The Dilemma of Foreign Aid

October 27, 1952

In a book published in 1947, Will Dollars Save the World?, I pointed out that intergovernmental loans or gifts were “on the horns of this dilemma. If on the one hand they are made without conditions, the funds are squandered and dissipated and fail to accomplish their purpose. . . . But if the lending [or giving] government attempts to impose conditions, its attempt causes immediate resentment. It is called ‘dollar diplomacy’ . . . or ‘interfering in the internal affairs’ of the borrowing nation. The resentment is quickly exploited by the Communists. . . . The dilemma is, in fact, inherent. It lies in the attempt of one government to bribe another into following . . . policies which that other government does not believe in sincerely enough to follow without the bribe.”

I also devoted an article to this theme in Newsweek of Nov. 3, 1947.

The recent tiff between the French Premier and our ambassador is simply the latest illustration of the point. Ambassador Dunn left a letter saying that the United States could not promise the $650,000,000 in economic aid for 1953 hoped for by Premier Pinay, but only $525,000,000. In addition, Dunn left a memorandum indicating that the French would have to increase their military budget if they wanted more U.S. aid. Whereupon Pinay hit the ceiling, let it leak to the French press that he considered the memo “inadmissible,” and won acclaim at home as “a strong man who has been willing to say no to the Americans.”

In its news columns of Oct. 10, The New York Times explained that the Pinay government “has been under fire of the Socialist left and the de Gaullist right for ‘subservience’ to the United States. What is more natural than that the Pinay government should try to ‘get out from under’ by stealing the fire of the opposition on both left and right by proclaiming righteous indignation in the French press over some assumed indignity.” What is more natural indeed? And what could more clearly demonstrate the futility, if not the boomerang nature, of our foreign-aid program?

Our State Department beat a quick retreat. “M. Pinay seemed to think,” it said, “that we were undertaking to say what the French budget will be, and he made it clear that that is a matter for the French to determine—and it is.” Why not carry this further? Why not point out that the French budget is so completely a matter for the French to determine that the American taxpayer, with no say about it, has also no duty to contribute part of it? Why not point out that the way for the French Government to show its complete fiscal independence would be to stop asking the U.S. for more handouts?

The foreign giveaway program was wrong from the start. The real answer was the Atlantic Pact. But this was not in fact even proposed until well after the Marshall Plan had been launched. Under the Atlantic Pact we should undertake to defend against Russian aggression a free Europe that proves its own determination to defend itself. But by our hasty ambition to assume something we like to call “world leadership,” by our overanxiety to shower monetary contributions in the absence of clear showing of need, by our panicky insistence that Europeans increase their defense budgets whether they themselves recognize their danger or not, we have done the precise opposite of what we intended.

We have encouraged Europe to relax its own efforts and to leave its salvation to us. We have increased European “neutralism.” We have permitted to flourish among Europeans the fantastic notion that we need their help more than they need ours. We have given the French the impression that when they increase their armament they do it, not for self-preservation, but as a favor to the United States. We have provided fuel for Communist propaganda that we want to boss and “enslave” Europe.

Incidentally, if we stopped these lavish handouts, we would cut our budget by $9,000,000,000 or $10,000,000,000 annually, which is the difference between continuing inflation and halting it.