The Roles of Aid in Politics Putting China in Perspective

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Goldstein, Markus P. and Moss, Todd J. (2005), “Compassionate Conservatives or Conservative Compassionates? US Political Parties and Bilateral Foreign Assistance to Africa,” in Journal of Development Studies, Vol. 41, No. 7, pp. 1288-1302.

These findings explicitly do not comment on either the utility of US aid or its impact on development in Africa. We do not consider modalities of aid delivery or implementation systems, which are likely to be more tied to developmental outcomes than are overall aid flows. Neither does this article deal at all with the disaggregation of aid, which recognises that not all ‘aid’ is the same. A dollar given to former President Mobutu of Zaire is clearly not expected to have the same developmental impact as a dollar given to a successful Ugandan education project. Lastly, we have used only one limited proxy of engagement with Africa, bilateral aid flows, which might not be the best such measure.

Nonetheless, these findings do demonstrate that total real US assistance to Africa has been rising over time. The data clearly show that the amount of aid or the relative importance of Africa is not affected solely by which party occupies the White House. Rather, our results show that the relationship between the President and Congress is what matters; when both are controlled by the same party, aid to Africa is higher, when it is split, aid is lower – both in terms of absolute flows and as a percentage of total aid. Lastly, at least in terms of real US aid flows, concerns over possible increased African marginalisation with the end of the Cold War have not materialised.

Goldman, Marshall (1967), Soviet Foreign Aid, New York: Praeger.

Chapter 11: Conclusion (pp. 185-201)

Although Soviet economic relations with the less developed countries have varied according to time, place, and politics, certain conclusions may be drawn by posing four major questions: What has been the Russian purpose in undertaking economic relations with the less developed countries? What has the Soviet Union accomplished with its aid and trade programs? What has it failed to do? What lessons can Americans draw from the Soviet experience?

The Reasons for Soviet Aid and Trade

The Russians have had many reasons for undertaking economic relations with the less developed countries. Their motives are not very different from those of any large country. In fact, the Soviet experience with the less developed countries of the world differs only in emphasis from that of the United States. This means, therefore, that the motives are mixed and not entirely consistent.

  1. One of the earliest stimuli for Soviet interest in less developed nations was the desire and need to maintain trade relations. In some cases, these areas possessed vital raw materials. In the years following World War II, Russia relied heavily on the East European countries for coal, oil, uranium, and other commodities. The technologically more advanced countries, such as Czechoslovakia and East Germany, also supplied the Soviets with machinery. Eventually, the Russians cultivated trade relations with the non-Communist developing countries as well; even here, trade often preceded aid and diplomatic activity. Through such trade, the Russians were able to obtain rubber, cotton, sugar, cocoa, and coffee.

Before long, the Russians had other reasons for promoting trade. By the late 1950’s, the export side of trade became almost as important to the Russians and their East Europeans allies as the import side. As Communist Europe passed through the initial agony of industrialization, it found that much of its industrialized capacity had been overdeveloped in terms of basic heavy industry and unsophisticated consumer goods. After a time, many markets in Eastern Europe and the U.S.S.R. had become saturated. When trade relations with China were drastically curtailed in 1960, the problem became especially serious, for China had been a major market for such products. Since the goods affected were not readily salable in the more advanced countries of the West, it became necessary to cultivate the markets of developing countries.

With few exceptions, however, the newly developing areas continued to rely on the West for merchandise and machinery. In some cases, the Soviet Union and East Europe were able to penetrate such markets by entering into all-encompassing barter agreements. This approach was successful in the case of countries that experienced a drop in the price of their primary export commodities. In the absence of such a barter arrangement, it was usually very difficult for Communist countries to make any inroads. About the only other way local businessmen in the developing countries could be weaned from the habit of trading with the West was through the use of credit or the inducement of repayment in soft currency. Hence, for the Soviet Union and its allies, aid became a very important means of displacing Western merchandise from its traditional markets. At the same time, it provided an outlet for excess goods produced by Communist Europe’s industry. In the words of a senior Polish trade official. “The West no longer has a monopoly on foreign trade. But to compete, the Communist countries, especially the smaller ones, have to provide the sweetener of credit. Without credit the developing countries would naturally buy from the West. This is important to Poland, since we now have to worry about securing markets for our own domestic industry. Our heavy industrial sector is overbuilt and we are now unable to sell all we produce within Poland or even to other Communist countries.”

