Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

125. Memorandum of Conversation¹

Washington, February 11, 1970.

SUBJECT

• Status Report of Peterson Task Force on International Development

PARTICIPANTS

• The President
• Rudolph A. Peterson, Chairman of the President’s Task Force on International Development
• Edward R. Fried, Executive Director of the Task Force
• Henry A. Kissinger
• C. Fred Bergsten

At the President’s invitation, Mr. Peterson began the meeting by describing where the Task Force stood at the present time. They had met with a wide cross-section of the American people, including—they hoped—all groups in the country which had a serious interest in foreign aid. They had spent considerable time on the Hill to get Congressional views. Many experts had furnished helpful papers and thoughtful suggestions.

The Task Force had now had several two-day sessions. They were still some distance away from their final conclusions, but sufficiently advanced that Mr. Peterson welcomed the opportunity to outline to the President the direction in which they were headed.

Objectives of US Aid Program

On the objectives of the US aid program, they had taken their cue from some of the President’s own statements. We sought a stable world in which we share both the benefits and the responsibilities of international cooperation. We will not live in the kind of world which we want in 10-15 years unless we are prepared to take action now. A collective world effort is needed to deal with pollution, the reduction of poverty, and increases in standards of living. These problems are not limited by national boundaries. And it is inconceivable that the United States, given its role in the world, would not share a portion of its wealth in these activities.

Our aid effort today must be conceived much differently than it was even ten years ago, let alone the period of the Marshall Plan. We need a completely different approach to the effort.

The US has had three different aid programs: security assistance, including military assistance and supporting assistance; humanitarian assistance, to meet emergency situations; and long-term development assistance, through loans and technical assistance. The three have been rolled together, but their objectives are quite different. Security assistance is an integral part of foreign policy, with shorter term objectives. The humanitarian programs, by their nature, meet short term needs. These both contrast with the long-term implications of development lending.

Multilateralization

It is apparent that there is wide support in the country—and despite some reports to the contrary, in Congress—for increasing our emphasis on multilateralization of aid. This view is generally shared by the members of the Task Force and should represent a major thrust of our policy in extending our longer-term forms of aid. (He did not refer here to security or humanitarian assistance, which must remain bilateral.)

Mr. Peterson added that he saw a very important role for multilateralization of our bilateral program almost immediately. The international financial institutions had developed a high degree of competence, especially in the World Bank group. They can make critical analyses of countries better than can bilateral donors. The institutions have made clear to him their willingness to accelerate their capabilities and to play a rather broad role in the development process.

US Bilateral Program

On the US bilateral program, security assistance should remain organizationally about where it is now, in State and DOD. The Task Force may recommend a different focus for military assistance, however. They feel that history plays too big a role in MAP levels. Perhaps we should seek a phase-out of MAP, assisting countries toward that objective rather than objectives which are beyond the reach of the LDCs themselves or which commit us to help them in perpetuity.

Our humanitarian assistance, which obviously must meet day-to-day assistance, is alright in the State Department.

Our long term development lending is not as large in dollar amounts as these other categories at present. It could become as important, however, if placed in a position to stand on its own feet. To do so, a completely new approach is needed.

Our development lending should be put under an independent Government corporation. It might be called a “fund” or “corporation”, and would have its own board of directors and management. It would function as a bank, judging the worthiness of the recipients of benefits. It should be staffed by competent judges of investment, many of whom would hopefully come from the private sector, who know where to seek advice as well as how to give it themselves. We could dismantle our overseas missions. The institution needs continuity, la the Export-Import Bank, since it will be developing long term programs. Its role might some day be taken over completely by the international lending institutions.

Mr. Peterson sees a tremendous role for another new Government corporation, this one functioning as a foundation. It would focus on research on development problems, including research in the LDCs themselves. It would be run by top professionals and seek multiplier effects, especially through using residents of LDCs themselves in a major role. This institution would probably never outlive its usefulness, especially on such issues as population control. Its creation would be a major step and could have a tremendous impact on the world, which we could develop into something of tremendous national pride.

Thirdly, we already have the Overseas Private Investment Corporation to assist the private sector. The Task Force has ideas for expanding its role, beyond what is now envisaged, to engage the private sector in an even greater role.

Mr. Peterson then noted that the $64 question was the great need for much greater coordination of all US overseas economic activities. (The President amended that this was the $64 billion question.) These three new institutions must be coordinated, along with other aid-related programs, and he would suggest a “Chairman of Overseas Development” to run a board comprised of the heads of all relevant agencies and institutions. The chairman should sit in the White House and report directly to the President.

The President asked whether military assistance should be included in the board. Mr. Peterson replied that he would leave it out, since the board would coordinate our long term development assistance activities and not our short term security programs. The President assumed that it would also leave the humanitarian assistance out, although if high-quality people were available in the new institution, it might be good to use them on an ad hoc basis. The President added that he was intrigued by the concept of such a chairman and asked Mr. Peterson to proceed.

Mr. Peterson added that the chairman would have a vital role in representing the President on developmental matters. With that stature, he could accomplish a great deal by coordinating all of our assistance efforts, including trade, Export-Import Bank, etc. (Mr. Fried added that PL 480 would also be so coordinated.) He would naturally keep in close touch with the key operating agencies.

Mr. Peterson saw a lack of focus to all these related activities at pres-ent. There are needless frictions; perhaps they cannot be eliminated, but they can be reduced. With a board sitting around the table regularly, you could get understanding and policy direction as we have never had before.

