- Historic Sites
What We Got For What We Gave
The American Experience With Foreign Aid
April/May 1978 | Volume 29, Issue 3
With victory in sight the Russians suggested a large low-interest loan from the United States. Secretary of the Treasury Henry Morgenthau, Jr., thought that a $6-billion loan would be a good thing politically; others, especially Ambassador Averell Harriman in Moscow, argued that there should be no loan except on a hardheaded quid pro quo basis. Roosevelt died and the Harriman position prevailed, but the Russians would not conform their behavior in Eastern Europe to American expectations. Early in the Truman administration the Russian request for a loan was conveniently “lost.”
American wartime aid to China was deeply entangled in politics. The American people sympathized with China’s plight-attacked by Japan in 1931 and continuously at war since 1937. But American assistance to China before the Japanese attack on Pearl Harbor in December, 1941, was insubstantial. By then it was almost too late. Japan controlled the China coast, and only driblets of supplies could be flown into China over the Himalayas from India. But in 1942 the Chinese Nationalist government headed by Chiang Kai-shek asked the United States for a $500-million loan. Some American diplomats and military advisers in China recommended that the loan be granted only after the Chinese guaranteed to reform their inefficient and even corrupt economic policies, and that the uses of the money be carefully supervised. The Chinese said that the attachment of such strings to the loan would be demeaning to China’s status as a great power. So Roosevelt and Congress extended the loan-no strings.
American leaders were well pleased, on balance, with the results of foreign aid during the Second World War. Germany surrendered in May, 1945, Japan in August. In the meantime, Congress and the public had invested great hopes for the future in the new United Nations and ancillary multilateral organizations founded between 1943 and 1945. These organizations would give Americans and the world a chance to prevent recurrence of the conditions which produced the Second World War. Thus, the American intention at war’s end was to channel most foreign aid through international institutions.
Immediate relief for war-devastated regions would be provided by the United Nations Relief and Rehabilitation Administration—UNRRA—financed primarily with American money. American subscriptions would sustain the new World Bank and the International Monetary Fund, designed respectively to facilitate economic growth and world trade.
And it worked-at first. But by 1946, with the Cold War in its incipient stage, President Truman and Congress grew wary of spending American dollars through an international organization in which the Russians had a vote. The cry went up that the United States should give aid to its friends. Accordingly, UNRRA was disbanded, and the United States turned to bilateral and rather uncoordinated grants and loans, the largest of which was a $3.75-billion loan in 1946 to Great Britain.
During this period Utopian hopes for the United Nations were breaking up under the impact of spreading disagreements between the Soviet Union and the United States and its friends and allies. Americans perceived the Soviet Union embarking on a campaign of world conquest first by consolidating totalitarian control over Eastern Europe; then by dominating Iran, Turkey, Greece, perhaps China; aiming next for control of all Germany and Western Europe-stirring up discontent and rebellion at every chance. It was a cliché of the time that the principal export of the Soviet Union was chaos. Unless chaos was stopped, it would soon engulf the world and destroy American security and the liberal political values by which Americans lived.
The year 1947 was a great watershed in the history of foreign aid. In February the British told the United States that they could no longer afford to support the government of Greece in its efforts to prevail over a left-wing insurgency in which Communists played a leading part; nor could the British any longer aid Turkey in its efforts to resist Soviet pressure for bases on Turkish soil. American leaders had long been pondering the strategic significance of the eastern Mediterranean. Quickly, President Truman accepted the recommendation that the United States take up the burden the British had dropped. In March, Truman announced the doctrine which bears his name:”… it must be the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures.” He asked and Congress granted $400 million for predominantly military aid for Greece and Turkey. Turkey modernized her armed forces and no longer felt seriously menaced by the Soviet Union. The Greek government, with American military advisers and ample air power, prevailed over the guerrillas. President Truman had noted that the total cost of the Second World War to the United States was $341 billion. By spending little more than one-tenth of one per cent of this amount in Greece and Turkey, the United States would”… safeguard this investment and make sure that it was not in vain.”