In 1965-66, the Russians openly began to revert to the imperialist position that foreign aid should be used to stimulate the flow of raw materials to the Soviet Union. Articles in Voprosy Ekonomiki of November, 1965, February, 1966, and April, 1966, argued that Russian aid should be channeled so that it promoted the flow of tin, copper, zinc, aluminum, oil, rubber, iron ore and cotton to the Soviet Union.

  1. A second motive for foreign aid has nothing to do with conventional commercial considerations. For some Russians, just as for some Americans, the prime motivation for allocating one’s own resources for the benefit of another country is a humanitarian one. Helping someone poorer that oneself has always appealed to man’s nobler instincts. Moreover, many Russians believe that the countries in Africa, Asia, and Latin America are poor today because of their exploitation by the capitalistic West. Therefore, even though their own country is relatively poor, the Russians feel they have an obligation as Communists and human beings to facilitate the industrialization of these areas.

The Russians had much the same feeling about China until the late 1950’s. China, too, had been plundered by the imperialists – including Czarist Russia. As a consequence, the Russian made a sincere effort in the early 1950’s to provide economic aid. In terms of present Russian capabilities, Soviet aid to China may not appear to have been so generous, but in relation to Soviet potential at the time it was a major effort and undoubtedly reflected Russian compassion for the poverty of China.

  1. Perhaps the most important consideration underlying Soviet actions is the one of political self-interest. It can be argued that all Soviet economic relations with the less developed countries are subservient to political calculations – whether or not an action will advance the interests of the U.S.S.R. It is only when confronted with pressure in the form of unrest, as in Europe in 1956, or competition for prestige or influence, as in India, that the Russian will respond with any meaningful help.

In evaluating Soviet motives, it would be an oversimplification to assert that a particular decision was made solely political, economic, or humanitarian reasons. Certainly behind every action there are mixed motives. It is true, however, that the U.S.S.R.’s relations with its satellites until 1956 were governed by a determination to promote Soviet national interests and to take as much out of Eastern Europe as possible. All other considerations were secondary. Stalin felt that the cause of world Communism could best be served be reconstructing and strengthening the U.S.S.R. and by maintaining tight control over Eastern Europe and China. The growth and fortification of the Soviet bloc in relation to the United States and the NATO countries was viewed as an urgent necessity. The best way to assure such a goal was to promote the development of a strong Soviet state.

In the mid-1950’s, as the field of East-West contention shifted to the non-Communist world, the Russians sought to increase their prestige and well-being by making inroads in areas long under the influence of the United States and its West European allies. As a challenger of the status quo, the Russians had to adopt a much more generous policy than was necessary in Eastern Europe. Wherever possible, the Russians encouraged anticolonial sentiment and the formation of independent states. It was anticipated that ultimately these governments would be transformed into Communist regimes – the goal foreseen by Lenin and others who argued that the road to London and Paris lay through Asia and Africa. Soviet trade and aid could help to produce this desired result.

The Russians soon found, however, that it was often much wiser, at least in the short run, to settle for independent by anticolonial governments in the Afro-Asian bloc than for Communist governments. In the case of the Communist regime in Cuba, the Russians discovered that supporting Castro was very costly. The Russians simply lacked the necessary materials and logistical facilities. With a non-Communist but anticolonial regime, the Russian could provide whatever aid they though appropriate and then watch as the Western countries paid the bulk of the bills but continued to face the wrath of the embittered new nations. In this way the Russians could have their cake without having to assume complete responsibility for training and supplying the cooks. While gaining national prestige and appreciation for their foreign aid, the Russians could wait contentedly fort the Communist revolution they were confident would come one day – when they would be better able to support it.

