Foreign Relations of the United States, 1955–1957, Foreign Economic Policy; Foreign Information Program, Volume IX

135. Letter From the Representative to the Economic and Social Council (Baker) to the Assistant Secretary of State for International Organization Affairs (Wilcox)¹

New York , December 7, 1955 .

Dear Mr. Wilcox : Thank you for all the time you gave me when I was recently in Washington. I appreciated having the opportunity of discussing with you in detail the feelings I have had for sometime about the “new look” which we must have in our international economic and social programs. The longer I am in New York working with these problems, the more I am convinced that new policies are needed not only for the Economic and Social Council meetings in the spring and next summer but, above all, from the point of view of our general position. Incidentally, there is a great deal of support for a more constructive approach to our foreign economic aid program here in the delegation to the General Assembly.

You suggested that the way to start on this would be to prepare a list of different proposals to be discussed. The following are certain suggestions which I am sending along for what they are worth. They are, of course, a consolidation of various ideas that I have received from many sources. I hope we may be able to get together again in the near future to discuss these and other ideas.

First, it seems to me that there are four propositions which should be established concerning our general attitude:

1. In the present period, we are entering a new era in the struggle between East and West. We have two weapons: (a) ideas and ideals, and (b) economic and technical help. Both must be used.

2. We should develop constructive attitudes and policies which would permit us to take aggressive leadership with new ideas in various economic areas. The negative approach such as “Stop SUNFED” is today inadequate.

3. Such policies might well to a large extent be carried out within existing or contemplated appropriations.

4. There should be a greater concentration of our efforts on significant projects in underdeveloped areas than we now have. This could have a far greater impact on world impressions and attitudes than the present proliferation of assistance.

The following is a list of positive suggestions looking to improvement of our total effort which might merit discussion.

1. Numerous people whom I saw on my trip seemed to feel that we needed to evaluate our past and present programs, both multilateral and bilateral. Most of them felt that the emergency period had passed, and that we should organize ourselves for the long haul. I believe that they would recommend that we review our administrative proposals and programs, get suggestions from our country directors in recipient countries as to how to proceed, and invite their observations of any new proposals that might be made. For example, some felt that funds should not be appropriated on a year by year basis, but that we should appropriate funds which would be adequate to finance projects which would continue over a period of years.

2. We should support a group of imposing key projects in various parts of the world; projects so significant locally that they would clearly demonstrate our great interest in that part of the world. Examples of this might be the High Aswan Dam, the Mekong River and regional technical institutes.

3. Since 1953 I have been impressed with the good will accruing to us from our support of multilateral technical assistance through the United Nations. Might it not be possible to shift to a greater extent from our bilateral technical assistance aid to multilateral UN aid? In this way, we would receive credit for our aid both in the multilateral forums of the UN and the Specialized Agencies and in the individual countries receiving such technical assistance.

Offering additional funds to the UN Technical Assistance Program over a period of years as we have done for 1956, providing they were matched by other countries, certainly would make the world realize our continuing interest in UN Technical Assistance, as well as our desire to get all nations to contribute to raising standards the world over. Foundations have used this procedure effectively for years in supporting worthy causes in this country.

4. The interest in and drive behind the Special United Nations Fund for Economic Development (SUNFED) should not be ignored. We have made our position clear, and I think we have received understanding support from many quarters.

At this time, however, we might consider the possibility of proposing that we now proceed to establish some additional arrangements within the framework of the United Nations for assisting in the framing and construction of basic projects in under-developed countries. Such a program should, of course, include all the necessary safeguards, including weighted voting. It might, for example, be within the control of the International Bank. While its organization and operation might be quite different from the proposed SUNFED, it would be designed to achieve the same objectives—to extend assistance for basic infrastructure programs in under-developed areas through grants or special arrangement loans. A moderate program of this kind would get us out of the position of opposition to greater multilateral action for economic development at this time, while still focusing on the need for world disarmament before really large amounts of additional resources could be directed to economic development.

Alternatively, we might wish to continue to operate within a bilateral framework of assistance to under-developed areas, but we might try to disengage our economic aid as much as possible from the military aspects of our programs. In this way, we might be able to demonstrate more effectively to the under-developed countries that our assistance is based on genuine concern for their economic welfare and not solely on our desire to build them up as military barriers to Communism.

