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RAGATZ, Janet Evans, 1924- AMERICAN, JAPANESE, AND AUSTRALIAN ECONOMIC ASSISTANCE TO SOUTHERN ASIA; A COMPARISON OF OBJECTIVES.

The Ohio State University, Ph.D., 1962 Political Science, international law and relations

University Microfilms, Inc., Ann Arbor, Michigan AI'-ÏERIGAH, JAPÀÏ'IESE, AND AUSTRALIAN ECONOMIC ASSISTANCE

TO, SOUTHERN ASIA: A COMPAI'flSON OF OBJECTIVES

DISSERTATION

Presented In Partial Fulfillment of the Requirements foi the Degree Doctor of Philosophy in the Graduate School of the Ohio State University

by Janet Evans Ragatz, A.B., A.M.

The Ohio^ State University 1962

Approved hy

'-A Adviser S Department of Political Science PREFACE

The world Is presently divided not only politically between East and Test but econoraically between developed an.d underdeveloped areas. Ultimate development of the latter is a foregone conclusion -- they will be industrialized, modernized; to the leaders of these lands, at least, there is no dispute on the point. The extent to which these countries develop., is another matter. Will development be thorough or superficial; will it reach ground level or con­ sist only of the conspicuous aspects of modernization? How they will develop is one of the major problems facing the world inasmuch as their people number nearly two billion and their homelands contain largo percentages of important and even strategic raw materials. Will these newly independent states take, along with the West European economic system and industrial skills, the personal freedom and individual dignity concepts on which it was based; or follow the commu­ nist industrial path and sacrifice all else to the develop­ ment of state power? The answer to these questions depends in part on the extent and effectiveness of the foreign aid received. Although underdeveloped countries extend the world around, conditions vary not only between continents and re­ gions but within regions as well. Within Asia, for instance, the requirements and the drive are different in over- and under-populated areas. The problems of China and India, ii lii including how to feed the many mi’’lion extra mouths appear­ ing each year, vary markedly, therefore, from those of other underdeveloped Asian states which do not share the same demo­ graphic problem to the same extent. The question of develop­ ment can also be examined by geographic region within a larger area. Thus southern Asia, encompassing both the southeastern section and the subcontinent of India, has characteristics dis- tinguishing it from the region to the north and east.' The area considered here, southern Asia, has been selected be­ cause it was the focal point for several aid programs, not only those of Australia, Japan, and the United States con­ sidered herein, but of the United ITations, the British Common­ wealth, and communist countries as well. One reason for this concentration of outside help there stems from a competition for influence; another from the fact that within this region are found countries which were the first-born states of the post-imperialistic period. Consequently they have received aid over a longer period than other new states and the ex­ cesses of independence zeal, the trial and error-processes of development, and the problems of aid have fallen into better perspective here than elsewhere. 2 Southeast Asia has been the stepchild of the world.

^Cf. G. Etzel Pearcy, "Geographic Regions of AsL a: South and East ” in Department of State Bulletin, February 1, I 9 6 0 , pp. 148-1 2 7. 2 Burma, Cambodia, Indonesia, Laos, Malaya, and Singapore (with the three British-dominated areas of Borneo: Brunei, Iv

Before the period of European domination, it was little known to the West, and after that period began, its compo­ nents, with the exception of independent Thailand, were never considered as separate entities, but as parts of the metropolitan power to which they belonged. Consequently it has only been since the end of World War II that individual consideration of the countries of the area has been exten­ sively undertaken. In some cases, little was known about them historically, economically, or socially. South Asia,"' however, was a little better Imown. The aim of this paper was to examine and compare the objectives inspiring Australian, Japanese, and United States assistance to southern Asia in the light of the reception their aid has encountered and of economic doctrine about the

Worth Borneo, and Sarawak), the Philippines, Thailand, and the two Vietnams. North Vietnam is not included in this study as it is outside the scope of aid considered. It should be noted that the Japanese use the expression "South­ east Asia" to include the Indian subcontinent and conse­ quently the. term has been written here as "southern Asia", which includes both Southeast And South Asia. ^Includes Ceylon, India (with its Himalayan protectoratesi Nepal, and Pakistan. The' term "Southwest Asia" covers the Middle East from Afghanistan to Palestine but omits the North­ ern African Muslim countries which are often included in the "Middle East" designation. "East Asia", of course, refers to China, Japan, Korea, the Mongolian People's Republic, Taiwan, and the British colony of Hong Kong. V development process. This raises questions, such as are the objectives humanitar’ia.n, or economic, or political, or a combination of one or more of these? IIow extensive were the several programs? Are the objectives in conflict? How well do the Australian or Japanese aims correlate with sxij of the American concepts? VJhat comparisons can be made from the evidence reviewed? What are the future prospects for tripartite aid to this area? The broader objective is a better and clearer under­ standing of aid motivation and problems and of the resultant efforts and accomplishments of the young Asian states. This ■should improve the appreciation of the scope and urgency of economic development in this region, and so contribute to the clarification of American foreign policy. ACm^CV/LEDGMEUÏS

First and foremost, .grateful thanks are due Dr, Kazuo Ka-wal, Professor of Political Science at The Ohio State University, for having introduced me to the subject of Asian affairs and for having painstakingly guided me in my doctoral studies. I am also grateful for the inspiration afforded by association with Lord Lindsay of Birker, Director of International Relations students, C. P. Fitzgerald, Professor of Far Eastern History, and L. C. Webb, Professor of Political Science, all at the Australian Nation­ al University. Hy year there was made possible by a Fulbright grant. Finally I wish to express thanks to the late Professor Harold Zini:, a long-time mentor and member of my graduate committee. Dr, Alvin Coons of the Department of Economics and Dr. E. Allen Helms of Political Science for service on my reading committee and to Professor Harvey Mansfield who substituted for an ill chairman at a late stage.

VI c OITTEITTS Page PREPACE ...... il

ACraiOWLEDCTl-rEI'ITS...... vi

LIST OP TABLES ...... vili

Chapter

‘I ' CHARACTERISTICS OP UHDERDEVELOPIiEHT .... 1 II THEORETICAL ASPECTS OP LEVELOPI-IEI'IT...... I| 7

III SOUTHERN ASIAN ATTITUDES TOWARD DEVELOPi-ISHT AND A I D ...... 101

! IV irOTIVATIONS UNDERLYING AMERICAN ECONOI-ilC ASSISTANCE...... '...... 1^3 V JAPAN'S INTEREST III ECONOMIC DEVELOPMENT IN SOUTHERN A S I A ...... 227 VI OBJECTIVES UNDERLYING AUSTRALIA’S ASSISTANCE PROGRAM ...... 282 VII A COMPARISON OP OBJECTIVES...... 320

APPEI'DIX...... 314-0

BIBLIOGRAPHY...... 3#

AUTOBIOGRAPHY ...... 359

Vll LIST OF TABLES

Table Page

1 Estimated Per Capita National Income of Southern Asia, 195I-1960 ...... 3

2 Daily Per Capita Calorie and Protein Content of Food S u p p l i e s ...... S

3 Medical Personnel and Average Life Span .... 11

4- Illiteracy...... 19

5 Crude Birth Rates, Death Rates, and Annual Rate of Population Increase ...... 30

6 Index Numbers of Food Production ...... 36

7 Index Numbers of General Industrial Production , ^3

S Gross Domestic Capital Formation and Private Consumption Expenditure .... ^5

9 Average Annual Rates of Growth in Southern Asian Production and Transportation, 1950-195 9 ...... 104

10 Comparative Average Annual Rates of Production Growth, 1 9 5 0 - 1 9 5 9 ...... 1 2 2

11 United States Non-Military Aid to Asia Compared to Total Asian and Total Global Assistance, 1951-195 7 ...... 1^4- 12 I95&-I959 U.S. Development Loan Fund Commit­ ments ...... 193

13 Country Proposals, Obligations, and Percent­ ages of Southern Asia Area Totals for American Economic Assistance, the Fiscal Years 1952 through I 9 5 6 ...... I99

l4- Japan’s Dependence on Imports ...... 235

15 The Import-Export Trade of Japan Proper with Asia, 1 9 3 6 ...... 24-5

viii LIST OP TABLES (Continued)

Table Page

16 American-Asian Percentages of Postwar Japanese Imports ...... 2^5 17 Japanese Exports to Southern Asia, 19^8-1960 . 2p7 18 Japanese Imports from Southern Asia, 191-18-1960 2^9 19 Prewar Australian Exports — Percentage of 2uL| the Total ...... 20 Australia's Merchandise Export Trade with Asia 302 21 Postwar Australian Exports -- Percentage of the T o t a l ...... 3^5 22 Australian, Japanese, and United States Assistance to Southern A s i a ...... 3^3

ix CHAPTER I

CHARACTERISTICS OP UHDERDEVELOPMBNÏ

A focal point of policy in international relations in the middle of the twentieth century has become the economic advancement of underdeveloped areas. The imperialistic days marked by the Kiplingesque philosophy of the "White Man's Burden" to govern his "little brown brother" are gone. With a violent nationalistic splash, the colonies released from tutelage following World War II plunged into the management of their own affairs, their people apparently convinced that the magic state of independence would immediately resolve their ills.^ As this failed to materialize and their pained surprise subsided, these southern Asian states settled to the stern task of organizing their economic advance. They then discovered that their progress often hinged both on factors beyond their control and on factors they were reluctant to

This is a widely-accepted observation inferred from the political antics and propaganda Jargon common to all newly independent countries. A rare documented admission of this state of mind appears in the following quotation of the re­ marks of a 3^-year old Burmese Army captain to his American professor at the University of Rangoon: "We expected so much from independence and many of us have been disappointed. Ruling ourselves is much tougher than we realized, but we would never admit it even now." Richard Butwell, Southeast Asia Today — and Tomorrow (New York: Frederick A. Praeger, 1961), p.

1 2

control. Today their experience in planning and politics exists to guide the more recently independent African nations and has influenced action within the older Latin American ones as well. Economic development has thus become a familiar concept the world around. The exact scope of the term is vague. Any economic history of the United States, or of Japan, or of Australia, or of Germany, or of the U.S.S.R. is a chronicle of economic development. In every state, even the most advanced, there is room for further improvement, a point projected into the i960 American election campaign. Contemporary usage, however, has turned the expression into one involving the industrial development and the advancement of the living standards of those countries termed underdeveloped. The characteristics of underdevelopment and their specific application to the southern Asian politico-economic scene will be outlined in this chapter. The methods of measuring a given nation’s degree of development are varied. The simplest and the most common device is per capita income, but authors also frequently employ statistics on food consumption, number of doctors, average life span, proportion of the population engaged in agriculture, employment of non-human energy, and literacy in their descriptive analyses. The role of these criteria is to set the stage for development, to establish measuring devices by which an underdeveloped state can be compared with more TABLE 1

ESTIMATED PER CAPITA NATIONAL INCOblE OF SOUTHERN ASIA, 1951-19608-

Year Burma Malaya Indon­ Philip­ Thai­ Ceylon India Pakis­ esia pines land tan:

1950 51 -- 149 85 104 55 74 1951 56 - 75 146 87 119 58 75 1952 59 — 89 158 102 111 55 71 1955 44 - 92 145 88 110 58 75 1954 42 - 99 l4l 86 111 52 65 1955 44 205 86 146 95 125 55 48 1956 47 206 98 169 96 ll4 59 51 1957 48 206 54 175 98 110 58 50 1958 47 194 42 181 96 115 65 49 1959 48 204 4o 162 102 117 65 50 1960 50 — - 164 90 119 — 51

®’To arrive at these estimated figures, United Nations Statistical Office annual estimates of national income were divided by annual estimated populations and the result converted to United States dollars by the annual averaged exchange rates. These per capita figures can, how­ ever, provide an indication of the trend in earnings in relation to population growth. k advanced nations both now, near the beginning of their modernization programs, and several decades hence by which time these countries hope to have made substantial progress. Although essentially valid, these guides must be used with caution since, like all generalizations, they involve many implications, complications, and qualifying factors, some of which will be discussed in more detail below. In using the per capita income guide criterion, statis­ ticians often divide the world roughly into three classes of states — rich lands, with average annual incomes of $^00 and over, the poor ones, showing incomes under $100, and those 2 lying in between. The latter category, including south central Europe and the Soviet sphere. South Africa, Japan, and southern South America, is usually ignored after this ini­ tial delineation, perhaps on the assumption that progress, while it might be slow, is assured. Similarly, the continuing advance of the rich lands, northern North America, Western

p For world-wide listings of. United Nations, Per Capita National Production of Countries, 19!j2-19^Ii , Statist'icaX Papers, Series E, No. I| (New York, 1937i* That there is no uniformity in this classification may be seen in the more recent evaluation by Paul G. Hoffman, One Hundred Countries: One and a Quarter Billion People (Washington: Albert D. and Mary Lasker Foundation, I960). His descriptive title, which actually omits the 6^0 million mainland Chinese, is based on a division at the $300 per capita income level -- this indi­ cates the enormity of the underdeveloped area of the world. He classifies the southern Aslan states as follows: those with per capita national incomes under $100, Burma, Cambbdia, Indonesia, Portuguese Timor, Laos, Thailand, Vietnam, India, Nepal, and Pakistan; those wihh incomes in the $100 to $199 range, the Philippines and Ceylon; those in the $200 toi|^99 group, Malaya, Singapore, North Borneo, and Sarawak. 5 Europe, and Australia, as -well as the smoothing out of in­ equities in their regional development, are assumed. Thus attention is focused on artificially stimulating the econ­ omic advancement of the Middle East, most of Latin America, practically all of Africa, and the whole of Asia with the exception of Japan. Such a classification is based on national income figured on a per capita basis -- an inflexible formula which perforce ignores internal variations. For example, there are regions of Japan and areas of Japanese transport and industry far more advanced than similar places or fields in Australia; yet, be­ cause the Japanese population is large and the Australian one small, and probably because housing and food conditions vary in a manner not generally appreciable since Western standards are taken as the norm, the former is put in the middle group and the latter in the wealthy one. Other peculiarities come to light in such a grouping, particularly among oil rich countries such as Venezuela. That land is rich by virtue of its income, but, because of inequality in distribution, shows otherwise all the characteristics of an exceedingly poor state. Additional problems arise from arbitrarily dividing countries according to income. The abject poverty of the poorest elements is concealed by averaging their earnings with the highest in a state. Second, data vary considerably from country to country both as to quantity and quality despite 6

