THE most significant event in the historical evolution of the century, in the opinion of Mr. Dag Hammarskjold, Secretary-General of the United Nations, may one day be considered to have been not any of the questions now uppermost in the news but the revolt of three-quarters of the world's populations--nearly 1,700,000,000--against the continued acceptance of poverty, ignorance and ill health. The peasant in his rice paddy, the fisherman on the lagoon, the hunter in the steaming jungle, have awakened from centuries of lethargy. Their forebears endured patiently the evils of poverty and ignorance because they had no basis for even imagining a better life. The great surge of modern science and technology has changed all that. With the airplane bringing the peoples of the world closer and closer, and with the spoken word penetrating even to remote villages via the air waves, underprivileged people everywhere have come to believe that a better life is possible for them. They know now that malnutrition and disease are not inevitable and that it is possible to create conditions in which their children can grow in knowledge and dignity.

This great awakening has profoundly altered the world situation. Its potentialities for progress or disaster are far-reaching. Out of the yearnings of these millions of people can come a better world, or, if the yearnings are ignored, a very dangerous world for the richer nations. Improvement in the living standards of these people is by no means a complete answer to all their problems. But it is the basis of progress toward solutions of any kind.

The signs of this revolution are all about us. No less than 22 nations have insisted upon and won independence for their 800,000,000 people in the short period of the 1940s and 1950s. Several other nations comprising many tens of millions of people will become independent in 1960. And there is explosive unrest in many countries, on every continent--Africa, Europe, South America and even North America.

Some 60 nations of the 82 members of the United Nations would by any criteria be classified as less developed. In addition, there are 40 important territories which should be so classified. Quite a formidable array--100 countries, one billion people. Red China, not being a member of the United Nations, is not included in these calculations.

Our churches and other humanitarian groups have long been concerned with the plight of the desperately poor and underprivileged in other lands. For centuries missionaries have tried to bring them spiritual comfort, and have done what they could to relieve their hunger and improve their health. But it has been all too little; moreover, it has been philanthropy. Bettering their lot through economic development--by helping them help themselves--is a new idea, and one that has begun to take hold only in the last ten years. Until recently their resources were more exploited than developed. For that matter, even in the richer countries development of resources rather than exploitation is a relatively new phenomenon. Here in the United States not long ago we were exploiting our rivers and our forests and "mining" our lands rather than developing them.

A significant recognition that something had to be done for the people in the less developed countries--in the interests of all--was President Truman's Point IV Program. About that time, too, certain of the European powers with colonial possessions began to recognize that development was preferable to exploitation.

Our present decade of the 1950s has seen this idea grow most encouragingly. Assistance to the underdeveloped countries has increased substantially, and today virtually all the industrially advanced nations not only contribute through the United Nations but have country-to-country assistance and development programs, and many are participating in regional programs. President Eisenhower has supported foreign aid aggressively and today the United States not only maintains a huge program of bilateral technical assistance through I.C.A. and bilateral lending through the Export-Import Bank and the Development Loan Fund, but it also contributes generously through United Nations agencies, the Colombo Plan and the Latin American Development Association. Great Britain, France, the German Federal Republic, the Soviet Union and other countries have also established programs for giving technical and financial assistance to underdeveloped countries.

Then, there are the United Nations agencies. First are those concerned with economic development through capital investment--the World Bank, the International Monetary Fund, the International Finance Corporation. Second, the group giving technical assistance: the United Nations itself, and also the Specialized Agencies set up to give expert advice in specific fields--education and science, food, agriculture, health, labor, civil aviation, atomic energy, and so on. And the Special Fund, of which I shall have more to say later.