The President replied that these ideas were very good. He asked about timing and Mr. Peterson indicated that he hoped to present the report by mid-March. The President noted that the Task Force would find it difficult to get agreement in this area. They would get screams from State, Treasury and all the other vested interests, as had occurred on some of the other Government reorganization measures which are under consideration. The difference here is that it is a question of life or death for the US economic role in the world. We will simply not get adequate support for our program unless it is completely new. He was in no position to judge the merits of specific corporations or the board, at this time, but did know that we must get rid of our present annual aid exercises.

The President noted that most earlier task forces had simply said that we should do better what we were already doing. This task force must do better than that. It was hard to say whether State or Treasury would raise the most difficulties, to which Mr. Peterson replied that State was more active at present.

Dr. Kissinger indicated that State wants to use aid as an arm of foreign policy, whereas Mr. Peterson wants to put it on a long term basis and reduce its susceptibility to short term tactical considerations. We must abolish AID, whose personnel are simply too weak. (The President firmly agreed.)

The President noted that he had always been a strong supporter of aid. One of his most frustrating experiences, in his numerous foreign travels, was to see how AID or its predecessors operate abroad. This is partly because they have always been on a temporary basis and therefore cannot get good people. He would hope Mr. Peterson would move in the direction of more, rather than less, revolutionary proposals.

The President added that several things proposed by Mr. Peterson appealed to him. The issue of central coordination is tricky. The State Department would oppose any such institution, as a rival, but it is definitely needed and would work in view of the new NSC system. The bank makes all sorts of sense. The foundation, which he assumed would handle technical assistance-type operations, would work; it should be put on a career basis and get the Point IV program onto the basis where it should always have been.

Dr. Kissinger noted that he was greatly impressed by the work of the Task Force. (He later told Mr. Peterson that it was the most imaginative task force report he had yet seen.) It tries to move away from day-to-day foreign policy concerns. A foundation would not be expected to make foreign policy judgments, so the LDCs could accept advice or help from it. As long as aid is given on a political level, we are merely trading favors for political reasons. The proposed program would help the State Department over the long term.

The President agreed that the State Department should buy the approach. Otherwise foreign aid is dead; he anticipated trouble this year even in getting modest appropriations. On the issue of coordination, the President agreed that it should be in the White House since it was so close to foreign policy. Dr. Kissinger noted that this could cause problems; the coordinator could be set up autonomously, and run through the NSC system, but it was clear that the coordinator could not be a departmental figure. The President agreed, since the coordinator would then be fighting with the other departments; he must be more than one among equals.

Dr. Kissinger reaffirmed that this was a very imaginative approach. It was the only way to save foreign aid. He could approve the proposals, since he had nothing to do with their formulation.

Implementation

The President asked what to do next to implement the ideas. The key problem was the competence of people, though this organizational approach would help solve it. The President asked about the competence of the staffs at the World Bank and the Export-Import Bank, to which Mr. Peterson replied that the World Bank group had very imaginative people. (Mr. Fried added that IDA would be key to this whole operation.)

The President added that, in addition to clearing up the organizational morass, the key was getting good people. Mr. Peterson replied that a man with professional pride would not go into the present aid organization, given its lack of morale and continuity and the discrediting of the program.

Mr. Fried said that the international institutions could take on major responsibilities. They could work with individual LDCs and take the heat off our bilateral relations. The United States is now in a position to step back and support their activities, which would be a basic change in our world role.

The President cautioned that many countries say they would prefer bilateral aid—since they can put more pressure on us directly. Dr. Kissinger said we would seem to retain the bilateral option under the proposed program. Mr. Peterson agreed, but noted that we could put 2/3 of our development assistance into multilateral channels now. Dr. Kissinger noted that this would take us out of the line of fire, since the international institutions can take criticism more easily. Mr. Fried added that this approach means fewer people, and different kinds of people, in the US program.

Mr. Peterson noted that he had been mindful of the President’s warning that his proposals must work. He had therefore disregarded targets for aid based on proportions of GNP. We, along with other donors, should provide whatever money increases are needed to increase the role of international institutions. Beyond that, he would not seek more money now. After a year or two of experience with the new institutions, we can come to Congress with intelligent estimates of the needs.

The President agreed, adding that this report would have been forgotten and derided if it had focused on amounts of aid. Instead, its proposals will fit into our reassessment of our over-all approach to foreign policy and its institutions, many of which were set up over twenty years ago. For the first time, we might be able to set up permanent institutions. AID had been seen for far too long as a temporary institution; Mr. Peterson added that continuity was necessary—the job could not be done in two or three years.

Dr. Kissinger added that AID’s presentation to Congress of aid as a percentage of GNP was a disaster. Mr. Peterson’s proposals, on the other hand, would provide a framework for a durable assistance program.

The President suggested that Mr. Peterson indicate, early in the report, that he was offering a reform of our institutions; that times have changed, so our programs must change; that he was deliberately not getting into amounts of aid; and that we can make judgments on amounts at a later time when our new institutions are in place. The President directed Dr. Kissinger and Mr. Bergsten to incorporate some of these themes in the appropriate section of his forthcoming Foreign Policy Review.

Finally, Dr. Kissinger urged Mr. Peterson to say what he thinks, rather than what would be bureaucratically acceptable. The President urged him to get out in front. Many will say his approach won’t work, but nothing will occur unless the Task Force takes the lead. They should be controversial and then they will attract attention.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Presidential/HAK Memcons, Box 1023, Nixon-Peterson, et al. 2/11/70. Confidential; Eyes Only. Drafted by Bergsten. According to the President’s Daily Diary, the meeting lasted from 10:07 to 10:55 a.m.; Fried is not listed as one of the attendees. (Ibid., White House Central Files)