•3 United Nations' attempts at standardization. Only time, training, and experience can overcome this defect, in itself a facet of underdevelopment, Third, statistics are also gen­ erally behind the times. Thus the 1961 edition of Staley's oft-cited work employed 19!?0 figures on Japanese income in classifying that country's position in world development because "I960 or thereabouts" was the norm used for all countries.^ Japan's postwar recovery, however, had barely begun at that time. The tremendous spurt in its internal de­ velopment was a startling event of the mid 50’s which soon elevated Japan to a position as a donor in developmental projects. West Germany's condition has been similar,^ Thus the necessity for using already outdated statistics is a handicap in such classification. Fourth, as most under­ developed countries are predominantly agricultural and pro-

^Cf. notes in any United Nations Statistical Yearbook. Also United Nations, Statistical Office, Principles for a Vital Statistics System: Recommendations for the Improvement and Standardization of Vital' Statistics (8T/STAT/ser. M/19J (New York, 19^3). ^Kugene Staley, The Future of Underdeveloped Countries (rev. ed., New York; Harper’ and" Brothers, l96i j, p. Ï7. The Japanese figures in his chart obviously had to correspond to others therein; however, unlike most Asian states, reliable Japanese date are available annually. ^In 1958 and 1959, Japan extended grants, among others of ^176.9 million to Indonesia and of §100,000 each to Thailand and Ceylon as well as a loan of §500,000 to India. West Germany loaned the latter million. United Nations, Statistical Office, Statistical Yearbook, 196u (New York, I960), Table 155. 7 duction is consumed rather than traded, only an approximation of the actual total produce is possible. These qualifications tend to restrict the validity of the per capita income criterion of underdevelopment. Consumption of food is a second measure of poverty in underdeveloped areas. This has been estimated to be about one“third less in poor lands than in rich ones. Although the quantitative factor is basic, it is not always the most significant. Insufficiency in the amount of food creates an undernourished condition, to be sure, but worse still, the poor man's diet is qualitatively and disastrously lacking in proper nutrients — a 73 per cent concentration on carbohy­

drates being common in the poorer lands in contrast to the 2 $ per cent in North America or the 31 per cent in Britain.^ Protective foods, such as dairy products, are almost com­ pletely missing and diversification is generally unknown. Amo%g thia first agricultural developmental steps to be taken is the introduction of poultry raising, fish culture, and vegetable and fruit production. It is not always easy to effect innovations of this nature, however. The UN Pood and Agriculture Organization reports that "certain foods are be­ lieved to possess magic properties for good or evil. Eating them, it is thought, may influence the weather or the crops

United Nations, Economic Commission for Asia and the Par East, Economic Survey of Asia and the Par East, I960 (BMngkok, l"^l), p. 12. 8

TABLE 2

DAILY PER CAPITA CALORIE AND PROTEIN CONTENT OP FOOD SUPPLIES

CALORIES PROTEIN fin grams) Country 1954- 1951- 1954- 1957- 1954- 1951- 1954- 1957- 1958 1955 1956 1959 1958 1955 1956 1959 51 d Philippines - 1940^ 2020° 2100* - 46^ 47"

Ceylon - 1990^ 2070 2050 - 45b 44 45 India 1950 1700 1840 1980® 52 46 49 55" Pakistan 1950 2010 2000 1970 52 47 47 46

Japan 2050 I960 2100 2210 55 58 65 67

United States 5280^ 5150 5150 5100 86^ 91 95 92

a. Extracted from United Nations, Statistical Office, Statistical Yearbook, 1961 (New York, 1961), Table 126.

b. 1952-1955.

c. 1954-1955.

d. I95Ô.

e. 1958-1959.

f. 1955-1959. or sexual potency." 7 Anthropologists have even concluded, that a man can starve in the face of plenty, so powerful are his eating prejudices. Other social problems have influenced the spread of animal husbandry. Cattle donated to one section of Africa were rejected because their color had adverse religious con­ notations,^ while the breed of chicken introduced into a Middle Eastern state was dictated by the political significance of its color. Educating people to new tastes is likewise a problem. In Mexico, school girls were taught to make fish tamales as a part of a program to increase protein intake. Pish culture has spread to the West Indies from its Asian homeland, where Thailand and Indonesia have proven that inland ponds often yield more protein than the same areas when used 9 for grazing. Dried extract of soybean, an ancient Chinese substitute for milk, is being spread abroad. It has been introduced into Indonesia where demand, cultivated through the schools, has outstripped production facilities. The recent plight of Vietnamese pilots is typical of the effects on culture of diet and of a dietary change. Although deemed skillful enough, these men lacked the stamina of their

^United Nations, Food and Agriculture Crganization, Man and Hunger (Rome, 1961}, p. 2l|. ^dwin A. Bock, Fifty Years of Technical Assistance (Chicago: Public Administration Clearing House, P« 44* "^FAC, op.. cit.. p. 1|3. 10 Western counterparts until a change was made In their eating habits. This Innovation Involved an entire complex of social adjustments. It meant a religious change for strict Buddhists; It also meant a preparation and consumption change for the less westernized since. If they can afford It, many Aslans eat small pieces of chopped meat, mixed with vegetables or sometimes with rice. In the Chinese fashion. The new diet necessitated pro­ tein In a far larger quantity, one less adaptable to local cooking habits or eating methods. The enlarged demand also affected animal husbandry, meat slaughtering, preservation, and transportation. The complexity of the criterion of food as a measure of underdevelopment Is thus greater than is usually realized. The availability of medical services as an underdevelop­ ment guide Is closely related to food consumption. Malnutri­ tion Is a disease which Invites additional maladies, but the number of qualified medical practitioners in underdeveloped areas Is limited Indeed. Table 3 gives some Indication of the paucity of physicians and related technicians but cannot reveal the very disturbing feature that many trained local doctors have located in the cities, so that rural areas may be entirely lacking in any professional medical help. Improvement In the health and energy of the rural popula­ tion often permits more extensive cultivation and so Is an Integral part of programs to stimulate food production. Con­ sequently, early attention is usually given throughout the TABLE 5

MEDICAL P E R S O M m AND AVERAGE LIFE SPAN

Country Inhabitants Medical Personnel^ Average Life Span° Per Physician® Doctors Dentists Midwives Pharmacists Male Female

Burma® 8,4ool 708 17 2,555 - -- CambodiaS - l4 5! 57 5! 44.2 45.5 Indonesia^ 71,000“ 954 120i 1,885 75^ _ Port. Timor^ 50,000“ l4i 1! -- West IrianS 21,000% 80 - 7 - - - Laos® 29,000“ 46 2 7, 1 __ Malaya^ 8,500“ 857 105 64lJ 60 - - Singapore^ 2,700“ 616 90 272 91 - - BruneiS - 15 - 66i -—- North Borneo^ 11,000“ 48 1! 88 --- Sarawak® 15,000% 27, 4, 1! -_ PhilippinesS 12,000* 2,559! 512I 2,076!'j 215I 48.8 55.4 Thailand® 6,800P 5,098 215 188 760 48.7 51.9 Vietnam® - 549 74 562 271 - Ceylon® 5,500“ 1,997 162 2,4ioJ 1,021° 6O.5 59.4 India® 5,700l 76,916, 5,676 28,050J 50,556 52.5 51.7 Port. India 24,000 “ 48! -- 5 Pakistan‘S 15,000“ 5,497 --- - Japan® 1,000“ 97,500 51,814 52,519] 56,518 64.9 69.6 United States® 770“ 217,058 91,000 500° - 66.5 72.5 Table 5 (Continued)

À* Extracted from United Nations, Statistical Office, Statistical Yearbook, 1955 (Now York, 1955)» Table 172, Even more interesting are the following changes between estimates : the nuzAer of inhabi­ tants per doctor in Indonesia rose 4,000 between 1948 and 195^» in Portuguese Timor it dropped 15,000 between I950 and 1955» in Malaya it dropped 1,500 (1950-1955)» in Singapore it dropped 600 (1951- 1955); in North Borneo it dropped 2,000 (1951-1955)» in Sarawak it dropped 4,000 (1951-1955)? in Ceylon it dropped 5OO (1952-1955)» in India it dropped 500 (1950-1952)? in Portuguese India it dropped 1,000 (1951-1955); in Japan it dropped 100 (1951-1955).

b. Extracted from UN, Statistical Yearbook. 1961. op, cit.. Table 177. The Burmese figure on dentists, the Vietnamese figure on doctors, and the United States figure on midwives are estimates.

c. Extracted from United Nations, Statistical Office, Statistical Yearbook, i960 (New York, I960 ), Table 5.

d. Medical Personnel data for 1954. e. Medical Personnel data for 1956.

f. Medical Personnel data for 1957. g. Medical Personnel data for 1958.

h. Medical Personnel data for 1959»

i. Government services only. This restricted classification gives an erroneous picture of medical services? for exaaçle, in the Philippines, the majority of the doctors are in private practice of which the UN Statistical Office has no record.

j. Includes those not fully qualified. k. 1951.

1. 1952. m. 1955.

n. 1954. 0. 1956

tV) 13 poor areas of the world to eliminating or controlling major health hazards. Increasing the number of clean water supplies, careful disposal of human waste, spraying to eliminate the malarial mosquito, dusting to end the dangers of typhus, and wholesale innoculation of both animals and man have been under­ taken to control disease the world around. It is interesting to note that in Thailand, anti-mosquito measures were taken under the leadership of the Buddhist priests. Their religion forbids the taking of life, conse­ quently some difficulties have been encountered even in introducing pasturized milk in Southeast Asia. Participation of the monks indicates that a relaxation of stringent relig-' ious interpretation in favor of progress may have occurred, and this is an encouraging sign for the development of Thailand, at least. The effect of the anti-malarial campaign on food pro­ duction and hence on improving nutrition and therefore health, has been extensive. Not only have swamplands been reclaimed for active productive purposes, but the first major anti- malarial campaign in northern Thailand so improved the health of 600,000 people that they were capable of producing a second crop each year. Little of this could have been

This interpretation has been corroborated by a recent comparative study of Burmese and Thai Buddhism. Of» David E. Pfanner and Jasper Ingersoll, ''Theravada Buddhism and Village Economic Behavior,” in The Journal of Asian Studies. May, 1962, pp. 3^1-361. accomplished with the medical means available to the individ­ ual underdeveloped countries. United Nations medical teams, working under the WorId Health Organization and the Inter­ national Children’s Emergency Fund,.and usually in coopera­ tion with the Food and Agriculture Organization, have moved into farming regions, training local midwives and clinical helpers. This has been the beginning of rural health pro­ grams in most underdeveloped areas, but the ratio of medical personnel to total population remains small indeed. Average life span is a further indication of the under­ developed condition of a state. Life in these areas today is reminiscent of industrializing England where Hobbes found it to be vicious, cruel, and short. Not only have malnutri­ tion, malaria, and typhus ravaged the peoples of these lands, but tuberculosis, intestinal parasites, and yaws have also plagued them. To utilize just two examples, 63,000 cases of yaws were treated in Indonesia in January 19^^ alone, while on its portion of the island of Timor, over half of some 2,000 of the children from a dozen schools were found to have the disease.Gradually the major debilitating illnesses are being checked, and disabilities formerly considered to be almost natural developments by isolated villagers are being effectively treated at the new regional health centers. The

^^Kathleen McLaughlin, New Life in Old Lands (New York: Dodd, Mead and Company, 1951] ), PP. 101-102. 15' results of these medical Innovations, combined with the program to increase nutriment in the local dietary pattern, will tend to lengthen the average life span of the people within the now underdeveloped countries. As yet, however, a comparatively short life expectancy remains a reliable criterion of their underdevelopment. The proportion of the people engaged in agricultural pursuits is a further measure of the underdevelopment of a nation. Those countries falling in the poorest class have as much as 6l per cent of the population coneentrated in the farming sector of the economy. There is a dispute between economists on the subject of reducing these numbers -- some say it must be done, other say it is unlikely to occur. Professor Benjamin Higgins states that "If we want early improvement in per capita output . . . Lwe must] make [farm] labor relatively scarce , . . [by] shifting to a more 12 mechanized and larger-scale agriculture." On the other hand, Barbara Ward maintains that "The experience of Japan , . . suggests that industrialization is more likely to take care of the births to come rather than to reduce in any decisive way the numbers in agriculture. There are still almost as many people on the land in Japan as there were in

^%enjamin Higgins, Economic Development: Principles. Problems and Policies (Hew York: W. W. Horton and Company, 1959), p. 1)61. 16 the 1870s* But there are over sixty million more people elsewhere It would seem immaterial whether an increase in per capita farm output resulted from intensive or mechanized means. Forcing development into a pattern seems less desirable than effectively utilizing national assets. Thus where labor is in short supply, as it was in the period of Western development, farm mechanization would be a natural occurrance. Where, on the other hand, a superabundance of labor exists. Mechanization would possibly only complicate rather than solve a country's problems. The Japanese have substantially raised per capita yields, at the same time making great strides toward self-sufficiency, through applying technology to agriculture and farm-based industry. Improved seeds, widespread use of commercial fertilizers, and the intro­ duction of non-agricultural fibers are only a few of their efforts along these lines. The proportion of people in agriculture has, however, not yet reached the low level of ■most Western countries, and farm size and mechanization are far removed from American norms. The question returns to a basic one in development, namely, does Asian or African modernization have to follow the identical pattern of the West as all writers seem to expect? The ratio of a country's

^^Barbara Ward, India and the West (London; Hamish Hamilton, 1 9 6 1 p. 183» ' ' ' 17 agricultural population to total population is therefore a limited measure of development, as the Japanese experience indicates. The two remaining measuremental criteria require little comment. In underdeveloped countries, the use of non-human energy is not yet widespread; steam and hydroelectric power are being introduced, but there is a tremendous need for expansion in order to meet the industrial goals of the day. United Nations statistics show that whereas all areas except Singapore, Brunei, and Sarawak increased, their per capita production between 195b' and 1.960 Burma, Cambodia, West Irian, Vietnam, and Pakistan improved by one-half and Laos and North Borneo by nearly four times. Fortunately, in Southeast Asia the possibilities are extensive. The three long rivers draining the mainland area offer many opportunities in this direction, one of which, a multi-national, multi-purpose, TVA-like project along the Mekong, is presently in the ad­ vanced stages of planning. The island republics are also well endowed with hydro-electric potential. At present, how­ ever, the underdeveloped countries are estimated to use one-twentieth of industrialized countries' use of horsepower hours per person. lÔ

In the field of literacy,only about one person in the

underdeveloped countries, out of four or five on a broad aver­

age, is thou^t able to read and write. A survey of the ad­

vances made in this field since the end of the colonial re­

gimes is interesting; it reflects the intense concentration

of the new states in preparing their people for technical train­

ing so essential to, but so lacking in, their developmental

programs.

