35. Memorandum of Conversation1

SUBJECT

  • President’s Task Force on Foreign Aid2

PARTICIPANTS

  • The President
  • Rudolph Peterson, Chairman of the President’s Task Force on International Development
  • Dr. Henry A. Kissinger, Assistant to the President for National Security Affairs
  • C. Fred Bergsten, Senior Staff, NSC

The President began the meeting by speaking bluntly about the objectives of the Task Force. It would not be like the earlier Task Forces on aid chaired by General Clay and others. This group must come up with a truly new approach to foreign aid or the U.S. aid program will die.

AID’s presentation to the National Security Council was the worst it had had this year. (This is not due to Dr. Hannah, who was new at the time and had not yet been able to effect any changes.) The State Department wants to give aid to every country in the world and the result is lots of “Mickey Mouse programs.” The President does not believe in this approach.

Foreign aid is not an abject failure, the President continued. There are numerous success stories. In all of them, however, there were additional key factors beyond aid, such as U.S. military expenditures or impressive natural resources.

Mr. Peterson can expect to hear from the State Department that government-to-government aid is best because State likes to use aid to stroke its clients. They believe in aid to socialist countries and enterprises [Page 101]and are not worried by such events as India’s nationalization of the banking system. The President asserted that we need to get away from government-to-government aid and from aiding countries who are headed toward adoption of totalitarian socialist systems. This is not because of ideology.

It is because aid simply will not be effective in such environments. The success stories to date have occurred mainly in environments where the private sector played a major role. He had told Mrs. Gandhi, for example, that public aid was not expandable—only private investment was.

Latin America is a disaster, the President continued. State and AID like to provide aid to consumer/social enterprises for purposes such as health and housing. This is wrong. We must help countries help themselves through supporting industries which have multiplier effects throughout the economy. We must help them increase their GNP’s so they can build the needed infrastructure themselves. The way to help poor people is to help increase the size of the pie from which they can get a slice.

The President stated that there has been no really new thought in the foreign aid field in twenty years. There are always references to “trade and aid” and increasing private investment but we have added nothing really new. Everybody is caught in the Marshall Plan syndrome, which unfortunately could not work outside Europe and Japan.

The President did not pretend to have the answer himself. He did feel, however, that our program was far too fragmented. We do not need to aid every country. For example, some of the former metropoles should bear the responsibility for their ex-colonies. The U.S. should only aid countries where there is a major U.S. interest. We should not attempt to dictate the type of political system maintained in foreign countries, although many of the Task Force members will probably espouse socialist approaches and repeat many of the old tired ideas.

The President concluded that Congress will not provide money to do what is needed in the aid field unless we have a new name and a new approach to the program. He stressed the importance of getting an exceptionally able staff for the Task Force and that the group must not be on the defensive about the aid effort.

Dr. Kissinger, at the President’s request, added that the whole U.S. approach to aid has been exceedingly defensive because of the lack of a new concept. The bias has been that foreign aid is good and the only job is to sell it. Another problem is that aid has fallen into the hands of economists, which was all right in Europe where the need was essentially technical and the requisite private energy and political structures existed, but which will not work where political structures do not exist as is the case in many LDCs.

[Page 102]

There is no necessary progression from economic growth to political stability, Dr. Kissinger continued. In fact, there must be a political structure or else economic growth will not occur. We therefore need an explicit consideration of the link between political and economic frameworks in particular countries.

Dr. Kissinger added that Mr. Peterson will hear that leftist totalitarian approaches are completely acceptable but that the U.S. should oppose rightist approaches. This is particularly strange because we do not know what democracy means in a less developed country. This is another conceptual problem which must be tackled. He was afraid that his academic colleagues were not very fertile in answering it.