It was not too long, however, before it became apparent that furthering Russian national prestige sometimes ran at cross purposes with the long-range goal of spreading international Communism. To the extent that Soviet foreign aid did in fact facilitate the industrialization of developing countries, and to the extent that these countries became economically viable, a Communist revolution became less likely. While the Aswan Dam brought immense international prestige for the Soviet Union, there was no satisfactory answer for those who asked what, if anything, the millions of rubles spend on the dam had done for the Communist movement in Egypt. Such questions became especially embarrassing when Nasser decided to jail members of the local Communist Party. More than anything else, such actions by aid-receiving countries highlighted the conflict between the national self-interest of the Soviet government and its commitment to revolution and the spread of Communism. This was especially disturbing to those in the Communist movement who resented the fact that the Russians usually subordinated the international movement to purely national aims. Thus in Latin America, the Russians extended official diplomatic recognition to Eduardo Frei’s government in Chile at the same time that Fidel Castro was calling for a revolt in the country. Castro’s supporters charged that such “Soviet actions in Chile and Brazil hold back the struggle for liberation.”1 These activities also upset the Chinese, who seized upon such dilemmas to embarrass and attack the Russians.

As the feud between China and the Soviet Union intensified, foreign aid was used for a new political purpose: both countries used it to increase their national prestige at the other’s expense. Although both were still anxious to outperform the NATO countries, they were often more concerned about competing with each other. The climax of this competition occurred prior to the cancellation of the second Bandung Conference in Algeria, which after many earlier postponements was scheduled for June, 1965. A comparison of the aid commitments of both countries for the months preceding this meeting indicates how much like a poker game the foreign aid negotiations had become. (See Table XI-I.) Numerous offers of long-term credit were given in the hope that the donor would thereby gain support for either the inclusion or the exclusion of the Russians at the forthcoming conference. These loans in turn were generally met by counterbids from the other country. In Cambodia and Algeria, the counterbids were followed by yet a third offer. At this stage, neither the Russians nor the Chinese appeared to be seriously interested in the furtherance of international Communism; behind the ideological camouflage it was essentially a question of Soviet national interest versus Chinese national interest.

What Has Soviet Aid Accomplished?

The purposes of Soviet aid, then, are complex, although generally not much different from those of other providers of foreign aid, but what has this foreign economic program accomplished? Russia’s efforts in Eastern Europe left those countries in an extremely poor condition. Even though the Russians tried to redeem themselves after 1956, it was too late to remedy the basic wounds and fractures that will pain those countries for years to come. In China and the neutralist world, Russian efforts have been much more constructive. Undoubtedly, their foreign aid program has won them numerous friends and increased their international prestige. While there is much to be criticized, on the whole the Russians have tried to promote economic growth in the non-Communist countries they have aided. No country in Africa, Asia, or Latin America is poorer today because of its experience with the U.S.S.R. (Some countries, such as China, Cuba, Guinea, Indonesia, and Ghana, may have been their own worst enemies, but the Russians cannot be blamed for this.) Most neutralist countries are considerably better off because of Russian economic help. This pertains especially to those countries where military purchases from the Soviet Union have been at a minimum and where political involvement with the U.S.S.R. have been circumspect.

With few exceptions, the Russians have stressed basic industrial projects. With Soviet assistance, new industries have been built at an astonishing rate. At times, excessive enthusiasm on all sides has led to the creation of over-ambitious projects, but this should not detract from the basic contributions which have been made. The Russians seem to have a knack for the spectacular. Much of the Soviet success has been due to concentrating on certain key projects, which are generally industrial in nature. These major impact projects not only excite the imagination, but result in productive and visible monuments. The workmanship and administrative efficiency that go into these showpieces are often more impressive than those in the U.S.S.R. itself. On occasion, the Russians have also been able to suggest improvements in already projected plans; in the case of the Aswan Dam, their suggestions saved Egypt considerable domestic and foreign currency. The Russians are also to be commended for training native technicians and turning over to them the operation of projects. In addition to on-the-job training, the Russians have invited large numbers of foreigners to the U.S.S.R. for training in Soviet schools. On occasion, such policies have backfired; native technicians have failed to perform properly; and the Russians have been criticized either for poor training or for poor quality of equipment. Nevertheless, their efforts deserve praise.

The successful Soviet projects are also distinguished by the efficiency and flexibility of Soviet administrative procedures. When a project is singled out for priority handling, the full resources of the Soviet Union are put behind it. The Bhilai steel mill was considered to be as important as any steel mill in the Soviet Union, and Soviet specialists in the field had authority to make decisions without referring to Moscow. When it is necessary to obtain a decision in the U.S.S.R. about a priority project, the answer is usually fast in coming.