Most of the above criteria of underdevelopment inspire

little criticism, but issue can be taken with the lamented

consumption of "only about one-fourth" as much cloth per

person as in highly developed countries.This would seem

^One using this criterion will, however, run a serious risk of arousing the wrath of Pearl Buck, a profound observer of Chinese life, whose respect for the illiterate peasant’s accumulated wisdom was only matched by her contempt for highly-educated Western-trained local people who had lost the human touch which would have provided the link between China’s pnst and the industrial present. See My Several Worlds (New York; John Day, 1954). A distinction should be made between being able to read and write, which is one thing, and what one subsequently does with the skill, which is an­ other thing. Many a so-called literate is far less intel­ ligent thanhis "illiterate" counterpart. Consequently the question of furthering education turns on training in mechan­ ical skills rather than on the immediate urgency of universal adult education — in fact there is some evidence that this facet of social advancement in India was far behind other pro­ jects in popular appeal. T. H. Coates, "Social Education in India," in Australia’s Neighbors, February 1956, unnumbered. 15 Staley, op. cit. , p. 18. It appears also in the Stan­ ford Research Institute, The American Citizen’s Stake in the Progress of Less Develope^Areas of the World (rev, ed.. Wash­ ington: U.S. Government Printing Office, 1957), p. 15, with which Dr. Staley was connected. 19

TABLE 4

ILLITERACY^

Country Date Population Men Women over 15 (%) ()() (^)

Burma 1921 62.5 58.8 87.5 1951 57.6 54.5 . 82.2 1955-54 55.8 15.0 56.5 Cambodia 1958 66.9 57.8 94.7 Malaya .. 1947 .61.7 45.0 85.6 ' 1957 55.0 54.1 75.5 Singapore 1947 54.1 55.7 78.4 1957 50.0 52.2 70.6 Brunei 1947 72.6 56.2 92.1 I960 57.4 59.8 77.6 North Borneo* 1951 82.9 72.2 94.2 Sarawak 1947 82.4 71.7 95.8 I960 78.5 69.1 87.9 Philippines 1959b 51.1 45.6 56.7 1 9 ^ 59.2 55.5 45.0 1958. 25.0 22.0 27.9 Thailand 1957b 68.8 52.8 85.1 1947 48.0 51.4 64.4 1956 56.4 24.6 47.7

Ceylon* 1921° 65.8 51.5 82.0 1946 57.0 22.1 54.8 1955 52.5 19.5 47.5 India-Paki stan 1921 91.4 84.9 98.2 1951 90.4 85.6 97.6 India‘S 19519 85.4 75.1 92.1 Port. India 1921 89.0 85.9 95.5 1950° 78.5 72.1 85.9 Nepal 1954- 94.9 90.0 99.4 Pakistan*»* 1951° 81.1 74.7 88.5 United States 1920 6.0 6.0 5.9 1959 2.2 2.5 1.8

a. Literacy is defined as the ability either to read or write; it therefore includes semi-literates (except for Pakistan and for North Borneo, 1951)* Ceylon (1955) is an actual enumeration but figures generally are based on samples or surveys and are therefore of question­ able reliability. Extracted from United Nations, Statistical Office, Demographic Yearbook. I960 (New York, I960 ), Table 11. Japan is not included in this table because compulsory nation-wide education had been in effect there since before I9OO. b. 10 years of age or older, c. All ages, d. Excludes Kashmir. 2 0 to be a moralistic or Victorian evaluation rather than a practical one. For tropical countries, it ignores all geographic and climatic considerations. Admittedly more clothing, not for moral purposes but in a quantitative sense, would be desirable for most underdeveloped peoples. As early as 1938 when the national Planning Committee was founded in India, consideration was being given to raising the consump­ tion of cloth from an annual average of fifteen yards per 1 / person to thirty. Then, too, in Thailand during World War II, lack of a basic textile industry led to such a serious clothing shortage that some families reportedly could dress only one member at a time for the outside world; the others had to remain at horae.^"^ Never, however, could tropical peoples sensibly hope to consume the yardage used in colder regions where heavier clothing, draperies, overstuffed furni­ ture, rugs, blankets, etc. all have advantages traceable tc extremes of cold, features both unnecessary and even un­ healthy in the moist atmosphere of a low-lying tropical country. In most such areas, cloth has a counterpart in rush matting and in bamboo for window hangings, floor coverings.

United Nations, Department of Economic Affairs, "De­ velopment Planning: India," in Economic Development in Selected Countries (Lake Success, New York, 19^7)» p . 15iV ” ^'^United Nations, Educational Scientific and Cultural Organization, Department of Mass Communications, They Can't Afford to Wait (Paris, 19^2), p. I8 . 2 1 and light comfortable furniture. Their replacement by cloth would oft-times be absurd, just as ignoring their use in this statistical measurement leads to false conclusions. Another fundamental consideration rarely stated in analyses of tropi­ cal underdeveloped countries concerns the ease of life in such regions. Because of the climate, less clothing and less substantial housing and furnishings are not only possible, but a necessity. In the early 19^0s, a Thai architect built, as an exhibit for an adult education fair, a model house for I 18 only $100 worth of bamboo and labor. ' Similarly, as Ameri­ cans are more prone to eat less and to eat more lightly in summer than in winter, dietary differences, all questions of nutrient aside, are bound to result from climate. Pood is plentiful in tropical areas such as Southeast Asia and West Africa and can, at least in rural sections, be obtained with virtually no effort. Given these climatic circumstances, only wholesale abandonment of country living for urban life far removed from tree and stream can reduce a life of pleasur­ able indigence to one of squalid impoverishment. It is just as effective, possibly, to make non-statisti- cal observations respecting underdeveloped countries. These states are predominantly agricultural, indulging in either subsistance or intensive production; they have little savings for investment, and suffer from inadequate transportation

^^Ibid.. p. 20. 2 2 facilities. Absence of local demand marks rural living. Underdeveloped regions are characterized by poor nutrition, rudimentary hygiene, high mortality rates and oft-times, but not always, by high fertility ones. Furthermore, edu­ cation is inferior, an extensive middle class is lacking, training facilities are inadequate, and mature leadership has commonly not appeared. One of the most vivid statements summarizing the expec­ tations of a peasant child from such an environment maintains that the chances are overwhelming that he "will be chronic­ ally sick all [his] life — from malnutrition or intestinal 19 parasites, or tuberculosis, or maybe even leprosy .... [He also has] a reasonably good chance of experiencing real famine -- to the point where [he] will be glad to eat the bark off a tree .... [He has] only a one to four chance of learning to read .... [He] will most likely live in a mud 20 hut, with a dirt floor and no chimney, its roof thatched with straw. [He] will almost certainly work on the land and most of what [he raises] will go to the landlord. In addi-

%arold Wilson, War on World Poverty (London: Victor Gollancz, 1953)» P» l6 stated the total weight of worms in the intestinal tract of the Chinese people has been estimated at 130,000 tons! This is a form of food wastage akin to spoilage through improper or insufficient storage or through JLqss to rodents. All such supplies could more effectively be used to nourish mankind if these losses could be reduced. 20 Its walls often plastered with cow dung. 23 21 tion, Lhe is] likely to be deeply in debt ' to the local .22 money lender . . . Such passages are saturated with emotinnal appeal to affect public sentiment. Economists rather tend to use 23 descriptions such as "poor lands" or "areas of high con­ sumption and potential high consumption"^^' or to rely on observations such as that a pronounced concentration of man­ power and energy in agriculture characterizes underdeveloped areas, Other generalities affecting future development which are shared by most of these states stem from a common back­ ground. Most of the present underdeveloped countries were once dependent territories. Use of the term "dependent" is deliberate in order to include areas, such as China, which were not actual colonies but whose economic and even politi­ cal policies were suborned to European authority during the

2:Cambodian private moneylenders charge 80-120 per cent interest per year; Indonesian rates are from 50-100 per cent; Philippine ones 2S-L\00 per cent. United Nations, Pood and Agriculture Organization, Credit Problems of Small Farmers in Asia and the Far East (Bangkok, 1957) •

22gtringfellow Barr, Let's Join the Human Race (Chicago: University of Chicago Press, 19'5o)> P« 3.

^^Gunnar Myrdal, Rich Lands and Poor (New York: Harper and Brothers, 1957). This appeared in England under the tital Economic Theory and Underdeveloped Regions. 2I|Bugene Black, The Diplomacy of Economic Development (Cambridge, Massachusetts: Harvard University Press, 195b), pp. 2-3. 2 i | major period of Western imperialism. In the belt running westward from the Philippines in the Pacific to Morocco on the Atlantic, there were only four states which remained inde­ pendent in the century from I83O to 1930: Siam, Iran, Turkey, and Ethiopia, Of these, Iran was divided into spheres of influence while Turkey suffered from economic imperialism and only a determined nationalistic Republican resistance kept Anatolia from being carved up by the occupying European powers after World War I. Such subordinate status had unfortunate effects on future policy. First, European colonialism generally developed a racially discriminatory bias which has produced modern politi­ cal overtones that will motivate policies for decades. This did not appear in the Middle East, but has had adverse effects on southern Asia and Africa. Asia, being an area with highly- developed religious and political concepts, felt the attendant slight most keenly, although the differing attitudes of the administering European powers modified its intensity in the various colonies. Generally speaking, although the governing British practiced the most exclusive social policy in Asia, their friendly withdrawal and subsequent efforts at Common­ wealth association have done much to lessen the sting of previous racial bias. The Dutch and the French were less rigid regarding social relations, but their tolerant record was practically effaced by the difficulties experienced when the Indonesians and the Annamese attempted to secure their independence. 2'j Second, the educational policies of the administering powers served to stunt the growth of the former dependencies once Independence was achieved. Again the degree to which '" this observation applies depends on the policy of the admin­ istrative unit — the British had established and trained more local people than the French or Dutch, There was, however, one problem connected with British education -- It 2 d emphasised English history and the legal profession. ^ As a result, graduates were of little practical* assistance In developing an Illiterate and predominately agrarian society which needed engineers, agricultural and medical experts, and assorted technicians. British education was the basis, however, for the very excellent Indian Civil Service, one of the few such In Asia. In the Netherlands Indies educational opportuni­ ties were so limited that there were still only some 200 Indonesian high school graduates annually throughout the entire archipelago In the 1930s. This has put a severe strain on the administrative organization of the Republic and heightened the difficulties of economic development. Some American and all Australian assistance to Indonesia has taken the form of education and training programs. The same need for greater numbers of technicians and scientifically-

P ^ •"VJard, p£. clt., p. 155. Justus H. van der Kroef, "The Philippines, Indonesia and United States Aid," In Current History, August 1957, pp. 60ff. 26 trained professionals can be found in varying degrees throughout southern Asia. Third, colonialism stimulated nationalism. With inde­ pendence this has expressed itself in a pronounced expression of anti-imperialism which has had both good, and ill effects. The latter are the more obvious. Intense concentration on this attitude has induced international friction and reduced the energy available for internal affairs. It has also led to the introduction of rules and regulations which actually hinder economic development. The good effect of nationalism is the barrier it has generally erected against communism, whose advocates have usually been violently opposed to nation- 27 alism and who have, therefore, antagonized local patriots. An intelligent leader found it difficult to reconcile a communist'6 claim to being a nationalist and a devotee of international communism at the same time. It %vas this point which served to keep these two anti-colonialist g: oups apart. Fourth, colonial economic policy consistently sought to repress industrial advance. Consequently, all colonies remained

27Cf. J. H. Brimmell, Communism in Southeast Asia: a Political Analysis (London: Oxford University Press, 195^) and Frank IT. Trager, ed., Marxism in Southeast Asia: a Study of Four Countries (Stanford: Stanford University Press, 19d 07T The obvious exception to this situation was the case of the Viet Minh which, though communist, thoroughly identified it­ self with local nationalism. It was, in effect, nationalist first and communist second during its early history. During the Chinese invasion of India in late 1962 the Indian com­ munists denounced the action in order not to jeopardize their internal position. 27 in a more or less primitive condition, prized for their markets and as sources of raw materials. Industries established there were primarily extractive, providing the metropolitan power with needed supplies. In exchange even such simple manu­ factures as cloth and pots and pans were imported. One of the initial developmental steps has therefore been to become self-sufficient in such goods as a means of cutting the ex­ penditure of scarce foreign exchange for consumption rather than for constructive purposes. These four main features of a common colonial background provided every state of southern Asia, except Thailand, with similar reflexes to the Western world, its political pattern and its economic attitudes. There is, however, an oven worse reflection on life in the colonies which is currently affecting the policies of the new states. At the time of independence, some former dependent people were living less well than they had fifty years before.?8 This is essentially a population problem, but the blame for the deterioration in living standards can be laid, in part, at the feet of the administering authorities who failed to give proper attention to a problem which is now beginning to approach crisis proportions. Agricultural production had not increased sufficiently to maintain the existing level of con­ sumption in the face of increased births which the surge of

pp Gf. United Nations, Pood and Agriculture Organization, Second World Pood Survey (Rome, 19^2). 28 twentieth century health discoveries had brought about. It was from a sense of social obligation that some health and sanitation features were introduced by the several foreign governing authorities. The theory that colonies existed to be exploited, however, did not generally allow for heavy gov- 29 ernment expenditures for public works for the masses, works such as dams, jungle clearance and the like which would have led to an increase in food production. V.Tiere transportation and communications were developed it was to facilitate colon- ^ 30 ial aims, such as troop movements or export shipments.

