37. Highlights of the First Meeting of the Working Group on Problems of the Alliance for Progress1
PRESENT
- AID—Mr. Chenery, Mr. Moscoso, Mr. Rubin
- E—Mr. Trezise
- ARA—Mr. Goodwin
- S/P—Mr. Rostow
- S/P—Mr. Fried
- S/P—Mr. Johnson
- S/P—Mr. Ramsey
- S/P—Mr. Wriggins
- Ambassador Stephansky
- Treasury—Mr. Leddy
- OAS Committee of Wise Men—Mr. Perloff
The working paper prepared by S/P2 appeared to be a useful starting point, raising among other questions, (1) the usefulness of attempting to locate Latin American countries in one of four identifiable stages of modernization and (2) the necessity of taking the political (and other non-economic) characteristics of recipients into account when Alliance assistance programs are to be considered.
Latin America is a peculiarly useful area for examination of the problem of assistance on this combined basis because political and economic factors are closer to being dominant than in other areas where military factors are more urgent. Also economic and political development has proceeded far enough in some cases to reveal major structural imbalances.
In our explorations it is important to remember that aid is only one element of foreign policy, and trade, commodity stabilization, traditional diplomacy and other forms of direct influence may be as useful.
Because up till now the criteria for aid have been explained to Congress in broad terms, emphasizing the need for long term aid, our hands may be unnecessarily tied unless we are able this year to explain with much greater sophistication the uses and limits of the present aid criteria. With Congress we must discuss candidly the underlying problems of effecting a turn-around in aid policy, which demands a turn-around in the policies of the recipient governments themselves. Since we must bring the recipient countries along with our own changing concepts, it [Page 76] takes time. Often there are signs of change—notably the early formulation of plans—which do not strike the casual observer and are not yet affecting official policy in recipient countries. Accordingly, we have reason to attempt to persuade Congress that our aid policies in Latin America are not in as disheveled a condition as it may appear.
What are the most urgent reforms which we should insist upon?
We should distinguish reforms urged for essentially political reasons from those aimed at promoting economic development. The former might be designed to shift the locus of power from backward-looking to forward-looking groups, to prevent the defection of important groups, or to bring the government closer to the people. Land reform in many countries might serve such purposes. Tax reforms may serve a more exclusively developmental purpose, although certain types of tax reforms might work against development if they were mainly political in their intent.
What techniques have we for applying political pressures in order to induce conformance to reform criteria? There are some countries where the politically dominant groups are not interested in reform, where their power remains for the present relatively unimpaired—either because change has not yet challenged their traditional base of power or because they can count upon the loyalty of the military. We cannot expect to influence such regions very much toward reform, unless they face urgent financial or other crises.
How can we develop the skills, organizational and other know-how, for promoting the strength, unity and constructiveness of the middle and left of center political elements who are likely to be the best guarantors of the kind of orderly yet expeditious change which the Alliance sets as its model? Often such political groupings exist in latent form but lack organization.
Where aid must be given for political reasons, such as to prevent a diplomatically friendly regime from falling, we should endeavor to (a) give it some economically sensible purpose, and (b) strengthen the hand of those who want to press forward toward development. Military aid in the past has often served the purpose of shoring up an unpopular regime and, unfortunately, it has often been given to men with little interest in development, whereas we should use aid to enhance the influence and prestige of those who are interested in development.
The term “political aid” is regularly used in two different senses: (a) aid designed to have a favorable impact upon our relations with a particular country (e.g. aid to Panama designed to reduce demands for unacceptable changes in our Panama Canal relationship); and (b) aid designed to have an effect upon the political structure or political process of the country aided. In actual fact, of course, the distinction is often not so clear-cut. It is clear that Congress objects to political aid in the first of these two senses; [Page 77] it is less certain whether Congressmen could not be convinced of the value of the second kind of political aid.
Alliance as at present formulated lacks an illuminating overall political objective for the hemisphere and its place in US grand strategy. The last Administration made the promotion of a free enterprise community our objective. That was simple and it had an appeal to certain groups. It contained a self-help element. Is our present objective the creation of some new kind of inter-American system? Lacking a clear objective, we are not clear where we must … trim developmental objectives in order to insure survival of friendly regimes, or where we can sacrifice a regime friendly in the short run so long as it is likely to be replaced by one more determined to bring rapid political and economic change.
Bolivia has passed through the Punta del Esta barrier, but it poses profoundly difficult problems. Commitment and promise have outrun capacity to perform: mass organizations have leaped forward in their ability to swing power while government administration, the political system, economic productivity and the balance of payments position have all fallen far short. On the other hand, Bolivia’s leaders are well-endowed with that indispensable precondition for development—the will to modernize—and this may be the most important ingredient of all.
Particularly here, there may be very real merit in concentrating efforts on a few cases which can become demonstrations of what we are able to do when we set our minds to it. Too much dispersion may lead to inconspicuous results; concentration of effort may make demonstrations possible.
Can we appropriately discuss “criteria” and expect to have them operative when we are in fact within an “alliance” in which the recipients, too, pre-sumably have something to say about what they require? When others are as deeply involved in the planning as they are presumed to be, criteria defined by the US may not be applicable.
Some insurance in cases of risky policy. If we could assure countries that we could stand behind them if they undertook policies with some economic risk, such as land reform, tax reform, etc., it might be a useful inducement to bolder development initiatives.
Despite our talk of “self-help”, many government leaders in Latin America just don’t take us seriously. In part this is because they do not see how they can insist upon further measures of self-help and still remain in power. In part, too, they believe our assistance to be largely politically motivated. We must be alert to the demonstration effect of our assistance policies. They must have it demonstrated that those who try to meet the criteria will obtain more resources for development. If we shore up too many friendly regimes for political reasons without putting due weight on economic development criteria, they will not take our talk of self-help and reform seriously.
[Page 78]Perhaps the most difficult problem is finding ways of engaging the local political system in the development enterprise. Unless there develop local political pressures working toward self-help, reform and development, US efforts to insist on aid criteria will be diplomatic liabilities. This may be the most important task facing us.
Some important cautions were expressed on the way work should be conducted: (1) an unduly elaborate analytical scheme may not be applicable for lack of data, the margins for statistical error in many cases being so large as to more than outweigh any possible increments of resources forthcoming from abroad; (2) since each situation was unique, and fraught with intangibles, generalized propositions would not be likely to be applicable in more than one or two cases, and each one country would have to be examined independently in any case.
For instance, too rapid tax reforms can cause disinvestment and flight of capital, land reform initially produces a fall in production and balance of payments difficulties. Therefore, one must be able to reach an equation combining political growth, social gains and economic development. Each country’s equation will be different. On the other hand, an unstructured empirical analysis of individual countries was not likely to be fruitful.
It was decided to proceed along the following lines:
- (1)
- A smaller working group would be established, combining AID and S/P personnel, to formulate a set of questions which would, if answered, get at the key economic and political problems in carrying forward the Alliance criteria in individual countries. These, when refined, would provide a working framework for some country studies.
- (2)
- Five or six studies would then be undertaken, in considerable depth, on countries of major importance to the US which represent different characteristic Alliance problems.
- (3)
- The criteria problem would then be re-assessed and the possibilities of extending this method to other countries in Latin America and elsewhere.