In spite of these multitudinous national and international programs, there has been only a modest improvement in the living standards of the people of the less developed countries during the 1950s. There have been a few outstanding successes. For example, in the Western Hemisphere, Mexico has staged a real breakthrough from stagnation to rapid economic change, and Puerto Rico, with its "operation bootstrap," also seems to be well on the way. But the picture as a whole is not encouraging. Over-all, the average annual rate of improvement in personal living standards for the 100 countries, as nearly as it can be estimated, has been approximately 1 percent. Gross income went up at the rate of 3 percent but population increased at the rate of 2 percent, leaving a net increase of only 1 percent. In the last year for which figures are available, 1957, the income of these 100 countries was approximately $120 billion, or $120 per person. That same year the average per capita income in the industrially advanced countries was approximately $800; in the United States it was more than $2,000. One cannot get the true contrast in living standards through statistics, but so far as figures can tell the story, there it is: $2,000 per capita in the United States, $120 in the less developed countries.

Per capita income in the more prosperous countries has increased sharply in the 1950s. For example, in the United States between 1950 and 1957 it increased by $530; Canada, by $485; Western Germany, by $371; The Netherlands, by $299; Switzerland, by $372; and the United Kingdom, by $360. In that same seven years per capita income in the less developed countries increased by less than $10.

This rate of increase in the less developed countries is clearly not acceptable. It is slow--dangerously slow. Explosive situations are developing. Our war against need must be fought on far wider fronts, with intensified vigor and under a grander strategy.

II

Why has progress been so slow during the 1950s?

In the first place, the size of the job was underestimated both from the standpoint of its complexity and from that of the investment required for acceptable progress. Each of the 100 countries presents a problem differing in some respects from others, which means that there are 100 problems to be dealt with, not one. The amount of investment needed for an adequate program will be discussed later; however, speaking in general terms, too much has been expected too soon from too little.

Second, the industrialized countries have not recognized that development programs must be thought of in terms of decades, not years; not as temporary aid (or worse, "giveaway") but rather as long-term investments in people and prosperity. Because we have not regarded our aid programs in this light, progress has been retarded by lack of certainty and continuity.

Third, wholly inadequate attention has been given to investment in education, technical training and surveys of resources, all essential to economic development. It is impossible to develop sound programs without knowing what a country's resources are and without training the people to make effective use of those resources. There has also been too little investment in power development, roads, transportation, irrigation--projects which may not yield immediate returns but which are necessary to attract capital for industrial or other development.

Fourth, the underdeveloped countries, many of them enjoying new-found independence, have at times, through inexperience or otherwise, indulged in mistaken development planning. Too often they have given priority to glamor projects rather than to primary needs--a steel mill rather than a fertilizer plant, or boulevards in the capital rather than farm-to-market roads. Nor has sufficient account been taken of the need for strong incentives or for giving prestige to entrepreneurs and entrepreneurial activities. In many countries industrialists and businessmen are regarded as second-class citizens.

Finally, and this is of crucial importance, the industrialized countries have to a great extent failed to undertake economic development in the less developed countries as something good, desirable and rewarding in itself; too often they have extended economic aid to "win friends and influence people" and as an instrument in the cold war. I am firmly convinced that this attitude seriously diminishes the effectiveness of economic aid and development programs. In fact, it tends to defeat them.

Our guide in this matter should be the words which Secretary of State George C. Marshall uttered in his commencement address at Harvard University in June 1947:

It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace. Our policy is directed not against any country or doctrine but against hunger, poverty, desperation, and chaos. Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist. . . . Any assistance that this Government may render should provide a cure rather than a mere palliative.

Secretary Marshall's address resulted in the most successful economic aid program ever devised. The American people invested $13 billion in that program and on all counts it is one of the most profitable investments the country ever made. One of the most important reasons for its success was that it was carried on in the spirit of the words quoted above. As Administrator of the Economic Coöperation Administration I made them my constant guide.

The objective of the Marshall Plan was not political warfare or to win the Europeans as friends, but to assure European economic recovery. And the enterprise was carried on coöperatively through the Organization for European Economic Coöperation. The result today is a free and prosperous Western Europe. Could we ask for more?

The objective today should be to help the underdeveloped countries create self-propelling economies that will yield increasingly high standards of living and sustain internal freedom and political independence from any power, whether it be the United States, the Soviet Union or any other. To look for more is self-defeating.

