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Presbyterian Council held at the Federal Reserve Bank of Philadelphia on Monday, April 4, 1966. RICH I. INTRODUCTION: LANDl POOR LAND WHY TALK ON THIS TOPIC? A. B. Trained as an economist — C. Have concern for international economic relations. 1. 2. D. II. problem has economic aspects! Balance of payments. Technical Secretary at Bretton Woods. Because Bob Hilkert asked me tol THERE ARE RICH NATIONS AND POOR NATIONS. A. 3. B. HI. Rich becoming richer; poor becoming poorer FEELING THAT SOMETHING SHOULD BE DONE. A. B. Selfishlyt 1. Explosive character of situation. 2. Poor now know about differences and have aspirations. Moral imperative. 1. 2. Guilt Positive ¿ v£ o ¿^ 4 ¿ d e ^ & ^ í. -V* 0 -Z t/ jL *^ / ¿X. U r& t jt ' ¿ o ít í* ^ V » / / / ^ w _ j ^ rá~. ^ m W.J -T ^ t» L ^ . « *'*'~ *» / ^ ^ át^X. c *^ , -& * ~ 4 *¿C.+r+~ ¿ « y \J L j u JL> fb A u c i. r 5 . f*C j /é ^ jU tc X * * 'i } ¿ r% S / ' -V -U ^ ò (Presbyterian Council, p. 2) IV. WHAT SHOULD BE DONE? A. Simplistic solution. 1. B. Transfer GNP from rich to poor. Depends on character and organization of people involved. Ca .'L/j& w i 1. Character. a, Liberian student wants job — "big wheel." (I) I happen to fear power. (Goes back to ray childhood.) (II) Some relish exercising it. 2. V. b. First-class air travel — cleaning your plate. c. Our character is a function of our genes our environment and experience. d. These change slowly — usually. and Organization. a. Meaning of democracy in tribal countries. b. Shintoism and Japanese defeat. The success (?) of materialismi NOT SO MUCH AN ECONOMIC PROBLEM AS A SOCIAL AND POLITICAL PROBLEM. A. Effectiveness of the Marshall Plan. B. Relative ineffectiveness of aid to underdeveloped countries. (Presbyterian Council, p. 3) I. WHAT THE UNITED STATES HAS DONE. T a b le C-QQ.— United States foreign assistance, by type and area, fiscal years 1946-65 [Millions of dollars] Net obligations and loan authorisations Type and fiscal period Total Near East and South Asia Latin America Far East Africa Europe Other and nonregional Foreign assistance: Total postwar................... 1062-44 average................... 1865..................................... 115,875 6,505 6,958 23,600 2,120 2,045 10,343 1,210 1,346 25,842 1,369 1,390 3,237 480 347 44,676 664 611 8,178 782 320 Economic aid: Total postwar..................... Loans........................... Grants.......................... 1962-64 average................... Loans........................... Grants.......................... 1066..................................... Loans...................... . Grants.......................... 81,197 32,008 49,189 4,861 2,682 2,179 4,645 2,643 2,002 17,324 9,366 7,958 1,792 1,234 658 1,680 1,336 344 9,430 6,720 2,710 1,114 767 347 1,282 778 604 16,191 2,926 13,267 764 220 646 726 190 635 3,061 1,286 1,766 464 170 285 329 157 172 30,292 11,494 18,797 335 266 69 204 182 22 4,910 218 4,692 402 25 376 424 AID and predecessor agencies: Total postwar.................... 1962-64 average................... 1965..................................... 40,030 2,314 2,028 *103 922 669 3,010 648 632 8,625 356 408 1,683 248 160 10,230 4 -1 2,479 230 207 Food for Peace: Total postwar.................... 1962-64 average_________ 1965..................................... 13,225 1,671 1,527 6,311 798 922 1,390 226 107 1,960 283 210 862 161 117 2,334 164 118 358 60 62 Kxport-Import Bank long term loans: Total postwar.................... 1862-64 average................... 1965..................................... 8,770 461 622 987 67 78 3,573 115 258 896 83 86 380 30 34 2,909 166 66 Other economic aid: * Total postwar__________ 1962-64 average................... 1965...................................... 19,172 416 671 922 6 11 1,456 226 385 4,791 42 22 136 16 27 9,819 11 22 2,048 115 106 Military assistance:* Total postwar.................... Loans_______ ______ Grants... ...................... 1962-64 average................... Loans....... .................... Grants. ....................... 1965..................................... Loans........................ . Grants.......................... 34,678 586 34,092 1,644 50 1,694 1,313 71 1,242 4276 160 0,126 328 2 326 365 25 340 913 132 781 96 6 90 64 8 66 <9,661 «35 <9,616 <695 <12 <683 <664 186 11 176 26 17 14,384 126 14,269 219 19 200 307 19 288 3,268 134 3,134 380 11 309 -104 19 -123 Addendum—Repayments and Interest:* Economic assistance: Total postwar.............. 1965............................... Military assistance: Total postwar_______ 1965............................... 