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• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 01430484
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 15
• Document Creation Date: December 28, 2022
• Document Release Date: August 7, 2017
• Case Number: F-2007-00094
• Publication Date: April 25, 1973

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SFNDER WILL CHECK CLAt...51FICATION TOP AND BOTTOM
-1� INCLASSIFIED 1 CONFIDENTIAL
' SECRET
. OFFICIAL ROUTING SLIP
TO
NAME AND ADDRESS
DATE
INITIALS
1
Mr. Halpern
i..7-
2
3
4
5
6 ......
,
ACTION
DIRECT REPLY
PREPARE REPLY
APPROVAL
DISPATCH
RECOMMENDATION
COMMENT
FILE
RETURN
CONCURRENCE
INFORMATION
SIGNATURE
Remarks: '
.Sam:
Attached are the following:
1-background paper on TIC #7
2-comments on facts and statistics
37comments on AID by Mr. Schlesinger
1963 (which Mr. Colby might find
� of interest)
0659r-
a
FOLD HERE TO RETURN TO SENDER
FROM: NAME. ADDRESS AD PHONE NO.
DATE
25/4/73
um..LAnnir in) I -r CONFIDENTIAL J
SECRET
FORM NO. f)427 the previous editions
L.� 1-67 Gal
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- 00603
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� Approved for Release: 2017/01/18 C01430484
NATIONAL SECURITY
Political, Military, and Economic
Strategies in the Decade Ahead
Edited by
David M. Abshire and Richard V. Allen
� �
Introdu;tion by
Admiral Arleigh Burke, Director
� THE CENTER FOR STRATEGIC STUDIES
� GEORGETOWN UNIVERSITY
Published for the
HOOVER INSTITUTION ON WAR, REVOLUTION
AND. PEACE
by
PREDERICK A. PRAEGER, Publisher
New York � London
"
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Strategic Leverage from Aid and Trade
�JAMES R. SCHLESINGER
�
Summary
The analysis Of this paper rests on the- assumption that
American policy-titakers should not be so concerned with the
. Pursuit of hard-to-obtain ideological objectives that they exhaust
the power potential implicit in trade and aid relationships.
Rather the trade and aid programs should be managed so as to
preServe an environment in which pressures can be brought to
bear to serve the national interest at a later, and perhaps More
critical, date. This emphasis on power considerations implies
� both (a) that the assistance program cannot be based primarily
on humanitarian or idealistic goals, and (b) that economic ties
with other nations should not be severed simply because of our
disapproval of other social systems, including those based on
communism. Though typically public opinion vastly overstates
the strategic leverage that can, be .gained through economic
-weapons, this leverage is still not negligible. One can argue that
in the past the United States ,has failed to take advantage of
the power potential implicit in aid and trade through its failure
to develop concepts and mechanisms of deterrence in ways akin
to what .has been done in the military field. Much of the
. difficulty may be ascribed .to .a -failure to develop sanctions,
which discourage actions unfavorable to Our intereste, as well
as incentives, which encourage cooperation. No system of
deterrence can exclusively stress the carrot and ignore the stick.
More is being demanded of the aid program than it can
. reasonably achieve. Assuming that the primary emphasis of the
� aid program is to encourage social and economic development
rather than to elicit direct support for American foreign policy
687
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688
Lulus R. SCHLESINGER
objectives, it is argued that we should attempt to develop stable
social and political conditions by strengthening the "legitimacy"
of the developing social order in the eyes of the respective
Publics�rather than attempting to export the trappings of
American democracy.
' Technological change, the easy availability of substitutes, and
the lengthy period for adjustment in a prolonged struggle have
all reduced the impact of the "supply effect" which was at one
time the main weapon of economic warfare. If the economic
weapons of strategy are to be at all effective under today's
conditions, the "influence effect" must rise correspondingly in
importance. This implies that we should be in a position to
threaten to do damage to other economies through the curtail-
ment of access to Western markets. In order to keep this threat
� as ever-present one, we must, however, continue to trade in
Volume with other countries, including Communist ones. Partic-
ularlf in dealing with the underdeveloped nations the potential
effectiveness of such threats may prove to be considerable.
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696 � JAMES R. SCHIZSINGES
One final consideration�it would be unwise to use potential
weapons of this sort for niggling purposes. The balance of pay-
ments has been troublesome and is properly an object of concern
In Washington, but surely it is not a first-order consideration
in our relations with the underdeveloped nations. Suggestions
have been bruited about that we should make use of the aid
program to force recipients to buy from us in ways that go
beyond tied aid. Under the best of circumstances, our bargaining
power is limited, and shooting away strategic ammunition for so
paltry an economic goal would seem to reflect a poor sense of
proportion.
ma
Within an over-all framework designed to discourage hostile
or. predatory attitudes toward the West, the aid program may
seek to foster the maximum rate of economic and social progress.
in the basic policy of MD, the Kennedy Administration has
explicitly adopted this goal. As has been indicated there are
costs to this decision. Outsiders are not likely to be much liked
even under the best of circumstances, which hardly apply to the
underdeveloped countries, and their intervention in whatever
direction will in the long run excite antagonism based on real
or fancied wrongs. Nevertheless, the basic decision has been
Made. Let us examine in what way we may proceed so that the
good effects clearly outweigh the ill effects.
