An End to Patchwork

As he confronted the dismaying prospect of extracting from Congress yet another year's worth of foreign-assistance money, President Nixon last week put forward a bold proposal: gradually dismantle the whole vast, cumbersome machine through which the U.S. has been dispensing aid to the poor nations of the world and rely instead on an expanded international model.

Ever since the Marshall Plan, aid has been one of America's chief foreign policy weapons. Yet for more than a decade, the once acclaimed program has faced increasing antagonism and steadily shrinking appropriations (current request for economic aid: $1.85 billion, compared with last year's request of $2.28 billion and appropriation of $1.46 billion). There has been resentment in recipient nations over the American presence and conditions that accompany financial help, resentment in Congress over inefficiency and the commingling of military and economic goals, resentment among taxpayers over politically portrayed "giveaways."

Untying Assistance. Last March a presidential task force under the Bank of America's Rudolph Peterson proposed a drastic revision. Its chief feature: over a period of time, do away with most direct, two-party arrangements and replace them with a multilateral system in which the haves combine to help the havenots. The idea had been advocated by reformers for some time, against the objections of critics who argue that if the U.S. was going to spend all that money, it should at least be clearly labeled as coming from America and not disappear into some international pool. But the President approved Peterson's proposal, agreeing that U.S. interests would be best served if international lending agencies, and not the U.S., disburse most of the tax dollars that Congress appropriates. Nixon warned that an increase of U.S. aid will be required in the '70s, but he felt that the money could be spent more efficiently and with far fewer political entanglements. Pending details to be supplied in legislation next year, these are the main features of the proposal:

> Dismemberment of the Agency for International Development, which now oversees almost all U.S. aid and whose bureaucracy has swollen in inverse proportion to the funding of its programs. It would be replaced by three smaller agencies: the U.S. International Development Corporation, to manage some direct economic assistance as well as humanitarian programs such as disaster relief; the U.S. International Development Institute, to oversee technical assistance such as birth control programs and economic planning; and an as yet undefined authority, presumably responsible directly to the White House, to superintend all foreign economic policies, including trade as well as aid. Nixon is also attempting to solve a continuing problem of stability in the aid program--the uncertainty of just how much Congress will appropriate each year--by proposing that future funding for the development corporation and institute be set for a few years at one time.

> Total separation of military from economic aid. Though AID is organizationally responsible for arms aid now, in practice the Defense Department administers it, and would probably do so officially under the new system.

> Support for the creation of an international insurance agency, proposed by the World Bank, to protect private investors from political acts, as when a government expropriates foreign property.

> International agreement among the industrialized nations of the world to "untie" their foreign aid and permit recipient nations to spend the money wherever they think they can get the most for it. At present, 90% of the money provided by the U.S. must be spent on

American products; in practical terms, perhaps $300 million could be spent elsewhere in the absence of that requirement. A good deal of the potential loss to the U.S. would be made up by new customers with the untied funds of other industrialized nations to spend.

Even before such an international agreement--which may be long in coming--Nixon announced a partial untying of U.S. aid. Receiving nations will now be able to spend their money in any other undeveloped country, but not in an industrialized one (except the U.S.). For example, Tanzania will be able to spend U.S. funds in neighboring Uganda to purchase concrete for road building instead of being compelled to shop in the U.S. at considerably higher cost. In the process, the economy of Uganda, which also receives American aid, will be helped. Such examples may not be numerous, however, since the things underdeveloped nations most want can be pur chased only in industrialized countries.

Central to the Nixon proposals are the 112-member World Bank, the International Development Association and the Inter-American Development Bank, through which U.S. aid funds would be increasingly channeled. Under the direction of former Defense Secretary Robert McNamara, the World Bank last year granted $1.8 billion in so-called "hard" loans, at 7% interest with money raised through the sale of bonds, and $385 million in interest-free and very low interest "soft" loans that do not have to be repaid for 50 years.

The U.S. has much to gain and little to lose from funneling its funds through the bank. The bank's American executive director--each major contributing nation has one--holds an absolute veto over the use of U.S. funds in any proposed loan; negotiations are conducted on a businesslike basis and political pressures are minimized.

An early test of congressional attitudes toward the reform may come over a Nixon proposal to double the U.S. contribution to the World Bank's soft-loan fund, from $160 million to $320 million a year. If that measure passes, the diversion to multilateral aid will take a large step forward. Opposition to all such expenditures is widespread. Friend and foe alike, however, will be attracted by one aspect of the Nixon proposals: a substantial cut in the 17,344 full-time and temporary employees of AID. Says one White House official of the employees of the agencies replacing AID: "Think in terms of hundreds rather than thousands."

One man Nixon would like to employ again, at least temporarily, is Task Force Director Peterson. Nixon wants him to return long enough to help guide the reforms through Congress. To win that fight will be to end a philosophy of giving that has become, in Nixon's words, "patched up and painted over."

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