It is in the field of public relations that Russians appear to be at their best. Their preference for impact projects, together with their sense of timing, creates exciting drama and wins them applause from the recipients, their own people, and even their competitors. Because there was no need to seek the approval of any legislative body for its projects, the Soviet Union was able to announce its willingness to finance the Aswan Dam very soon after the Americans withdrew. They reacted the same way after the United States decided against financing the Bokaro steel mill in India. Similarly, as soon as the French proclaimed they would no longer help Guinea, Russian promises of aid were immediately sent off to Conarky, just as they were sent to Tunisia when the French bombed the naval base at Bizerte. Until recently, it was a rarity when an international crises or realignment of power was not followed by a new Soviet aid agreement.

But perhaps the Russians’ most notable accomplishment is that through the combined use of political expansion and foreign aid they have stimulated the use of economic aid by others. It was largely because of the fear of Russian expansionism in Europe that the United States introduced the Marshall Plan for European reconstruction. Until the Russian feelers in Afghanistan and India, American foreign aid to Africa and Asia was at a minimum. For example, annual American promises of aid to India, which were only $4.5 million in 1951, rose to $87 million in 1954 and to more than $100 million in 1959. In addition, the decision to counter Soviet aid helped to bring about the creation of numerous international and financial institutions whose sole purpose was to aid economic development. The International Bank for Reconstruction and Development (World Bank) was joined by the International Finance Corporation, the International Development Association, the Development Assistance Committee, and the Inter-American Development Bank.

From the Soviet point of view, perhaps the most important contribution of the foreign aid program was that it made neutralism a practical alternative. The very existence of the alternative of Soviet aid provided needed leverage for the numerous countries that obtained their independence in the 1950’s and 1960’s. After the unexpected Russian decision to finance the Aswan Dam, the West and the developing countries learned that the Soviet Union was prepared to commit immense quantities of resources for countries that were willing to stand up to NATO powers. Consequently the emergent countries did not have to worry as they once did that Western boycotts would ensure submission. It is entirely possible for example, that Premier Mohammed Mossadegh’s attempted nationalization of the Iranian oil companies in 1951 might have been successful if it had taken place only five years later. As Soviet support for Egypt indicates, by 1956 the Russians had decided to support actively just such provocative challenges.

What Soviet Aid Has Not Been Able to Do

If Soviet aid and trade has helped to produce neutralism and has increased the national prestige of the Soviet Union, it has not helped to bring a Communist regime to power. Even when the Communists did take over in a developing country, as in Cuba, it was done without Soviet aid. Although Russians were probably delighted by their success in promoting and winning the support of the neutralist movement, eventually they began to wonder about the imminence of Communism in the rest of the Afro-Asian-Latin American bloc where Soviet aid had been applied. As we have seen, this provoked some conflict over the ultimate purpose of Soviet aims, especially when “neutralism” in favor of the U.S.S.R. became “neutralism” for the West.

Similarly, Russian aid and trade policies have not always been warmly received by fellow Communist states. The list of the openly disenchanted includes Yugoslavia, Albania, China, North Korea, and Rumania. At one time or another, protest has also come from Hungary, Poland, East Germany, and even Bulgaria and Czechoslovakia. As a result, even CMEA, which has some merit as an institution for stimulating foreign trade, is regarded with considerable hostility. Thus, although Russia’s economic policies toward its satellites at one time brought short-run advantages, the long-run effects have brought dissension and economic inefficiency for the bloc as a whole.

As we have seen, the Russians, like other aid dispensers before them, have not yet discovered how to avoid mistakes in the implementation and administration of their foreign aid and trade programs. The frivolous nature of some projects such as the luxury hotels in Burma and Guinea, and the unproductive nature of others, such as the stadiums in Guinea, Mali, and Indonesia, have generated complaints about poor Soviet advice. Like their Western competitors, the Russians have sometimes failed to make adequate feasibility studies. Many of these difficulties are due to the relative inexperience of the Russians, but they are also due to problems inherent in any underdeveloped country.

