IN A few paragraphs, the fourth point of President Truman's inaugural address in January 1949 phrased a concept that sparked an electric response along the great circuit that links the minds and imaginations of human beings throughout the world. The concept was basically simple. It declared that:

1. Mankind for the first time in history possesses the knowledge and skills to make his environment yield an adequate and progressively improving return to all peoples.

2. Despite this knowledge, more than half of the world's people still live under economic systems which provide less than minimum needs of food, clothing and shelter, and lack the promise of betterment.

3. Since the security and continued prosperity of the United States and other relatively industrialized nations can be maintained only if there is complementary progress in the economically backward areas, we should assume the leadership in a concerted productive effort which will promote both their interests and ours.

4. Basic to the accomplishment of this purpose is a flow of investment capital, carrying with it technical and managerial skills, to create and harness mechanical power and production tools and equipment so that they supplement the work of human muscles. Our policy should focus on creating conditions that permit and encourage such transfers, under procedures that avoid imperialism or any form of exploitation on either side, and are founded upon mutual respect and recognition of a mutual interest.

5. "Democracy alone can supply the vitalizing force to stir the peoples of the world into triumphant action, not only against their human oppressors, but also against their ancient enemies--hunger, misery and despair."

The wide and extraordinarily warm response invoked everywhere outside of the Communist world by this formulation of a new phase of American foreign policy merits examination. Seemingly, it stemmed in part from a recognition that we were thereby taking a further step away from our traditional isolationism. Our acceptance of a common interest between United States and Western Europe had been attested by our participation in two world wars and by direct military and economic aid, amounting to some 55 billion dollars, given to Europe during and after the second of these struggles. Point Four was a declaration that our interest included a concern for the well-being and progress of the entire world.

Furthermore, this interest was defined not in military or even in political terms. The pronouncement placed it squarely upon economic considerations that linked the continuing progress of our system to a correlative development in the economies of all democratic peoples. As a nation, we have 6 percent of the world's peoples and 7 percent of the world's land area, but more than half of the world's industrial output. Yet we possess only one-third of the raw materials, so that we depend upon others for a large part of our strength. These economic ties have a way of persisting through periods of peace, war or the uneasy half-war, half-peace, in which the world now lives.

Thus, the principles stated in Point Four were accepted as an assurance that we have moved from self-contained sufficiency to a recognition of our responsible partnership in a free-world effort. This emphasis has tremendous import. Its implications should be thoroughly understood here as well as abroad.

There already was no lack of evidence that the United States stood ready to coöperate with other nations in time of need. Over the past ten years the total of its military and economic assistance to other nations has amounted to the staggering sum of approximately 80 billion dollars. But the money was spent for emergency measures to meet successive crises. One after another, lend-lease, UNRRA, the United Kingdom loan, Philippine rehabilitation, Greek and Turkish, Japanese and Korean aid, the Economic Recovery Program, and even to a major degree our subscriptions to the International Bank and Monetary Fund arrangements agreed upon at Bretton Woods--each was submitted to and accepted by the people of the United States as something that must be done to avoid catastrophe, with a strong implication that once it was done the situation would be well in hand and our responsibilities discharged.

It is unfortunate that the presentation of the Point Four concept to the American public and the specific steps implementing it have taken a form that carries the dual connotation of a "give-away program" and one that is principally concerned with sending technicians abroad to offer advice. Humanitarian motives are deeply ingrained in the United States tradition and have been nourished by the religious and democratic heritage of its people. But the tendency to accept the giving of grants and advice as an all-embracing definition of what is implied in the Point Four program does a major disservice to its basic principles.

Such an interpretation narrows the broad pronouncement of community of interests put forth in the President's original statement, and it even now clearly whittles down the statement of purpose given to the program by Congress in Title IV of its Act for International Development (Public Law 535). In Section 403(a) of this law, Congress states: "It is declared to be the policy of the United States to aid the efforts of the peoples of economically underdeveloped areas to develop their resources and improve their working and living conditions by encouraging the exchange of technical knowledge and skills and the flow of investment capital to countries which provide conditions under which such technical assistance and capital can effectively and constructively contribute to raising standards of living, creating new sources of wealth, increasing productivity and expanding purchasing power." In a preceding paragraph [Section 402 (a)] it is stated: "The peoples of the United States and other nations have a common interest in freedom and in the economic progress of all peoples. Such progress can further the secure growth of democratic ways of life, the expansion of mutually beneficial commerce, the development of international understanding and good will, and the maintenance of world peace."

