Foreign Relations of the United States, 1950, East Asia and the Pacific, Volume VI

890.00/8–350

Mr. Harlan Cleveland, Deputy to the Assistant Administrator for Program, Economic Cooperation Administration (Bissell), to the Ambassador in Burma (Key)¹

personal   confidential

Washington, August 3, 1950.

Dear Mr. Ambassador: There have been enough inquiries from the field about the Griffin Report and programming in general to suggest the need for a general exposition of preliminary ECA thinking on the development of the Southeast Asia program. To some extent what is said in this letter may duplicate what has been said in cables or previous letters; but an attempt is made here to set down certain ideas in a little more systematic fashion than has been done previously. Any views about a program just beginning must, of course, be tentative. They can grow firm only as a consequence of the experience of the Special Technical and Economic Missions in field operations.

In a letter dated July 26, 1950,² I informed you that the Griffin Report³ had not yet been issued. We have so far worked from a single carbon copy of an early draft. Copies will be sent you as soon as available. This delay, however, need not be unduly retarding in its effect on programming. You and your staff participated in the original telegraphic summary of the Report and perhaps in developing some of the working papers. The copy of the Report we have seen does not generally carry projects into substantial detail. In view of the short duration of the Griffin Mission, and the wide field covered by its recommendations, it would be surprising if this were not so.

The Griffin Mission recommendations as such have already served a most useful purpose in outlining the general nature and size of the program needed. It remains for the STEMs and ECA/Washington, working together, to create an actual program. And the initiative and primary responsibility for creating a program, as you are aware, devolves upon the Chief of the Special Technical and Economic Mission who, in turn, must inspire and draw out and work out a program with appropriate officials of the Government to which he is accredited. Ideally, a program of rehabilitation and development should originate with the local government and our role should be that of aiding in its execution. In practice, it will probably be necessary for us to suggest, work out details, and even help put the program into operation.

I

I draw your attention to one major deficiency of the program recommendations which we are charged with carrying out: They do not take explicit account of the problem of financing the internal costs, within each country, of the U.S. aid program. The primary need in each country, as emphasized by Mr. Griffin and every member of his group, is for assistance in restoring or extending essential services—mostly government services (to health, agriculture, education, industry, utilities, transport, etc.). These will require U.S. dollars for U.S. or other foreign exports and equipment, but they will also require large amounts (compared to current revenues) of local currencies. And yet, large amounts of funds are simply not to be raised without resort to the printing press.

We therefore recognize that there is a major difference between aid to Southeast Asia and aid which has been given to Europe under the Marshall Plan.⁴ Europe’s financial problem has been a scarcity of dollars—a foreign exchange problem. Southeast Asia needs dollar aid too, if it is to pay for external assistance. But we recognize that in most countries of Southeast Asia the financial problem is primarily one of a scarcity of internal revenues to pay for an expansion of essential services (which in turn, it is hoped, will in time generate revenues to pay for a continuation and expansion of such services). We can overcome this deficiency of internal revenues via dollars and without inflation only by the supply, under our aid program of commodities that can be sold for local currency which can then be used for public projects and services. We are fully facing the fact that we are going to have to do this on a scale sufficient to pay most of the internal costs of the aid program in some countries, and at least some of these costs in all countries.

In some of the recommended country programs of the Griffin Mission there are significant amounts of commodities (such as cotton textiles, agricultural implements and fishing equipment for Indonesia, cotton yarn and miscellaneous iron products for Indochina, and irrigation equipment for Thailand) although it is not clear to what extent it was expected that these items could be sold on the market for cash (as distinct from being sold on terms or given away as part of government programs). In other recommended country programs there are fewer commodities listed. But regardless of whether listed or not, the commodities have not been, so far as we can gather, included in the programs for the express purpose of generating local currency revenues with which to finance the extension of services which constitutes the major part of the programs. It is not likely therefore that the Griffin program recommendations are properly balanced as between saleable commodities, on the one hand, and technical assistance and non-saleable goods on the other. Accordingly, it is suggested that the first major overhaul of the Griffin recommendations be made with such a balance in view.

The question naturally arises as to what should be the criteria for the selection of saleable commodities for the program. This is a difficult question to which we have been giving some thought, and I hope to be able to send you some notes on this point before long.

II

Another subject to which I suggest some serious thought needs to be given is the whole question of how we organize our relationships with each of the Governments to which the aid is being given. It may be found that in each country some type of special organization needs to be established. It might be a national organization or a joint organization with the United States; but previous experience elsewhere suggests the need for vesting in a central place the responsibility for planning a program of rehabilitation and development (with dollars plus counterpart funds) and for supervising its execution by the several ministries concerned. Quite aside from the question of efficiency, such an organization would seem to be necessary to the political effectiveness of a program—an organization that could engage in publicity, employ emblems, and bring the program home to the population at large. We are not dealing in Southeast Asia, as in Europe, with highly organized and efficient governments capable of planning and carrying on a program. We are dealing with governments we must help even to maintain essential services. Moreover, in Southeast Asia we have no OEEC⁵ to act as a prod and a censor, and no central U.S. Government field agency to stimulate the whole. Our program in Southeast Asia requires a great deal more administrative action per dollar of aid than in Europe. If our program is to have a political impact, our money must be spent on well-designed, efficiently-executed and well publicized programs.

