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

27. Memorandum of Discussion at the 301st Meeting of the National Security Council, Washington, October 26, 1956¹

Washington, October 26, 1956

[Here follow a paragraph listing the participants at the meeting and item 1.]

2. Report by the Interdepartmental Committee on Certain U.S. Aid Programs (NSC 5610;² NSC 5611, Part 2;³ Memo for All Holders of NSC 5610, dated August 9, 1956;⁴ Memo for NSC from Executive Secretary, same subject, dated October 19, 1956;⁵ NSC Actions Nos. 1486,⁶ 1560⁷ and 1607⁸)

In introducing Assistant Secretary of State Prochnow, Mr. Jackson referred to the recent article by Drew Pearson⁹ on the activities of Secretary Prochnow and his committee. The President expressed great irritation, and said that he believed that we ought to get the Federal Bureau of Investigation to study this leak. He remained astonished that such leaks continued to occur. It seemed to him likely that some “clerk” far down the line in some department or other must talk to people like Drew Pearson. The President observed philosophically that he supposed that if one were engaged in intelligence activity there was reason to read Drew Pearson’s column, but he could think of no other valid reason.

Secretary Prochnow opened his report to the Council with a brief comment on the Pearson statement, which he said was totally without foundation.

After a brief description of the work of the interdepartmental committee, Secretary Prochnow outlined the principal conclusions of the committee’s studies. These conclusions dealt, first, with the overall costs to the United States of the assistance programs to the six countries which were regarded as most critical. He said that this program would amount to $2 billion a year through 1960. His second conclusion dealt with the ability of the six countries in question to support their military programs. The Prochnow Committee concluded that it was clearly beyond their ability. The third conclusion dealt with the military capacity of these six countries. It was concluded that, even taking into account our military assistance, the military capabilities of these countries had not been greatly enhanced when compared with the capabilities of the Soviet bloc. The fourth conclusion dealt with economic growth in the six countries. The Prochnow Committee studies concluded that, even with our large economic assistance, economic growth in these countries had been very slight indeed. The last conclusion dealt with possible obstacles which would confront the United States if it attempted drastically to change these assistance programs. The Prochnow Committee concluded that these obstacles would be serious.

After dealing with the conclusions of the committee, Secretary Prochnow outlined alternative courses of action which were open to the United States. These were four in number. First, we could go along present lines at a cost of about $2 billion a year through 1960 for the six chief problem countries. Secondly, we could attempt to reduce the burden on the U.S. economy by cutting back the economic assistance programs to these countries. Thirdly, we might contemplate the alternative of attempting to reduce our support of the military establishments of these countries. Fourthly, we might elect to increase the existing level of our economic assistance to these countries. (In each instance Secretary Prochnow commented briefly on the pros and cons to be anticipated in each of the above four alternatives.)

In concluding this section of his report, Secretary Prochnow indicated that at the conclusion of their work one or two members of his committee had raised the question as to how far the United States should build up indigenous military forces over and above the level required to ensure internal security.

As the third and final portion of his report, Secretary Prochnow summarized the chief issues raised by his report, putting them in the form of the following three questions:

1. Were the original premises underlying our foreign assistance programs in these six countries keeping abreast of the changes which had occurred since these premises were originally adopted?

2. Were our aid programs conceived and carried out in such fashion as to force us into a posture of inflexibility?

3. Do we have the best possible balance between our military and our economic assistance programs?

In conclusion, Secretary Prochnow expressed the hope that the report and work of his committee would prove helpful in the achievement of policy decisions by the National Security Council. The President thanked Secretary Prochnow, and said that all the members of the Council were deeply obligated to him and to his committee.

Mr. Jackson then called on the Director of the International Cooperation Administration for any supplementary observations he might wish to make on the foreign assistance programs.