The Russians are also beginning to realize that while their system has the advantage of permitting swift action in priority situations, it also has shortcomings. After all, there can only be so many priority projects. Those projects that are not in the priority category move very slowly, and often run afoul of the Soviet bureaucracy. The emphasis being placed on the so-called Liberman reforms indicates how much remains to be done to bring about improved quality and efficiency within the U.S.S.R. itself. Until such reforms are implemented successfully, Soviet industrial aid and trade will not be completely satisfactory. The very debate over the reforms helps to focus world attention on Soviet economic difficulties. Similarly, Russia’s inability to solve its own agricultural problems generates a skepticism with regard to Russia’s agricultural aid programs. Russia’s agricultural problems also embarrass those Soviet critics who complain that the United States stresses agricultural at the expense of industrial help. All of this detracts from attempts to make the Soviet Union a model of economic development for the poorer countries of the world.

One particular aspect of Soviet domestic economic policy deserves special mention because of its effect on Soviet foreign aid. The keystone of the Soviet aid program is its emphasis on industrial help. Yet there seem to be an increasing number of situations where lack of restraint in applying such a policy has come in for criticism. The Russians have a tendency to build factories on a scale more suited to Soviet conditions than to conditions in the developing countries. This disregard for scale and the tendency to concentrate on industrial projects have been partly due to the absence of the interest rate in Soviet calculations on plant size and feasibility. The loan fee of 2.5 per cent that the Russians charge is not the same as the capital charge used to determine the amount of capital (capital intensity) in a particular project. The capital or interest charge is used by project designers to decide on the optimum scale of the plant. The more limited the availability of capital, the higher the interest charge will be and the more likely it is that the planners will be persuaded to use less capital. In all likelihood, the plant will be smaller in size and less mechanized. In some cases, if the interest rate is high enough, a change in plans may be necessary and no factory be built at all. The absence of a capital charge signifies that capital is free and that there need be no limit on the amount of capital that is used. This is what leads to excessive scale and unprofitable operations.

Because American project calculations take into account the capital charge, American factories in Africa and Asia tend to be smaller in size. Americans recognize that capital is a commodity in short supply. This helps to explain why they are more cautious than the Russians in building industrial projects in the less developed countries. Such enterprises must not only earn enough revenue to meet current expenses for inputs like labor and raw material, but they must also meet capital expenses. It is not true, as the Russian assert, that Americans are reluctant to build factories in the less developed countries because they fear subsequent competition with their own domestic industry. American investment and factory construction in Western Europe indicate that the possibility of future competition does not inhibit overseas investment by Americans. It is just that the risks are greater, the supply of capital is smaller, and the changes of profitability are more remote in the Afro-Asian bloc. Ironically, as the Liberman reforms take hold in the U.S.S.R. and as the Russians being to use capital charges in the economic calculations at home, it is only to be expected that a similar calculation will enter into Soviet foreign aid projects. This in turn should induce a more conservative attitude as to the size and economic feasibility of industrial projects financed by the Soviet Union. The increase in interest charges to 4 per cent on a 1966 loan to Brazil indicates that this may be happening.

The Russians are likely to move in this direction not only because of domestic economic reforms but also because they are now harvesting the fruit of past unrestrained policies. Many of the less developed countries find themselves with serious balance-of-payments problems once their debt repayments to the Soviet Union fall due. As we have discovered, even the more conservative countries of Asia and Africa are having such difficulties. Where the national leaders are profligate spenders and/or dreamers, the chaos is likely to be monumental. The “go-go” generation of the revolutionaries – Nkrumah, Sukarno, Ben Bella, Sékou Touré, Nasser, and Castro – have generally been unable to sublimate their frenetic energy and the political plotting of the soap box to the methodical plodding of the drawing board and accounting ledger. In addition to a common penchant for such useless endeavors as stadiums, statues, and oversized factories, these firebrands have also obligated their countries to pay for large quantities of unproductive military equipment; this further complicates their already serious balance of payments. In Egypt, Ghana, Cuba, Guinea, and Indonesia, this has led to default on repayments of Soviet debt or at least to requests for debt postponement. As Soviet aid projects are completed and more and more countries find themselves having to begin to repay their debts, this is bound to become more serious and generate considerable friction between the Russians and those they help.

