New Plan For Distributing Foreign Aid

Perhaps because they do not realise that economic development is one of the trickiest subjects in the world, perhaps because they know it all too well, the political leaders of this country and the candidates for their posts have spent the summer talking a good deal of drivel about poor countries, some of it inane, much of it puerile, and nearly all of it misleading. They have appealed to charity ("in India a man's average annual income is $80"), to conscience (development means new self-respect, new freedom"), and self-interest ("the outcome of the cold war depends on whether we can develop these countries before the Communists do"), They have asked for programs, which they call "bold new ventures," and for money, which they call "a flexible investment approach."

What on earth do they mean by it all? Their appeals and demands are fuzzy, their exhortations mixed up with one another. Charity, while right and proper, is not sufficient excuse to open the floodgates of the Treasury; it must be justified by the national interest. But self-interest alone seems too harsh; it must be mellowed by the sweeter talk of conscience. In all this taradiddle there is no mention of the actual political, social, and economic settings that must absorb the generosity of the West.

Rostow Reconsidered

Much of the current non-technical literature of economic development suffers from the same fault: inability to impress clarity on a very confused situation. Some writers, like W. W. Rostow of M.I.T., have tried to be too clear. In his Stages of Economic Growth, Rostow attempts to provide a useful framework by dividing all societies into five stages of development: traditional societies, the preconditions for take-off, the take-off, maturity, and the age of high-mass consumption. If nations such as Peru and Pakistan can fulfill the right pre-conditions, Rostow says, by allocating resources to the right sectors, by stimulating the energies of entrepreneurs and private investors, they will soon create demand in more sectors, energy in more entrepreneurs. And they will find themselves well on the way through the vital stage of the take-off.

I have simplified his thesis almost to grotesqueness, but my point is that although this framework supplies clever headings under which descriptions of now mature societies can certainly be placed, it assumes too bravely that the newer nations will follow the same patterns.

They may, in fact, follow the most extraordinary patterns. Most of the countries in the stage of transition to industrialization have this much in common: an economy based about 75 per cent on agriculture, and hence, problems of altering traditional methods of farming and of land tenure; geophysical difficulties like swamps and jungles; labor shortages and unemployment in the wrong places; high illiteracy rates; rapidly expanding populations, the result of the overwhelming influx of technology that has reduced rates by more than half, lack of technological knowledge; lack of political experience; lack of capital.

In nearly everything else, however, the countries differ widely, and a "bold new venture" that would rescue one would be just as likely to suffocate another. They differ, for instance, in "absorbtive capacity"; foreign capital can build a dam in the Indus River Basin or at Aswan, but if it tries to build a railroad where no one knows how to--or no one wants to--build railroads, a lot of money will go to waste in abortive projects and in the television sets that grace the living rooms of members of the local congresses. The question of allocation of resources also has curious answers. The government in Lagos may spend 43 per cent of the national income on education; the government in New Delhi knows that it dare not do so, although India is 85 per cent illiterate, for the Indian who receives a smattering of learning immediately considers himself too good for manual labor of any kind.

New Development Program

In a lame try to clear up the muddle comes a thin volume by Eugene Black, the President of the International Bank for Reconstruction and Development. His approach to the subject of development planning is different from most: what he says is at least unpretentious and fairly substantial.

Black invents a phrase, "development diplomacy," that is, "how to secure advantages in terms of development without arousing too much hostility." The development diplomat's job is to "illuminate the choices" before the governments of poor nations, to show them the possible effects that building a Brasilia, or laying a railway, may have on the growth of the economy. By no means should he attempt to make the choices himself--that should be left to the politicians--for he may ignore the social and political implications of his decision. There is nothing new about any of this, but Black puts it in a simple, exemplary fashion that makes the cant of the campaign seem properly absurd. "The mere fact that a river runs down-hill very fast," he says, "is not sufficient reason to build a power dam."

One must ask whether the construction of a power dam would meet some important objective; that is, would it provide power for a market that already exists or is in prospect? Would it provide irrigation waters for land which can be made arable in this way and on which farmers might be willing to settle? Would it provide benefits in terms of flood control? Then one must ask whether a big power dam is the best way of meeting any or all of these objectives. Alternative possibilities, as a thermal power plant or a simple irrigation barrage, or both, have to be considered as possible choices.

It could hardly be more plainly or more directly said. Black regrets the fact that the area in which the "diplomat" could be most effective, that of policy planning, is so new and so shrouded with the misconceptions of those in authority, that more often than not the economist who tries to outline long-term programs is confined to short-term objectives. (Presumably this distrust of planning is the reason why the U.S. Congress continually refuses to extend the Mutual Security program beyond a length of one year. The many unhappy results of this policy--technicians abandoning projects for which funds were not renewed, bridges half-built, food improperly stored--surely should have convinced congressmen that long-term projects are worth the trouble it takes to formulate them. Without a guarantee of capital, a nation trying to grow economically is in a sorry spot.) As Black shrewdly, if somewhat oddly, puts it: "The concept of planning is bedeviled equally by the suffocating embraces of its idealistic champions and the cynical shafts of its detractors."

This is part of the basis for Black's most fervent wish: that "development diplomacy be given a separate and distinct status" in the strategy of the West. If it is not, he warns, economic aid will continue to be used as it has been in the past: "as a reward for a military alliance or a diplomatic concession, or as a last-ditch attempt to retrieve a diplomatic miscalculation... Economic aid, after all, does not just subsidize people; it influences events."

In other words, Black manages to succeed in a very small way in clearing up some of the confusion about charity, conscience, and self-interest. Charity is not enough, because the blind giving of funds may subvert economies rather than develop them; self-interest--looking at the poor third of the world as an economic battle-field in a giant bipolar struggle--may be "competing with the Communists on their own terms." The rationale of competition, as Rostow has pointed out, is not a necessary one. The recent rapid diffusion of military power leads one to suspect that it will not be long before the influence of these countries will become a heavy one indeed, and the traces of bipolarity remaining from the immediate postwar days will disappear. Finally, Black maintains that the West should embark on this "series of adventures," as he calls it, for its own sake, "to provide a means of reasserting its own identity with the ideals of liberty and tolerance."

Perhaps so; I am by no means convinced of it, for the book is too sketchy to resolve the difficult question of a nation's conscience, yet sometimes, in his drive for simplicity, Black goes too far, as for instance when he airily declares that "the world, according to the Communists, is riven by a hideous class warfare between the have-not nations and the haves," or when he states that it is the "balance of hope" rather than the "balance of power that is at stake." One's mind wanders from Black's fascinating negotiations over Suez and the Indus River basin back to the Presidential campaign.

Obvious Solutions

He is most interesting when he speaks of the curious aspects of the shift to industrialisation that few others seem to have noticed.

If the migrant to the city is lucky enough to get a factory job, he is likely to find factory discipline Irksome and pointless.... Away from work he is more often than not herded into a wretched slum and exploited by the large, permanent underworld of beggars, vagrants, refugees, petty criminals and the like who manage some-how to survive on the fringe economies of the cities of the underdeveloped world...

Otherwise, The Diplomacy of Economic Development is much like one would expect it to be from the last sentence: "It is rare in international affairs that doing the obvious makes so much sense." A good deal of Black says is obvious; most of it, fact, is pretty dull, an extraordinary accomplishment considering the excitement that men working in field seem to generate around Almost all of it, however, is sensible indeed; this I must however much I wish he could have stuck his neck out a little further a not have been so unassuming. H book will not make anybody mad him, certainly; and if it really is t that Washington didn't know a thing of what he has had to say before perhaps it will be constrained to with him.