It is this emphasis upon community of interests that gives significance to Point Four as an important forward step in the evolution of our foreign policy. Once accepted, it is clear that any program for carrying out our intent must be broad enough to embrace all of the aspects in which our economy exerts important impacts upon the economies of others in the free world, not merely the giving of gifts and technical advice. It is equally clear that the program must be a continuing one--geared to the deliberate pace of economic development rather than to the bell-clanging rush of apparatus designed to put out fires.

The pressure of compelling political or security considerations will necessarily change the focus and the emphasis of our economic policies at home and abroad. The policy of Soviet Russia and her dominated satellites is to organize a tightly-contained economic area having the least possible trade with free-world areas. This necessarily restricts our community of economic interest to those countries outside the Soviet orbit. The militarily aggressive Soviet policy forces us at the present time to give precedence at home and abroad to those aspects of economic activity which will assure successful resistance to that aggression either through direct production of armaments or through correcting deficiencies that make certain areas peculiarly vulnerable to pressure from without or subversion from within.

But the aim of our foreign economic policy should remain constant--in peace, in emergency, or in war, if war cannot be avoided. If we live up to our pronouncements, we shall conduct our economic affairs as a whole in a way to further the healthy, balanced development and the progressively larger yield of the economies of all peoples who elect to belong to the free-world trading system.

II

Is the concept of an economic policy based upon community of interest valid? To answer this, we must know the importance of our economic ties to the so-called underdeveloped areas and whether it entitles them to high priority among the competing demands being made upon scarce resources in the present emergency period. First, let us demarcate the areas we are talking about.

The term underdeveloped may be applied to areas of the non-Communist world inhabitated by the 1.75 billion people living in Latin America, Africa, Greece, Turkey, the Middle East, South Asia, Southeast Asia and the Pacific islands of Oceania. The term has never been given precise definition; and obviously any descriptive term applied to the above areas will mask the widest disparities in ethnic groups, cultures, religious values, population densities and social and economic institutions, as well as in climates, topographies and resources. A few of the countries situated in these general regions have attained per capita income levels that remove them from the "underdeveloped category," except in the sense that all countries might make better use of their material and human resources. Perhaps they account for about 40,000,000 people. It may be said of the remainder that per capita incomes are appallingly low--generally under $200 per year and averaging perhaps $80 a year. Further, their annual outputs in few cases are increasing faster than their populations, and hence they offer little current promise for bettering levels of living; they are largely agricultural, with low yields per person employed and per acre, so that they seldom produce sufficient foodstuffs to provide a satisfactory domestic diet; and their manufacturing and industrial activity is generally rudimentary.

Despite the meagerness of their individual and collective economic output, the economies of the underdeveloped areas are of crucial importance to the United States and to Western Europe. The very imbalance which limits their production and makes them so vulnerable to world commodity market fluctuations gives them a weight in world trade quite disproportionate to their overall economic performance. They supply 57 percent of the United States' imports and 65 percent of Western Europe's. Of the critical and strategic materials upon which armaments depend, they supply three-quarters of all United States imports and an even higher percentage of those of our European allies. Clearly, the success of the industrial mobilization plans of the North Atlantic Treaty countries is contingent upon the continued and increasing supply from underdeveloped areas of such strategic minerals as bauxite, chrome, copper, lead, manganese, tin, uranium and zinc. The same is true for natural rubber and a variety of important fibers. Our civilian economies are equally dependent upon the same sources for such items as coffee, tea, cocoa and bananas and other fruits and foodstuffs. Seventy-five percent of Western Europe's supply of petroleum comes from the Middle East, and the cutting off of even the 25 percent supplied by Iran would have a most serious impact upon the petroleum economy of the entire Western World.

