The growth and decline of American economic aid to less developed countries

Abstract

The principal purpose of this study is to account for changes in the amount of economic aid which the United States has provided to less developed countries. Economic aid is defined broadly to cover direct transfers of resources (money, credits, commodities or services) from the government of the donor nation to the economic sector of the recipient nation. Concessional economic aid refers to grants and credits on terms markedly more liberal than those applying in private commercial markets. The first chapter of the dissertation notes that the United States provided very little economic aid to less developed countries prior to the New Deal. The American Government sought many of those objectives which later gave rise to the transfer of aid, but it used other instruments (including gunboat diplomacy, the institution of customs receiverships, and measures to deny or facilitate private loans) to achieve its objectives. U.S. relations with Central American countries in the first part of the century illustrate the use of these techniques. The second chapter covers the emergence of significant programmes of economic aid for less developed countries over 1933- 47. It includes detailed case studies on the growth of Eximbank lending and technical assistance in Latin America, and the provision of aid to North Africa, Saudi Arabia and China. The chapter argues that a number of factors explain increased resort to economic aid over this period, including the presence of strong foreign policy and defence motives for providing assistance, increased interest in developing new outlets and markets for American products, changed attitudes concerning the effectiveness of aid as a foreign policy instrument, diminished use of alternative methods (of the type discussed in Chapter One) for influencing events in less developed countries, improved relations between the United States and some recipient nations, the increased capacity of the United States to provide aid, a humanitarian response to widespread destruction brought about by the Second World War, and a relatively favourable domestic political climate for the transfer of aid. Chapters Three and Four deal with the expansion of concessional economic aid to less developed countries between 1948 and 1966. The third chapter suggests that the expansion of general programmes of capital and technical assistance over this interval resulted from increased concern with ’communist' influence in less developed countries, the growth of doctrines which were optimistic in their assessment of the way in which large scale capital aid could promote development, increased requirements in a number of less developed countries, improved relations between the United States and some important recipients, a more pessimistic judgment of alternatives to economic aid, and an increase in the capacity of the American Government to provide aid as less funds were required in Europe and revenue from other sources expanded. Chapter Four considers the special case of PL480 and associated programmes. It takes issue with the view that the introduction of PL480 can be understood simply in terms of the emergence of large agricultural surpluses in the United States. While this was the immediate cause, resort to economic aid to deal with the problem of surpluses was facilitated by the increased reliance of less developed countries on imports of wheat and other relevant commodities, and by the existence of a climate in which the provision of large quantities of concessional aid was considered more acceptable than it would have been fifteen years previously. Subsequent expansion of commodity aid to LDCs is attributed to diminished willingness to transfer surpluses to Europe and Japan, a positive interest in providing additional economic aid to less developed countries, expanded requirements for food imports in these nations, and improved relations between the United States and other producer countries. The fifth chapter shows that there was a decline in the amount of U.S. concessional economic aid to less countries over 1966-73. This is explained in terms of reduced emphasis on some of the 'Cold War' objectives previously important in justifying the transfer of aid, a marked reduction in the level of U.S. agricultural surpluses, greater scepticism concerning the effectiveness of aid as an instrument of policy, the increasing severity of the American balance of payments problem, deteriorating relations between the United States and some important recipients (including India and Egypt), the manner in which concessional economic aid became linked with unpopular issues (such as American involvement in Indochina) , the ability of a number of less developed countries to expand their foreign exchange earnings rapidly by other means, and increased concern with domestic problems in the United States. The concluding chapter states the principal findings of the dissertation concerning the emergence, growth and decline of American economic aid to less developed countries, attempts some general statements about the factors influenced the amount of economic aid transferred.