Mr. Hollister said that he would speak briefly and generally. He did wish to emphasize that the factors which Secretary Prochnow had singled out as applying to the six critical countries also applied in some degree to the entire lot of fifty or sixty countries in which the International Cooperation Administration was operating. Furthermore, the questions posed by the so-called Prochnow Report could only be answered after adequate study by all the responsible agencies straight across the board. No such adequate study had yet been made.

Mr. Hollister then referred to the Fairless Committee and to the Senate Committee which had been set up to study our foreign aid programs.¹⁰ He indicated his belief that these committees were proceeding effectively in pursuit of their objectives.

Mr. Hollister then indicated his belief that the best help he could give the Council at the present time was to repeat the conclusions which had been set forth in the status report on the Mutual Security Programs as of June 30, 1956 (Part 2 of NSC 5611). This report had, of course, already been sent out to the National Security Council, but Mr. Hollister doubted whether the members of the Council had found time to read such a long report. Nevertheless, what had been said by way of conclusion in the status report would be more helpful than any new formulation. Accordingly, Mr. Hollister proceeded to read the page and a half of conclusions of Part 2 of NSC 5611. When he had completed his reading, he stated that essentially he was trying to point out to the National Security Council that the studies by the Prochnow Committee really constituted only the first, though fine, step in what must be a continuing study of the problem of foreign assistance.

The President then observed that a very important question would have to be answered by the State Department. This was to find out how far the United States could go in reducing its foreign assistance expenditures, given the fact that the countries we were aiding had come to regard these expenditures as commitments made solemnly by the United States. The President went on to observe that most of us here present were already convinced that our military assistance program world-wide was too large. The problem, however, was how to reduce the size of this program without inducing disastrous political repercussions.

Mr. Jackson then called on Assistant Secretary of Defense Gray for his supplementary observations.

Secretary Gray remarked that he could not pose any more questions, and wouldn’t take the time to do so even if he could. He said that he felt that the work of the Prochnow Committee was a step forward to a solution of our foreign assistance problem, but that we had not yet arrived at the solution. The Prochnow Committee had had neither the competence nor the authority to evaluate much more than the budgetary implications of the courses of action which it had analyzed. Nevertheless, in addition to these budgetary implications there were very significant economic, military and political factors and interrelationships which remained to be assessed before any decision on these assistance programs could be made. Secretary Gray cited various examples in support of this thesis, and added that he was only suggesting the difficulties which had faced the Prochnow Committee and which the Fairless Committee in turn would have to face. Accordingly, continued Secretary Gray, he believed that hard decisions in this area would have to be made by an instrumentality which had cognizance of all the diverse considerations and interrelations which he had mentioned. This meant the National Security Council or a body very much like it.

Refining his views, Secretary Gray stated that in his opinion we could not continue to make individual country decisions with respect to our assistance programs. He would therefore urge that in any event the President direct that the total foreign assistance picture be considered in any decision that is made with respect to aid programs for individual countries. Such a decision must be made at a very high level and with the full participation of all departments and agencies having responsibility in the foreign assistance field.

Secretary Humphrey stated that he would subscribe heartily and entirely to what Secretary Gray had just said. But he would go even further and state that the foreign aid problem itself could not be considered alone. Before we consider the foreign aid problem we must answer the real question. This was: “What part of $5 billion a year would we rather spend this way than spend on our own U.S. military defenses?” Secretary Humphrey went on to insist that we must be selective in our security expenditures. We must give up talking about what we would like to do, and talk instead about what we can afford. Until we are prepared to answer the basic question stated above, Secretary Humphrey insisted that staff studies would be almost immaterial. Our staffs will study the foreign assistance program until the cows come home without any solution until this key question had been answered.

