90. Editorial Note

On April 21, 1971, the same day the President sent to Congress his message on foreign assistance reform (see Document 89), Peter G. Peterson, Executive Director of the Council on International Economic Policy, conducted a press briefing on the subject of the President’s message. He was accompanied by C. Fred Bergsten, Assistant for International Economic Affairs, National Security Council; James R. Schlesinger, Assistant Director, Office of Management and Budget; and Ernest Stern, senior staff member, Council on International Economic Policy. The press conference began with a briefing by Peterson, in which he provided the context for the President’s proposals:

“The changes in our foreign policy are very familiar to you already. The new foreign policy concepts that are implied in the Nixon Doctrine call for a new partnership, the primary purpose of which is to achieve a generation of peace in a durable world order. More specifically, it means a greater sharing with others in the definition of policy and in the bearing of costs.

“It means the encouragement of others to participate fully in the creation of plans and designing programs. And while it means continuing U.S. leadership, it means a leadership within an active partnership rather than a leadership of unilateral decision.

“The reorganization reflects these basic policy objectives. It brings under one authority the economic and military assistance programs which are necessary to shoulder the responsibility for defense without endangering the freedom and independence of our allies and friends.

“The resources that are being requested are approximately at the same [level]as the funding of these programs last year. They are small, we believe, compared to the savings and reductions of American troops overseas.

“On the other hand, the International Development Assistance Act will provide us with a vital instrument to support our long-term foreign policy interests in developing countries.

“As I will show you in a moment with some charts, about two-thirds of the world lives in these countries. And I thought you might be interested in my telling you about some data that might help orient you a little better to the Message as a whole.

“When we talk about the less-developed countries, let’s remember we are talking about roughly two-thirds of the free world and while there has been growth over the last ten years at a slightly higher rate than developed countries in their Gross National Product, one of the particular problems is that the per capita growth in population during [Page 318] this period has been at significantly higher levels in less-developed countries than in the industrialized countries, with the result that, if you will look at the per capita income, you will see that the growth continues to be significantly higher for the developed countries than for the less-developed countries.

“If I may show you this chart, in general, there was a watershed date here in this period, but for the first time, the rest of the world contributed more official aid to less-developed countries than the United States, until at the present time, we account for about 45 percent of the total aid, official aid, that is.

“You will also notice, however, that the rest of the free world is putting in a great deal of private investment into these less-developed countries.

“As one looks at numbers of these kinds, he often sees them expressed in terms of per capita income in these particular countries. If you take them as a whole, you will find that the per capita income is approximately $200 for these countries that constitute two-thirds of the world.

“Numbers have a way sometimes of not conveying the human meaning of $200 versus $3,000 to $4,000 in the industrialized countries of the world.

“Let’s think of it perhaps in human terms, whether these people want—I am sure they want a job. The numbers there are sobering. About 20 percent to 50 percent of the people in these less-developed countries are unemployed. They undoubtedly want good health. About one out of four children in this two-thirds section of the free world die before the age of one. About half of the children die before the age of four. Obviously these people want food. I have been impressed with the number that three-fourths of the children in this two-thirds of the world suffer from serious malnutrition to the point where, as you all well know, their human development is retarded in one way or another.

“Finally, there is a world where education is important. In this two-thirds of the world, only about five percent of the children ever reach high school. So that is a part of the world in which many of America’s and the world’s most important political issues will certainly be tried and many of these political issues have a very basic economic origin to them.

“Another question that is raised, aside from the political and humanitarian aspects of this, is how is this related to the economic interests of America?

“I might point out that there is a high correlation between the rate at which these countries grow in their exports and the rate in turn in which their Gross National Product grows.

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“If we want them to get stronger and more industrialized, we must also think about their exports. One might say, ‘Well, these exports are certainly in their interests. Are they in the interest of the United States?’

“Well, aside from assuring a more stable and peaceful structure, I would want to remind you that in many of these rapidly growing markets our exports to these countries from America have doubled in the last four years.

“So, aside from the political and humanitarian issues, I think there are some very important issues in terms of our own economic development.”

Peterson then discussed the essentials of the new proposals:

“Under this new structure, you will see an International Security Assistance Act where, for the first time, all of the security assistance is looked at together and hopefully in a more integrated way and includes all of these categories of international security assistance.

“Then all of the development and humanitarian assistance is grouped together in this set of categories here. I hope most of you can read those. I am sure you read at least as well as I do.