The interdependence is equally impressive when viewed from the perspective of the underdeveloped areas themselves. Their highly specialized economies depend for more than 70 percent of their total imports on the United States and Western Europe. Any important curtailment of this supply would create chaos for most of them. Their imports represent a decisive proportion of their ever-deficient supplies of manufactures and foodstuffs for consumers, and a preponderant proportion of all of the basic equipment needed both for maintenance and for development.

Here we have a striking example of the principle set forth above, that the Point Four policy must have regard for the total impact of industrialized economies upon the less developed. As our NATO programs for munitions production bite deeper into our available supplies of materials, manufacturing capacities and manpower skills, there will be--there already is--increasing pressure to tighten up on our export licensing. The underdeveloped areas are dependent upon the United States and Western Europe for imports valued last year at more than 12 billion dollars; and for most of these they have no presently feasible alternate sources of supply. Cutbacks of these exports, even to the degree that we curtail our own output of civilian goods, will have a far more disruptive effect upon their economies, habitually starvation-thin, than we can imagine. Any reckless handling of this problem can create such chaos in the underdeveloped areas that our present imports of raw materials from them may be completely upset, and future imports perhaps lost as a result of their being thrown into the closed economic orbit of the enemy.

One of the strongest arguments for setting up an administration for the whole foreign economic program, including development, is that through export controls alone the United States can do the underdeveloped countries 5 billion dollars' worth of damage. This could never be compensated for by an aid program totalling a few hundred millions, however well intentioned it might be in concept. If we choke off the equipment upon which their industrial progress depends, any program of economic coöperation designed to stimulate economic development in underdeveloped areas will be an act of hypocrisy.

If we look beyond the present emergency to our long-term economic prospects we see that the stake of the United States and Western Europe in an expanding economy throughout the free world is even more impressive. The United States accounts for more than one-half of the heavy industry production of the world, but it mines only about a third of the 15 basic minerals upon which such production depends. Even so, it is depleting its mineral reserves at an exorbitant rate. On balance, the mineral reserves now within Soviet Russia's effective control are larger than those available to the United States within her own borders and from other parts of the Western Hemisphere. Our industry will become increasingly dependent upon imports. If access to the raw materials of the underdeveloped areas were to be denied to us and to Western Europe, our current industrial outputs would be devastatingly affected. Unless development in those areas keeps pace, it simply will not be possible for the United States and Western Europe to continue to expand their economies in the future in the manner which has given them their strength in the past.

Thus both the security of our free world and our own continuing economic growth are dependent upon the development of the underdeveloped countries. But we should be under no illusions that we could, even if we wanted, expand them as raw material suppliers exclusively, retaining ourselves the more lucrative operations of transferring such materials into manufactures. The history of the United States shows conclusively how stubbornly the people of a nation and of its several segments insist upon the prerogative of diversification, and how wise they are to do so.

Thus while we must seek to expand the free world's raw material production, our policy must be sufficiently broad and sufficiently wise to encourage an industrial expansion as well. The chief incentive of the underdeveloped areas to produce additional raw materials for export will be the desire to acquire the exchange to purchase the equipment for building healthily-balanced economies. Initially they must purchase such heavy equipment from industrialized areas, since machine tools and machinery generally are the product of relatively mature economies. Eventually, they will produce such machines themselves. Those who fear the impact of such competition would do well to consider the volume of market demand if the billion people of the underdeveloped free-world areas could raise their per capita incomes from the present average of $80 per year to the $473 level of Western Europe or to the $1,453 level of the United States.

III

When once the fact of interdependence and community of interest among the United States, Western Europe and the underdeveloped areas of the free world is accepted, two questions thrust themselves forward. The first: Is it within the practical range of our power and resources to aid effectively more than a billion people to move their economies off dead center and imbue them with a dynamism to match our own? If this question can be answered affirmatively, the second is: How?