Because the industrialized countries have too often been intent on getting full credit for every dollar of aid, they have failed to take full advantage of multi-national organizations to accomplish economic development abroad--even in situations in which it is clear that they can operate more effectively and at lower cost. The principal reason why multi-national organizations such as the United Nations can operate more effectively is because the less developed countries prefer to deal with them, hence their bargaining position is strong. This means that they can insist upon maximum self-help from the recipient countries. This is important not only from a standpoint of cost but also because when the receiving countries become deeply involved in projects they accept responsibility for them. A further reason for lower costs and effectiveness in execution is that the United Nations has the whole world to draw on for its experts.

The record of the Expanded Program of Technical Assistance of the United Nations, which is now completing its tenth year of operation, demonstrates the advantages that lie with a multinational organization. Last year it had a budget of $32,000,000. But because it was a U.N. agency belonging to everybody rather than a single country which could be suspected of having ulterior motives, it was able to obtain from recipient countries $60,000,000 worth of local materials and local effort. Thus the $32,000,000 snowballed into $90,000,000.

The International Bank for Reconstruction and Development (the World Bank) is, of course, the shining example of a well-administered international lending institution. It has established firm, non-political criteria for its loans and in consequence it has earned the respect of the world for the service it is rendering. Since its founding it has put more than $4.5 billion to work in revenue-producing projects, more than $800,000,000 in the last year; and it has operated profitably.

Multi-national organizations have a further advantage in that they are not--and I repeat the phrase quite deliberately--trying to "win friends and influence people." They can insist that agreements entered into be carried out meticulously by recipient nations.

III

The crucial decade 1960-1970 is just around the corner. In that decade half the world's people must find proof that they are on the road to a freer and fuller life. The very minimum they should expect is an increase in their income each year by 2 percent--as compared with the present annual increase of 1 percent. It is perhaps even more important that as many of these countries as possible make a real breakthrough to self-sustaining growth. It cannot come for all countries. But if it comes even for a dozen, it will be immensely worth while. There is a great need for examples--living examples of peoples who have made the effort and, with reinforcing outside help, have made the grade.

Can this be accomplished in the coming ten years? It is a task of staggering dimensions but I believe it can. My main reason for thinking so is that the peoples of the underdeveloped areas are on the march. Without insistence on their part, without their burning desire and effort, it would not be possible. When I first took over the administration of the Marshall Plan in 1948, I stressed that only Europeans could save Europe. Similarly, basic responsibility for the development of the less developed countries must rest with the people of those countries. Happily they seem eager to assume it.

There are other reasons for optimism. The immense scientific and technological advances of these times make it possible to speed up the pace of progress. We have more and better international tools for the job. We have acquired experience during the 1950s and can profit from past mistakes. We have come to know that most of the less developed countries are really rich--rich in material resources and latent human capacities which need only to be discovered and developed. However, if their potentialities are to be realized, a number of conditions must be met.

First, we must have a great deal more information about their physical resources. Each day at the United Nations brings new evidence of how little is really known about their mineral resources, their river flows and watersheds, about soil content, industrial potentialities, markets and the like. Resource surveys are a highly important prerequisite of economic development.

Second, there must be a great increase in educational and training facilities. The human resources of the less developed nations have been shamefully neglected. Only a very small percentage of the people who live in these countries have ever had the opportunity to acquire an education. Most cannot even read or write--and only a few have ever had positions of responsibility. There is an immense need for training of all kinds, from on-the-job training of artisans to the more complex sciences of technological institutes. And let no one believe that the people of the less developed countries cannot be trained to be good mechanics, good farmers, good engineers, good doctors, good administrators. I recall a myth current in the United States not long ago that the Russians could not even run a tractor; and then came the sputniks.

Third, there must be a substantial increase in capital investment, of two kinds: investment in projects that are immediately revenue-producing; and investment in basic facilities such as schools, hospitals, highways and communications, which cannot produce revenue overnight but which are the foundation for a sound economic structure.

Finally, many underdeveloped countries need assistance in administration. Modern government is a complicated affair even when it is not carrying the additional burden of a development program. These countries must be able, if they wish, to call upon the more experienced countries, preferably through an international agency such as the United Nations, for well-qualified persons who can temporarily serve them in an operational, administrative or executive capacity.