The population expansion, which began in the colonial period, has continued. If the development problem is con­ sidered from a universal rather than from a national angle, a vital need for improvement, particularly in the realm of agriculture, becomes apparent. Statistics reveal a startling increase in population annually, one which could outstrip

29 In Southern Rhodesia, for example, the annual budget of the Native Agriculture Department amounted to tl3,000 com­ pared to £248,000 approved for European agriculture there in the same year. W. Keith Hancock. Wealth of Colonies (Cambridge; Cambridge University Press, 1950), pp. 73-74. Another aspect of colonial economics appeared in Japanese Korea; the pea­ sants exported their rice to Japan and ate less desirable millet. Today, independent, they eat the rice even though their exports suffer, 30 These networks were, however, entirely inadequate from a national point of view; like education, agricultural im­ provements, and common industries, this sector of the economy gets immediate developmental attention. Evidence of the need for expansion appears in early Colombo Plan reports where some 3 5 per cent of a six year total expenditure was earmarked for these fields, the largest single class of improvements to be undertaken. 29 food production within the century. It took some years after World War II for farm output to reach prewar levels. Now it has generally passed them, but the outlook for an improved standard of living is dim unless (1) population can be held in check and (2) greater production can be achieved. The alternative is for presently-low standards to sink still lower as existing stocks are stretched to cover larger numbers This condition enables neo-Halthusians to hold that efforts at economic development, particularly agricultural advance, only stimulate an increase in population and so are useless.31 In the past, population growth has generally been held in check by a high mortality rate, but, as health measures increase, deaths decline. The World Health Organization re­ ported a drop of ^0 per cent in deaths between 193’0 and 19^3 in twenty-eight political entities encompassing some 56I| million people. United States aid for the Indian anti- malarial campaign reportedly resulted in a drop of 790,000 in annual deaths over a period of seven years.^32 Birth rates usually decrease at a lower rate for some time, possibly since families are slov; to adjust to the fact that infant mortality has been slashed, and so continue to produce many

^ Wilson counters this argument, ojo. cit., pp. 20-21. Such views have been criticised as being a mere excuse for Western inaction. ^^The New York Times, November 3, I960, quoted in Staley, op. cit., p. I|l2S. American aid for this purpose amounted to ijpWT million. TABLE 5

CRUDE BIRTH flATES, DEATH RATESi AND ANNUAL RATE 0 ]P POPULATION INCREASE

C n ide Birth Rat OrLide Death Rate* Annual Country Per Thousand1 Per Thousand Increase 1945-1949 1950-1954 1955-1959 1945-1949 1950-1954 1955-1959 Rate - %°

Burma _ — 50.0°*^ — ,20.5°'k 1.0 Cambodia - ---- 45. o°,i------«50.0 ° - Indonesia - 4o.oc -- 20.0 °*^ - 2.2 West Irian - — -- - 0.7 Port. Timor - 25.8" 25.9 - 15.0 17.5 1.4 Laos -» -—-- 5.2, Malaya 4o.6j 44.i3 44.41 17.5,3*“ i4.o3 11.5^ 5.o3 Singapore 46.41 45.5, 42.8 I2.5I , 10.4 7.5. 4.6l Brunei 45.23 56.5J 55.73 19.7.3*1 15.83 15.i3 7.0I North Borneo 20.0“ 52.2“ 54.6 I5.7I 12.2 9.2 5.6 Sarawak l4.ll 25. 2^ 25.4 - 9 . ^ 6.5 5.5 Philippines 24.5I 50.1“ 50.1 IO.7I 10.7 8.6 5.2 Thailand 25.0 50.6, . 56.9 , 15.2 9.8 9.7, 4.5 Vietnam - 58.0®*" 55.61 - 10.6® 7.2I 5.4 Ceylon 58.2 58.5 56.6 16.0 9.9 2.73 4c,n« .11-5____ India — 59. 59.1*'S ---- 27. 19.2s 1.9 Port. India 27.5 29.7 25.4“ 16.8k 15.7 15.0 0.2 Nepal - 45.0c - 50.0° - 1.6 Pakistan^ 20.6 20.1 - 15.2“ 12.ll'k - 1.9 Japan 50.1 j 25.71 18.23 16.s3 9.43 7.83 l.o3 United States 25.4 24.5° 24.6° 10.0 9.5° 9.4° 1.73 TABLE 5 (Continued)

a. Census, samples, or registrations provide the data for all figures except Portuguese Timor ones before 1948 which include late foetal births and Pakistan figures which exclude infants dying before births are registered. Extracted from UK, Demographic Yearbook. 1961 (New York, 1961), Tables 6 and l4.

b. For 1955“1960. Extracted from ibid., Table 1. c. Estimate.

d. 1947. e. 1954.

f. 1955. g. 195s.

h. Covering approximately 61 per cent of the population.

i. Covering approximately 90 per cent of the population.

j. Figures considered reliable. All others are estimates or are based on data of questionable or unknown reliability.

k. 2-year average. 1. 5-year average.

m. 4-year average. n. 1941-1951»

0. Provisional.

w I-* 32 children in line with the older need to assure themselves of a few surviving offspring. Traditionally this lag has meant ”a period of rapid population growth .... [which] in past cases . . . has extended over generations." There is some hope, however, that this pessimistic out­ look on the demographic situation need not dictate the future any more than traditional economic patterns of development would seem to determine developmental economics. Governmental leaders today have the advantage of historical perspective, modern communications, and of a tendency to national planning compounded with a determination to improve their peoples' standard of living. The result can well bo a concerted attack on the population problem. This is currently underway, although the effects are not yet established, and probably will not appear in this decade. India has legally interferred in this social process by raising the marriage age, encouraging family planning, and birth control measures. Nearly $^2 million was allocated for this purpose in the Third Five-Year Plan -- five times as much as in the two previous ones. In this effort the underdeveloped countries have the example of Japan to guide them. There the government established the world's first official population agency and, through admin­ istrative efforts such as legalizing abortion and extensive publicizing of birth control measures, succeeded in dropping

33jbid., p. 273. 33 the birth rate from 33*7 to lo.3 per thousand in the ten years since 19l|8 . An interesting statistical fact also holds forth promise: evidence from the Colombo Plan participants indicates that in both East Bengal and Burma an increase in living standards was followed by a decline in birth rates.^ Should this trend persist and become general, then it seems possible that an official program of birth control would stand a reasonable chance of succeeding even without the advantages of industrialization and urbanization which pre­ ceded the Japanese program. Dr. Irene Taeuber’s observation that "the decline in marital fertility has i . . extended from Tokyo to the villages of Hokkaido in the northeast and KyClshu in the southwest" adds a hopeful note that peasant objections to such programs will not bar their fruition. It would be more hopeful, however, if the populations of Southeast Asia and other underdeveloped areas were as lit-

was 28.2 in 19^0, 2^.L, 23.5^ 21.20.1, 19.^, 18.3^ 1 7 .3 , 18 .1 , 1 7 .6 , 1 7 .2 , and 1 6 .8 . United Nations, Statisti­ cal Office, Demographic Yearbook, I960 (Hew York, I960), p. 1]83 for pre-1931 figures^ ^ r later ones see Demographic Yearbook, 1961 (Hew York, 1961), p. I7I.

g ^^Burmese urban rates rose from 39.6 in 1950 to a high of hi.7.3 in 1952, dropping precipitately to 31.7 the following year. In 195^1 and successive years, the figures were 33.5, 3 7 .1 , 3 5 .9 , 3 6 .0 , 3 6 .6 , and 3 8 .2 . In Ceylon after 19^9 the following yearly trend appeared: 39.7, 39.8, 3 8 .8 , 38.7, 3 5 .7 , 3 7 .3 , 3 6 .I|, 3 6 .5 , 3 5 .8 , and 3 7 .0 . Both evidence a very erratic but slow drop. Demographic Yearbook, 196O, op. cit., p. 1)83 for early figures; for those after 1952 see Demo­ graphic Yearbook, 1961, op. cit., p. I6 9 . 34 erate as the Japanese. The success of Japan’s program was due not only to a desire for better standards but also to the ability to read and understand the principles and consequences of birth control measures. Pull page newspaper advertisements and placards in public transport all screamed a theme the likes of which immobile illiterate peasants will never be able to experience. Dr. Taeuber bears this out when she adds "[The Japanese situation] is not the response of an agrarian society in the initial period of its social and economic modernisa- A tion. It is the response of a literate people . . . Already problems in this respect have shown up in India. Attempts to introduce control through the use of colored beads to indicate "safe" and "unsafe" days for Hindu women ran into various complications ranging from simple prayer- style movement of the beads, through children's playing which upset the calculations, to fear of neighbor ridicule. Real understanding of the advantages, fear of the consequences even comprehension of the physical reasons necessitating action appeared lacking. Although birth control remains primarily a matter of personal concern with governments usually only willing to guide the people, stimulating agricultural production to care

^^Irene B. Taeuber, The Population of Japan (Princeton, New Jersey: Princeton University Press, 19^U], p. 2 8 3 . ^'^Time, January 17, 1955- 35; for the world’s now inhabitants has become an international matter. Hot only are various countries working to improve agriculture in underdeveloped areas, but this is the main aim of the United Hâtions’ Food and Agriculture Organization and a subsidiary goal of other specialized agencies such as the World Health Organization, Educational Scientific and Cultural Organization, and the World Meteorological Organi­ zation. The first reported encouragingly in 193^1 that "food production expanded faster than population over the last four years in all of the less well-fed regions of the world except in Latin America.A 1939 report, however, indicated that per capita production had not yet fully recovered its prewar position while several countries of Southeast Asia were falling behind or barely pacing population growth. 39 It is the view of this agency that there are no technical reasons why agriculture cannot keep up with population growth al­ though such a movement would be a challenge — it becomes merely a formidable problem of economic organization and investment. The states of Southeast Asia, sharing the common heritage of colonialism (except in the case of Thailand), face a portentous development in the demographic field. All of these features both affected their earlier development and limit their present advancement attempts.

^^United Hâtions, Food and Agriculture Organization, State of Food and Agriculture, 1933 (Rome, 193^-1 ), p. 19. 39xnj^ PAG, State of Food and Agriculture, 1939 (Rome, 1939), p. 3. 3 6

TABLE 6

INDEX NUMBERS OP FOOD PRODUCTION®

1952- 1955- 1954- 1955- 1956- 1957- 1958- 1959- Country 1955 1954 1955 1956 1957 1958 1959 1960

Burma 102 98 96 97 108 92 109 115 Indonesia 89 98 106 102 104 105 111 112 Malaya 90 89 101 105 116 114 111 121 114 114 Philippines 94 . 99 100 101 107 110 Thailand 89 108 84 105 114 91 104 108

Ceylon 97 90 101 115 99 101 106 109 India 90 101 101 102 106 102 108 109 Pakistan 96 100 105 96 104 101 99 106

Japan 97 85 94 ll4 110 114 119 126

United States 98 97 99 102 104 105 112 115

a. Extracted from United Nations, Food and Agriculture Organi­ zation, Production Yearbook, I960 (Rome, I96I), Table 8. Base period was 1952/1955 “ 1956/1957» Figures are at variance with those in United Nations, Economic Commission for Asia and the Far East, Econom­ ic Survey of Asia and the Far East. I960 (Bangkok, I96I), p. 150. This may be explainable in terms of the FAO footnote indicating that the Organizations's uniform basis of calculations may cause indices to differ from national ones because of weights, etc. 37

The outer limits of growth for all underdeveloped ter­ ritories are set by two additional common characteristics.

One has been expressively described by Gunnar Myrdal as The

Great Awakening. This term encompasses a phenomenon recognised in all writing on this subject, specifically that the peoples of underdeveloped areas have become aware not only of the in­ equalities which separate them from the more advanced nations, but are restless to see an improvement in their status. That this awareness is not new was formally attested in 1937 by

Harold Butler, then Director of the International Labor Office, following a visit to the Orient. "A great change [wa^ stir­ ring Eastern society .... [A} desire for higher standards and the determination to acquire them" was beginning to replace the old belief that misery was the inescapable lot of the poor.

Although undoubtedly correct in his appraisal that this was

"nerhaps the most revolutionary movement of our revolutionary 40 age," there was no great grass roots movement of this sort throufliiiiut Asia until after the Second World War. Even now there are many isolated areas little touched by changing times.

This stirring is akin to the nationalist movement of

Problems of Industry in the East (Geneva: International Labor Office, 1938), pp. 65-66, quoted in Staley, o£. cit.. P. 19. Dr. Henry Gordon Bennett, first director of the Ameri­ can Point IV Program, stated, some ten years later, that this awakening would be the dominant theme of the history of the first half of the century. 38 Asla.^^ It is not an exaggeration to say that there always was opposition to foreign rule among colonial peoples, but a popular movement in this direction developed only in tho twentieth century after the Japanese defeated Russia in 1903 and World War 1 showed up the European "superiority" system as non-Western troops were used to fight Continental battles and Chinese coolies returned home with Western wives. These common people spread to their native villages radical new ideas inherent in which was the concept that the Europeans were not invincible gods and that there were many material advan­ tages in the world which Afro-Asians did not enjoy. World War 11 ended the twenty-year incubation of these ideas; again European weakness was revealed, again Western material advantages were pointed out, but now this was done on Asian soil with first-hand experience widespread, and with proof, in the form of Japanese power, that such material items were not the monopoly of non-Asian societies. This knowledge has grown as a result of th-e transportation and communications revolution of the past half century. Former "far away places" are now practically next door while radio and movies, infre­ quent as they still are in some outlying areas, carry convic-

Cf. Brian Harrison, Southeast Asia (London: MacMillan and Company, 193^), chapter xvii; Harry J. Benda, "Revolution and Nationalism,” in The Non-Western World (Ithaca, New York: Cornell University Press,' Ï938)» Rupert Emerson, Prom Empire to Nation (Cambridge, Massachusetts: Harvard University Press, i960), chapters x, xi, xiv, xix. 39 tion word of mouth often lacked.All of this has contributed to The Great Awakening and violently stimulated the nationalist movements which ultimately culminated in independence for virtually the entire colonial Asian world. It was this determined desire for a better life which created the "revolu­ tion of rising expectations", the spark starting many of the underdeveloped countries on the road to economic improvement. The importance of The Great Awakening cannot be over- stressed. Economic history reveals that during Western develop­ ment the lot of the working man was a hard one. Marx saw it at its worst and from his observations has sprung an entire philosophy of life that is today tearing the world asunder. Times have changed and the working man has come into his own, but austerity remains the key word of development. Savings for capital investment have to come from somewhere, yet how can austerity and saving go hand in hand with satisfying the the desire of the masses for better things now? It is around this point that the question of democratic or authoritarian or ' communist control revolves. Specifically, can the democratic way be maintained in the controlled atmosphere essential to