The 150,000,000 people of the United States have devised an economy which currently produces a national income of well over 250 billion dollars per year. The 270,000,000 people of Western Europe are producing an income totaling 150 billion dollars. The billion people with whom we are concerned live on an income estimated at, perhaps, 80 billion dollars. The several economies are all interrelated. Looking at their magnitude instead of at the numbers of population, we see that the 400 billion dollar economy of the industrialized West can obviously exert a decisive impact on the 80 billion dollar economies to which it is so closely linked. Thus the question of "whether" can be quickly resolved. The answer is affirmative. The question of "how" is far more difficult. Here any answer must take cognizance of the fact that our past relationships with these areas have not, except in a few cases and upon a limited scale, sufficed to plant the seeds of organic growth. But the barrenness of the past record need not be regarded as an index of future possibilities, since until now there has been but little recognition of the need to concentrate on such a goal and no focussed effort to achieve it. The essential job is one of organizing all of our economic relationships with the underdeveloped areas in a fashion to lead consistently toward economic progress. For maximum effectiveness there must be close coördination of policy and practice between the United States and Western Europe.

Last fall, the President asked the International Development Advisory Board to report on how the results he had sought in his Point Four statement could be achieved. The Board consists of 13 men and women from varying walks of life, with varying experience and talents. After some months of work in coöperation with a staff of experts in many fields, they reached unanimous conclusions which they submitted to the President in March. The author of this article served as chairman.

It was our conclusion that in the interest of clear policies and effective operations there should be set up a centralized agency, an Overseas Economic Administration, with powers of administration or coördination sufficient to give consistent direction to the whole United States foreign economic policy. That was the same conclusion reached by Paul Hoffman, former head of E.C.A., in his book, "Peace Can Be Won." The major immediate objectives of our foreign economic policy must include:

1. A drive to increase food production in the underdeveloped areas by 25 percent, which would bring them barely above the minimum needed for health.

2. An increase of 50 percent in the production of raw materials for export by the underdeveloped areas as a means of meeting the needs of the industrialized world and of giving the underdeveloped areas the exchange they need to maintain their economies and to further their own agricultural and industrial progress.

3. The maintenance of essential exports from the United States and Western Europe at levels which avoid disruptions that might threaten national security; and the accordance of due weight to development needs which would improve the internal economies of the receiving states, giving them positive incentives for adhering to free institutions.

4. A foundation for broad economic development which will increase production and make possible a rising standard of living in the underdeveloped areas.

Under the pressure of current emergency mobilization requirements, our foreign economic policies and procedures are inevitably governed by considerations of national security. Nevertheless, in order to be successful our strategy must take account of the need of preserving the cohesion of the countries of the free world against either external aggression or subversion. To accomplish this, it must embrace far more than the production of arms, although that is essential. For both the emergency and the longterm the instruments for promoting economic progress are the same. They are: the furnishing of capital goods upon which productive efficiency depends; the exchange of consumption goods produced under the advantages derived from the specialized employment of resources and skills; and coöperation to achieve more efficient methods of production and management. At all times the problem is to see that these instruments are used in a way that promotes the combined strength of all the coöperating nations and the individual strength of each within the group.

It will not be enough to provide merely for the coördination of policy and administration within the United States, though the need for this is indicated by the fact that there are at least 33 international agencies and 23 United States agencies presently administering more or less autonomous programs having some bearing upon foreign economic relationships. Even the most efficient centralization or coördination on our part will not produce useful results in the underdeveloped areas unless we have a clear and intelligent conception of their local needs. To this end, the central organization in the United States should be set up on regional lines, with an assistant administrator in charge of the program for each of the major areas. Since the economic program should be developed in accord with the over-all foreign policy of the United States, the regions should parallel the desk organization of the State Department. It would be wise to provide for two special assistants to the general administrator of the central organization, one to encourage the participation of private business and non-profit groups, and the other to correlate United States activities with those of the United Nations and other international agencies.