IV

How much investment is needed to effect acceptable progress in the underdeveloped countries?

In the year 1957, the last year for which figures are available, it is estimated that $9 billion was devoted to capital formation by the 100 less developed countries. Of this amount, $6 billion came out of the meager $120 billion income of the countries themselves, and $3 billion from outside sources in the form of public and private investments and grants. If capital formation and investment from outside continues at the 1957 rate, some $90 billion would be available in the decade of the 1960s.

Experts are in surprising agreement as to the amount of additional investment which will be required to assure the minimum acceptable increase in per capita income during the decade. It is between $35 billion and $45 billion. Let us take the average and call it $40 billion. Of this amount, $10 billion can come from increased capital formation in the countries themselves; $30 billion must come from increased investment in those countries from outside sources.

Where might this additional $30 billion come from? Some from increased private investment, some from an increase in World Bank loans, some from increased investment by colonial powers in their overseas territories, some from increased provision of agricultural surpluses which, under certain circumstances, are capital. The remainder will have to be supplied in the form of development loans from existing or new national or international institutions. The exact mix will largely depend on the speed with which knowledge of the natural resources of the developing nations is acquired and people are trained to make effective use of them.

If maximum emphasis is given to such programs and if a total investment program is going forward expeditiously with assurance of adequacy and continuity, I estimate the following:

(1) That private investors in the advanced countries may, over ten years, increase their supply of capital to underdeveloped countries, over present levels, by $7 billion.

(2) That the World Bank, with recently doubled capitalization, may over ten years supply the underdeveloped countries with funds over and above present levels by $4 billion.

(3) That the colonial powers may increase investments in their overseas territories, during a ten-year period, by $3 billion.

(4) That the agricultural surpluses supplied to the underdeveloped countries during ten years may be increased over present levels by $3 billion.

These figures add up to $17 billion. The four sources enumerated are not only capable of expanding their investments to the estimated levels, but if all goes well may be predicted to do so. This would leave $13 billion in additional investment funds to be supplied over the years by increases in development loans supplied through national development loan programs (such as the U.S. Development Loan Fund), by regional development associations (such as the Latin American Association and the Colombo Plan), and by international development associations which would be established.

It is in this last category that there is least assurance of either adequacy or continuity of funds, and the greatest need for new thinking and the creation of new financial institutions. The greatest unfilled need of the underdeveloped countries today is for additional investment in what in modern terminology is called "infrastructure"--the schools, hospitals, roads, communications, irrigation and other facilities which are not immediately revenue-producing but which must be present before revenue-producing investment can be expected in any volume. Here is the greatest challenge to the more advanced countries: to have the vision and confidence to make investments of this kind which are adequate and which have an assured continuity over a period long enough to enable the developing countries to bring their economies to a point where they are self-propelling.

A number of national development loan programs and regional development associations are already functioning. For example, the Development Loan Fund of the United States has been investing at the rate of $700,000,000 per year, the new Latin American Fund is scheduled to invest between $100,000,000 and $200,000,000 per year, and the British Colonial Development Fund, the Colonial Development Corporation and France's FIDES are also putting out substantial amounts. However, the need for development funds will not be satisfied until an international development association is established. Such an association is needed not only to supply additional funds but also to give leadership and coördination to regional and national programs.

In all the discussion about investment and sources of capital, one point should be emphasized again and again. It is not dollars, pounds or marks that these developing countries require--it is mainly goods, and some services. They need wheat and other agricultural products which are surplus in other countries. They need steel, trucks, machines, tools, electronic instruments, road-building equipment, mining supplies, construction machinery, cement, chemicals, fertilizers, transport equipment and so forth. And a great many of these items can be manufactured out of unused capacity in the advanced nations, thereby recovering the huge social and financial costs of idle men and idle machines today and avoiding these costs tomorrow.

V

The newest tool for accelerating economic growth in the less developed countries is the United Nations Special Fund established by the General Assembly of the United Nations in November 1958. It is a semi-autonomous organization, responsible to a Governing Council elected by the General Assembly and supported by voluntary contributions of the member nations. In 1959 the United States agreed to contribute two-thirds of the total amount received from other countries. The amount available for 1959 is presently estimated at $26,000,000. The outlook for 1960 is much more encouraging. The indications are that something over $50,000,000 will be subscribed.