I This condition can also be distorted as pointed out in the experience of health teams projecting on mobile screens enlarged insect pictures in an attempt to show the method of transmitting disease. The enlarged cartoons failed in their purpose -- the native viewers were merely moved to pity the poor foreigner whose flies grew to such huge proportions. In as much as their flies were so much smaller than those pictured, the people did not learn from the experience until the films showed normal conditions. I|0 launch and sustain an econoniio advance of sufficient proportions to satisfy the people? It is a proven fact that communism, can achieve the requisite economic goals -- with the sacrifice of human dignity and individual freedom. Since these features are generally alien to most southern Asian experiences, their loss would weigh less, perhaps, than the desire for improved material standards and the national self-esteem that is associ­ ated with industrialization. Dr. Stringfellow Barr has very succintly summarized, this point of view: "When we Americans look at Russia, all that we see is tyranny. When millions of these wretched outcasts look at her, what they see is libera­ tion from the landlord and the money lender and the planned reconstruction of their country on the basis of modern machin­ ery. They see a possible end to a kind, of misery and despair which most Americans have never seen. Tyranny does not frighten them: they have never known anything else."^^ The second limiting feature applicable to all developing areas is the circularity of underdevelopment. Innovators must be most careful in initiating changes to avoid tangential complications.^^ A Cambodian rattan and rush stilt farm house is more sensible in a land presently beset with annual

cit., p. 1|. ^^Deep-digging steel plows used to replace forked sticks in the Middle East have been blamed for producing excessive salinity which ruined acres of farmland, while raising the water level in Pakistan undermined sun-dried brick buildings, leading to serious reconstruction problems. [ll flooding than would be a modern box on a concrete foundation. When floods are controlled, perhaps an architectural change will be feasible. Since obviously it is impossible, and I Jj I:. certainly of questionable wisdom, to make others over in the Western image, adaptation to local conditions should be the keynote to modernization both economically and politically This becomes the most difficult aspect of economic devei opment and the key to its success. Unfortunately, most Westerners tend to think of change as being complete; those sympathetic to adaptation and to a mingling of cultures are a decided minority. It is at this point that a greater emphasis on the experience and the path and techniques of modern Japan should be considered. In view of her social background, political experience, and economic baclavardness following her historical

££• Margaret Mead, ed.. Cultural Patterns and Techni­ cal Change (Paris: UilESCO, 19^3); B. P. Hoselitz, ed.. The Progress of Underdeveloped Areas (Chicago: University of Chicago Press, 1952); and the University of Chicago’s periodi­ cal, Economic Development and Cultural Change. ^Spatial problems alone, in Japan, would rule out the older American middle class ideal that each child should have its own bedroom. The absurdities of some attempts to force standards on others may be seen in excessive concern that many lack tables and chairs — modern American young people have recently adopted the habit of sitting on the floor. Similarly, going barefooted is an increasingly evident Ameri­ can practice, one even strongly advocated by pediatricians to strengthen baby feet. There are, of course, extremes to which such argumentation should not go. In support of the advan­ tages of Western-style living, one popularly accepted belief in Japan is that the increasing use of tables and chairs has contributed substantially to the postwar increase in height of the young Japanese. L|2 isolation, there is a greater degree of comparison between her deliberate attempt to modernize and the efforts of the new states along similar lines today than there is between the pc esent underdeveloped countries and the industrial states of the West. For this reason, greater emphasis and greater guidance might well come from Japan than is anticipated by most writers on this subject. Easterners are opposed to any complete abandonment of their existing way of life. A Pakistani scientist commented to UNESCO officials, "... every nation has its own standard of values .... We Imow that we must develop our country to survive, but that does not mean that we are seeking to pattern ourselves after any other country or region. The purpose of our development program is to enable us to preserve our own system and our own outlook, not to discard it for something not adapted to our own needs." A Ceylonese engineer similarly declared, "We want to improve our standard of living, but we aren't crying out for skyscrapers. Never forget this: I may dress on my job and work in the same way you do, but, when I go home, I get into my sarong, I eat my rice and curry with my fingers, I chew my betel, and I lead my own life."^^' In like vein, the cousin of Singapore's vitriolic nationalist politician David Marshall vehemently exclaimed, "We take our shoes off before entering the house. Isn't this cleaner and

UÎIESCG, 02» cit., p. 8. 1|3

TABLE 7

INDEX NUlyBERS OF GENERAL INDUSTRIAL PRODUCnON*

Country 1959 1954 1955 1956 1957 1958 1959 I960 1961

Philippines^ - 112 12^ 146 158 170 185 190 -

Ceylon - lo4 117 115 ll4 110 157 124 - India 76 107 116 126 150 152 l44 161 172 Pakistan® 76 128 161 182 192 215 240 260 275

Japan 96^ 108 116 l44 167 163 208 261 517

United States - 94 106 109 110 1(D2 116 119 120

a. Base year 1955» includes mining, manufacturing, electricity, and gas production. Extracted from UN, Statistical Yearbook. 1961, op. cit.. Table 11. I96I figures are from United Nations, Statistical Office, Monthly Bulletin of Statistics. June 1962, Table 7»

b. Ilanufacturing only.

c. Excludes electricity and gas.

d. 1958. Ill^ more sanitary than having to use a vacuum cleaner? Why should we change all our ways of doing things?"^^ All these propo­ nents of adaptation were educated upper middle class people; the desire to cling to old ways is probably even stronger among the country folk. The standard of being poor is always a comparative one, even among individuals. Gradations can also be seen among the less fortunate countries, I| 9 and placing the underdeveloped states into graduated categories rather than attempting to consider them as a single group, clarifies the problems con­ fronting individual ones. Per example, from the various tables it can be seen that conditions in the Philippines and Laos are quite different and yet these two states are both underdeveloped. By pointing up the differences facing the southern Asian states, this categorization may serve to make clearer the policies to be outlined in Chapter II. First, there are those states whose resources are as yet not fully utilized, but whose current industrial-agri-

^ Private conversation, Canberra, Australia, March 19^6. That the Japanese share these sentiments became apparent follow­ ing conversations with diverse elements throughout most of Japan in 1959-1960. Older people lament the Americanization of their national culture, and many of the young ones express a hope to avoid complete severance with the past. Only margin­ al elements among the latter seek complete Westernization. I, o I Higgins, 0£. cit., pp. 21-33» There are four such categories the last of which does not apply to South or South­ east Asia; it covers those areas both showing no rise in per capita income and devoid of potential, such as barren Libya and Jordan. |5

TABLE 8

GROSS DOMESTIO CAPITAL FORMATION AND PRIVATE CONSUMPTION EXPENDITURE

Gross Private Country Domestic Capital Formation* Consumption Expenditure 1950 1955 1959 960 I 1950 1952 1959 i960

Burma 11 14 21 17 63 7^d Indonesia ---- 76 - Malaya - 8° 10 8S - 70^ 71 682 Philippines 7 7 8 8 92 — 84 - Thailand - — - - — 76^ 78 782

Ceylon 9 10 12 15 72 79 74 75 India - -- — 90 - 86 -

Japan - 22 27 51 65'' 62 62 54

United States 16° 16 16 16 68° 62 65 64

a. Figures are a percentage of the Gross National Product for the years specified. Extracted from UN, Statistical Yearbook. 1961, op. cit.. Table 167»

b. Per cent of Gross National Product. Burmese, Indonesian, Philippine, and Indian figures extracted from EOAFE, I960 Survey. op. cit.. Table 20; others from UN, Statistical Yearbook. 1961. op. cit., Table 166.

c. 1948

d. 1951.

e. 1955.

f. 1957 S' 1959 1|6 cultural expansion is such that per capita income is already rising. (See Table 1), Although plagued by problems of un­ skilled labor, of the unequal distribution of wealth both socially and regionally, of insufficient technical and mana­ gerial forces, and of lack of capital, the states in this group evidence some savings, some income from taxes, and pros­ pects of foreign investment which would seem to assure their sustained growth. Of the southern Asian states, this descrip­ tion fits the Philippines and Ceylon. Second come the countries whose resources in relation to population are not abundant, but whose per capita income is ' nevertheless rising. Burma, Thailand, and Pakistan, fall into this group. Their problem is accelerating this income rise. Third are the nations relatively blessed with resources, but whose per capita incomes are stagnant, particularly in rela­ tion to pre-independence days. Here -- and Indonesia is an outstanding example — the problem becomes two-fold: launching, as opposed to sustaining or accelerating, growth and blocking a population expansion ivhlch would negate the progress achieved. The background of underdevelopment has been set in the preceding examination of the criteria by which it is measured, the common background affecting most of the new southern Asian states, and the two major problems establishing the limits with­ in which development can operate. The problems of developmental economic theory can now be considered in relation to the spe­ cific advancement opportunities of the southern Asian countries. CHAPTER II

THEORETICAL ASPECTS OF DEVELOPMENT

The economic deveL opment of underdeveloped areas is a post-World War II concept. As such, it is a young idea, and economists, sociologists, and political scientists are still striving to regulate its pattern and discover a plausible explanation for it.^ As yet there is no developmental econ­ omic theory equivalent to the classical or equilibrium one of the nineteenth century economics. Attempts to formulate such an algebraic model seem doomed from the beginning, since there are more human intangibles involved in considering present day developing states vjith their unfamiliar moral and psychological background. It is the purpose of this chapter to examine some of the reasons for the failure of develop-

There has been, in recent years, an interesting change in the terminology used in describing former dependent terri­ tories. They were originally called "backward areas" but, as nationalist sentiment developed, a sensitivity to the implied criticism inherent in the expression forced a post- World War 11 change first to "undeveloped" and subsequently to "underdeveloped". The difference between the older and the latest words is the suggestion in the latter that the metropolitan powers were responsible for the condition. Usage of the term was pressed by the underprivileged and acceptance of the verbal change by the richer countries has been said to indicate that they recognized this responsi­ bility. See Myrdal, o£. cit., pp. 7“8« More recently the more ambiguous term "developing" has gained currency. Il8 mental economics to conform to older models and to point out some of the non-eoonomic problems connected with modern developmental attempts. With these in mind, the specific American, Australian, and Japanese efforts to aid Southeast Asia can better be treated. In the preceding chapter, the dependence of an under­ developed state on agriculture was cited as a criterion of underdevelopment. This dependence is a very natural one. Pood is basic to man's being and any settled society has in­ itially devoted itself primarily to agriculture. With only limited areas of specialization available, the bulk of the population has remained on the land simply as a means of existing. It is from the earth that the economic circle of man's being stems. If he works the ground, he has a chance of survival, governments, wars, and other larger movements to the contrary notwithstanding. A plot of ground, however, does not assure a man of survival. He needs help to produce food for his family. The larger the family, the more assistance he has, but this is the beginning of a vicious circle ending usually in a state of abject poverty. The more mouths a man has to feed, the more food is needed; so the fertility problem leads ultimately to a starvation one. Lack of variety in the family diet, a fundamental nutritional problem, results in deterioriation in physical condition aggravated by lack of sanitation which 49 promotes the spread of disease. All of this reduces the in­ dividual's productive capacity and provokes the poverty which necessitates more hands to produce essential food, and so on indefinitely. Interwoven with and interacting on this end­ less circle is a related one. Lack of variety in diet stems in part from underdeveloped domestic trade caused by poor transportation and poor communication between regions. This in turn results from the poverty of the peasant and the government's resultant inability to develop needed facilities. Myrdal describes this societal feature as a ’’circular and cumulative process continuously pressing levels downward, in which one negative factor is, at the same time, both cause 2 and effect of other negative factors." Thus, although we can list characteristics of underdeveloped countries, it becomes impossible merely to isolate and correct the cause of this state in view of the circular relationship which makes one condition both the cause and the effect of others. The essence of developmental policy is to break into this circle and alter its course. The question remains

2 Ibid., p. 11. Of. also Ragnar Murkse's poverty circle; "a poor man may not have enough to eat; being undernourished, his health may be weak; being phsically weak, his working capacity may be low, which means that he is poor,” infini­ tum. See Problems of Capital Formation in Underdeveloped Countries (Oxford: Basil Blackwell and Mott, 1953) > P • Ij j C. E. A. Winslow's health circle: People were "sick because they were poor; they became poorer because they were sick and sicker because they were poorer.% See The Cost of Sick­ ness and the Price of Health (Geneva: World Health Organi- zation, i95l), p. 9. 50 how best to alter the downward spiral of underdevelopment. Left alone, a poor country would merely become poorer, a prospect not only appalling to local authorities, but generally repugnant to Western peoples. Fortunately, or un­ fortunately, few realize this prognosis. Based on Western experience, it is axiomatic that any alteration of the factors of production will change the economic trend. Thus the only relevant question would seem to be: should the alteration be brought about by such means as increasing productive capacity through improved nutrition, or by improving the skills of workers or of entrepreneurs through training or by injecting capital into the system through foreign grants or loans, or by a combination of two, more, or all of these? In 1956, in an attempt to refine an analysis of develop­ ment, W. W. Rostow put forth his concept of "The Take-off into Self-Sustained Growth"In his attention to the timing of development among the major industrial states, he noted that a "particular sharp stimulus" marked the beginning of such take-off. He opened his examination with a stable,^ tradi­ tional agricultural society characterized by static methods of production and little savings, conditions typical of under­ developed states described above. A receptive national group

^"The Stages of Economic Growth," in The Economic Journal, March 1956, pp. 25-l|8. ^Myrdal denies the idea that "stable equilibrium" exists in a social system. Op,, cit., p. 13. 51 is stimulated, usually from without, by motives both economic and non-economic, that is, social, political, or psychologi­ cal, If we examine the successful non-3uropean records of industrialization, it becomes obvious that parallels exist between the method of developing Japan, and even Turkey, and the method being employed by the new states today. For in­ stance, national pride was one of the non-economic motives stimulating their advance, but such a motive played no part at all in earlier British or American development. This stimulus also appears today on the contemporary Afro-Asian scene. Isolating the spark of today’s developmental moves is complex. One factor alone is definite, namely, the major­ ity of the peoples as well as the governments of most under­ developed countries want a better standard of living.

The pattern the development of the new states will follow is of major concern to political scientists. If a state elects a capitalistic method or a modified capitalistic method, the presumption is that it will adhere, in some degree, to Western sentiment in its concept of the rights of man and in its international relations. Politicians and scholars hope that this would also apply to socialistic development. It is ob­ vious that this pattern would not apply to a communistic one.

There is little parallel between the spontaneous rise of the industrial economy of England under predominantly laissez- 52

faire conditions and the beginning of directed economic change

as it occurred in Japan. , Simon Kuzaets explains this on the

ground that each so-called follower country operated at a

certain disadvantage in regard to the preceding modernizers.^

Thus England, developing alone, differed in its pattern from

the United. States and Germany whose industrialization followed.