The President suggested that our effort should appear publicly as aid without strings but that in practice it, of course, could not be. On the issue of bilateral versus multilateral aid, he noted that many foreigners prefer bilateral assistance from the U.S. Indonesia, for example, was uneasy about multilateral aid because they felt it let the Japanese get additional leverage through the use of U.S. money—they feel it is not truly multilateral. The President also noted that Indonesia was very high on his list—the State Department disagreed, but the President thought Indonesia was one country which could make it. The President stressed that Japan and Western Europe must increase their aid efforts, however.

The President continued that the U.S. should use its aid for humanitarian purposes in particular circumstances. Furthermore, we should not simply help those who meet our ideas of proper political organization. The key is to help those who follow economic approaches, particularly reliance on the private sector, which we consider feasible in leading to real development. He would not be worried about the politics of the leaders of particular countries but rather about the climate for investment and other major economic approaches.

The President further stressed that population control is a must. He urged Mr. Peterson to read his message to the Congress on population3 and to work closely with the White House staff involved in this effort. Population control must go hand in hand with aid. The U.S. has finally bitten the bullet on this issue and made it a top priority national policy.

Trade is another key area, and he urged Mr. Peterson to speak with Ambassador Gilbert,4 Secretary Stans and others involved in U.S. trade policy. We will probably want to try some new initiatives in this area. Linkage among trade, aid and population control may be the necessary new approach.

[Page 103]

On military aid, the President warned that many of the panelists will probably oppose it completely. He agrees that we should not supply exotic weapons to countries which do not need them. However, State/AID is wrong to not want to help Indonesia militarily; they must have sufficient military assistance to maintain internal security. More broadly, the military may be the most stable force in most countries. He would therefore hope that Mr. Peterson would have no preconceptions that the military or rightist leaders are villains. Mr. Peterson agreed that there is a new breed of military men around the world, especially in Latin America.

The President summarized that we should follow an aid approach that will work. Otherwise we should forget it. A banker’s approach, especially that of the Bank of America with its record of innovative financing, is good for this problem.

In response to Mr. Peterson’s question about the thrust of overall U.S. foreign policy, the President said that Congress will not buy any aid program not directly related to U.S. foreign policy objectives, except perhaps for a few clear humanitarian cases. He felt that our long term foreign policy interests will be well served by broad, generous foreign assistance programs. Because of the growing gulf between our wealth and that of most countries, and the shrinking of the world through modern communications, people in the LDCs will not stand for continuation of the status quo. It will develop like our own urban problems.

For the next five years, however, our efforts will be limited by budg-etary restrictions. We must thus bore in where it really counts with what we have. In the longer term, we must think of broader approaches.

The President stated his strong conviction that aid won’t work unless and until recipient countries develop political stability. He agrees with Dr. Kissinger that aid does not necessarily lead to political stability. He would use our limited resources in areas where some stability already exists.

We need some success stories. In the Pakistan/India situation, for example, Pakistan comes out way ahead in terms of likely progress, partly because India is headed down the road toward becoming a socialist state. Latin America is an exceptionally difficult case and we will send Mr. Peterson a copy of the Rockefeller report when it is received.5

[Page 104]

Dr. Kissinger added that individual success stories in given regions could spread out through the region by galvanizing others into action. We need to move toward greater self-reliance on the part of other countries. This is the thrust of our overall foreign policy—to get others to shoulder a greater share of the burden.

Dr. Kissinger continued that we must get away from abstract notions. Our policy must relate to concrete objectives of mutual interest between the U.S. and other countries. Earlier U.S. aid efforts were relatively easy technical problems. We now have the problem of developing a world order in which the U.S. does not have to carry the entire burden. This means relating individual countries to others in their regions and then relating them to the U.S. We are in for some troubled years ahead, especially in Latin America.

The President reiterated that his foreign policy approach is based on pragmatism. The test of a particular policy is how well it will work. We must get away from ideological battles. In response to a question from Mr. Peterson, he affirmed that he was not terribly concerned with electoral systems in other countries. Dr. Kissinger added that we must look at their foreign policy as it affects us.