5. We have talked a great deal about the flow of private capital, but still do too little about it. As I told you, I am tremendously impressed by the possibility of even more attention being devoted to this area. For example, Congress and the nation are accustomed to thinking of tax write-offs when we want to increase our industrial plant. This has been tried and has succeeded. Certain nations are now recognizing the importance of taking a proper attitude toward the flow of private capital, and in Colombia, for example, encouraging laws have been passed. Egypt has also been trying to promote conditions favorable to increased foreign investment. Last summer Swaran Singh (India)² made a strong speech in ECOSOC saying India would welcome private capital, but he told me privately that they had very little hope anything would occur.

In this connection, there is a feeling among representatives of many countries, such as Egypt, that we are not really interested in having our capital go abroad, and for that reason they show little interest in this subject when we mention it. This tends to move them into domestic policies which we describe as “socialistic” or unfriendly to us.

This should be a partnership venture—government and business, such as we hope will be the case in the International Finance Corporation. The clearing house which the I.F.C. is to set up, designed to bring together investment opportunities in under-developed areas and potential investors in capital-exporting countries, is an example of the way this partnership can operate.

I am strongly in favor of as much consideration being given to this area as possible for two reasons:

(a) If we really could create greater interest among private corporations to go abroad and make it profitable to do so, they could send their best men and establish many, many centers of influence. What we lack at the present time are these numerous centers of influence. We depend today almost exclusively on the government plans, especially in those areas where private enterprise and economic development are most required.

(b) Private capital now finds that the climate and the opportunity in this country promise substantial returns often greater than in other parts of the world. Therefore, I believe we should consider the possibility of urging even more substantial tax advantages to corporations which would invest abroad than already proposed by the Administration. The successful application of tax advantages is evidenced by the rebuilding of cities in Western Germany after the war.

Certainly we should discuss the wisdom of offering real tax advantages to a corporation investing money and know-how abroad. These tax advantages might be two-fold: they should permit a corporation to invest abroad a percentage of their annual earnings on which no tax would be levied. Also, they might be given tax advantages on bringing the earnings of these investments in foreign countries back to this country. These advantages could, perhaps, be worked out so as to offer inducements to those companies which would invest in areas involving a relatively high risk.

6. The two things particularly needed in under-developed countries are capital and know-how. We should not forget the second of these two points and devote all of our attention to capital. If we could think in terms of a corps of second-level technical people, who could go abroad to help under-developed countries start new industries and run them, we might create great good will. These people would not be advisers simply, but would be individuals with so much know-how they could do the job themselves and teach others to do it. These individuals might well be paid by U.S. funds.

7. More attention should be devoted to large numbers of fellowships and scholarships which would bring individuals from abroad, and especially from areas such as Asia to American universities, in which they would not only learn techniques and our philosophy, but also the English language.

8. Finally, I feel strongly that the impact of all our activities in the foreign aid field could be greatly strengthened, if a more determined effort were made to develop integrated country programs. As far as possible, and particularly in the strategically important countries, this should include everything from the provision of know-how to direct financing, from aid in the development of basic services and facilities to the promotion of private investment. To this end, the Administration should take the lead in bringing together for purposes of common planning and the development of coordinated action all the interested elements within our own country. This does not only include the various sectors of our own Government (Departments of Agriculture, Labor, Commerce, Health, Education and Welfare, etc.), but American business which could help launch needed industrial programs, including the building of factories; American schools and colleges which would be responsible for the provision of training facilities at home and abroad; private social and welfare agencies responsible for welfare programs; and foundations ready to undertake special projects which might fall within their area of competence. Such a move on the part of the Administration to bring together in a close cooperative relationship all the interested elements would result in increased support for the entire foreign aid program on the part of the American people, would render the individual programs more effective, and would certainly strengthen our relations with the countries receiving our aid.

Forgive the length of this letter, but I did want to send you some of my thinking so that we could discuss these matters in the near future.

The experience of being in and out of this UN session as an adviser has been exceedingly enlightening to me. It certainly will give me background which I never could have had for the coming meetings of the Economic and Social Council. I have also enjoyed working with Walter Kotschnig on the Technical Assistance Committee meeting which has turned out to be one of the most constructive meetings I have attended.³

Sincerely yours,

John C. Baker

1. Source: Department of State, Central Files, 340/12–755. Personal.
2. Sardar Swaran Singh, Minister for Works, Housing and Supply in India, was the Indian Representative to the Economic and Social Council.
3. Wilcox forwarded this letter to Kalijarvi on December 15. In a covering memorandum of that date, Wilcox wrote: “We have not attempted to analyze or assess his [Baker’s] suggestions, but we are favorably impressed by this attempt to come up with something positive. I would like to suggest that you and your colleagues in E might use Mr. Baker’s suggestions as a point of departure for coming up with ideas representative of current departmental thinking.” (Department of State, Central Files, 340/12–755)