It is obvious that the major impetus for economic progress in the underdeveloped areas must come from local initiative and local resources. Foreign capital, economic and social coöperation, and technical aid can be extraordinarily useful--they may even be essential in the initial development stage--but they can never have a decisive effect unless the people concerned show a will for improvement and offer genuine hospitality. Within each region, development plans must be worked out on a country-to-country basis; within each country, they must be worked out coöperatively with the citizens and their government representatives. The regional representatives in the central United States establishment should help develop over-all plans with respect to each country through a joint commission containing strong local representation in addition to those who are assigned from the United States. They would have the continuing responsibility of seeing that the sum of American economic relationships serves a constructive end.[i]

IV

In the above sections an attempt has been made to answer in the space available, the questions of "whether" and "how." There remains the overridingly important question of "what." The following paragraphs will attempt to outline the steps which might be taken to answer that question.

Economic progress in the underdeveloped areas as elsewhere depends upon three main factors.

The first is the production and distribution of goods. This is primarily a function of private enterprise, from the smallest farmer to the largest industrial corporation. It is logical, therefore, that we should help others in these fields by encouraging private direct investments abroad or joint investments with private domestic capital.

The second factor is that of the basic services of health and sanitation, education, agriculture, public administration and training people in basic skills. A variety of philanthropic and religious groups pioneered in carrying American procedures in these activities abroad. Now these are becoming more and more subject to government initiative. Our Government is best equipped to coöperate in these fields with government agencies abroad, either through its own technicians, those of the United Nations or experienced voluntary agencies.

The third factor is public works such as roads, railways, harbors and irrigation projects. These are primarily the responsibility of governments, but in many areas are developed by private capital.

Efficient agricultural and industrial production depends upon capital investment. The underdeveloped areas, with an average per capita income of $80 a year, simply do not generate sufficient savings to provide the needed capital equipment. Few of them have the will or the mechanisms to channel even their limited savings into productive uses.

Pioneer economies everywhere have depended for their initial forward impetus upon the foreign private investments provided by relatively mature economies. Investment in frontier areas has always entailed great risks. Historically, however, the large returns from successful ventures have more than offset the losses from those that failed. At the height of Britain's economic power, private foreign investment amounted to a fabulous 10 percent of her total national income, and it averaged almost 2.5 percent for a period of more than 30 years. Private foreign investment from the United States has lately been averaging less than .5 percent; and the United Kingdom and other countries of Europe no longer have any considerable margin of funds to commit abroad.

One major reason for the decline in foreign private investment is to be found in the new tax structures of industrialized countries. Corporation and individual income taxes absorb so much that what is left from bonanza enterprises no longer compensates for the capital lost in ventures that fail. Hence, a premium has been placed upon security in investments; investment in high-return, high-risk ventures has been discouraged. This has militated particularly against foreign investments in frontier areas, where the business risks remain as high as formerly and the nonbusiness risks--political disturbances, expropriation, discriminatory treatment, exchange losses, transfer difficulties and the like--are even greater than formerly. Underdeveloped areas obviously could do much to reduce such hazards, and should be encouraged to do so. But it is well within the power of the United States, the leading creditor nation, to take steps that, at relatively modest cost, would greatly increase the incentives for private investors to renew their interest in foreign investments.

The simplest, most effective and cheapest way would be for the United States to adopt the general principle that corporate taxes will be imposed on earnings only in the country in which they are realized, without requiring that the difference between the foreign corporate tax and the United States corporate tax be paid when they are repatriated. Tax rates are generally low in underdeveloped areas, and this is one of the few genuine incentives they can hold forth. But the incentive is completely discounted by the United States tax law. Although the loss in tax revenues to our Treasury through the immediate adoption of this measure would be small ($200,000,000 on the basis of 1947 figures, the latest available), it would probably be expedient during the current budgetary stringency to restrict the concession to new foreign corporate investments only, with the provision that it should automatically apply to all foreign corporate investments when the emergency is officially declared ended. A partial exemption should be offered to individual investments abroad that would offer incentives comparable to those granted corporations.

In addition to such tax incentives, there is genuine need for a banking facility not now in existence. Its job would be to furnish senior or equity capital to cover the domestic currency costs of establishing an enterprise. Many potential investors are willing to hazard the exchange risks of the dollar (usually the equipment) cost of a foreign project but hesitate to transfer additional dollars to cover land, building and labor costs and working capital. There is a similar difficulty, though for other reasons, in finding local investors to carry the domestic costs.

