Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

24. Memorandum From the Chief of the International Branch, Bureau of the Budget (Macy), to the Director of the Bureau (Brundage)¹

Washington, September 4, 1956.

SUBJECT

• Suggested Issues for President’s Citizen Advisers for Mutual Security²

As you requested,³ I have compiled a list of key policy issues in the Mutual Security area which may be of interest to the President’s Citizen Advisers.

1. Policy issue. Is the concept of “mutual security” still appropriate in a world increasingly populated by neutrals whose major concerns are economic and social, not military?

Discussion: It becomes increasingly questionable whether the concept of “mutual security” which seemed so appropriate for Western Europe several years ago is appropriate in 1956. At that time the dominant motivating factor was fear of aggression by Russia. Today many countries on the periphery of the Soviet bloc prefer to be neutral in the best sense of the word but would welcome aid from the U.S. If such countries did not have to “take sides” in order to qualify, the program would be more palatable psychologically and the Soviet bloc would lose a propaganda target in that future U.S. aid would be more positively slanted toward peace rather than preparation for war. If we moved away from the concept of mutual security and toward a concept of helping others help themselves to achieve economic and social objectives, then presumably we should have a somewhat less formal linkage between military assistance and other forms of U.S. aid. On the other hand, there is still a lot of sentiment within the Executive branch and in Congress to the effect that “if you are not for us you are against us”. In other words, we would restrict our aid largely to those who are willing to stand up and be counted on our side.

2. Policy issue. Should U.S. officials have more or less freedom from legislative and administrative restrictions in the future?

Discussion: There has been considerable discussion lately within the Executive branch of the alleged fact that the Soviets have more freedom in negotiating trade deals and economic assistance within the free world than does the U.S. There is also continuing objection to legislative provisions with regard to the 50–50 clause,⁴ the proportion of total funds that must be used for surplus agricultural products, etc. On the other hand some U.S. officials emphasize that in fact Soviet agreements reached with countries around the rim of the Iron Curtain seem to have very specific terms. In addition some of the alleged assistance that the Soviets were supposed to have promised on very liberal terms, such as the Aswan High Dam,⁵ have not materialized. From another point of view the present mutual security legislation does include substantial sums which are not subject to normal legislative restrictions. Finally it should be emphasized that a growing number of U.S. officials feel that we have been much too loose in our making of political commitments for aid around the world.

3. Policy issue. Should our assistance programs be looked upon largely as an effective means of achieving short-time political objectives or primarily as a means of strengthening the underlying economic foundations of a country on a longer term basis?

Discussion: Many examples could be given where U.S. aid has been used very freely as a “bribe” in order to persuade a country to vote on our side, to adopt sound but unpalatable internal economic reforms, or to counter Russian offers of economic assistance. As one reflection of such a policy, foreign officials in friendly countries frequently assert that the best way to get large amounts of U.S. assistance is to have a good internal communist scare, threaten to accept aid from the Soviet bloc, or fail to support us in the UN and elsewhere, etc. It seems that more and more we are getting away from the basic notion of using our assistance specifically for identifiable economic problems with the understanding that when these economic problems are solved the aid will stop. Is this trend a desirable one; i.e. should we in fact look upon economic assistance as a political weapon?

4. Policy issue. Once having established the pattern and concept of U.S. aid, will we ever be able to shut it off?

Discussion: The original Marshall Plan was developed on the assumption that at the end of four years we would “turn off the tap”. Such a policy laid down at the start of the program permitted forward planning with more assurance; it also caused the other countries involved to plan their part of the mutual effort so they would be ready to carry on alone at the end of four years. This plan was, of course, interrupted by the Korean war and the development of a military assistance program in Western Europe. Since that time, however, there has not been built into our aid programs a policy of phasing out an aid program in a country at a specified future date, except in certain countries in Western Europe. Even though conditions will change in some countries for reasons that could not be foreseen, many people feel that at any given time we should have a specific joint plan in a country for eventually phasing out U.S. aid.

5. Policy issue. Under what circumstances should the U.S. provide assistance to maintain military forces in countries that are “economically capable” of maintaining the forces themselves, but which are unwilling to do so? (This is an important example of the problems involved in shutting off U.S. foreign aid.)