The sale of munitions highlights another problem area in Soviet external affairs. The countries of Communist Europe, especially the Soviet Union and Czechoslovakia, have become major munitions manufacturers. Partly out of choice and partly out of necessity, they are now important suppliers of arms to the Afro-Asian bloc. In some cases, the Communists have been forced to sell weapons in order to retain the friendships and to protect the inroads already won. In other instances, they encourage the sale of arms in order to keep their munitions industry producing at full capacity. A curious aspect of the Communist arms business is that the Russians almost never publicize their sales of weapons to neutral countries. Although they mention the military help and equipment they give other Communist countries – Cuba, Vietnam, Poland, and china – there is virtually no indication of the scope of the Russian and Czech arms traffic to non-Communist areas. As a result, most Russian citizens are ignorant of such activities. Presumably they would be as disturbed about the profits of the munitions industries in their own countries as they are about such profits when earned by Western firms.

But while the munitions industries in the Soviet Union may do their best to promote the sale of arms, the finance ministry undoubtedly opposes such transactions. The sale of military goods not only complicates the repayment problems of the recipient country, but almost always creates additional unrest in the region. Now that the Russians are owed over several billion dollars’ worth of economic and military debts in various areas around the world, they are discovering for the first time that they have a vested interest in the status quo. They found that the governmental changes that took place in Algeria and Indonesia in 1965 and in Ghana in 1966 were distressing for economic as well as for political reasons. Similarly, military or political disturbances in India jeopardize the billion-dollar investment the Russians have in that country. As we saw, such considerations help explain Russia’s moderating influence in the clashes between India and Pakistan. Thus the Russians are beset by the same dilemma as other donors of foreign aid. Although they like to sell military equipment, they realize that the political aftermath as well as the financial effect on their nonmilitary loans may be unfortunate.

The Russians have not been able to do away with yet another feature of foreign aid and trade which has been sharply criticized: tying strings to their economic help. The Russians were especially domineering in dictating policy to their satellites. Aid was offered and then withdrawn in Yugoslavia, Albania, and China because these countries refused to accede to Soviet political demands. It was subsequently resumed in Yugoslavia. As the Chinese put it the Peking Review of September, 1964, “After receiving aid [Albania] was plundered, its internal affairs interfered in and it was even confronted with subversion.” Other countries that have found themselves penalized or threatened economically or politically because of some indiscretions include Finland, Israel, Cuba, Algeria, Guinea, Indonesia, Ghana, and Iraq.

It would be a futile to determine who pulls the most strings, the United States or the Soviet Union. The fact remains, however, that both countries have interfered when they deemed it to be in their short-run interest. No country likes to spend large sums of money for the benefit of another country only to see the recipient refuse to follow advice. Like parents with their adolescent children, the reaction is even stronger when the recipient begins to criticize or attack the donor. It is unrealistic to expect that economic support will be maintained under such circumstances.

Lessons for the United States

With time, Soviet foreign economic policy has produced experiences and reactions similar to those of the United States. As their investment in foreign aid increases, it is likely that the Russians will become more cautious. Whether they pull string, whether they worry about the repayment of the credits that they have extended, whether they are attacked for not providing enough industrial help, or whether they are criticized for the ineffectiveness of their aid, the Russian find themselves with problems that are all too familiar to Americans. What lessons are there in all of this for the United States and its aid program?

The most obvious conclusion is that foreign aid and trade with the developing nations is by its very nature a challenging and often thankless task. The returns are slow in coming, and failure and criticism are as much to be expected as success and praise. Patience, perhaps, is what is needed more than anything else. Consequently, it is encouraging to see that we have no monopoly on impatience.

Impatience, plus dissension among Communist allies and economic troubles at home, led to a moratorium on new aid promises by the Russians in late 1961. All of 1962 passed without a single major new commitment. This was a complete reversal of the pattern of the preceding years; it also meant the Russians had to watch the formation of an independent Algeria in July 1962, in silence. It was not until about fourteen months later, in September, 1963, that the Russians decided to offer any major promise of aid and finally announced a loan to Algeria. Then, as we have seen, the competitive battle with the Chinese generated a sharp increase in aid. A second reason for the extension of new loans was that the Russians found themselves trapped by what can be called the “quicksand effect.” Once they have undertaken to support a country like Egypt or India in its program of economic development, it becomes extremely difficult to refuse requests for supplemental aid. Failure to promise new aid creates the risk that the political gains from past aid will be lost. Thus as we saw, against the advice of his economic counselors and the Soviet Presidium, Khrushchev announced a new loan to the United Arab Republic of $277 million in May, 1964. Carried away by the flush of enthusiasm over the completion of the first stage of the Aswan Dam, he was just a man who couldn’t say no.

