If we can, during the current examination of the foreign aid issue, clarify our national purposes in the program as a whole, establish the possibilities and limits of the role of private capital within it, and grasp the significance of the special case of India, it should be possible over the next year to build a stable and effective economic development policy for the longer pull. Essentially, three elements are involved: continuity, scale and coordination.
It is evident that the Development Loan Fund will not be able to fulfill its mission until its Congressional lease on life, is, by one device or another, extended. The Congress may wish to postpone such action until 1959, since the Fund is only now beginning to disburse loans; and it is reasonable for definitive action to await evidence of vigorous and effective administration in terms of criteria of productivity. Similarly, it is evident that the present ad hoc emergency aid to India will not do the job and that the flow of American lending must be put on a longer-term basis if Indian leaders are to proceed with confidence and the Second Five-Year Plan is not to falter dangerously.
With respect to scale, it seems likely that the Loan Fund and the level of assistance to India will both have to be somewhat expanded. It is difficult to be dogmatic until further examination is undertaken; but it seems altogether possible that the Development Loan Fund will be able to justify an annual disbursement rate of about $1 billion in loans when it has worked itself properly into business. So far as India is concerned, it seems likely that American loans on something like the order of $500 million per year will be necessary for the duration of the next Five-Year Plan and, perhaps, for some time thereafter.
The maturing of the development program requires, finally, that methods of coordination improve both in Washington and on the international scene. As the Loan Fund has emerged it is simply one of a number of American instruments for accelerating economic growth in the underdeveloped areas. Grants and technical assistance flow from the I.C.A.; the Export-Import Bank dispenses dollar loans, and is likely to do so on a rising scale; food and fiber surpluses are being increasingly used for development purposes—as working capital—rather than merely to salvage famine situations; and the Government, in its guarantee program and other arrangements can influence to a degree the flow of private capital abroad. Finally, the United States has some influence in the allocation of
the hard currency loans available from the International Bank for Reconstruction and Development. There is evidently a need in Washington for strong central leadership in orchestrating these instruments around a coherent policy towards each of the nations applying for development assistance. The individual institutions and programs involved have grown up, each with its own history, criteria and mystique. Purposeful direction, backed by strong staff work, will be required in the Department of State to make them serve the nation's interests. In this connection, the ad hoc organization of $290 million for India was, on the whole, a hopeful exercise.
In addition, there remains the challenging and extremely important task of finding a method and an instrument for coordinating the economic development programs, now mainly bilateral, within the free world. There are powerful political undercurrents in Western Europe, Japan, Canada and elsewhere, which look to such a coordinated effort as a means of giving increased unity, meaning and vitality to the free world alliance. On the other hand, as the NATO conference of December 1957 revealed the countries of Western Europe are reluctant to commit themselves to an expanded and coordinated development effort until the American Government—in both its branches—exhibits the determination to build a serious and sustained program around economic (as opposed to military) aid. The passage of the current proposals before the Congress should open the way, over the next year, to the exploration of the enormous constructive potentialities of a common free-world economic development program in Asia, the Middle East, Africa and Latin America.