176. Current Economic Developments0
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US Views on Multilateral Aid to Underdeveloped Countries
The recent suggestion of French President de Gaulle that the West should take the initiative at the Summit in proposing joint Soviet-Western participation in aid to the less-developed countries has resulted in the US presenting a memorandum1 to France which rebuts that proposal and explains the alternative philosophy underlying the proposal for an International Development Association. US thinking on the latter has also been made available through the International Bank Board to all member governments.
de Gaulle Proposal On March 25 de Gaulle made a speech in which he called for a large joint East-West program of multilateral assistance to underdeveloped countries. He also indicated that he intended to discuss this question at a future summit conference should the foreign ministers meeting produce sufficient accord to result in a summit meeting. Although de Gaulle’s statement contained no concrete proposals, it aroused considerable interest throughout the world. It is still not exactly clear what he had in mind, but apparently he was motivated by two objectives. He feels keenly the obligation of economically mature countries to assist the underdeveloped areas and he believed such a move would provide initiative for the free world and place the Soviet Union on the defensive, as he is convinced the USSR would not accept this challenge to peaceful cooperation.
US Objections to Joint Western-Soviet Aid After carefully considering the matter, the US reached the conclusion that it would be contrary to Western interests for the West to take the initiative in proposing joint Soviet-Western participation in aid to the less-developed countries. This would contribute to the successful pursuit of the Soviet economic offensive, which is an essential element of Soviet strategy for undermining the West. That this economic offensive plays a key [Page 334] role in furthering Soviet political objectives in the less-developed areas has been confirmed to us from many sources, and it is clear that the offensive is being pressed with increasing vigor.
Western endorsement of Soviet participation in economic development of the less-developed countries would immediately give the Soviet Union an important propaganda opportunity. It would be used to demonstrate that the West regards the Soviets as a worthy and important contributor to the future of underdeveloped areas and would destroy the effect of the warnings which have been given by several Western powers to these countries as to the dangers of becoming too heavily involved with Soviet assistance.
We have considered the possible argument that the Soviet economic offensive would be less dangerous if it were channeled through a multilateral program with Western participation rather than through the present Soviet bilateral programs. We believe it certain, however, that the Soviets would refuse to participate in any possibility of Western control over Soviet activities. Furthermore, even if the Soviets participated in limited arrangements or in selected areas to which they have not secured access previously, this participation would not mean the abandonment or lessening of their bilateral programs. We are also sure, from past experience in ECOSOC and elsewhere, that in any multilateral program involving Soviet participation the Soviets would make every effort to penetrate or otherwise influence the operations of the organization to further Soviet political objectives. Among other things, they would insist on full membership for the satellites, use the forum for creating propaganda against Western Europe and the US, and advance unsound economic policies having great appeal in underdeveloped areas. They would also seek prominent representation on the technical staff and secretariat and in the field of technical assistance, where they are capable of delivering competent technicians on a larger scale and with greater despatch than many Western governments. Through these channels they would certainly seek to influence the governments of less-developed areas in the direction of communist economic methods. In short, competition between the Soviets and the West for the favor of the less-developed areas would be intensified and East-West frictions would be increased.
We have also considered and agree with the argument it is unlikely that the Soviets would agree to a multilateral assistance program or organization with provisions and safeguards acceptable to the West. However, this fact would not deny them the opportunity to obtain great propaganda advantage from a Western proposal. The most likely course of events would be that the Soviets, while not rejecting a Western proposal in principle would introduce modifications highly appealing to the less-developed countries but unacceptable to the [Page 335] West. Failure of the project would thus be blamed on the West, with the Soviets appearing as the champions of the less-developed countries.
Even graver is the possibility of the damage that might be done to practical efforts which the US and other Western governments are now making to obtain sufficient capital for helping the less-developed countries. Soviet attempts to undermine the economic structure of the free world and to subvert the governments of the weaker nations have been an important factor in motivating Western legislatures to support development assistance programs in the underdeveloped areas. A proposal now to collaborate with the Soviets on such aid could well weaken public support in the West for development funds to help the less-developed areas. Such a result would be a major victory for the Soviet Union.
US Proposals for IDA The US fully shares de Gaulle’s views that economic assistance to the less-developed areas is of the greatest importance and is indeed one of the most vital issues in the struggle for freedom. We are convinced, however, that the interests of the West can be advanced on this front only through a greater concerted effort among the free world countries themselves.
It is for this reason that the US is proposing that consideration should be given to the establishment of a new International Development Association (IDA) whose purpose would be to provide additional capital for the development of the less-developed areas, on flexible terms, and in a manner which would supplement the newly increased resources of the World Bank and of bilateral and regional programs of the Western governments.
The US paper as made available to IBRD member countries, and which is now the basis of discussion with some other countries, envisages IDA as an affiliate of the IBRD, therefore benefiting from the same effective management the latter has enjoyed. Membership in IDA would be open to all members of the World Bank, and voting in the organization would be on a weighted basis, assuring adequate influence by contributing members. US thinking is that the initial capital should be $1 billion, with provision for considering increases in the capital at five-year intervals. The US subscription would be proportional to its subscription in the International Bank, taking into account the proposed increases in the IBRD. If the IDA is set up with the capitalization we envisage, the US share would amount to about $320 million. IDA should also have the authority, we believe, to borrow from member governments or other sources.
US suggestions as to payment of subscriptions and use of the currencies subscribed are as follows. Members would pay in 50 percent of their subscriptions immediately and the remainder in equal installments over five years. Members would make their subscriptions [Page 336] in part (20%) in gold or fully convertible currencies, which would be freely disposable by the IDA; 30% in their own national currencies, which should, we believe, be convertible on demand unless IDA grants a suspension of that requirement but which would, as a minimum, be usable for procurement of nationally produced goods and services for use in connection with IDA-financed development projects within the country concerned or for export of such goods; the remaining 50% in national currencies. The extent to which this remaining 50% should be convertible is a matter for further consideration. It is, however, the US view that if all the other industrialized countries made their subscription available on a fully convertible basis, the US would do the same with this portion of its subscription. Also, the US believes arrangements should be made to permit the IDA to accept special contributions from one member in the currency of another member. Transfers by members of portions of existing accumulations of local currencies should not be on terms which impose greater restrictions on the use of the currency by IDA than previously applied to its use by the donor country. We believe that efforts should be made to secure agreement of member countries, in accepting the IDA charter, to cooperate in facilitating reasonable transfers to IDA of its currency which another country wished to contribute.
In summary, the US believes that Western interests can be advanced effectively in the field of multilateral aid to underdeveloped countries through cooperative Western arrangements such as the proposed International Development Association, but that a Western proposal for joint Soviet-Western participation in such aid, implying endorsement by the West of Soviet aid, would be dangerous to the interests of the West.
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- Source: Washington National Records Center, Current Economic Developments: FRC 72 A 6248. Secret.↩
- de Gaulle offered his initiative in a statement at the beginning of a March 25 press conference; for text, see Major Addresses, Statements and Press Conferences of General Charles de Gaulle, May 19, 1958–January 31, 1964 (New York: French Embassy, Press and Information Division), pp. 41–51. The text of the U.S. memorandum, which was sent to Paris in telegram 4651, May 29 (Department of State, Central Files, 398.10/5–2459), is presented nearly verbatim here.↩