Issues Concerning Capital Assistance to Less-Developed Countries

Abstract

I begin this brief report with a judgment based on close observation of various facets of the U.S. Foreign Aid program over the past thirteen years. This judgment is that the amount of progress that can be generated by a dollar of foreign aid has been greatly exaggerated by the proponents of aid. Perhaps the exaggeration was due to the phenomenal apparent success of the Marshall Plan, under which massive grants from the United States provided the capital equipment and other resources to stimulate the rapid economic recovery of a Western Europe already possessed of an advanced economic organization, high levels of professionalism and management, skilled cadres of labor, and relatively efficient, honest, and experienced governmental bureaucracies. In the Marshall Plan case the problem was one of restoring or replacing physical plant and equipment which, to the extent not actually destroyed during the war, was badly in need of renovation, repair, or replacement. We cannot know exactly how much of Europe’s early postwar progress was directly attributable to the Marshall Plan, but there is no doubt that that share was substantial.