The President replied that Secretary Humphrey was correct in strict terms of a business decision, but had he thought that the really vital question might be put in a different way—namely, how much would you rather spend than have a global war or an armed attack on the United States? Everybody knew, said the President, that he did not want to take the road that would lead to Socialism or totalitarian controls in this country. Nevertheless, he did not believe that we could look at the problem exclusively in the framework in which Secretary Humphrey had placed it. On the contrary, the question we must start with is the question as to what the security of the United States demands of us. Once having determined the answer to this question, we could proceed to break it down into the priority claims of our national security programs on our resources. Certainly we could not base a vital decision like this on purely budgetary considerations.

Secretary Humphrey expressed his agreement with the President’s reasoning, but repeated that we could not start with the details; we must start from the top in our programs and work down, not start at the bottom and work up to the general level of expenditure.

Secretary Dulles, turning to the President, said that there was now no need for him to state the argument which the President had just stated for him. However, he would like to add that he agreed with Secretary Gray as to the necessity for the National Security Council itself to make the big decisions with respect to our assistance programs. Secretary Dulles added that he had met for two hours yesterday with the Fairless Committee. Some of the members of that Committee were obviously knowledgeable; but by and large, it would be a miracle if this Committee, in six short months, even began to understand the foreign assistance problem to the degree that we in the National Security Council do after living with it for years. Certainly the Fairless Committee was not likely to make a decision on our foreign assistance programs which would be automatically acceptable to this Administration. Secretary Dulles felt that in the end we would probably not be able to do anything more effective than to seek this decision from the President and the top members of his Administration. With all our imperfections and short-comings, we around this table are more conversant with the foreign assistance problem than any outside group could possibly be after a mere six months of study. All such human and psychological factors as were represented by Syngman Rhee in Korea, or Magsaysay and Recto in the Philippines, Diem¹¹ and Chiang Kai-shek,¹² would have to be dealt with, and an outside committee would be ignorant of the magnitude of such very important human factors. Such feelings and factors could not possibly be reflected in the charts and statistics which were being studied by the Fairless Committee. It could almost be described as “reckless” to leave such a vitally important decision to individuals who do not have a grasp of these factors.

Secretary Dulles continued by stating his own belief that in point of fact there was no need for as many as twenty active divisions in the South Korean Army; but how difficult it was to figure any means of cutting back the force levels in South Korea. Outside committees haven’t the remotest idea of the real character of the problem. Secretary Dulles repeated his conviction that the answer to the foreign assistance problem must be found primarily in the combined wisdom of the people gathered around this table at this time.

The President replied that despite this argument he thought there was still some value in these committees, though he said he had never heard of any plan that these committees should make decisions with respect to foreign aid for the Administration.

Secretary Humphrey supported Secretary Dulles’ view, and stated that the responsibility for the decision centered in this room. Moreover, the National Security Council ought to face up to it promptly. The President inquired of Secretary Humphrey whether the latter thought he had all the facts necessary to face up to such a decision. Secretary Humphrey replied that he did not so think, but that we should proceed to get the requisite facts. Foreign aid spending was the most critical problem now facing the present Administration. To solve that problem should be the first order of business after the election.

Deputy Secretary of Defense Robertson referred to a comment by Secretary Gray earlier with respect to the use of nuclear weapons, and said he wished to relate this issue to the countries in question. He said he had been last week in Italy, making a visit to the Southern European Task Force (SETAF) with Italian Minister of Defense Taviani.¹³ He said that Taviani had been very expressive as to the favorable impact on the Italian people of knowledge of the existence of this U.S. force on Italian soil with an atomic capability. Taviani said it would have been impossible even to speak of such a force on Italian soil six months ago. Now, however, SETAF was welcomed by the Italians as something very salutary in the way of an atomic back-up for Italy’s own defense forces. Such a change could be related to the problems of Turkey and Korea. In short, the political difficulties of stationing American forces with atomic capabilities could probably be solved if we really set about to solve them. Specifically, President Rhee might well agree to a reduction in the level of his own armed forces if the United States promised to provide back-up forces with an atomic capability in South Korea.

