47. Memorandum From Secretary of State Rusk to President Johnson1

Your Cabinet Committee has reviewed every aspect of foreign aid—from principles to operations, country by country.2 As you instructed, we have asked ourselves whether the likely benefit to the United States from each program justifies its cost to the American taxpayer. We have made a serious attempt to separate the required from the merely desirable.

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Our study has reinforced our belief in the basic proposition that a properly directed foreign assistance program is a vital instrument of United States foreign policy. Economic and military aid remain far and away the most powerful means at our command to influence the massive forces at work in the less developed nations. They are our primary source of influence on the economic and military evolution of most of the countries of the non-Communist world.

Foreign aid has an even broader significance. It is the factor which lends weight to U.S. views, interests, and advice which would never flow from military, diplomatic, and commercial activities alone. Thus, assistance programs not only serve our development objectives, but also underlie much of our ability to promote other interests. It would be folly to dispense with, or seriously to impair, these programs; what is essential is that they be managed in ways which serve our own true interests.

We have also concluded that there is no need for any major change in the current foreign aid administrative structure. We believe that David Bell and the Agency for International Development have put together an outstanding record over the past few years. It is always difficult to prove that crises have been avoided, dangers diverted, or the tides of history redirected. But we believe there is solid evidence that our aid programs have helped to accomplish these things in several critical countries.

Beyond these fundamentals, we believe that you should direct a new emphasis upon the following principles in planning and administering foreign aid:

1. We must make better bargains for the use of aid resources.

The direct economic effect of our assistance is important, but it is dwarfed in value by the influence it can exert on the economic and political policies of the recipient countries. We must not overestimate our bargaining power, particularly with regard to such highly-charged issues as Kashmir. But neither should we fail to obtain from each aid agreement every possible advantage to the common interest—and also to the legitimate interest of the United States. Fundamental to this purpose is a broader recognition at home and abroad that all forms of U.S. aid—food, technical assistance, capital loans, and diplomatic help with other donors—are elements in a single negotiating package. Representatives of the United States must present a united front as to what is worth bargaining for and at what price. Aid must be used as a carrot, and the possibility of withholding it as a stick. We must not allow our zeal to help the needy to obscure the fact that their long-term interests and ours require maximum lasting return from every aid dollar.

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2. We must make it crystal clear that the basic principle of foreign aid is cooperation.

We should be prepared to insist that our aid is only available to countries which are not hostile to us, and which give convincing evidence that they are determined to help themselves. In a broad sense, every developing country must pull itself up by its bootstraps. We cannot do the pulling. We can only encourage and assist those who will. And we cannot permit our resources or our partners’ to be wasted on political or military adventures.

Moreover, we cannot mount major development programs in every non-Communist country. More than 80% of our development aid is now concentrated in eight key countries. This concentration has been achieved through extended effort, and at substantial diplomatic cost. We believe that cost is fully offset by the value of focussing aid resources in the countries which matter most to us, and which can and will make the best use of our help. The number of countries in which we maintain “presence” programs to support our general interests should depend on a hard-boiled survey of those interests country by country, year by year. In Africa, we should move in the direction of regional administration of bilateral programs and maximum use of regional organizations. But the number of major development programs should be sharply limited.

3. We must make a concerted attack on the roots of world poverty—hunger, ignorance, and disease.

The overwhelming lesson of our experience in the developing world is that no amount of capital or technical training will result in sustained economic growth unless some progress is made against the basic conditions which dull the desire, sap the will, and destroy the capacity of most of the world’s people to better their lives. We must take on these problems in the massive and relentless way we have dealt with them in the United States. We must adapt our attitudes, methods, and institutions to the conditions abroad. Most important, we must teach confidence that these ancient plagues can be eliminated.

With regard to hunger, we must face up to the fact that, while our food surpluses are dwindling, the developing countries are losing the battle to feed themselves—that, with some notable exceptions, per capita food production in poor countries has actually declined over the past few years. Anything less than an agricultural revolution in the next decade will result in food aid needs which will force us to choose between the politics of mass starvation and the immense costs and inefficiencies of restoring our huge acreage reserve to grain production. Eventually, even this costly step would not meet the need. Moreover, overall economic growth targets in most major countries cannot be met if the agricultural sectors which dominate their economies cannot grow [Page 136] even half as fast as their industrial sectors. Scarce foreign exchange diverted to food purchases to compensate for failures in local production is lost forever as investment to stimulate growth. This situation makes it imperative that we redirect our food aid program to (1) use food aid more aggressively as a bargaining lever to induce agricultural self-help abroad, (2) ensure that food aid is integrated with increased dollar aid to agriculture in a comprehensive U.S. aid strategy in each receiving country, (3) gradually substitute the disciplining effect of dollar-repayable food financing (with appropriate grace periods) for the current local currency sales program, and (4) move as quickly as our mutual interests permit toward harder financial terms, and ultimately, cash food sales.

