End Foreign Aid Now

July 20, 1953

The United States has spent $92,500,000,000 in foreign aid since 1941. Now, at long last, there are signs in Congress of a revolt against indefinite continuance of the program.

Sen. Walter F. George, Democrat of Georgia, served notice on July 1 that he was voting for the last time for any authorization for the Mutual Security Agency. If the nations of Western Europe were unable to stand on their own feet after seven years of foreign-aid programs, he said, “they never will be.” A still greater surprise came when Sen. Mike Mansfield, Democrat of Montana, a traditional supporter of foreign-aid programs, offered an amendment, which the Senate adopted, to terminate the Mutual Security program on June 30, 1955 (instead of 1958).

There are many reasons behind this change in opinion. Some of them can be found in the facts summarized in a recent study by the Tax Foundation. Industrial production had reached prewar levels in most European countries by 1947, and in all of them by 1951. Agricultural production in general exceeded prewar levels by 1949.

So far as defense aid is concerned, I pointed out in this column of June 15 that the United States is spending on national defense more than four times as much absolutely as ten European arms-aid-receiving nations combined. It is also spending—twice as much relatively—15 percent of its gross national product against an average of 7 percent for the ten beneficiaries. Finally, the United States is spending 70 cents out of every tax dollar on defense, whereas these European nations are spending only 30 cents out of every tax dollar on defense. They are spending the other 70 cents on such things as deficits on their socialized industries, overgrown social-security systems, and subsidies to unprofitable and inefficient industries. Some of them act as if their defense were primarily a favor to us, and we should pick up the check.

It is beginning to be recognized, finally, that our economic aid has not only failed to speed up a return by Europe to sound economic policies, but that it has actually been used to finance the socialization of Europe. As the economist F.A. Hayek has put it: “There can be no doubt that, because of American financial assistance, governments of many countries now control economic activity to a much greater extent than would otherwise have been the case. Because of the form in which the United States has chosen to provide capital for these countries, their governments, in turn, have become the main dispensers of capital. When a government thus becomes the main source of investable funds, if inevitably speeds up the process of government domination of business.”

Will Congress really accomplish anything by setting a deadline for foreign-aid “programming” in 1955, and for spending in 1957? This is more likely to be

interpreted abroad as a promise to keep the handouts going at least until that time. Paul Hoffman used to announce frequently the forthcoming termination of ECA; but it merely changed its name to MSA and cost us just as much.

Why not terminate new foreign-aid appropriations right now? After all, more than $10,000,000,000 of unexpended balances for foreign aid still remain on the books, even if Congress does not appropriate another penny.

If Congress does think it has to appropriate more, why not make the funds available strictly in the form of loans, to be paid off, say, in equal monthly installments of principal and interest over 25 years? Congress would probably be surprised at how little need European governments found for such repayable loans. Congress might even supplement this by limited government guarantees of private loans abroad under the strict conditions suggested by F.A. Hayek in an article in The Freeman of April 6.

We just had a deficit for fiscal 1953 of $9,389,000,000. We face a deficit for 1954 approaching $7,000,000,000. Surely the day of the huge handout to foreign nations, on any sort of facile rhetorical plea, ought to be over.