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What We Got For What We Gave
The American Experience With Foreign Aid
April/May 1978 | Volume 29, Issue 3
Imagine a person of great wealth with a habit of giving away vast sums and lending more. In order to understand his character, we should examine how the money is dispensed and why. Who are the recipients? What does the donor expect of them in return? How does he react if his expectations are not fulfilled? By asking the same questions of a wealthy and seemingly generous government, we can acquire a similar insight into its character.
Among nations in this century, the United States is the number-one giver and lender, having dispensed approximately $300 billion in foreign aid since the start of World War I. (There will never be agreement on the precise amount because of inconsistencies in government accounting and the problem of secret, unreported aid distributed by the CIA.) This money helped defeat Germany in two world wars, contain the Soviet Union in the Cold War, cure the ill, feed the starving, build highways, train technicians, sustain democracies and dictatorships, win permission to maintain military bases abroad, kill guerrillas and teach them to kill, support the United Nations and its agencies, precipitate or prevent changes in foreign governments, station men and women of the Peace Corps in remote villages, stimulate a population explosion and then try to control it—all this and a thousand other things inconceivable but a few decades ago. This outpouring was in response to constantly shifting purposes and was accompanied by bitter controversy at every stage, both at home and abroad. The results of foreign aid were sometimes triumphant, more often disillusioning, and occasionally tragic. No chapter in the history of American behavior on the world stage is so complex or revealing.
The only experience the United States government had with large-scale foreign aid before World War I was on the receiving end. Without gifts and loans from France, the Netherlands, and Spain during the American Revolution, the United States could not have acquired the weapons and supplies essential for carrying on the war. France, implacable foe of Great Britain, provided the most cash and also direct military and naval assistance under the alliance of 1778. France’s reward was the reduction of the British Empire achieved when the American colonies won independence. The French neither expected nor received lasting gratitude from the United States. Indeed, twenty years after the alliance, the United States and France were engaged in undeclared naval war, with Great Britain as a quasi ally of the United States. Self-interest ruled on both sides of this first transaction.
During the nineteenth century, private American philanthropy overseas expanded steadily, principally through missionaries. But the federal government saw neither the need nor the constitutional justification for giving away the people’s money abroad.
Then came the First World War. American sympathies lay overwhelmingly with Great Britain and France and against Germany. Britain and France needed American food, fuel, and munitions but lacked the cash to buy. While the United States remained neutral, they borrowed heavily from American banks under a program organized by the Morgan firm and condoned by President Woodrow Wilson. But by the time the United States declared war on Germany in April, 1917, Britain and France were near bankruptcy. Only the credit of the United States government could sustain them. They asked for loans. Wilson and Congress said yes. The United States was in the business of foreign aid.
The First World War loans to belligerents and to newly independent countries established upon the dissolution of the old German, Austrian, and Russian empires totaled about $10 billion. They bore interest at near bank rates and were expected to be repaid. President Wilson, Congress, and Wilson’s Republican successors in the 1920’s all agreed on that point. The recipients hoped the United States would forgive the loans as an American contribution to common victory. They had contributed the blood of millions in battle. Could not the United States contribute treasure? But Wilson denied there had been a common victory. Allied purposes, embodied in secret treaties, and the overarching American purpose of making the world safe for democracy were different. The loans must be repaid.
After the war, the borrowers, in spite of American insistence, could not or would not repay. The United States begrudgingly scaled down the interest rates and did forgive much of the principal-up to 80 per cent in the case of Italy. In the world economic collapse of the 1930’s, payments by the major borrowers were suspended entirely. To Americans the European nations now looked like deadbeats, while in the eyes of Europe, Uncle Sam had turned out to be Uncle Shylock. The mood of Congress and the American people in the 1930’s was “Never again.”
In the era of the First World War the United States also provided food for starving populations in war-devastated regions. The first effort, financed by private donations and headed by Herbert Hoover, provided relief for Belgium under German occupation. Hoover’s extraordinary competence led to his appointment as head of all American food production and distribution in 1917 and director of all European relief in 1919.