The Special Fund is not a lending institution. It provides no investment capital and engages in no field operations. Its function is to help bring into being some of the pre-conditions for successful private and public investment. For the most part it supports relatively large projects which may be expected to lead to early results and have the widest possible impact in accelerating development in the countries concerned. And it seeks, where possible, to enlist local effort and financial support for the projects undertaken.

The Special Fund now envisages, or is engaged in, financial support for projects of three main types. The first is surveys of natural resources--geological surveys, soil surveys, hydrological surveys, timber surveys, fishery surveys--all intended to disclose wealth that has not previously been used for the benefit of the country.

The second is the establishment of research laboratories, for scientific research can disclose greatly expanded uses for local materials. The third is the establishment of training institutes. People everywhere will respond to training, but the required education facilities have not been available. The Fund cannot help in providing basic education, a special problem with which UNESCO has been concerned; but it will train people to train people, particularly in vocational, scientific and administrative skills.

The success of the Fund will not be judged by the number of reports added to the shelves, but by the number of new investments made possible and by the skills learned. The aim is, through the expenditure of a few million dollars, to lure billions--to bring out a vast amount of undisclosed wealth, to make bankable many undertakings which would otherwise at most remain but interesting ideas. And it is to develop the talent and increase the productive capacity of increasing numbers of people.

There has been no dearth of projects during this first year of Special Fund operations. With approximately $26,000,000 available to the Special Fund in 1959, there have already come 116 requests from governments asking for a total of more than $100,000,000 in financing. These projects have not all been evaluated, and undoubtedly some will be declined, but more are coming in every week.

The first 13 projects approved by the Fund's Governing Council, in May 1959, while not a representative pattern, suggest the nature and scope of the operations. The allocations, covering periods of three to five years, and totaling $7,550,000, are as follows:

Argentina: Electric Power Survey $ 250,000
Costa Rica, Guatemala, Honduras, Nicaragua, El Salvador:
  Central American Research Institute for Industry (ICAITI) 900,000
Ghana: Survey of Volta River Flood Plain 305,000
Greece: Pilot Project in Groundwater Development 245,000
Guinea: General Development Survey 400,000
India: Industrial Instructors' Training Institute 860,000
Israel: Pilot Project in Watershed Management 320,000
Jugoslavia: Training of Vocational Instructors 905,000
Poland: National Center for Training Supervisory Personnel
  in Industry 700,000
Thailand: Investigation of the Silting Conditions in the Bangkok
  Port Channel 600,000
Turkey: Middle East Technical University 1,500,000
United Arab Republic: Pilot Project for Drainage of Irrigated
  Land 300,000
United Arab Republic: Soil Survey from Aerial Photographs 265,000
Total $7,550,000

Each of these projects holds exceptional promise. For example, the Volta River survey seeks to determine whether suitable soils and topographic conditions exist for large-scale growing of sugar cane, cereals and other irrigated crops. If this survey, costing the international community a few hundred thousand dollars, has favorable results, it will bring into cultivation more than 50,000 acres of flood plain, and provide a basis for the establishment of a new industry in Ghana, the cultivation and refining of sugar. It could, in fact, start a chain reaction.

Another of these promising projects is the expansion of the Central American Research Institute for Industry. This Institute is the product of coöperative action by five Central American governments--Guatemala, El Salvador, Nicaragua, Honduras and Costa Rica. Its success to date in helping governments and private enterprises develop new industries and expand existing ones clearly demonstrates that it can contribute mightily to strengthening the economies of the five countries.

On the training side, a vocational training institute is projected in India, which is expected to train 800 craft instructors each year through courses in 14 different fields, extending from carpentry and plumbing to mechanics. The instructors so trained will in turn instruct many thousands of trainees. The Special Fund is providing experts to train the instructors, and also necessary equipment.