Free trade, for example, fell before protective tariffs as

these nations sought to fend off the English advantage in

order to build their own industries. Japan, too, was a

follower nation. Her experiences are even later, and hence

closer to the present situation than were those of the United

States or Western Europe. Thus the economic pattern, too, would seem to stress the role Japan can play in developing

the poorer states.^

Economists tend, generally, to look on this entire matter

solely as an economic problem. They examine existing economic

theories of development, evolved to explain Western industrial

change, in an attempt to discover what economic thinkers dur­

ing the period of Europe's growth considered as responsible

Simon Kuznets, "International Aspects of Economic Growth," in Bulletin of the International House of Japan. April,,1962, p. 5. 6 See Chapter I. This is emphasized when considering, in more detail than in that unit the dissimilarity between Orien­ tal and Occidental societal patterns, a dissimilarity which tends to lessen when comparing Japan to those states just be­ ginning to modernize. There are limits to this argument, how­ ever. See Chapter V. 53 for the phenomena occurring. Thus, for example, they work out equations to show how output is râated to the four fac­ tors of production — capital, resources, labor, and the level of technique — as the quantity of one or more of these 7 factors is varied. To this basic classicalist theory, Marx contributed stress on technology, a change incorporated by virtually every economist since, but he overestimated its re­ sultant adverse effects on the utilization and life of the laboring class. Among other contributors to economic thought,

Alvin Hansen added the concept of governmental monetary and fiscal controls as essentials to maintaining a stable expand- & ing capitalist economy. These are but a few of the inter­ pretations which appear in developmental economics. Yet older thinking sannot be transferred intact to present devel­ opmental problems, at least partially because of the com­ plexity of non-economic factors.

Economic development is irrefutably a question of con-

?Adam Smith, Wealth of Nations (1776); David Ricardo, On the Principles of Political Economy and Taxation (1817), source of currency , taxation, and international trade views; Thomas Robert îtelthus. Principles of Political Economy (1&20), class antagonism and demographic and social con- cepts — he exen expressed views of development of poor states: John Stuart Mill, Principles of Political Economy (1343). ------3 Fiscal Policy and Business Cycles (New York: W.W, Nor­ ton and Company, 1941). 54 cern to economists: the interplay of production factors, their proportion, the change that can be expected from their varia­ tion, the source of capital, the effects of dualism found in the subsistence-plantation economies of most underdeveloped areas, the supply of money, the tax structure, labor policies, international trade, monetary manipulation, exchange control, and many other varied faoets of society. There have been any number of attempts to explain the problem of underdevel- 9 opment, to discuss the policies of states faced with this situation and to advance suggestions on how best to remedy it. These generally do not concern us here, except as they reflect on the social and political aspects of the problem.

It would seem that an economist often loses patience with the human element in working out his approach to contemporary

9 Gunnar Myrdal, An International Economy: Problems and Prospects (New York: Harper Brothers, l95h}; P. T. Bauer, 5conomic~Analysis and Policy in Underdeveloped Regions (Durham, North Carolina: Duke University Press, 1^$7); Lyle W. Shannon, ed., Underdeveloped Areas (New York: Harper Brothers, 1957). There are also a variety of works dealing with specific aspects of underdevelopment: Nurkse, Capital Formation . « » « op. cit.; K. Mandelbaum, Industrialization . . . (2nd edition, Oxford: Blackwell, 195571 D. h . K. Lee. Climate . . . (New York: Harper Brothers, 1957); E. S. Mason, Economi^Planning . . . (New York: Fordham Uni­ versity Press, 1958); Charles Wolf, Capital Formation and Foreign Investment (Syracuse, New York: Syracuse University Press! 1958) not again referred to herein; Reinhard Kovary, Investment Policy . . . (Rangoon: Rangoon University Press. T w n ------55 development in non-European states.^® A specialist in his own field, he has neither the time nor the inclination to become one on a foreign area. His appraisal may stem from an ingrained conditioning to the European socio-religious structure and its resultant standard of economic mores. Thus a Western-oriented economist works essentially in a vacuum when he does so in terms of his otni philosophy of life. So powerful are the social and cultural complications in effecting an improvement in the living standards of the

Professor Higgins’ statement that his "experience of having recommendations put into effect six years after they were made, when the economic and political conditions made the time ’ripe’ for them in the eyes of the government leaders" , cit., p. 6l8) implies a veiled surprise and rebuke that an economist’s plan should be subject to politi­ cal considerations. To contend that government officials (unless selfishly inspired) are unnecessarily cautious in awaiting the opportune moment to press ahead with an eco­ nomic change suggests that a dictatorial imposition of the proposal would be a more satisfactory policy for the govern­ ment involved merely because the advice was essential to the state’s well being. Any politician, anthropologist, or psychologist would attest that no matter how good for one an idea might be per se, a person will not automatically accept it on those grounds alone. But economics is not the only discipline which produces this phenomenon; a political scientist can be equally insensitive to the role economics can play in creating desired political conditions. See Hans Horgenthau, "A Political Theory of Foreign Aid," in The American Political Science,Review, June 1962, pp. 30I- 309. This is managed through indirection. Of. David Wurfel, "Foreign Aid and Social Reform in Political Develop­ ment: a Philippine Case Study,” in The American Political Science Review, June 1959, pp. I|56-Ij82. 56 poor states that any acceptable theory on developmental eco­ nomics must Include non-economic factors. Anthropologists report It Is practically impossible to effect an Innovation In a village without considering Its customs and taboos, and both the. United States Technical Cooperation Administration and the Mutual Security Agency eventually concluded that at ' least one cultural authority was needed at each of their overseas missions to assist In such practical matters as the modernization of agriculture and In the elimination of nutri­ tional defects and health hazards.This may explain, In part, why It has been so difficult for the economic experts to devise a developmental theory. The role of assorted non­ economic features will be repeatedly pointed out throughout the remaining sections of this chapter. Only In this way can the Immensity of the social, political, and psychological forces of development be demonstrated. Merely mentioning their existence, even Itemizing them, cannot sufficiently re­ veal the extensive role they play. There are certain features of modern day development. Involving particularly the climate of modernization and the four production factors of classical theory, which are common­ ly held to differ markedly from nineteenth century conditions, These divergencies are, however, often overly magnified and.

Jonathan Bingham, Shirt-Sleeve Diplomacy: Point IV In Action (New York; The John Day Company, 195l| ), P « 205. 57 In some cases, a more thorough regional examination will often reveal previously unsuspected parallels between the two periods. First, regarding the climate of industriali­ zation, twentieth century modernization has been a matter of personal leadership rather than a gradual unfolding of technological advance. European development was not in­ spired from above by strong men leading uninformed masses, but from the middle, from inspirational activities of people spurred by nagging ideas to make something new. In contrast to the Asian situation where, broadly speaking, the contrary is true, Western Europe had already broken the feudal barrier and had an extensive commercial group whence sprang innumerable inventions previously undiscovered, forgotten, or not util­ ized to the full. In the non-We8tern world today, the role of leadership is a prime one. The starry-eyed theorist in his ivory tower, the timid or vacillating leader easily swayed by vested in­ terests, the power-hungry, all accomplish little in the practical sense' of "getting things done" for the masses. Today Sukarno, U Nu, Nehru, Kassim, Nasser, Mboya, and Nkrumah are men whose leadership will determine the course of development of the new states as in the earlier portion of the century other men personified progress in their homelands. In Japan the matter was initially under the corporate guidance of a group of senior statesmen called the genre ;. Lenin and Stalin, placed indelible marks on Soviet industrialization; 58 Mustafa Kemal, or Ataturk, was the effective modernizer of Turkey, without being moved by the success of his benevolent dictatorship; Peron influenced the course of events in Argentina; Franco’s role in Spain is indisputable although the country’s slow revival has yet to be completely evalu­ ated; Resa Khan also exercised personal control of the state although he would perhaps have been more effective a remaker of Persia had he possessed a sterner nature. All of the states involved were underdeveloped at the time of the rise of these leaders. All of the leaders affected the course of human events within their countries. History is filled with "what might have beens"; in terms of leadership, one might speculate on what course the events in the U.S.S.R. and China would have taken had death not removed both Lenin and Sun Yat-sen in 1921] and 1925. In Southeast Asia today leadership is a problem mainly in the fact that there is so little available; South Asia does not suffer as much from this disadvantage. The number of well-trained administrators is small. At the top level, outstanding men are few. Sukarno has a personality cult which obscures other people in Indonesia; U Hu has seemed to be the perpetual leader of the Burmese although recently replaced for the second time by an army coup; in Thailand leading contenders have played at government as if it were a game of musical chairs ; in Cambodia Prince Norodom Sihanouk seems to be the only man worthy of the leadership distinction; 59 in Laos everyone within a small inner circle wants to govern; in South Vietnam there seems to be no one available but Diem although, were he removed, in all probability a man would rise from the unlcnowns as U iTu did in Burma following the death of Aung San; in the Philippines democratic processes are currently encompassing a battle between men of the people and old-line politicians. Since a case can be made in favor of an autocratic administration’s ability to wipe out old social barriers to modernization and to organize manpower to get things done in a hurry, a strong hand on the helm is essential. No such parallel existed in the course of Anglo- American or even Western European development. Second, in regard to labor, it is frequently noted that population growth patterns differ between nineteenth century Europe and the present underdeveloped areas. Demographic factors stimulated production in the West since labor in re­ lation to other production factors was relatively scarce there. As the specialists say, this is not true, in general, in Asia, A sup.er-abundance of labor exists in India, China, and Japan; this remains one of industrial Japan’s great problems, and will plague the development of India and China, Mainland Southeast Asia, because of its geographic configuration, and certain Indonesian and Philippine Islands are also overpopu­ lated although the region as a whole is frequently termed underpopulated when total numbers are compared to total area. All good agricultural land, all good productive regions are 60 densely peopled. As in Asia generally, the limited opportun­ ities available on the small farm plots will ultimately en­ tice some younger sons to try other forms of economic activ­ ity. In all probability, however, industrialization in South­ east Asia will follow a different pattern from what many writers would vaguely call "the Asian norm". The supply of manpower there may be insufficient to overcome the scarcity value of labor and a developmental pattern more similar to Europe’s may result. There is some historical substantiation for this view. Chinese and Indian laborers were imported to work the newly-opened mines and, to a much lesser extent, the plantations of all mainland Southeast Asia. Today such a solution would be unthinkable on a permanent basis. Another argument for the scarcity of labor in this part of Asia lies in the so-called baclcward sloping supply curve of effort. This refers to the inertia which must be overcome before local people can be stimulated to industrial activity. Life is generally too easy for them to want to work hard. B'or all ihese reasons, development of at least part of Southeast Asia may take a slightly different form from that elsewhere in the Orient. China and peninsular India, however, will follow the Japanese pattern of variance from the Western path. Third, it is said that the rate of discovery of resources will not spurt, suddenly, as it did in Europe with the demand for new materials since many resources have already been 61 charted in Asia. This does not mean that no further discover­ ies will be made there or that future technical innovations will not utilize presently untapped resources. Since raw materials were one of the impelling motives behind colonial acquisition, the exploitation and even exhaustion of the rarer minerals is not surprising. In Indonesia, it has been esti­ mated that present Imown oil reserves will last for only ten more years and tin for only six, Malayan tin allegedly will 12 be exhausted in fifteen years. The more common resources, particularly if they existed in inferior state, were often ignored by administering powers. India has only recently begun to tap its coal and iron; its iron reserves are thought to be the largest in the world. 1 The Philippines, too, can ultimately produce more of these essential materials, none of which were utilized by Europeans since there were supplies closer to home. Indonesia and Malaya both have quantities of bauxite and the latter also has iron deposits.Exten­ sive geological surveys are necessary to the intelligent planning of any state. They are essential, also, in light of new demands from a space-age industry whose needs will have changed, from those existing at the time of colonial ex­ plorations. There is no gain-saying the fact that possession

^^The Economist, May 31, 19^2. ^^/Jard, p£. cit., p. ll)7. ^^The Economist, op. cit. 62 of raw materials is an advantage, as in the United States and the U.S.S.R. Britain, however, quite early had exhausted her inadequate supplies and Japan had few such endowments to begin with; yet they both prospered. It is, however, a de­ batable point whether the human attributes of these island peoples can be duplicated in other environments. One basic resource, fertile land for agricultural ex­ pansion, is practically non-existant in Asia. So dense is the population of both the larger countries and the natural­ ly fertile agricultural areas of even the more sparsely populated southeastern section that every available square inch of easily productive land is already in use. A movement akin to the western and eastern treks across North America and Russia is out of the question. Only after expansive reclamation of desert, water-logged, or jungle land can new territories be opened to farming. Consequently, it is main­ tained that a parallel expansion in the agricultural sector to roatch the industrial advance is not possible. This would hinder an increase in per capita food production by reduced numbers of farm laborers to accomodate enlarged urban demand and the supplying of the agricultural needs of industry. This "no new.lands" argument, however, ignores the benefit which can be derived from three aspects of Asian agriculture: first, the potential increase that can come through the use of better seeds, fertilizers, and other fea­ tures of scientific farming; second, reclamation which. 63 though costly, was the initial developmental step in most areas, thus opening thousands of acres to food production; and third, the relatively empty land in Sumatra and in the Outer Islands of Indonesia. Efforts to resettle Javanese there are long-standing. If they succeed, this will reduce both economic and political tension within that Republic. Fourth, it is held that the rate of technological advance will be higher in Asia than in Europe as a full century of modern techniques is absorbed in a less gradual fashion than in the West. This is not only true but a great advantage to underdeveloped countries. The new states can obtain the best machines and ideas immediately, rather than having to endure the experimentation through which the V/estern world had to struggle. l3 The blessing this can be is exemplified in the recent e:cperiences of Germany and Japan. Their postwar economic spurt was aided immeasurably by the near total destruction of wartime facilities. Some English manufac­ turers, on the other hand, are currently laboring under the

ig "^Disadvantages exist in that this equipment, generally designed to be labor saving, has mechanical features that are wasted on overpopulated underdeveloped countries, is costly, and is subject to overly-rapid deterioration. The latter results from the necessity for skilled care and maintenance, which would be lacking, and from the fact that oils used in the machines are designed for temperate rather than tropical climates. Of. H. W. Singer, "Obstacles to Economic Develop­ ment," in Social Research, Spring 19^3, PP« 26-27. See Chapter V for Japanese experiences in introducing modern equipment in India. 6I|

economic disadvantage of having inefficient, but still

operable, old equipment which they are reluctant to scrap

for expensive new machines with all the technical improve­

ments of the postwar world. For the underdeveloped countries

this advantage applies both to modern machines and to the

most advanced economic thinking of the day. One of the more

obvious outgrowths of this situation is the planning which is not only possible, but, by the very nature of developmental

economics, essential to improving living standards. Here,

however, the disadvantage of this divergence from Western

practice comes to the fore. The new states tend to adopt

fully developed economic and social policies for the

psychological lift such moves inspire.These policies, how­

ever, more often than not fail to apply to problems within the

country with tho result that, to use the example of labor,

short hours and high cost are often not commensurate with the work produced, as a comparison with world per capita output

figures would indicate.

