Foreign Relations of the United States, 1961–1963, Volumes VII, VIII, IX, Arms Control; National Security Policy; Foreign Economic Policy, Microfiche Supplement

367. Memorandum from Rostow to President Kennedy, March 13¹

March 13, 1961

SUBJECT

• Draft of Crucial Portion of Foreign Aid Message

If the principles I have outlined are followed we cannot now state with confidence and precision how much external capital can be productively absorbed by the underdeveloped nations over the coming years. That amount will be determined by the energy and the talent they apply to the mobilization of their own resources.

But it may be useful to set a target. I should like to see the underdeveloped nations growing at the rate of about 2% per capita each year. That rate of progress—if widely spread among each nation’s citizens—should convince men and women that growth is a reality—that the lives of their children and grandchildren will be better than the lives of their parents and grandparents.

Such a growth rate requires, however, a higher level of investment in most developing nations than is now taking place. Most of that increase in investment they must generate themselves. Some of the increase must come from abroad.

In what terms should we envisage the responsibility of the more developed nations. What is the gap in aid if a growth rate of 2% per capita is our common goal in the underdeveloped areas.

The answer appears to be about $2 billion a year, on average, over the next four years. Very substantial programs of assistance are now under way: American, British, French, German, Canadian, as well as significant contributions from smaller developed nations. They now amount to something like $5.5 billion each year. But taken together they fall below a critical minimum by something of the order of $2 billion. If regular growth is to become a widespread reality in the underdeveloped areas we must all increase our efforts. The independent calculations of many experts suggest that total Free World development aid each year should be about $7.5 billion.

Let me repeat: We cannot now tell precisely how much additional aid will be required and justified until the underdeveloped nations themselves organize careful forward looking programs; but it may be helpful if we envisage as a first approximation Free World capital assistance programs averaging some $2 billion higher than they are at present.

How should this extra burden of the Free World be allocated? That is an urgent job for the OECD. But again it may be helpful if I suggest an initial target. Right now the United States—aside from military assistance—is furnishing something like 75% of the long-term capital assistance available to the underdeveloped nations. We are a rich and a large nation. We should be prepared to meet our communal responsibilities without flinching. But I believe the percentage of our contribution is now too high. In an expanded program I believe the extra burden should be shared on an even 50–50 basis. Roughly speaking this may involve an extra $1 billion each year from the United States; an extra $1 billion each year from the rest of the Free World. I am confident that this increase will be promptly pledged and fairly apportioned in the forthcoming negotiations of the OECD.

On this basis the American aid proportion would decline from about three-fourths to about two-thirds. That is where it more fairly belongs at this stage of Western history. The major developed nations would then be contributing about 1% of their GNP to long-term development purposes.

As an indication of our nation’s seriousness in launching this Decade of Development, I propose that the Congress authorize our new economic assistance agency to make long-term development loans of $2 billion over the next four years. The level of lending in fiscal year 1961 would be little more than planned in the Eisenhower budget; but if the underdeveloped nations do their job, it would rise in subsequent years. A program on that scale would permit us both to shift some of our present aid from a grant to a loan basis; and it would permit us to play our part in the international scheme which will be taking shape in the next weeks and months.

I believe it is essential that the Congress act at this session to signal to all the world that this is the road we are prepared to follow. Among the contributors—although the burden will be more equitably shared than in the past—we shall remain the leaders. And a leader must lead.

In the underdeveloped nations it is essential that the governments and peoples understand that there is a solid basis for them to think through their programs; to work hard this year on how they propose to develop their assets; and to look to a future where the whole of the industrialized Free World is prepared to assist them in bringing to life the possibilities that exist within their human and material resources.

The whole enterprise is, of course, contingent on what others are prepared to do. But I am convinced that to mark this watershed in modern history—to launch this decisive Decade of Development—the American people, the American Congress, and the American President must firmly lead the way.

This great barn-raising is a thoroughly realistic and possible effort. But it must begin here and now; and it must begin with us. I tell you most solemnly that our nation’s security—and the Free World’s security—do not permit us to wait.

If this line is taken, I would propose:

1. Macmillan, Adenauer, Diefenbaker, and De Gaulle be informed of your proposal before it is delivered.

2. A personal message to Adenauer should state that, despite the difficulties with Congress, despite the forthcoming German election, you judged the position in the underdeveloped areas so urgent that we would all have to make order of magnitude commitments promptly. We need urgently a new element in the equation if we are to deal with the underdeveloped areas. You are counting on him to back you in this matter; for in your view the capacity of the North Atlantic Alliance to deal with the pressures in Asia, the Middle East, Africa, and Latin America hinge on a display of boldness and unity among us in this as in other matters on the common agenda which you look forward to discussing personally with him soon. It would be useful if a German order of magnitude, interim commitment could be made on the occasion of Under Secretary Ball’s forthcoming visit to Bonn. Although U.S.-German relations involve many other matters—Berlin, NATO, etc.—much hinges on prompt unambiguous German support.

3. A personal message to Macmillan should state that, despite his short term balance of payments problems, you are counting on his prompt support. This program would supply a new under-pinning to the Commonwealth and to our relations with the underdeveloped areas in general. This was a moment when, setting aside immediate pressures, we must all step off into the dark together; and that you are confident that he will respond, as well as Adenauer and others. You look forward to an early order of magnitude interim British commitment and to your discussions with him in April.

4. A personal message to De Gaulle should state that, despite his understandable preoccupation with the Algeria affair and despite France’s great efforts in Africa that you are counting on his support for a long-term commitment to this effort. You should recall his own earlier inspiring statements in this direction. You should explain that you believe we need an initiative of this kind and a display of allied unity in this area if we are going to be able to deal effectively with the crisis areas in the southern half of the globe.

5. Parallel message to Ottawa.

6. Raise with Erlander, Dutch, Swiss, etc.

1. Thoughts on foreign aid message: getting the Congress and Allies on board. Confidential. 4 pp. Kennedy Library, National Security Files, Meetings and Memoranda Series, Staff Memoranda, Rostow–Foreign Aid, 3/61.