The President observed that what Secretary Robertson was suggesting was what this Administration had really started out to do four years ago, in the form of the so-called new look strategy. But instead of succeeding in reducing the costs of our conventional armaments, the costs of both conventional and atomic armaments had steadily risen.

Governor Stassen pointed to the value of the study of the foreign aid programs by outside committees. He believed that their findings could well result in influencing the Congress and the American people to accept whatever final decision the Administration reached with respect to the level of our foreign assistance expenditures. Nevertheless, Secretary Dulles said that he was still curious to know why we imagined that the Fairless Committee would come up with the right answer to this great problem, when we ourselves don’t yet have the slightest idea what the answer is.

The President again repeated that he did not expect the Fairless Committee to come up with the right answer. The President then went on to say that what in essence this Government was really trying to do, when you get down to it, was to prevent the Iron Curtain from advancing further or, indeed, to force a retraction of that Curtain if we could. The question was the best and cheapest means of achieving this objective. The President said that he had felt for a long time that we have not been going about this course of action in the right way. We had not chosen the best path. Furthermore, continued the President, the best path must be to consider first the kind of foreign assistance program which would be best from the strict point of view of U.S. national security interests. Having made such a decision, we should then ask the State Department to estimate the effect on other countries of trying to put such a revised U.S. program into effect.

Secretary Dulles was inclined to disagree with the President, and thought that the two issues, of what was best from the strict point of view of the United States and what would be considered acceptable by the countries receiving our aid, should be studied together and not in succession. He added that he believed it possible for the United States to work out an aid program for Korea, Turkey, and the others, which would cost us a lot less money. But there would remain the problem of getting these countries to accept such a program without tearing things to pieces because we had not related our program to the psychological repercussions it was bound to cause in these friendly countries. Even this could be done successfully, but the members of the National Security Council are the best ones to do the job, not any outside committee.

Secretary Humphrey proposed as a suggestion that after the election the Administration start formulating a brand new general military program on the order of what we started to do four years ago. After we have formulated such a program, that the Secretary of State criticize it from his point of view, and let Secretary Humphrey criticize it from the financial and budgetary point of view. Wouldn’t the end result of such an effort probably be a pretty good assistance program?

The President cautioned that a program designed solely in our own particular interests might very well “bust” the countries that we were purporting to assist.

Agreeing with Secretary Humphrey’s proposal, Governor Stassen pointed out that in fact we were just approaching the time when we were in the best position to do what Secretary Humphrey had suggested. We are about to get a fresh mandate (we hope) from the American people (some laughter). Moreover, the re-election of the Administration will make the rest of the world aware that the present Administration will be in power for at least four years more.

With some evidence of amusement, the President agreed that Governor Stassen might be right.

Admiral Radford asked if he might be heard. He said that he was not as pessimistic about the foreign assistance problem as many people were. He believed that the military aspects of this problem could be ironed out, but there were two most important features which he wished to stress if the problem were to be solved. The first feature related to the stability of all these little countries around the world. Essentially, their stability depended upon a conviction that the United States would in fact assist them quickly if they were confronted by a crisis and by aggression. Once these countries are really sure of this, they will begin to get a climate of stability economically which they do not now possess.

Secondly, said Admiral Radford, and even more important, is the bearing on our economic aid programs of the fact that many U.S. corporations would gladly operate in overseas countries and invest in these countries if they in turn could be assured of some degree of stability and security for their operations and investment. In sum, if the United States can go on record in such a way as to assure the peoples of these foreign nations that we will provide help in case of need, we could certainly look forward to a future period when these countries could advance on their own. As for the specific military problem, SETAF was a model. SETAF was equipped only with defensive atomic weapons. No one could reasonably criticize it on this basis.