Finally, regarding the fifth point of divergence between modern and earlier development, there is said to be a notice­

able lack of spontaneous entrepreneurial feeling in the under­

developed areas. The ’’frontier spirit”, stemming either from

Forth America’s westward expansion or the British nineteenth

l^Labor legislation, welfare state policies, graduated taxation, etc. 65 century rural-urban shift, is held to have no counterpart 17 today. Regarding the latter point, it seems a little strong to say there is no Asian parallel. An examination of Japanese modernization after 1868, at which time that state would have been classed as non-industrialized, would show a rural-urban movement, thus indicating that such a develop­ ment is likely to occur, as in Europe, only after it has been demonstrated that the wherewithal to exist is available away from the soil. Otherwise nothing would inspire mass migration to the cities but sheer desperation, e,g, starva­ tion, improbable in Southeast Asia, the rice-bowl of the East,

As for a "frontier spirit", expansion in the American

fashion is possible only after costly reclamation, such as re-

-1 o vitalizing the ancient irrigation systems of Mesopotamia or

of the valleys of central Asia, or TVA-like flood control lo projects, ^ or draining waterlogged

^^Higgins, op_, cit,, p, 193. The degree of shift may be smaller than in the West, however. Barbara Ward maintains that industry absorbed less labor from agriculture than was expected. See Chapter I, ^®It is estimated that this would providefkrras for two or three million people. United States, International Develop­ ment Advisory Board, Partners in Progress (the Rockefeller Report) (Washington, 19Î?l)V p. 30. 19 Such as the Indian Damodar Valley project in Bihar, the two Sutlej River dams (at Bhakra and at Nangal), and the Hirakud Dam on the Mahanadi which were expected to make cultivable some six million acres and to yield 700,000 kilo­ watts of electric power as well. The Colombo Plan for Go- pneratto-:Sg.Qi^miQ.D.av.elQment in South and Southeast Asia. (London, 1950), Chapter iv and Appendix 3* 6 6 lands, 2 0 or plowing the stubborn Kans grass of India, or 21 clearing areas abandoned to the malarial mosquito. Recla­ mation becomes a major problem in the arid Middle East and in drastically overpopulated India, although Southeast Asia is not so seriously bothered by it. 22 Consequently, a ’frontier spirit' of the American type stemming from freedom to pioneer, is indeed missing in most underdeveloped areas of Asia.

There are, however, other forms of pioneering effort. A far more difficult barrier curtailing the entrepreneurial thinking or even the adventuresomeness of an individual farmer is the Asian social structure. The traditional

PO A^gout 2.3 million acres of the Punjab (West Pakistan) have become water-logged and saline through over-irrigation. The Rasul Tube-well Project is one of several attempts to remedy this. Wilson, o£.* cit., p. 31* 21 A two-year RTIO-UNICEP project cleared northern Thai­ land of malaria which affected 60 to 70 per cent of the population. The 600,000 people benefited were then able to produce a second rice crop each year. See Partners, op. cit., p. 6. In East Bengal, rice production increased 1^ per cent following a similar campaign. In Afghanistan, a WHO program cleared the Hundus, abandoned to the mosquito about the four­ teenth century. The best exaraj)le, however, is the Terai in India. Widely cultivated a millenium ago, irrigation which cut across the natural drainage system, led to swamp condi­ tions and ultimately tiger-infested, malarial jungle. First sprayed, then tractor cleared, the Terai has been returned to cultivation. 22 nevertheless dams, primarily for irrigation but also widely sought for hydroelectric power, are being built in Southeast Asia. In June I960, Thailand received United States Development Loan Fund money for just such an agri­ cultural purpose. 67

societal feature underlying the Orient from East to Southwest

is the extended family, sometimes based on maternal lineage but more often patriarchal, patrilineal, and patrilocal.

What incentive is there for a farmer to drive himself to pro­

duce more to feed, his children if he must share the results with an endless number of nephews and nieces whose fathers may be less ambitious? Without a violent wrench, a young man

is not free to take off and make a new start. These social

attitudes can be extended into every feature of economic

life. On the other hand, once industry gets a foothold, the

extended family is replaced as the basic unit by the smaller nuclear family -- Japan is experiencing this as business con­

cerns move personnel from one end of the country to the other;

China began to do so and the communists reportedly have accel­

erated the program; India likewise is changing. In all cases, however, this was an unnatural experience, one learned from

contact with industrialization and commerce. Those members

of a free society who make this break with tradition are pioneering a new frontier in their own culture as large as

any the West had to offer. Further, in support of Eugene

Black's contention that entrepreneurs will spring up on 68 po demand like flowers responding to a desert rain, • there has been a surge of private entrepreneurial activity in Japan and in India which would put the claim of a lack of enterprising spirit in doubt. Regarding the latter state, Barbara Ward has reported that "never has private enterprise expanded or diversified so quickly" as there in the 19^08.^^

The case of Southeast Asia, however, indicates the economists’ fear concerning the lack of entrepreneurial aggressiveness in underdeveloped lands has some merit. His­ torically it has been immigrant Chinese and Indians who have dominated the business activity of the southeast. Their enterprise soon brought many villages under their economic 25 control, and. many large sections of the economy as %ve 11.

cit., p. 28. The Innumerable opportunists the world around whose enterprises mushroomed after World War II substantiate this observation. The seed, according to Black, is mere consciousness of the possibilities extant and is not a matter of formal education which many of these new busi­ nessmen lack. One obstacle to the expansion of commercial activity in Asia is the tendency of a merchant to charge all that the traffic will bear -- the concept of profiting from quantity turnover is unusual. 2^0^. cit., p. 159. or;' ■^Victor Purcell, The Chinese in Malaya (London; Oxford University Press, 19^8) and The Chinese in Southeast Asia (London: Oxford University Press, 1951)> G. William Skinner, Chinese Society in Thailand: an Analytical History (Ithaca, Hew York: Cornell University Press, 1957) and Leadership and Power in the Chinese Gomiaun it y of Thailand (Ithaca: Cornell University Press, 195^); Richard J. Coughlin, Double-Identity» the Chinese in Modern Thailand (Hew York: Oxford University Press, 19él/; Justus' M. van der Kroef, "Chinese Assimilation in Indonesia,'? in Social Research, Winter 1953, PP* ^^5-^72. 69

So extensive has been this dominance that one expression of the rising nationalism of the area has been the restrictions on foreign business aimed at these Asian merchants.The problem for Southeast Asia would seem to resolve into the question of whether successful entrepreneurial activity is a learned technique. If it is, then tropical Asian citizens may sometime become fired with the same business-like spirit.

To date, however, they have shown little interest in commer- • cial activity. This observation holds true throughout the region but has somewhat less merit in the Philippines. Per­ haps there is a connection between this commercial interest of the Filipinos and the fact that in those islands more than anyvJhere else, the progeny of mixed Chinese marriages can acquire a position of dignity in society.

Social forces remain the biggest obstacles to entre­ preneurial activity among the southern Asians. In certain areas, sullying one’s hands is still considered to be degrad­ ing. This has been particularly true in India, but was at least breached during the community development projects of the fifties when innovators sent to guide villagers in health, agriculture, home improvement, etc. readily assisted in

Burma, promptly upon receiving her independence, vir­ tually drove out the Indians; Indonesia later followed suit regarding her Chinese; and in the Philippines and Thailand, restrictions have.curtailed Chinese mercantile activities. In all cases, the effect on the local economies was adverse. 70

cleaning out •wells and doing other manual l a b o r . This rounded out a pattern of initial social change since industry had, in previous decades, already successfully attracted many Hindus to its ranks. This barrier, to the extent that it exists in southern Asia, may also pass inasmuch as the temporary nature of the restrained feelings toward the rising industrialists, the nouveau riche of England and of Japan, is a matter of record. Religion, as a bar to Southeast Asian economic aggressive­ ness, is not however, so easily overcome. Diverse philoso­ phies mark the area: Buddhism predominates in Burma, Thailand, Cambodia, Laos, and Vietnam; Islam in Malaya and Indonesia; Catholicism in the Philippines. The latter also appears in Vietnam while there are Muslim elements in Burma, Cambodia, and Thailand. Except for the Philippines and Vietnam, a Hindu past underlies the region as well. The philosophical outlook of the two Western religions, both stemming from the Judaic tradition, presents no barrier to agressive economic development so long as purists do not dominate. Experience in other states has shown that industrialization has been

^Bingham, p£. cit., pp. 12l| ff. One dairy technician, recently returned from working for four years with an Indian educational team, stated his belief that no progress was be­ ing made in eliminating this attitude tuward manual labor. Until fear of dirtying one's hands is removed, he said, there would be no progress in India. (Private conversation, Worth­ ington, Ohio, April 1962), Perhaps the solution will come when more men of the lower classes, accustomed to manual work, receive sufficient education to assume these technical jobs. 71 possible in Catholic countries like Prance and in Islamic ones prt like Turkey. Hinduism with its "infinitely absorptive capacity", has been surprisingly successful in adapting to 29 modernization by being all things to all people . Because of this flexibility, Nehru is busily reconciling past and

“^Despite certain attempts to lay the rise of capitalism at the door of the Reformation. R. H. Tawney, Religion and the Rise of Capitalism (New York: The New American Library, ]7%b) and Max Weber The Protestant Ethic and the Spirit of Capitalism (New Yorkl Scribners, 19i|h). There has even been an attempt to find the Protestant Ethic in Japanese life; see Robert N. Bellah, Tokugawa Religion: the Values of Pre­ industrial Japan (Glencoe, Illinois: Free Press,'1957)« There are also opponents of this view, one of which commented that "in a world where Samurai, Parsees, Jews, North Italians, Turkish, Russian, and Chinese Civil Servants . . . have played the role of a leading elite in economic growth, John Calvin should not be made to bear quite this weight." See Rostow, o£. cit., p. [|2. In regard to Muslim countries, an examination of the industry and commerce of the tenth century Arab Empire would indicate that religion was no bar to successful and extensive expansion. At its height that society was extending technical assistance to a backward Europe, an amusing switch on contemporary events. Today, of the countries with per capita incomes from #2^0 to $^00 (the intermediate group), the majority are Roman Catholic, those between iljlOO and $2^0 are mainly Roman Catholic or Muslim, and those in the most underdeveloped grouping with incomes under ÿlOO are mainly Hindu, Buddhist, and pagan. Higgins, op. cit., p. 222. has been noted that what seem like incompatible thoughts and situations to a Westerner can be made compatible with one another by an Indian. See P. G. Carnell, Political Ideas and Ideologies in South and Southeast Asia (mimeographed, Leicester, England: Political Studies Association of Great Britain, 1961), p. 9. In the famed Etawah project, ancient Vedic Laws were interpreted in the interest of science. The need to plow under an immature ground cover for its fertiliz­ ing benefit was met with hostility until justified by religious scripture on the ground that a man's first obligation was to feed his family and his bullocks. Hence denying life to the plant was made acceptable. See Bingham, o£. cit., p. L\^, This is an excellent example of the necessity for leavening economic adjustments with social force. 72 future, but Buddhism, which like all predominating religions, pervades even those parts of society which neglect its prac­ tice, has not proven as adjustable as its parent.

In view of the industrial rise of Japan and China, this statement may seem incorrect, but several factors justify 30 differentiating these two. First, these countries practice

Mahayana Buddhism, a different form from the more ascetic

Hinayana expression prevalent in tropical Asia. Second, they have indigenous philosophies which have both shared the re­ ligious field and modified Buddhist teaching. In Southeast

Asia, however, unorganized animism was the only autochthonous competing religion. Also, the lingering effects of Hinduiàm which preceded the present Buddhist dominance there, may have helped mold that religion in its distinctive modern form.

Third, in mainland China any expression of a religion other than communism as a politico-economic-social force would today be officially rejected.

Hinayana Buddhism finds itself at strict odds with

Western materialism. It teaches a moment-by-moment accounting of past actions rather than a vague "future” Judgment Day; it

Even between these more advanced states there was a pre-World War II difference in attitude. A Western observer, over twenty-five years resident in Japan, cites the following example: Chinese railroad builders, upon coming to a ceme­ tery , would bow, pray, and detour the track around it; Ja­ panese railroad builders, upon encountering a similar obstacle, would bow, pray, remove the bones, and build the railroad r: ' straight through. Private conversation, Tokyo, Japan, Novem­ ber 1959. 73 is collective in that it denies to man the separate soul or individuality the West places on each human being; it preaches the sublimation of desire and craving since happiness is im­ possible so long as any desire remains unfulfilled. Western man seeks success in his one life on earth and seeks material things as status symbols without which he is unhappy. These Buddhists seek only their salvation, and direct all their actions toward achieving it, looking on material objects as temporary and fleeting since there is nothing permanent in the universe. Present life is but one of a series of lives, each better or worse than the last according to the accumu­ lated credit an individual possesses, therefore the tendency to acquire material objects, which are of a transitory nature, is subordinated to a fear that such action is no credit toward the next life, which may in consequence be even less auspicious than the present one. Since few people are happy with their existing lot, this fear of the future can have a profound effect on the present."31 Consequently, owning an automobile now, a neutral act, may be less desirable than giving its purchase price to the poor, a positive act, and so laying up credit toward a better life next time. The only merit in mak- ing money seems to lie in the ability to use it for good works.32

71 -" Embassy of Burma, Religion as a Factor of Cultural Difference (mimeographed, Washington, 19^8] , pp. 1| -7. fanner, o£. cit. 7I| Certain traditions will change or can be broken under the impact of industrialization, but the speed of economic development will depend to a great eztent on how tenacious some customs are. Religion is one of the hardest to over­ come. Although many people may recognize that a tradition or a taboo has outlived its usefulness and that ignoring the practice is already wide-spread, there are few who will clamor for its actual abolition. A democracy is handicapped in attacking such problems, but a dictator can prune this deadwood by decree enforced by law, treating opposition as a virtually treasonable act. A generation later there will be no criticism. 33 The preceding discussion has dealt with the divergencies between Western and modern economic development as applied to all the major factors of production except capital. This, however, is an essential production factor without which neither the entrepreneurial consciousness, nor available

^^Evidence of this is apparent in the successful modern­ isation of Turkey and in the more severe political climate of the U.S.S.R. and China. Even though some forced changes do not survive — witness the present revival of religion in Russia or the perpetuation of Catholicism some 200 years underground in Japan — other significant changes, such as abolition of the veil which had been worn since the tenth century remain unchallenged in the second generation. This kind of situation invites the rise of a strong man in the government, one such as Ataturk who forcibly swept away out­ moded and restrictive social customs. This contention has been substantiated by Zbigniew Brzezinski, "The Politics of Underdevelopment,? in World Politics, October 19^6, pp. 75 labor or resources, nor technological advance can be utilized.