Concerning the plethora of small U.S. programs in Africa, the President said he was not impressed by the argument that the Communists will pour in aid if we don’t. We need not react every time to such a threat. The question is whether U.S. interests in the particular countries are vital. We must not let other countries shake us down, even though some of our friends are among those who do so.

The President reiterated that we should not pour money down ratholes. We should test a specific program by asking whether it will work. The Task Force should look into all the international lending organizations and the trade area, where we must consider preferential arrangements. In general, the Task Force should take a broad view of its mandate.

Mr. Peterson asked who would be his main point of contact with the Administration. The President replied that Dr. Kissinger, or anyone he might designate, would be that point. The Task Force should of course get input from Dr. Hannah, who is very able and will be developing some new ideas as he gets new people.

The President also noted that we probably have too many Americans abroad, a point on which he probably differs with Dr. Hannah. Point IV was great in its time, but the U.S. generally has the wrong people overseas. We should not assume that the best possible world is one in which many Americans are helping out overseas. In fact, the Task Force must assume that our present aid program is not full of good administrators. Many of our people are dedicated but many are [Page 105]incompetent, partly because AID is short of money and is a resting place for persons nearing retirement.

American businessmen abroad are not so good either, because the best businessmen do not view foreign assignments as the road to success. However, the President suggested that Mr. Peterson seek the views of a thousand U.S. businessmen overseas on our aid program, perhaps through getting the top 25-30 companies to canvass their people and pass their ideas on to us.

The President concluded that Mr. Peterson faced an extremely difficult job. The effort had been tried before and failed. In addition, many people disagreed with the views that the President had been spelling out. What he did know, however, was that the effort of the past will not sell even if it is right. And Dr. Kissinger added that with the loss of purpose in aid the annual appropriation process had become an end in itself.

The President instructed Mr. Peterson to take both a short-term and a long-term look at the problem. What kind of a world do we want in the future? How much can and will others do?

He did not have an answer to these questions. He did know that it was ridiculous to simply compare the percentages of different countries’ GNPs which are spent on aid, in view of the burden assumed by the U.S. in the military area. Dr. Kissinger added that it was also irrelevant to compare percentages when the magnitudes differed so sharply. The President also instructed Mr. Peterson to look at the personnel and organization of our aid effort.

Mr. Peterson concluded that his effort must be to decide upon a new approach and also recommend how to implement it. The President concurred and stressed that the whole program must be reorganized.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 1026, Presidential/HAK Memcons, June-Dec 1969. No classification marking. The meeting was held in the President’s office in the Western White House. No drafting information is provided but the memorandum was apparently drafted by C. Fred Bergsten of the NSC Staff.
  2. On September 2 the White House Press Secretary announced the appointment of Rudolph Peterson, President of the Bank of America, as chairman of the President’s Task Force on International Development. President Nixon had announced his intention to appoint such a task force of private citizens to review the entire range of U.S. foreign assistance activities in his May 28 message to Congress on foreign assistance (see Document 26). On September 24 the White House Press Office announced the membership of the task force. (National Archives, Nixon Presidential Materials, NSC Files, Box 193, Agency Files, AID, Task Forces on AID) In an October 6 memorandum to Peterson, Kissinger noted the high prioritinger noted the high priority the President attached to the task force and his instruction that the agencies cooperate fully with it. (Ibid.) For documentation on the Peterson Task Force, see Foreign Relations, 1969-1976, vol. IV, Documents 119 ff.
  3. For text of the President’s July 18 message to Congress on problems of population growth, see Public Papers of the Presidents of the United States: Richard Nixon, 1969, pp. 521-530.
  4. Carl J. Gilbert, Special Representative for Trade Negotiations.
  5. At the request of President Nixon, New York Governor Nelson Rockefeller undertook a mission to survey the quality of life in the other nations of the Western Hemisphere. Rockefeller’s report, including policy recommendations, was released by Nixon on November 10, and is printed in Department of State Bulletin, December 8, 1969, pp. 493-540.