At Crisis Point

The storms that forever rage over foreign aid have all but obscured the fact that it is a relatively recent and radical experiment in international cooperation. Only for a couple of decades have the world's richer nations observed a general commitment to help the more than 100 less developed countries that embrace two-thirds of mankind. The results have been mixed, but there have been enough signs of success to merit strong support for the experiment. Yet after a year-long study sponsored by the World Bank, an eight-member commission headed by former Canadian Prime Minister Lester B. Pearson warned in Washington last week that foreign aid is at "a point of crisis."

In both the have and have-not camps, says the Pearson report, the aid climate is "heavy with disillusion and distrust," partly because "instant development" has proved illusory, partly because economic improvement has not always been "an antidote to violence," partly because the wealthier countries are turning to problems of their own.

A Poor Seventh. The crisis is reflected in the figures. Economic assistance rose steadily through the 1950s, but after 1967, when it reached a peak of $7 billion, it began receding. Last year the total dipped to $6.9 billion --while worldwide arms spending neared $150 billion. Japan, Australia and Switzerland have increased their contribution; Germany, Canada, The Netherlands and the Scandinavian countries plan to do so soon. But there have been cutbacks in Belgium, Italy, Britain--and the U.S. which still dispenses almost as much aid as all the other countries combined.

Congress has slashed foreign aid to the lowest level in two decades. With only $3.3 billion, or .38% of its gross national product devoted to aid, the U.S. ranks a poor seventh in effort, though it remains far in front in total flow of aid (see chart). Because businessmen are proving more venturesome than bureaucrats, the worldwide decline in aid has been more than offset by rising private investment. The trouble is that private capital goes mainly to countries rich in oil and minerals, where help is not urgently needed.

Though government aid accounts for only 2% of the underdeveloped world's income, its influence is often decisive. Aid finances perhaps 10% of the total investment in third-world countries; in countries such as Pakistan, Jordan, Korea, India and Tunisia, it provides as much as half.

Ransom Notes. So far, the money has been moving on what the Pearson report calls a somewhat sloppy "trial and error" basis. The have-nots have made an art of what aid experts call the "ransom note" approach (hinting that they will warm up to Moscow, say, if the U.S. starts getting stingy). The haves play "puppetry" with the strings they attach to aid deals (the U.S., for example requires aid recipients to oppose the seating of Red China in the U.N.).

The Pearson recommendations have long been awaited, especially by the Nixon Administration. In his campaign, Nixon seemed to hint at a further cutback, stressing that "we are spread far too thin in too many countries." He has also said that he likes aid that "aids the U.S.A.," suggesting the use of assistance as a political tool.

Such an approach does not always pay off, at least not to the degree of the 'postwar Marshall Plan in Europe. "Aid for development," says the Pearson report, "does not usually buy dependable friends." Then why give at all? On the simplest level, the report stated, "it is only right for those who have to share with those who have not." Then again, the report notes, "we live in a village world," where concern with problems at home and abroad is becoming "a political and social imperative." Strongest of all is the pragmatic argument that aid-fostered development will help increase world trade, to the benefit of rich and poor nations alike.

Both the Pearson report and a recent study by the Manhattan-based Committee for Economic Development recommend that much more aid be channeled through multilateral agencies like the World Bank; only 10% flows through such bodies at present. Another Pearson recommendation is that countries increase their aid to seven-tenths of one percent of their gross national product in five years. In the U.S., that would mean an annual foreign aid outlay of $8 billion by 1975. Even if Nixon seconded that motion, which is virtually unthinkable, there is no chance that Congress would go along.

Plainly, it would be a mistake to let the momentum of aid slip further. Over the past few years, 41 poor countries have managed to achieve yearly growth rates of 2% or better in per-capita income, despite sharp population increases. Pearson's goal is a growth rate of 6% throughout the next decade, and "self-sustaining" expansion for most of the underdeveloped countries by the year 2000. If the report's proposed aid increases are adopted, and if population growth can be held down--two enormous ifs --they might make it. If not, Pearson's "village world" may be an even more dangerous place in which to live than it is today.

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