12,156 1,012 1,312 275 2,474 324 830 166 298 36 7,129 211 116 10 302 42 67 4 69 6 14 14 3 101 11 07 9 <664 0) 20 18 (0 0) 424 O 26 1 Less than $500,000. * Includes capital subscriptions to Inter-American Development Bank, International Bank for Recon struction and Development, International Development Association, and International Finance Corpora tion (1946-65, $1,541 million; 1962-64 average, $135 million; 1965, $312 million) and Peace Corps (1946-65, $246 million; 1962-64 average, $54 million; 1965, $85 million). * Includes grant-aid and credit assistance under the Foreign Assistance Act (FAA) phis military assist ance grants under other acts. Regional totals for the former include country aid programs only; all other programs are shown in "other and nonregional.” FAA military data are from the Department of Defense. Annual data are for deliveries. "Total postwar” entries are program totals. * Excludes Australia and New Zealand, shown in "other and nonregional." * Data for certain programs from Department of Commerce. Office of Business Economics, and Depart ment of Defense. Calculations for 1962-64 period not available at time of publication. 8ource: Agency for International Development (except as noted). (ECONOMIC REPORT OF THE PRESIDENT - January 3P3 1966) UNITED STATES PRIVATE FOREIGN INVESTMENT POSITION END-1964 ($ billions) International Total Total U.S. Private Investment Abroad Direct Portfolio Short-term West Europe $75-5 44.3 20.4 10.7 Canada Latin America $19.5 12.1 5.4 2.0 $24.6 $13.8 8.8 2.0 2.3 2.6 6.4 2.3 1-9 2.2 5.0 0.1 1.6 3.3 0.1 1.0 0.2 4.4 0.4 13.8 8.9 Other Countries Institutions and Unallocated $14.6 7.7 2.9 4.1 $2.9 5.6 0.6 1.9 1.0 ----------- Total Private Foreign Investment in U.S. Direct Portfolio Short-term 16.6 17.5 24.8 5.8 II .9 7.1 Net Private Foreign Investment 32.9 - 5.3 18.2 8.8 9.0 2.3 Net Private Long-term Investment 39.8 - 0.2 18.4 9.5 9.4 2.7 Source: 42.5 8.4 Survey of Current Business, September 1965 — Comments by Karl R. Bopp Monday, April k, 1966 (Presbyterian Council, p. 1) II. REQUIREMENTS FOR INCREASING PER CAPITA INCOME. THE "STANDARD OF LIVING A. ^ . Definition: B. Population developments: ... National Income per capita income = — Population---* For the world: Population tomorrow equals population today - deaths + births. For a nation: Must subtract emigrants and add immigrants. 1. Deaths. a. Survival in an over-populated world. b. Medical science and survival. (I) Survival of the unfit? Bentley Glass lecture. (II) 2. Not a general solution: would result in lowering of standards all around. Immigration. a. 4. of whom? Emigration. a. 3. Euthanasia — Moron. Aggravates the problem. Births. a. Control is only prospect with hope. b. Who shall determine? Eugenics. (I) Individual freedom with education? (A) Slow process. (B) Least effect where most needed. (II) The State. (A) Hazards. c. 700 million ChineseI (Presbyterian Council, p. 2 ) C • Income developments. Income » domestic production + net flow with foreigners. 1. Net flow with foreigners. a. Desirable to have maximum gross trade with others. b. Net exports reduce per capita availabilities. c. Net imports increase per capita availabilities. But no permanent solution. (I) Would involve ever larger gifts or indebtedness where we want (II) Ultimate self-support. 2. Domestic production. a. Factors: Land, manpower, organization, capital. b. Output = consumption + saving. Present versus the future. Distribution of ¥ + I as affecting c. Saving = investment. d. Investment. (I) Intensive vs. extensive use of capital. (II) Pride, religion, tradition and investment. (A) Religion. (1) Sacred cows. (2) No fertilizer. (3) Gilding the Taj Mahal. (B) Pride. (1) Ethiopia - Haile Selassie and his airplanes. (2) The showpieces - modern steel mill. (C) Tradition: unproductive investment (1) Gold. Silver. (2) Precious stones. (Ill) Modern versus traditional sectors of under developed countries (A) City versus country (B) Education and Rising Expectations (Presbyterian Council, p. 3) D. Conflict of objectives. 1. No absolute priorities. a* Only 2 per cent of GNP! - and we spend 2+ per cent for some "foolishness. b. Who is to establish what is "foolish"? Incentives to those who want foolish things. c. Marginal utility. 2. Foreign aid ian't ultimately a country to country proposition. a. Poor as well as rich pay taxes. b. Priest on redistribution. 3. National objectives in foreign aid. a. Generosity. b. Self-determination. Do we know what it means for those without our traditions? c. E. Defense of free world. On what conditions should aid depend? 1. Political? 0 2. „ . 0 Economic? — On basis of uses. X . On amount. The problem of incentives. a. Why not on degree to which recipient improves himself? Per capita income. Not a final solution: Aid would continue forever1 At decreasing rate perhaps? Upper limit? b. Difficulties of measurement. Bretton Woods and the populations of China (Kung) and India (Deshmuck).
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