FOREIGN AID AND ECONOMIC DEVELOPMENT - U.S. FOREIGN AID THE OUTLOOK by M. F. Millikan and W. W. Rostow In the past year American economic foreign policy has moved perceptibly, if indecisively, back towards the path marked out by the Point Four Program launched in 1949, the Gordon Gray Report of 1950 and the Nelson Rockefeller Report of 1951—a path from which the United States was diverted by the Korean War and the subsequent concentration on the build-up of military pacts (backed by military aid) around the periphery of the Communist bloc.
The acceleration of economic growth in non-Communist Asia, the Middle East, Africa and Latin America is beginning to be recognized, in fact as well as in word, as a major national objective, quite apart from military aid and the use of money to help salvage crisis situations. The Development Loan Fund exists; some $290 million has been scraped up to postpone too drastic a cutback in the Indian Second Five-Year Plan; surplus food and fibers available under Public Law 480 are beginning to be understood, both abroad and in Washington, as potentially a major constructive instrument for economic development; and before or during the Nato meeting of last December significant gestures, at least, were made by the German, Italian and American Governments looking toward coordination of the free world's development effort.
Whether there will now emerge into maturity an American and free-world economic development policy capable of protecting the common interest in a world dominated by expensive military stalemate on the one hand, and by the accelerating nationalist revolutions of Asia, the Middle East and Africa on the other, hinges in part at least on a clarification of three major issues. These are: the nature of the American interest in the revolutionary areas; the relations between private and public capital in the early stages of economic growth; the special position and problems of India.
The American interest in economic development flows from the historical status of most of the nations and regions of Asia, the Middle East, Africa and Latin America.
Economically, these stand somewhere along the path between a relatively static agricultural society and a society capable of applying promptly and productively the fruits of modern science to its natural and human resources. These transitional societies have absorbed varying de
grees of modern economic activity; but they have not yet woven them together in such a way as to make economic growth a regular, automatic condition: productive investment is not yet high enough regularly to yield increases in output substantially greater than increases in population. Politically, they are somewhere in the transition from regionally based hierarchical societies, rooted in traditional land relations, to centralized states capable of providing a unified national framework for modern economic, social and political activity.
Both historically and at present the building of modern economies and centralized modern governments has been driven along less by the profit motive than by the aspirations for increased national and human dignity. Merchants and the profit motive played their part in the modernization efforts of Bismarck's Germany, Meiji Japan, Witte's Russia and Ataturk's Turkey; but soldiers, civil servants and nationalism were the more powerful agents. And so it is today in Asia, the Middle East and Africa.
In these transitional stages, nationalism may be turned in varying proportions to these three objectives: towards the consolidation of the central power of the new state over the old regional interests (as with Diem and his sects in post-1954 South Viet Nam) ; towards external adventure, to redress real or believed old humiliations (as with Nasser in the Middle East since 1955); or towards the economic and social modernization of the domestic society (as with the Indian Five-Year Plans). No successful politician in a transitional society can afford wholly to neglect any one of these tasks; that is, he must build up the power of the central government, assert a position of increased authority and sovereignty on the world scene, and launch some kind of program for economic and social modernization. And these three elements of policy cannot be cleanly separated.