The International Bank for Reconstruction and Development has long been interested in the above problem. There is reason to believe that it would be glad to operate, as an affiliate, an International Finance Corporation which would make loans in local or foreign currencies without requiring government guarantees and likewise make non-voting equity investments in local currencies in participation with private investors. Obviously, the Finance Corporation would select its investments upon criteria of soundness; and there is expectation that it would realize sufficient profit from the sale of its equity holdings in successful ventures to compensate it for all risks taken. Such sales should be to domestic investors, who would acquire full voting rights with all equity stock purchased. This would be an effective step--long urgently needed--toward bringing about the local marketing of securities.

A still further step that might help to renew interest on the part of United States investors in gilt-edge foreign portfolio securities would be for the Export-Import Bank to exercise the authority it already possesses to underwrite, for a proper fee, the transfer risks of the interest and amortization on dollar debt securities of highest credit rating. The issuing corporation, which would be responsible for the risks of exchange depreciation, would thus have the advantage of obtaining long-term credit that is seldom to be had in its local market; and United States investors would again have reason to look favorably on at least some foreign offerings. If a recently-petitioned modification of the rigid New York State restrictions upon the type of investments eligible to insurance reserves is allowed, United States insurance companies will be enabled to invest 5 percent of their funds in high-grade securities abroad.

No one can state with certainty what influence the above-recommended measures would have on our private investment in underdeveloped areas. At the current rate it averages about $700,000,000 per year. Perhaps this would be tripled. Private foreign investment then would still represent less than 1 percent of our national income. We invested about twice that abroad during the 1920's, and more would be desirable now.

In making recommendations concerning the second factor--basic services, such as health, sanitation, education, training--the International Development Advisory Board studied various types of coöperation. Technical assistance alone is not sufficiently broad in concept or operation to achieve the necessary results. Nor would a United States program operated by United States personnel and paid for by the United States do the job; even if it succeeds momentarily, such a project creates jealousies among local officials; and when the United States stops, the whole project stops. Joint planning and operations in which United States and local government personnel work together, using joint resources, are needed. A specific target must be selected, and the people and resources of the country used fully. At a rate set in advance, the United States share of financing would be reduced and the local share would rise, so that at the end of the fixed period service would be entirely in local hands.

The third field--that of heavy public works--presents the most problems, and yet it is of basic importance. Huge sums can be wasted on such projects through bad planning, bad construction, bad operation. The inherent weakness here lies in the fact that the money of American taxpayers is spent for projects to be run by governments other than their own. Yet the more we try to assure high standards, the more resentment we are apt to generate on the ground that we are intervening in the internal affairs of another government.

Yet there are many cases where basic public works must precede or accompany any progress in agricultural or industrial development. Even in an emergency period, when long-term projects are subordinated to immediate needs, it becomes necessary to build highways, railways or port facilities to get out raw materials or to support new domestic production in vulnerable areas which are difficult to supply through normal exports. Since the governments of underdeveloped areas have limited ability to raise capital, outside aid is needed. The problem is to organize public works aid in a manner to avoid corrupting our political relationships--easy money, slush-fund politics on an international scale--and outraging the tolerance of our Congress and our people.

Perhaps the best way to organize assistance in this field is through an International Development Authority, which in turn could organize local authorities to carry out approved projects. The administration of its activities might well be entrusted to the International Bank for Reconstruction and Development, which has had much experience and knows how to exercise sound business judgment in assuring the feasibility of projects and in analyzing national development needs and credit potentials. There is no need to duplicate its staff work. In the course of its investigations it has turned up many useful development projects which it cannot accommodate because local credit cannot support the entire cost. Its officials believe that a number of sound loans could be made, for example, to support large-scale mining projects, if the access roads or port facilities could be given grant assistance.