The President replied that as far as what Admiral Radford had been saying about the role of private investment was concerned, practically all of it could be found set forth in the National Security Council papers which were considered back in April 1953. Further, the President said, he couldn’t agree more with Admiral Radford, but the question was, how do you get this private investment going? The President then reverted to his previously expressed view that the first task before us was to determine what as a minimum the United States requires as force levels to be maintained in Turkey, Pakistan, Korea, and Formosa. If we could once figure out the minimum forces that such countries ought to maintain in being, we would then have something to start with by way of an assistance program. Thereafter we could turn to Secretary Dulles and ask him whether he could sell such a program. After all, he is the salesman of foreign policy.

Secretary Humphrey asked to what extent we were proposing to go back to the new look policy of four years ago. That was the real question.

The President then suggested that the NSC Planning Board be asked to start a review of those countries where the United States was really most heavily engaged in assistance programs. The Planning Board should be asked to look at the analysis of the Prochnow report for each of these countries, and having done so, review U.S. policy in each of these countries. Careful attention should be paid to what constituted the minimum demands of our national security with respect to the level of forces to be maintained in these countries. If this were done perhaps we could gradually approach an answer to our foreign assistance problem.

The National Security Council:¹⁴

a. Noted and discussed the subject report (NSC 5610), prepared pursuant to NSC Action No. 1486–e as subsequently modified by NSC Action No, 1560, as summarized at the meeting by the Chairman, Interdepartmental Committee on Certain U.S. Aid Programs; and the supplementary observations thereon and on Part 2 of NSC 5611 by the Director, International Cooperation Administration, and the Assistant Secretary of Defense for International Security Affairs.

b. Noted the President’s request that the Joint Chiefs of Staff prepare reports to the Council, in the light of the discussion, as to the minimum level of indigenous forces which it would be in U.S. interests to have maintained in Pakistan, Turkey, Taiwan, and Iran over the next two years.

c. Directed the NSC Planning Board to review the scope and allocation of military and non-military foreign aid, for Korea, Pakistan, Turkey, Iran and Taiwan on a priority basis, and recommend to the NSC appropriate revisions in existing policies which will take fully into account the political implications of such revisions, the economic considerations presented in the Report by the Interdepartmental Committee on Certain US. Aid Programs, and the military advice presented by the Joint Chiefs of Staff in the reports referred to above.

Note: The action in b above, as approved by the President, subsequently transmitted to the Secretary of Defense for appropriate action by the Joint Chiefs of Staff.

[Here follows item 3.]

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret. Prepared on October 26 by Gleason.
2. NSC 5610, “Report by the Interdepartmental Committee on Certain U.S. Aid Programs,” August 3, 1956, is in Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5610 Series, and ibid., OFD Files: Lot 59 D 620.
3. NSC 5611, “Status of National Security Programs as of June 30, 1956,” is ibid.,S/S–NSC Files: Lot 63 D 351. Part 2, Status of Mutual Security Programs as of June 30, 1956, was submitted to the NSC by the International Cooperation Administration, September 17.
4. Not found in Department of State files.
5. Not printed. (Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5610 Series)
6. See footnote 14, Document 13.
7. NSC Action No. 1560, concerning military assistance and supporting programs, was taken at the 285th meeting of the National Security Council, May 17, and approved by the President, May 24. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council, 1956)
8. NSC Action No. 1607, concerning U.S. objectives and courses of action in Korea, was taken at the 297th meeting of the National Security Council, September 20, and approved by the President, September 25. (Ibid.)
9. Newspaper correspondent, author of the newspaper column, “The Daily Washington Merry-Go-Round.”
10. The Senate Special Committee to Study the Foreign Aid Program, established July 11, 1956, by Senate Resolution 285, 84th Congress. Chaired by Senator George, the committee was composed of the full membership of the Foreign Relations Committee and the chairmen and ranking minority members of the Committee on Appropriations and the Armed Services Committee.
11. Ngo Dinh Diem, President of South Vietnam.
12. Chiang Kai-shek, President of the Republic of China.
13. Paolo E. Taviani.
14. Paragraphs a–c that follow constitute NSC Action No. 1624. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council, 1956)