All of the projects approved by the Special Fund call for substantial contributions by the government concerned. In the case of the Indian training institute, for example, the Special Fund's contribution is estimated at $860,000, the Indian Government's will be $2,140,000. If outside assistance is to be taken seriously in a receiving country and have its fullest effect, that country must bear a heavy share of its cost and of responsibility in operation.

It is expressly forbidden to use the Fund's assistance as a means of foreign economic or political interference in internal affairs of the countries concerned. Nevertheless, strict conditions and accountability are demanded of the receiving governments and the "executing agents" to ensure the effective use of international funds.

VI

Are the advanced countries justified in making the additional $30 billion investment in the next decade? The answer is an emphatic yes, for several reasons.

First, we must do what is possible for our own sakes and for the sake of our children; there can be no peace in the mind or in the world if the present admiration of the poorer nations for people in advanced nations should, because of frustration, turn to envy and hatred. They expect us to join them in a magnificent enterprise, a new practical humanism on a world scale. And here idealism and realism can at last be united, for even from the standpoint of our own most immediate economic interest we must carry out this program.

Our aid is an investment in the stability and well-being of the forgotten nations, and investment in our own prosperity. The advanced countries must look to the less developed countries--in Asia, Africa, the Middle East, Latin America--for most of the raw materials they need, and for the additional quantities they will need in the years to come. And they can also look to the less developed countries as the largest potential consumer market in the world. These are the new economic frontiers. To take only the case of the Americas: the less developed countries, even with the present very limited improvement in their situation, are spending twice as much on American goods as they did at the end of World War II, five times as much as they did in 1938. As the poorer countries develop, so will their purchasing power and the volume of their trade. Rising prosperity in those countries will ensure rising prosperity elsewhere. Our own development is geared directly to theirs.

The most compelling reason of all for increasing our investment in the underdeveloped countries, however, has to do with our security. We are living in an unsafe world, and our greatest problem today is to prevent its blowing up. The United States alone is spending for defense at the rate of about $45 billion a year--$450 billion for defense in the next decade, if the present rate is maintained. The authorities say it is going to increase, and we are not asking: "Can we afford it?"

One of the reasons why our world is unsafe is, as I stated earlier, that hundreds of millions of people in the less developed countries are refusing to accept their present condition as inevitable. Economic advance in these countries is not a complete answer to the question how to achieve peace, but it is a step toward peace. It lessens the social and political instability that springs from discontent and resentment and it lays a more stable basis for sound economic relations among nations. I believe that if over the next decade an additional investment of $30 billion by the advanced countries does help to move the world in the direction of peace, it will save many times that sum in defense expenditures.

The goal which has been set forth for the coming decade--a doubling of the rate of increase in per capita income in the underdeveloped countries--may seem to be over-modest. It would mean an increase of the average per capita income of the less developed countries from $120 to about $140, or perhaps a bit more. That increase may seem insignificant to us, but for hundreds of millions of people it would mean clean water, better medical facilities, protection against epidemic and endemic diseases, more schools, a chance to learn to read and write and acquire knowledge. And just to get perspective, let me recall that today's average income in India is only $68 per capita.

However, the most important point is that this decade could be used to lay the foundations for a number of countries to achieve self-sustaining economic growth. Such a breakthrough by a few countries--a first lurch off dead center--would inspire all underprivileged peoples. For the entire community of nations it could be one of the most spectacular events of the century. It could give such momentum to a forward movement that no one can say how far it might carry. In this connection we should consider the experience of the European Recovery Program. It was the highest hope of most of us involved in it that within the four-year period agricultural and industrial production would be restored to prewar levels. But the Europeans, once they were assured of adequate assistance, went to work with such spirit and drive that within two and one half years industrial production in Europe was 40 percent ahead of the prewar level and agricultural production 20 percent ahead.

This much is certain. If we can accelerate the pace of economic development in the 1960s as we hope, and if it is maintained, it will come close by the end of the century to banishing the poverty, illiteracy and chronic ill health which have plagued the human race since the beginning of time.

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  • PAUL G. HOFFMAN, Managing Director of the United Nations Special Fund; Administrator of E.C.A., 1948-50; former President of the Ford Foundation
  • More By Paul G. Hoffman