To deal with ignorance, we must find new ways to harness the experience and expertise of our institutions to the enormous challenge of mass education in the developing countries. We need arrangements through which we can provide teachers and teachers of teachers. We need long-term relations between American schools and schools abroad. We must offer opportunities and incentives for American universities to apply themselves to the intellectual and practical problems of basic education on a huge scale in cultural circumstances very different from our own. We must develop means of broadening the perspectives and experience of able young people abroad through new and enlarged exchange programs and other such initiatives. We have more questions and fewer answers in this field than elsewhere, but this only adds to the urgency that we expand our knowledge and our activities.

A high priority in the health field must be assigned to population policy. The best efforts of the developing countries will avail them little or nothing if they are unable to deal with the population growth which is now consuming two-thirds of their economic growth. Although we cannot and should not force any country to take any particular measure in this area, we can and should use our aid to encourage each of our major partners to face up to the problem, and to help make effective whatever programs are begun.

But our health efforts should not be restricted to the population problem. We now have the capacity to help the developing countries eliminate smallpox from the list of man’s natural enemies, and drastically to reduce malaria, yellow fever, cholera, rabies, and other age-old killers. In addition, in connection with the hunger initiative, we should take steps to reduce malnutrition which is permanently impairing the mental and physical development of 270 million children alive today.

4. We must stand ready to increase our support of multilateral lending agencies as soon as other donors will join us.

The United States should let it be known that it is prepared to increase the proportion of its aid channelled through multilateral institutions or procedures, subject to matching contributions by others and the [Page 137] effectiveness of the institution in question. In order to draw larger contributions to the aid effort from other donors, and/or to give the appearance of apolitical action, multilateral agencies can play a useful role. But we should not delude ourselves that it is to our advantage to get completely out of the bilateral aid business. In the major theatres of action there is no refuge in all-out multilateralism. The bilateral U.S. role is as essential to the Alliance for Progress as for the future of South Asia, and the case for bilateralism is stronger still where the Communist threat is more immediate—as in Southeast Asia.

5. We must increase the pressure on other donors to enlarge the volume and soften the terms of their aid.

Although our leverage on other donors has decreased in recent years as our aid has declined slightly in a world of growing need, we remain the largest aid supplier. The entire multilateral structure—from the IDA to the aid consortia—is largely a tribute to our arm-twisting. But there is still room for greater volume from others, and a vital need for softer terms. We must persuade every important donor that the aid need is growing, that quasi-commercial terms on development loans are self-defeating, and that decreases from existing aid levels are false economies.

6. We must develop ways to ease the growing burden of foreign debt now facing many developing countries.

We must pay greater attention to the net flow of resources to the developing world, the flow over and above repayments of foreign debt. We are fast approaching the point at which large increases in gross aid will be necessary simply to keep the net flow constant. A few rollovers and reschedulings have already been negotiated, mostly involving debt to Europeans. We must face up to the necessity of developing our own policy toward this problem.

7. We must sustain our intense efforts to assure that the foreign aid program and the balance of payments program do not conflict.

We have already applied the obvious remedies, and some which have been neither obvious nor easy. We have substantially exhausted the means of reducing the payments drain, but we must keep searching for ways to offset the remaining outflow, perhaps by encouraging recipients to use more of their free foreign exchange to buy American goods and services. More generally, we should so conduct the aid program as to maximize the growth of markets for American products in the less developed world.

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8. The Military Assistance Program should continue its progress toward more sensible levels of conventional aid for the countries which face conventional threats (nearly all along the borders that contain the Communists), and toward counter-insurgency elsewhere.

MAP should be under the policy eye of the Secretaries of State and Defense, but otherwise separated from the economic aid program, and its legislative authorization should not be lumped with AID’s.

9. We should seek five-year legislative authorization for economic and military assistance.

This does not imply that we intend to commit aid money for long periods in advance. Neither would long-term authorization reduce the power or the duty of the Congress to review aid programs frequently and in depth. But it would signify the solid commitment of the United States to use aid as an established instrument of foreign policy, and to help those who help themselves.

Beyond these recommendations lies the knotty problem of deciding upon a U.S. strategy for each major country, designed to put all of our policy instruments in effective service to the full range of our interests. We have undertaken to develop such strategies, which are submitted to you under separate cover. We believe that the unique set of circumstances, problems, and opportunities which apply in each major country must shape the final decisions on program composition and negotiating strategy. Thus, we have not included any recommendations at that level of detail in this memorandum.

The substance of our thinking is that we have been doing much that is right, and that most of the needed adjustments are new emphases, based on lessons learned on the job. But they are major new emphases, and will, we believe, result in major new benefits. We strongly recommend that you direct them at an early date.

Dean Rusk 3
  1. Source: Johnson Library, National Security File, Foreign Assistance Programs—President’s Advisory Committee on [Perkins Committee], [3 of 3], Box 17. Secret. A stamped notation on the source text indicates that McGeorge Bundy’s office received the memorandum on February 2 at 2:20 p.m.
  2. See Document 32 regarding the formation and membership of this committee.
  3. Printed from a copy that indicates Rusk signed the original.