up those elements of economic strength which would enable these countries to make some effective contribution, of resources and effort, to the common struggle for freedom.

Intensive study has been made within the Department (a) to determine, both in real and in money terms, what are the minimum requirements for these countries if they are to be effective partners with us in the struggle against Communist aggression and (b) to determine how economic assistance could most effectively be programmed and administered. These studies are rapidly nearing completion and are already far enough along to substantiate four general statements:

1. Instead of a situation of strength in these countries we shall have a situation of dangerous weakness unless we embark promptly on an economic assistance program. It is presently believed that the cost of such a program might be as low as $300 million a year over a 5-year period.

2. In all the countries concerned the first emphasis of the program would be upon prompt and substantial improvement in the indigenous food supply, thus directly and immediately strengthening the will and patience of the peoples and meeting their most fundamental needs. Projects will, insofar as possible, be selected with regard to their contributions to economic strength, and thus to military potential.

3. The manner of administration of the program would have to be somewhat different as between, say, South Asia on the one hand and the Arab States on the other hand; but in all the countries concerned it will be possible so to administer an aid program as to ensure demonstrable reciprocal benefit to the U.S.

4. While P.L. 535² might provide the requisite authorization for a minor part of the proposed program, both new authorization and new appropriations will need to be sought. Since no substantial foundation already exists upon which expanded program activities can be based, it is felt that a beginning should be made immediately, which involves taking certain definite steps. If a first step is not taken now, the last step may come too late.

It is recognized that other areas besides those specifically mentioned herein will need our prompt and earnest attention. A report is coming forward to you shortly from the National Security Council, in response to your request of April 12, setting forth the concerted judgment of the interested executive agencies about the probable cost of programs that might be required of us. The findings embodied in previous paragraphs of this memorandum are substantially the same as the estimates, with respect to this particular area, contained in the National Security Council’s report. They are put forward separately at this time, in advance of the overall report, because of the urgency (as stated above) of taking preliminary steps now.

It is, therefore, recommended that you authorize this Department to take the earliest opportunity to discuss with Congressional leaders the problems in this area and the general character of the programs proposed, looking toward discussions with the countries concerned.

1. The source text was accompanied by a covering memorandum of transmittal from McGhee to Secretary of State Acheson dated August 25, which read, in part: “In accordance with previous discussions, I attach a Memorandum to the President with respect to possible aid to South Asia and the Near East. I believe it is a matter of great urgency that we proceed with further discussions on this important problem, and I consider it most desirable that the President concur in our presenting to Congressional leaders our tentative and entirely preliminary views.” The August 25 memorandum noted that the memorandum to the President had the concurrence of G, E, FE, S/P, and H.
2. Public Law 535, the Foreign Economic Assistance Act of 1950, became law on June 5, 1950. It is printed in U.S. Statutes At Large, volume 64, part 1, pp. 198–209.