There are two initial postulates: (1) our bargaining power
will be limited, and (2) American notions of social reform and
of equity are neither necessarily applicable in the underdeveloped
lands, nor need we assume that those whose cooperation we
must win will find them appealing. These postulates are inter-
related. Jointly they imply that we cannot press .forward on
all fronts to create a society in which a good American democrat
will feel at home, but must instead concentrate our energies on
those social changes which will spur economic growth even if
the immediate results are more consistent with the cultural
genius of the peoples involved rather than our own tastes. We
ought not expect them to make the same choices as we would,
or, if :they make the same choices, to achieve in a ten-year period
what it took us eighty years to achieve. Finally, in reaching
judgments on social processes in other lands, we cannot apply
what are our own--or, in reality, higher,--standards of purity.
As outsiders, we will be unable to perceive the social function
of behavior which is superficially corrupt, and will tend to lump
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&RA LEVERAGE FROM AID AND TRADE 697
It together with that which is purely parasitical. With respect
to our own history, retrospectively we have come to find merit
In what once were regarded as the disreputable procedures of
an organization like Tammany Hall in that it provided a kind
of social security and a welcome for the newly arrived im-
migrant. We are accustomed to the daily dangling of new post
offices, good committee assignments, and bridges over creeks in
the outback before wavering Congressmen, and warm approval
it given, for its fine sense of political realism, to whatever ad-
ministration is doing the dangling by those who agree with its
� goals. Toward similar procedures abroad we are inclined to
� take a simple muckraking attitude. We look askance at the
higgling of the political market�with a naivet�hat would do
credit both to missionaries and old-style political reformers. If
we hope to achieve a fair measure of success, we shall have to
sharpen our critical faculties and learn to distinguish between
unappetizing social devices which are functional and those which
are simple barriers to progress.
The statement of objectives by AID is a very ambitious one.
The purposes of the assistance program include stimulation
of self-help, encouragement of progressive forces, and achieve-
ment of governments based on consent, which recognize the
dignity and worth of individuals who are expected to participate
in determining the nation's goals. No doubt, a statement of
aspirations is in large part window dressing, but the criteria
by which self-help is moving toward social and political progress
are more specific: a more equitable distribution of income, a
more equitable tax system with increased yields, expanded wel-
fare programs, increased political participation and civil liberties,
and so on. Several points may be made regarding the objectives:
first, there are too many; second, they are to some extent in-
consistent; and third, they ignore the real resources available.
There is, in the first place, the long-perceived clash between
economic progress, on the one hand, and the combined goals of
equitable distribution of income, immediate improvement in
living standards, and security on the other. This underlying
conflict spills over into a tension between rapid economic pro-
gress and the introduction of democratic processes. On this
Issue there appears to have been a revolution in informed
opinion in the United States during the past five years. During
the late fifties, it had become almost an axiom that authoritarian,
if not totalitarian, governments had innate advantages in guid-
ing economies, toward rapid growth. The prevailing view was
�
00608
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I:-
1�
I based, no doubt, on an assessment of the record of the Soviet
regime, and an exaggerated notion of how much the Chinese
i
i "Great Leap Forward" would accomplish. Perhaps the earlier
."pessimism" regarding the relative performance potential of
"free" and "controlled" economies was overdone, but have we
not gone too far in the now prevailing "optimism" that any clash
between economic progress and the democratic institutions which
insure the dominance of the vox populi is minimal?
The average citizen�particularly when he is ill-housed, ill-
clothed, ill-fed, and ill-educated�seems most likely to be in-
terested in the here and now. A government which is responsive
i to the desires of the public will continually be tempted to
-- . --' -mortgage the future for the present. The "abstinence" or
. "waiting" which classical and neoclassical economics state to
I. be necessary ingredients in economic progress will be hard to
require, as will be the incentive schemes (and the accompanying
1 conspicuous consumption) which are likely to strike the average
f - voter as inequitable. We may recall that the PerOn regime was
(and still may be?) the most popular regime in recent Latin
American history. Or we may observe the economic consequences
. of Brazilian democracy, and have our doubts. The inflow of
American resources may be able to make showpieces out of
several small, recently-democratized nations like the Dominican
Republic, but we ought not assume either that democracy assists
in economic development, or that the Dominican example is
widely applicable. This is not to say that some judicious
�Prodding in the direction of democracy may not be a wise policy,
but it must be judicious, and cannot be based on the assumption
that democracy necessarily fosters the political stability essential
to growth.
One of the criteria by which self-help can be judged as justify-
ing additional aid is an improvement in the savings ratio. Some
students of the aid program would put major emphasis on
changes in the savings ratio in that it provides a relatively
; � objective standard by which an improvement in economic. per-
-
4 : formance can be judged.* If we apply an objective standard,
complaints about the distribution of aid and subjectivity in the
� Charles Wolf, Jr. of RAND has been attempting to develop an econo-
metric model which will provide an objective measure of the performance
of aid recipients in terms of self-help. The criterion is the savings ratio.
� 'In the model the attempt is made to eliminate the influence of other
variables, such as per capita income, income distribution, and degree of
Urbanization, which account for a good deal of the observed variation in
� the savings ratio as between nations and between different period i of time.
698 JAMES R. SCHLESINGER
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