A third factor explaining the resumption of Soviet aid commitments is the traditional one of seizing new opportunities to penetrate new areas. In the early 1960’s the nations of the CENTO pact became restless and disappointed with American support. Since most of these countries have common borders with the Soviet Union, the temptation to developed improved economic relations with these areas was too much for the Russians to resist. Thus, for all three reasons, the Russians resumed their aid program until early 1965, when it was cut back again because of the growing economic problems at home and an increasing awareness that the means and ends of Soviet foreign aid were contradictory.

Nonetheless, whatever Soviet shortcomings or hesitations, in terms of per dollar expenditure on foreign aid, the Russians seem to have done better than the United States. In India, the United States has offered almost $6 billion and the Russians only $1-1.5 billion; in Egypt, the respective figures are $1 billion and $820 million. Yet Russian aid has had much more of an impact and is considered to have contributed more to the industrialization of both countries. It is true that this is partially because the Russians are newer at the game and not all of their promises have yet had to meet the test of reality. As their projects are completed, there is certain to be more criticism mixed in with the praise. Yet there are some techniques the United States would do well to copy from the Soviet Union.

A praiseworthy feature of Soviet aid is its flexibility. The U.S. foreign aid program tends to move from one extreme to another. First, we stress grants in aid. When that does not bring immediate results, we adopt a loan policy. We should be much more willing to use a little of both. When necessary, the Russian can move very rapidly to implementing their aid program. American procedures are often time-consuming and cumbersome. Without restricting our flexibility, we might profit from preparing a prepackaged “shell” of prototype aid projects that could be easily utilized and put into operation. This might make it possible to reduce the months usually required to produce working plans for such basic projects as sugar mills, canneries, dairies, and lumbermills. Of course, it would still be necessary to make adjustments to local conditions, but the existence of standardized plans might reduce much of the frustration created by excessive delays that often precede the actual construction of American aid projects.

Where we are already more flexible, we should do more to publicize the fact. For instance, American aid officials should make an effort to show that American aid is not limited to privately sponsored projects. Our aid is divided much more evenly between private and state enterprises then is Russian aid, which tends to be concentrated on government projects. Here we tend to be more flexible than the Russian, but few people know about it.

The Russian could also teach us something about public relations in foreign aid. Soviet officials and the Russian press go out of their way to draw attention to Soviet efforts. It would help in senior American officials, especially the President and the Vice President, would make a point of inspecting or inaugurating American-sponsored projects on their foreign tours, as Soviet officials do. Similarly, American firms should be encouraged to publicize their work on American-sponsored foreign aid projects. This would help to inform the public about the existence of such projects and would also be a way of indicating how foreign aid appropriations benefit American businessmen. After all, this is no more than what American corporations presently do after each space shot. They vie with one another to show off their engineering and technical accomplishments. They should do the same about their foreign aid accomplishments.

To provide an image for its over-all efforts, the United States should adopt the Soviet practice of “flagship projects.” Projects such as the Aswan Dam and the Bhilai steel mill focus world-wide attention on Soviet foreign aid and lend an atmosphere of substance to all their efforts. One of the greater shortcomings of the American aid effort is its diffusion. Few Americans can name one American project. Had the United States undertaken to build the Bokara steel mill, it could have served as a symbol of tangible American support. The prestige from such a project would probably flow over to other important by less exciting America projects, such as agricultural help and educational and technical assistance, where the results are highly useful in the long run but less apparent in the short run. The United States should undertake one or two such flagship projects and commit itself to the necessary financial credits for more than one year. Although political hand-biting by the recipients may occur in the course of construction, this is something the United States must be prepared to tolerate. These have been insufficient swings in the political pendulum in the last twenty years to indicate that if one waits long enough, a hostile regime will eventually be replaced by a more favorable government. In the meantime, the aid project can make a basic contribution to economic development; this should redound more to our benefit than to the Soviet Union’s.