“The Overseas Private Investment Corporation, which is set up to guarantee U.S. overseas private investment has already been passed. But I did want you to recall that. Here is the Inter-American Foundation, which was authorized by Congress last year and is now operating and it finances the social development programs in Latin America.

“The Peterson Task Force and the subsequent Presidential decision on this new development assistance part of the program—and we have experts here who will be happy to answer your questions on any specific aspects you want—but on the development side, there are distinct objectives now for each of these agencies. Each of them has a mission. The President has been quite emphatic in being sure that this program be very responsive to initiatives by the less developed countries; that they have come up with, to the maximum extent possible to function in a frame work set by international institutions.

“We want to have as cooperative an effort in this important field as we can, concentrating on countries of special interest to the United States and on projects where the United States has special competence—that is, really having something to contribute; match the terms of our assistance to the economic capacity of the recipient, which is, I think, an important way of increasing the productivity; extremely important, improving the management to carry out these basic reforms; and an important byproduct of this program will be to reduce substantially the number of U.S. Government officials overseas that have previously been involved in these programs.

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“The first structure is in the development side, the U.S. International Development Corporation. Its basic activities are development loans to developing countries, very often on a project or program basis and important technical services that are related to either preparing the loan request or implementing the program. Here are the operating principles that are implied here. They will be run in response to specific proposals where the United States has a long-term interest. They will function in the framework set by the international institutions and very often in coordination and cooperation with other bilateral donors.

“The loan terms will be tailor-made to the repayment capacity of the recipient: the valuation of the loans on sound business and development criteria; and operations will be centralized in Washington, thereby reducing field staff and relying more on the recipients for relevant information.

“In the management sense, there will be a Board of Directors. You will notice here that this will include not only the Secretaries of State and Treasury, but three private individuals. This group will have its own charter. The President will be the operating head and the request is for a three-year, $2.5 billion authorization, both appropriated funds and borrowing authority.

“The U.S. International Development Institute, we think, also fills an important need. One is to finance research that is relevant to development, strengthen research capacity which is very much lacking, as all of you know, in less-developed countries; provide training. Know-how is a very important part of this process; and to help build institutions with emphasis on agriculture and education that can continue this development process within the country; and finance advisers on development problems.

“The operating principles, again, will be to be very responsive to proposals that come from them; to concentrate on development problems in which we believe the United States has special competence; to try to build and emphasize research capacity within the less-developed countries; to provide grant financing but insisting on LDC contributions; more from the more advanced countries and less from the poorest; and implement projects through the private sector reducing official U.S. overseas personnel.

“Management and finance, the two will have a Board of Trustees. You will notice that the majority will be private citizens. Again, the Executive Director will be the operating head and again we are asking for a three-year authorization of $1.3 billion. I would emphasize here the concept of continuity and forward planning.

“The very nature of the development process is a long-term process and all of the people who know this field best believe that the long-range [Page 321] planning requirements should be reflected in the way the funds are authorized for it to operate.

“I should want you to know that there has been careful consultation with the legislature in this program and that one of the questions that has come up from the beginning of the Task Force and certainly recently is the whole question of coordination of this development assistance operation.

“Under this bill, there will be a U.S. coordinator of bilateral development assistance. He or she will be appointed by the President with the advice and consent of the Senate, responsible to the President, accountable to the Congress as the Administration spokesman on bilateral development assistance. He will exercise his authority by being Chairman of each of these boards that I have mentioned. He will chair an Executive Committee, the operating heads of the three agencies. He will operate under the foreign policy guidance of the Secretary of State, coordinate with the National Security Council, and of course security issues are involved and under the coordination of the new Council on International Economic Policy and Economic Development Issues.

“In terms of the funds that are involved here, we have them broken down as between nearly $2 billion, $1.993 billion for the international security assistance portion and $1.245 billion for the development assistance portion.

“I might say that in hearing the President discuss this program, he has said that this is not the kind of world where we dare leave a vacuum and it is not the kind of world where we can withdraw our physical presence as we are in key areas of the world and, at the same time, withdraw our economic presence.

“If we are going to have a generation of peace, it is not going to be simply by ending a war, but by building a structure for peace. And he believes that one of the key foundations of that structure for peace has to do with the vital and viable group of less-developed countries, which, as I have indicated, account for two-thirds of the world’s population where many of the political issues of the ’70’s will arise and where in turn many of the political issues are at their core economic issues.” (The Richard Nixon Library, Nixon Papers)

A period of questions and answers followed Peterson’s briefing, which began at 10:25 and ended at 11:05 a.m.