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

32. Letter From the Director of the International Cooperation Administration (Hollister) to the Chairman of the Council on Foreign Economic Policy (Randall)¹

Washington, March 12, 1957.

Dear Clarence: Answering your letter of March 4,² I am enclosing [for] you the brief comments of the ICA on the twenty-three points set out in the attachment to Colonel Cullen’s letter to me of March 5, dealing with the Fairless Report.³

In reviewing any report of this nature I realize the difficulty which the group had to overcome in trying in a short time to understand and consider the ramifications and complications of the largest and most diversified foreign economic operation in the history of the world. It was manifestly impossible for them to do more than hit the high spots. That they were able to achieve unanimity on this report is a great achievement in itself.

In our review we must naturally consider first the proposed changes in existing principles and practices, and it is, of course, comments on these which you have requested. Next, however, as a practical matter we must consider the question of timing and feasibility. Some of the changes in principles and practices which should be put into effect on theory cannot be accomplished soon enough to be applied to the Mutual Security legislation in the coming Congress. Perhaps some of the changes are impossible of achievement simply because Congress just won’t approve them irrespective of the time they are presented. Furthermore, we must remember that these large and far flung efforts in some seventy countries which we call the Mutual Security Program, make, in the composite, a great stream which can be dammed or diverted only with considerable effort but cannot be turned on and off with a spigot.

In making a review of a report perhaps we should also consider omissions. For instance, I find little in the report on the following important subjects:

1. The direct relationship between the force goals in a country, which our own military experts have approved and often urged, and the economic program in that country.

2. The question of whether or not there should be substantial cuts in some of these force goals. Such a question involves:

a. The willingness on our part to use nuclear weapons in the event the countries in question are attacked, and

b. The balance in the United States between reduction in total defense resulting from force goal cuts on one side, and the maintenance of a sound economy through reduced spending and therefore reduced taxation on the other side.

3. Should our spending attitude be tougher in the political area? Are we too quick and too generous in granting economic aid to accomplish wholly political ends? To express it differently, are we succumbing too easily to the “gun at the head” psychology?

4. Should we consider grants or loans with less or perhaps even with no “strings” attached? At present all aid carries conditions of some sort.

5. Should we give a substantial amount of economic aid through the framework of military pacts (as distinguished from economic pacts) rather than through our bilateral arrangements with individual countries which are members of the military pacts?

6. Should we be affected in our program by whether or not it makes us immediately “popular” in the country involved or should we pay less attention to this and think of the long-term effect in that country? A corollary of this is the extent to which we should advertise our aid in a country.

7. Is our policy of insuring against non-convertibility, expropriation, and war risk sound? The purpose of these insurance provisions was to induce American private funds into underdeveloped areas, but our experience indicates that all but a small percentage of the funds insured have gone into those countries whose economies no longer need our support.

This is far from a complete list of unanswered questions. Many others will undoubtedly occur to you. Such questions must be considered in making an adequate analysis of our present Mutual Security Program and recommending changes in it.

Yours very sincerely,

John B. Hollister

1. Source: Eisenhower Library, Harlow Records. Official Use Only. A copy of this document is ibid., CFEP Chairman Records.
2. Randall sent requests for written comments on the Fairless Committee recommendations to the Secretaries of State, Defense, the Treasury, Commerce, and Agriculture, the Directors of ICA and the Budget, the Chairman of the Council of Economic Advisors, and the President of the Export-Import Bank. (Department of State, A/MS Files: Lot 54 D 291, Fairless Committee Report)
3. Not printed, but see the enclosure to Randall’s memorandum, infra.