Americans should also take a somewhat less skeptical and hostile attitude toward Soviet aid. Although we should not forget that behind Soviet aid there are political motives and ambitions just as there are in American aid, we should nevertheless recognize that in the long run, a successful aid project that strengthens and stabilizes an economy will help the United States more than the U.S.S.R. While the two may be connected, we should distinguish between subversion, which is destructive, and aid, which is constructive. History so far shows that Communism does not flourish or spread in countries that seem to be solving their economic problems. Logically, therefore, instead of discouraging Soviet aid, we should encourage it. Every project they undertake is one less we have to bear. There are short-run political risks in such a policy, but the long-run effects, both economic and political, seem to be in our favor. Experiences shows that if the aided country prospers because of Soviet aid, it is less likely become Communist. On the other hand, if Soviet aid is unsuccessful, the Russian are often made to share the blame for the country’s problems and the country is likely to turn to the West for support. This has been the case in Indonesia and Ghana. In countries where the Russians have been excluded, for example, Guatemala, Communism often seems to make the greatest inroads. Although the absence of Soviet aid in such countries is not the main reason why there is a strong Communist movement in the country, it is an interesting paradox.

Recognizing that Soviet aid may not always be detrimental to American interests, it is worth noting the emergence of a new and promising phase in the administration of American foreign aid. Largely at the initiative of sincere and committed aid and foreign service officials from both countries, there are a growing number of cases where the United States and the U.S.S.R. are attempting to coordinate their aid efforts in a particular country. There are immense advantages for all parties concerned in such a trend. Already it is possible to find some such joint efforts. In Afghanistan we saw how American roads end where Russian roads begin. In Ghana, water provided by American projects with irrigate sugar case which is to be processed in a Polish sugar mill. Other cooperative efforts may only take the form of a discussion as to what each country plans to do. Even this can help to eliminate or reduce duplication and overcapitalization. On occasion it may even lead to a component-building process whereby one project supplements another. There seems little doubt that while both donors benefit from such an approach, the one who benefits the most is the recipient country.

Nonetheless it would be unrealistic to assume that American-Soviet cooperation in foreign aid will take place on a significant scale. This is not entirely to be regretted. Regardless of the advantages that coordination and cooperation may bring, history still shows that in the long run foreign aid, investment, and trade are most beneficial when rendered as a result of international competition. At best, coordination is most effective in a context of over-all competition. When a developed and powerful country or a group of large countries has a franchise to do as it pleases in a smaller country, the results are usually not entirely salutary from the poorer country’s point of view. This has been true of American operations in Latin America and Soviet activities in Eastern Europe. Accordingly, Russian interest in Latin America has forced the United States to take a les selfish look at Latin America. Similarly, greater American and Western economic interest in Eastern Europe has caused the Soviet Union to re-examine its economic relations in that area. The West could probably bring about further improvement in conditions there if we took even more interest in Eastern Europe by offering better trade and credit privileges to the East European countries which seemed particularly deserving. In the past the most successful foreign aid projects have resulted where the United States, the Soviet Union, other Western countries, and, now, the Chinese have found themselves engaged in courting the favors of a particular country. For the country whose affections are being sought, this may be all to the good. To the extent that it can play off one faction against another, it is possible that it may be able to obtain more foreign aid and political concessions than it would if there were no competition from the other powers. The threat of Communist penetration has given birth to the Marshall Plan and to the Alliance for Progress, among other project; the promise of neutralism has sparked a $4-billion aid program by the Soviet Union to the developing countries; and the likelihood of a Chinese takeover of the 1965 Afro-Asian Conference in Algeria caused the Russians to resume their foreign aid program and increase their loans by over half a billion dollars.

The role international foreign aid is gradually changing from what it was in the late 1950’s and early 1960’s. Then acceptance of aid from a particular donor often implied strict adherence to the donor’s particular point of view. With time this has changed. While there is still a danger of economic subversion under the guise of Soviet aid or trade, more and more, the developing nations seem to have learned how to balance off the various lures of the donor countries without losing their equilibrium. As long as the U.S.S.R. continues to invest in various projects overseas and as long as the recipient countries continue to reject Communism, there is growing likelihood the U.S.S.R. will act as a moderating force in these areas. Conceivably some day the Chinese may react the same way. In the meantime, the United States should continue to compete and even cooperate with the Soviet Union in the developing countries, both Communist and non-Communist.

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