Discussion: We are devoting approximately 40 percent of our military aid program to maintaining, modernizing, and gradually strengthening forces in countries that are either reducing their own defense expenditures, or are making little or no attempt to increase their defense effort commensurate with their economic capacity. We usually continue to provide military aid long after economic aid is discontinued—in many cases without regard to economic ability to pay. Some small starts have been made towards reducing or eliminating this aid but they have been made difficult because of (1) the political consideration that we shouldn’t cut off aid to any member of the military alliance (e.g., NATO); (2) psychological impact of U.S. reductions in defense expenditures; (3) use of military aid as a tool in negotiation for base rights; (4) the lack of a firm U.S. policy on providing “new weapons” (atomic and otherwise); and (5) the lack of an agreed-upon measuring stick for “economic capacity”.

6. Policy issue. Under what circumstances should the U.S. encourage and assist another nation to expand its military program beyond its own capacity to support?

Discussion: A growing number of U.S. officials feel we have helped finance military programs in a number of countries which are much too large from the standpoint of (a) likelihood of external military aggression, (b) resources of country, and (c) alternative means of deterring potential aggressors. Corrective action has been delayed because of (1) a reluctance to seek modification of specific or implied political commitments, (2) lack of an effective procedure within the Executive branch to review force goals from other than a “military mission” point of view, and (3) continuing differences of opinion over the correct policy in several countries. The money involved is so large that this issue has very important fiscal implications.

Other issues that might be considered are as follows:

A. Policy issue. What adjustments should be made in both the level and the methods of technical assistance programs?

Discussion: Some people believe that for the uncommitted underdeveloped nations the technical assistance program offers more promising results over the long run than any other part of our Mutual Security Program. This approach calls for an expanded long-term effort to remedy through mutual security and other exchange programs identified critical shortages in skills. On the other hand, it is alleged that the U.S. Government is spreading its efforts so thin in individual countries that accomplishments are either too slow or not visible. Under this approach the efforts of other agencies, both public and private, would be taken into account, and the U.S. Government effort directed to targeted projects which could be quickly accomplished.

B. Policy issue. Should we put more emphasis on achieving U.S. policy objectives through multilateral channels?

Discussion. Underdeveloped areas have become increasingly insistent that multilateral agencies play an expanded role in economic development, and are quite annoyed over the negative attitude of the U.S. Government. Some U.S. officials feel this situation offers an important propaganda opportunity to the Soviet Bloc and that we should adopt a more positive approach. Partly as a result of the President’s visit to Panama,⁶ there is renewed interest in expanding the non-political activities of the Organization of American States. Recent developments in Europe have resulted in intensified efforts to expand the role of NATO and so on. Those who oppose this trend of thinking argue that we inevitably lose control of U.S. funds contributed through multilateral channels, and sometimes argue that multilateral agencies are usually much less efficient than U.S. agencies overseas working on a bilateral basis.

C. Policy issue. Should the U.S. seek only very gradual relaxation of East-West trade controls and current restrictions on East-West contacts of all sorts, or should we actively sponsor a rapid removal of barriers between the East and the West?

Discussion. A growing number of U.S. officials doubt whether it is to our “net advantage” to continue the many types of controls now existing between the East and the West. Because of the recent change of Soviet tactics this is no longer an academic issue; in fact, we may appear to other nations to have erected an iron curtain against the Soviet Bloc. It is essential that the sharp differences within the Executive branch be resolved soon so that operating programs related to this issue can be carried out effectively without continuous dissention.

1. Source: Eisenhower Library, CFEP Chairman Records.
2. Chaired by Benjamin F. Fairless, the committee was formally commissioned by President Eisenhower on September 27, 1956, to examine and make recommendations on U.S. foreign assistance programs. The terms of reference, membership, and results of the committee’s deliberations are in Report to the President by the Presidents Citizen Advisers on the Mutual Security Program, March 1, 1957 (Washington).
3. No record of the request has been found at the Eisenhower Library.
4. First incorporated in Section 111 (a)(2) of the Foreign Assistance Act (Public Law 80–472), enacted April 3, 1948, and retained in subsequent aid legislation, the 50–50 clause provided that not less than 50 percent of all goods shipped abroad as part of a U.S. aid program would travel in U.S. merchant vessels; for text, see 62 Stat. 143.
5. Project conceived by the Egyptian Government to control the flood waters of the Nile.
6. President Eisenhower participated in a 2-day meeting of Latin American Chiefs of State at Panama City, July 21–22, 1956. At the conference the President proposed the establishment of a special committee to recommend ways in which the Organization of American States could become a more effective instrument in economic, social, financial, and technical areas.