If such an International Development Authority were set up--supported by major contributors to the International Bank for Reconstruction and Development in the same proportion that they subscribe to the Bank's capital, i.e. 40 percent by the United States and 60 percent by the other participants--the apparently insoluble problem of organizing efficient support for public works in underdeveloped areas might be overcome. There would be no need for a big "give-away program" by the United States, with all the accompanying pressures and strains upon good will and all of the difficulties of imposing proper controls. The funds would be administered by the World Bank, which is in a position to turn down unsound projects and accommodate useful ones with far less strain than arises when the negotiators are separate national sovereignties.

Under the auspices of such an international agency, it would be possible to establish a Jordan Valley Authority, for example, which could help settle the 750,000 Arab refugees from Palestine, one of the grave sources of unrest in the Middle East. At present, these people are being barely kept alive by some 30 or 40 million dollars of relief expenses a year. This is a palliative, not a solution. The reclamation of several million potentially fertile acres is possible, both in the Arab countries and Israel, but it is expensive. It could be accomplished through the combination of a loan from the International Bank, meeting the costs that could be repaid over a period of years, plus a grant from the International Development Authority, meeting the costs which would not be a sound banking risk. Furthermore, this would be an international loan and grant, representing a genuinely coöperative effort of the whole free world.

V

What would be the cost of a program like that here set forth? It would not be inconsiderable. But neither are the costs that we shall have to bear if major areas of the world which form part of the fabric of our national economic life and our political security are alienated. The military budget of our present armament program alone will rise shortly to an annual rate of 60 billion dollars.

The foreign aid budget submitted by the Administration for the coming fiscal year contains more than $500,000,000 earmarked for coöperation with underdeveloped areas. Such a sum would certainly be adequate to cover all of the proposals set forth above. Three-fifths of it would more than provide for the regional programs of the Overseas Economic Administration recommended as the centralized agency, and for its apportionments to United Nations programs. The remaining $200,000,000 would represent the United States' contribution to the International Development Authority, to be supplemented by $300,000,000 from other participants.

The proposed International Finance Corporation might require a United States authorization of $150,000,000, supplementing $250,000,000 from other nations, but that would be a capital sum to be put to sound investment use and returnable to be used again. The same would be true for the $100,000,000 sum that might be authorized for the Export-Import Bank's support of the transfer insurance function. Thus, the total cost to the United States for the coming fiscal year would be $500,000,000 appropriated for economic coöperation in annual grants and $250,000,000 in capital authorizations.

What might the expectations be from such a program in the flow of funds to underdeveloped areas? All the measures combined, including the release of savings in the underdeveloped areas themselves, might mean a flow of capital into productive channels of 3 or 4 billion dollars a year.

An annual flow of funds of this dimension would not accomplish miracles overnight. It would not result in European levels of living for most of the billion people in the underdeveloped areas for many weary years. But its potential force should not be undervalued. Not much is known about domestic capital accumulation in the underdeveloped areas, but the total is probably not more than 6 to 7 billion dollars annually. Only a small fraction of that total is channeled into new productive enterprise. If 3 billion dollars annually were directed wisely into crucially productive channels, if it were supplemented by additional grants or investments from other relatively advanced economies, if our procurement and export policies are handled with due regard to the interests of the whole free world--the tempo of economic advance in the areas in question would be, in truth, revolutionized. The hope of discernible progress would replace the despair of stagnation. And we should have gone far toward giving meaning to the institutions of democracy, and a sense of a living and deepening community of interest to free nations.

[i] Author's Note: For a more complete exposition of the above ideas see "Partners in Progress, a Report to President Truman," by the International Development Advisory Board (Simon and Schuster, New York, 1951). The author of this article gratefully acknowledges his debt to the other Board members and to its staff in the formulation of most of the concepts here set forth.

You are reading a free article.

Subscribe to Foreign Affairs to get unlimited access.

  • Paywall-free reading of new articles and a century of archives
  • Unlock access to iOS/Android apps to save editions for offline reading
  • Six issues a year in print, online, and audio editions
Subscribe Now
  • NELSON A. ROCKEFELLER, Chairman of the International Development Advisory Board; Coördinator of Inter-American Affairs, 1940-45; Assistant Secretary of State, 1944-45
  • More By Nelson A. Rockefeller