a. One way of operating would be for the Mission to work out an aid program in cooperation with the officials of the several ministries of the local government—more or less in the European ERP pattern—and then try to get it put into effect. This method has obvious disadvantages where a weak and inexperienced government is concerned.

b. A second manner of operating is suggested by the Chinese National Relief and Rehabilitation Administration (CNRRA)—set up by the Chinese Government at Cabinet level to handle the distribution of all UNRRA supplies. This agency cut across the work of individual ministries and had the advantage of relative efficiency of operation, but it frequently snarled up the normal operation of the individual ministries and was not conducive to the development of orderly government processes, which is one of our aims in Southeast Asia.

c. A third device is the Inter-Ministerial Committee, with a competent staff, working in close cooperation with the Mission at various levels. One example of this was the Chinese Council on U.S. Aid (CUSA) with a staff comprising many highly competent planning-minded members of the Chinese Government, with which the ECA worked on the mainland in the execution of the ECA China Program. The ECA Mission staff worked closely with CUSA staff at all levels in developing and executing programs. Another example is the American-Korean Stabilization Commission, chairmanned by the Korean Minister of Finance. This Commission was composed of several cabinet level officials on the Korean side and the top U.S. Mission officials on the American side. Below this level there were a number of joint committees in which the ECA staff worked alongside the Koreans on specific programs and problems both on planning and execution. There are similar examples throughout Europe in connection with the carrying out of ERP.

d. A fourth kind of operation is that represented by the Joint Commission on Rural Reconstruction (JCRR) that has done such good work in China and is still operating in Formosa. The JCRR represents perhaps the ultimate in “jointness” of operation. In JCRR three Chinese work alongside two Americans in the actual planning and operation of a program, which is carried out by an integrated staff of Americans and Chinese. The success of this kind of operation depends to a great extent, however, upon the compatibility and similarity of outlook and objectives on the part of the members.

No one of these devices need serve as an exact precedent for any of the countries of Southeast Asia. Organization must be tailored to meet the special needs and capabilities of the country concerned and to serve the special ends our programs have in view. Bearing especially in mind that our programs must seek to make the maximum political impact upon the greatest number of people, to increase the authority and prestige of the local government, and to emphasize the solidarity of the government with the U.S. and the free world, what are your thoughts on this whole question of organization?

III

If we are obliged to devote a substantial part of our program funds to commodities chiefly to get local currency for local program expenses, will this not limit our positive programs of technical assistance? Will we not run out of money fast?

The answer is of course yes, but in the opinion of both the State Department and ECA, program planning should be done more in terms of what it takes to do an adequate job than in terms of a tentative total based on Griffin Mission estimates. Our several programs will be for quite a while highly fluid and shifts can be accomplished fairly easily. Moreover, if need arises, as seems likely, we contemplate going to Congress for a deficiency appropriation early in the new year. The Korea war with its train of new policies and emphases, including general and official recognition of the necessity of holding the line in Asia, dictates that we keep our sights high rather than low, and long range as well as short range.

One of the main functions of the Mission Chiefs after they get the program of aid started will be to develop with the governments concerned a long range program of rehabilitation and development covering a period of years, pointing up longer range goals, resources available, and U.S. aid necessary over a period of years. We think it necessary to proceed upon the assumption that our responsibilities in the area will require U.S. aid in adequate amounts over a considerable period. You will recognize, of course, that this general line of thinking should not be discussed even in the most guarded terms outside the U.S. Government.

We are building an organization and refining the aid program in a time of fast moving international events, in a situation where few precedents exist. I am sure you realize the extent to which we are dependent upon the Missions to take the initiative in developing imaginative programs adequate to cope with today’s danger. I have written frankly and informally of the state of our present thinking in order that we might together arrive at the most effective solutions. We would very much appreciate your observations and suggestions in the same vein.

Sincerely yours,

Harlan Cleveland

1. Identical letters were sent to Merle H. Cochran, Ambassador to Indonesia; Edwin F. Stanton, Ambassador to Thailand; and Robert Blum, Chief of the ECA Mission in Indochina. Copies were sent to Raymond T. Moyer, Chief of the ECA Mission in China (Taiwan), and to Livingston T, Merchant, Deputy Assistant Secretary of State for Far Eastern Affairs. Cleveland’s letter of transmittal to Merchant, August 3, read as follows: “The enclosed informal letter has been sent out to give further background to the acting STEM chiefs on several points which have been covered by cable. We expect to circulate it for general information within ECA minus the last section. You may wish to do likewise in the State Department. If so, we can send you some mimeographed copies of the abridged edition.” (890.00/8–350).
2. Not printed.
3. For the reports of the Griffin Mission on the various nations it visited, see Hayes, The Griffin Mission, pp. 59 ff.
4. For documentation on the Marshall Plan, see Foreign Relations, 1947, vol. iii, pp. 197 ff.
5. Documentation on United States interest in the Organization for European Economic Cooperation and related subjects is scheduled for publication in volume iii.