To build an irrigation dam, for instance, requires payment to the foreign engineers and bo the local workers and for the requisite material. Not only is it these big projects which require money, but even the very smallest productive boost needs it as well. A postwar entrepreneur had to have capital

even if it meant stealing it from an army store or smuggling goods into the country, A farmer, in order to improve his crops, needs better seeds and fertilizers which someone has to pay for.

The difference between the original and the present pattern of development in this case, however, is the time

element. England industrialized over a long period during which money was plowed back into the economy. Today the new states are determined to modernize and have set definite goals, usually of no more than twenty five years, during which they hope effectively to raise their standards and

increase their stature in the world. Such a program re­ quires capital suddenly and in exceedingly large amounts.

^^In 1951 United Nations experts estimated that ÿl9 billion would be needed to raise the national incomes of the underdeveloped world by 2 per cent a year; this was (|:ll| billion beyond their estimated resources. See United Nations, Underdeveloped Countries (New York, 1951), pp. 75-80. In i960 Paul Gr. Hoffman,' Managing Director of the UN Special Fund, reported that some $3 billion annually would be needed for ten years to maintain an extra 1 per cent of growth per annum per person. See 02,. cit., p. I|6, British economist Barbara Ward favors a 1 per cent tax on all states with per capita incomes over 0500. Such a levy would raise over 05 billion annually for, development purposes, 0£, cit,, p, 208. 76

The sources of the requisite funds become. In consequence, a matter of grave importance.

Taxes, loans or grants, and savings are the major means by "Which a country gains the necessary money to implement its development program. The first, income or wealth taxes, generally yields only about one-fourth of an underdeveloped country’s revenue compared to one-half or more in the indus- trial s t a t e s . Taxing of the impoverished peasantry pro­ duces negligible results, and, furthermore, runs counter to the modern concept of progressive assessment which is designed to affect the lower classes only moderately. Professor Hansen has pointed out that, in European development, the tax level was such that the burden fell on the consumers, leaving the "^6 wealthy free to reinvest their returns."" Today’s tendency in the industrial states is the opposite, namely to tax the rich and this middle-class technique has carried over to the underdeveloped areas without the responsible social structure

'^■"SCAFE, i960 Survey, op. cit., p. 3. Southern Asian states’ revenue from taxes on incrome and wealth including land, for 19^6 and 1961 are as follows: Burma 37.6 per cent of the total and 30.9 per cent. Cambodia 12.3 and 1^.7; In­ donesia 22.9 and ^2.9 (I960); Laos 33.7 (1957) and ^^.2; Malaya 20.5 and 2ij.9; Singapore 1)1,2 and 39.9; Brunei 92.2 and 93.3 (i960); ilorth Borneo 13.^ and 21.8; Sarawak 19.3 and 2 3 .0; the Philippines I8.8 and 2l_j.7j Thailand 7.6 and 10.1); Vietnam 9.1 and 10.2; Ceylon 30.i) and 2i).7; India 3^.9 and 29.1; Pakistan 21.8 and 19.7. In Japan the figures run 53.1 per cent and 51.7 per cent of the total. UIT, ECAIiE, Economic Survey of Asia and the Far Eas4:, 1961 (Bangkok, 1962), p. 1 ^ ,

^^Op. cit.. Chapters VI and IX. 77 to hold it up, A change in development techniques necessar­ ily follows. According to older experience, taxing the rich would hinder capital accumulation by the upper class and so would block development, but this analysis ignores the role which government has assumed in these nations today. It in­ serts itself into the expansion picture in an attempt to re­ place an inert upper class which has failed to realise its potential and its historical role in investment, facts which will be developed later. Instituting an effective tax system is one of the first steps in any developmental program. It is also one of the few reforms which can easily be made in an underdeveloped country if not blocked by vested interests in the legisla­ ture. Every peasant expects taxes — the only question re­ specting them is their severity and the honesty of the collecting officials. Untrained collectors, inadequate ex­ perience in accounting and bookkeeping procedures, and, most important, the tendency to conceal assets and to avoid taxes are some of the problems facing the new states. Nevertheless, a fiscal program which is severe, not against the masses but against evaders, is essential both to increase the revenues of the state to allow for its investment in developmental projects and to skim off excess spending which would cause 78 an inflationary trend.In fact, the latter reason for an effective tax system can be termed the most important. In­ vestment money could come from other sources, but reducing the danger of competition for limited consumer goods in a developing society is vital in making positive for>;ard steps toward modernization. Runaway inflation could negate all accomplishments. The second major source of development funds, namely loans or grants, presents a strange problem whether they are given by one nation or by an international body, ITo matter what their origin, the bulk will be paid in foreign currency, Bingham has stated that this is perhaps the most overlooked fact about the capital shortage problem for underdeveloped countries. It is not so much dollars which are needed but rupees, or rials, or cruzeiros. Major development projects are expensive, but the majority of the bills which need to be paid have to be met in local c u r r e n c y ,8®

8^A system has been worked out which will trap the in­ dividual who attempts to avoid his obligations by automati­ cally cathhing him in a second category if he hedges on the first. Thus, for instance, a merchant who conceals his income from sales will be taxed on excessive inventory, details con­ cerning which are to be kept in his income file from import- export licenses and customs receipts and from district govern­ ment and other 'production figures. The basis of this plan was Nicholas Kaldor’s assessment-assets taxes as devised for the Indian Government, Of, Indian Tax Reforms (Bombay: Ministry of Finance, 1955T- While working with the Indonesian Government, Professor Higgins tightened Kaldor»s plan by closing the system and adding penalties. 0£. cit., chapter xxiii, 8^0p. cit,, pp, 160-163. 79 Thus Vietnamese highway laborers, or Thai dam. builders, are paid in piastres and bahts, respectively, not in dollars or the foreign currency provided by the International Bank. To meet bhis sudden increased demand for funds during the construction of a foreign aid gift or even loan project, the government would have to print more currency which, in turn, would be spent in local shops for food and clothing. Since the aid project is non-productive in the sense that it is not imriiediately providing the market with extra shirts, or pans, or shoes, or food, the supply of these commodities would not have been increased although demand for them would have soared with the higher incomes or the new incomes available to the construction crews. As a consequence, prices for the scarce items would rise and inflation would set in. Importa­ tion could adjust supply to this demand, but at the expense of dissipating the funds available to pay for capital goods. Most new states try to control the buying of non-essentials in order to spread their foreign exchange over requisite de­ velopmental items. To overcome the transferal difficulty, "counterpart funds" were established in the various recipient countries. Under this arrangement, goods rather than money were shipped in and sold to local customers for local currency which was then set aside for developmental purposes, thus avoiding the printing of paper currency. The system works well so long as the imported materials consist of what the country normally 60 purchases so that no excess piles up in the aid administra­ tor's hands and no imports are made without benefiting the counterpart fund. In practice, then, highpriced foreign cars, wines, and even Hetrecal have a way of showing up on the aid account. Such a currency transferal problem is avoided when salaries of foreign technicians are paid by foreign sources or when capital goods such as rolling stock, machinery, and electrical equipment are given in aid. Even such assistance, however, usually requires some local construction, i.e., a roadbed for the railroad, a factory for the machinery, and dams to activate the electrical equipment. These expenses might well necessitate foreign currency expenditures since the recipient state often can ill afford them. In acquiring essential foreign capital for its develop­ ment program, a country is faced with other problems beside how to transfer funds without starting a serious inflationary trend. Loans are the most obvious source of funds but re­ quire pepaymentConsequently their extent is limited by a nation's ability to service its debt. Grants, therefore.

39 The question of interest has been injected into inter­ national relations by the Soviet Union's policy of loaning money at about 2 1/2 per cent compared to the West's normal charge of 5 or 6 per cent. The usual American rate now is little over 3 per cent to most governments and purely nomi­ nal charges have apparently also been made. United States, Development Loan Fund Report for 1959 (Washington, I960), pp. i B-2^o 8 1

are preferable In this respect, but Involve psychological reactions the effect of which may be serious inside the country, possibly affecting its collective attitude toward self-reliance and possibly disturbing its relations with the donor. The question of unilateral versus multilateral assis­ tance also rises. The latter is favored by the recipient since it reduces the role a given state plays within its borders, but donors are sometimes unhappy at losing control over the application of their contributions and rarely favor the multilateral international programs.This is particular­ ly true in the case of countries like the United States, where a body such as Congress keeps close check on how money is spent. These again are technical points which concern us here only to the extent that they point out the interrela­ tionships of economic and non-economic factors in the advance­ ment of the underdeveloped countries. In each such state, the need for capital is great; in each, too, psychological and _„nolitical problems complicate the giving of grants or the making of loans. Savings, the third major form of capital accumulation, like taxes are virtually non-existent among the masses of the poor states. Usually a peasant's entire income is used in

^ For a discussion of the pros and cons of this contro­ versial issue, see Bingham, op. cit., chapter xiii; Robert T. Mack, Jr., Raising the World's Standard of Livinp: (Uew York: The .Citadel'Press. 19^3); Wilson, op. cit., chapters X and xi. 6 2 maintaining a subsistance standard of living. Western society was able to accumulate more capital at a faster rate than is possible now since industries then tended to pay extremely low wages. In that period, according to one economist, Euro­ pean living standards may have been even lower than the Indo­ nesian peasant’s is today.The employers, who profited from this wage scale, then reinvested the funds saved. Unfortun­ ately, in the underdeveloped countries now demands for high wages, short hours, and even fringe benefits are heard. These are sometimes stimulated by outside labor organizations. Since labor productivity frequently fails to keep step with these advanced demands, industry and production suffer. The upper classes, on the other hand, tend to accumulate resources to a considerable extent, usually from rents. They have generally failed, however, to invest in developmental projects. The universal attempt to follow the living pattern of the man next door, in this case of the more advanced states, often results in extensive consumer spending, while the investment which is pursued by this wealthy group is more likely to be short term with its higher profit yields. Thus money is put into agricultural loans or into the hoarding of grain for speculative purposes. Channeling these funds into longer term investment projects would assist in the country's modernization program. As yet, success in this respect has been rather limited.

^^Higgins, o£. cit., p. 253* 03 The failure of the upper classes to invest in local industry is duo in part to a certain distaste for things national. Generally speaking, members of this group have been educated in the metropolitan country or some other European state. They have also traveled widely and, if admitted to the European community in their homelands, developed certain of the aloof tendencies of that group. Imitating their European friends, they exploited rather than developed. Absentee landlordism became the order of the day. Excessive short term interest charges that kept the peasants perpetually in debt were asked as a matter of course. Grain speculation, despite the pinch it puts on the poor and the positive suffering that famine entails, remained a profitable game. The worst aspect of this problem, however, is the fact that it is this group itself which has usually inherited the mantle of government from the outgoing European powers. Even if nationalism has coated its political point of view, it may I 1 .7 Î ! : have only moderately affected its socio-economic outlook, and the problems of the more dedicated nationalists continue to be how to circumvent the vested interests of this wealthy class. Government regulation of luxury imports would cut spend­ ing by this group, and prohibition of usury and control over crop dealings (through government grain purchases, coopera­ tives, or the like) would do much to curtail such short term financial speculations, A thoroughgoing banking reform 814 would probably help considerably in further regulating a poor state's economy. Contrary to popular belief. Professor Higgins claims that there are often too many^^ rather than too few banks in underdeveloped lands. The problem would seem to be one of unification and regulation, including such features as licensing, established reserves, credit controls, and the integration of specialized banks into the national system. Agricultural banks to help meet the farmer's per­ sistent demand for funds would be a particular boon to the rural populace although their acceptance would perhaps be another problem. It is difficult for the ruling elite to bar itself from its conventional practices. As with land reform, legislative and administrative action on financial matters usually lies within the hands of the wealthy themselves. Their willingness to legislate is often limited to lip service, with an occasion­ al gesture of positive action which, in turn, is often nulli­ fied by administrative negligence. Three patterns for sol­ ving this problem stand out: first, and the most radical, is the communist revolution which wipes out all vestiges of non-proletarian privilege. Second is the less severe social upheaval following the Egyptian-Iraqi pattern which puts middle class elements into power, elements favoring land

^^Op. cit., p. 1)83. ^^Staley, o£. cit., p. 26?. 85 reform and nationalization while lacking the vested interests to thwart these pronounced goals. Third, and tho pattern is as yet unconfirmed, is revolution by the electoral process. T%vice, in the Philippines, men-of-the-people have been re­ turned to the presidency.Their public spirited, dedicated attempts cannot help but inspire more of their kind. To date their efforts have frequently been thwarted by an obstinate Congress, but sufficient democratization of the legislature may enable future passage of really effective reform programs. This optimistic appraisal, heavever, is not a foregone con­ clusion, as shown in the case of attempted legislated land reform in Iran. Despite certain legal acts and despite the Shah’s public example in surrendering part of his holdings, intrenched interests have clung to their position without re­ gard to the obvious court thus paid to revolution. To the above three-fold list of ways to accumulate capital, Staley has added "inflation" and "investment in kindIII .'J-l These are two means Higgins examined in some de­ tail but rejected as being "Primrose Paths" to development. "Inflation" would have to be controlled, obviously not the disastrous run-away type which ruined Germany socially and economically in the 1920s. Staley proposed short term deficit

^^'Piamon Magsaysay (1953) and Diosdado Macapagal (1961). ^^Op. cit., pp. 266 ff. ^^Op. cit., chapter xix. 86 financing of production facilities for consumer goods. By printing money to hire unemployed workers for a hew factory producing essential products, the government would increase the supply of money, but only a portion of the stock of essential consumption items would be augmented. Vying for short goods would shoot thoir prices up. Higgins holds that, among other things, inflation would drive off foreign in­ vestors, export industries would suffer from rising costs and this would croate a balance of payments problem at a time when exports and foreign exchange were essential to further­ ing the modernization program. Also he held that the govern­ ment might be insufficiently equipped with effective economic stabilizers to right the process since fiscal controls are often lacking in these new states. Higgins does not deny that Inflation would work, but believes that its value has been exaggerated. Staley’s "investment in kind" or self-help projects appear identical with Higgins' "up by the bootstraps" method save in scope, the latter thinking in terms of a complete development program of this type, the former intending such measures only as a means of adding to existing capital. Higgins denounces the method as a virtual impossibility de­ spite the use made of it by England, Japan, and the Soviet Union, He holds that it implies no outside financing, as in the case of England and the U.S.S.R., or very little, as in the Japanese instance. Here he has a point since such 87 extremes of austerity as practiced in the communist states and in England's early days are not appealing to free socie­ ties, particularly where the Great Awakening has touched the masses. It is essentially this matter which makes modern India's problem so difficult. On the one hand is a voting populace demanding improved living conditions, on the other hand are the necessary controls to effect them. The people reject the controls without modifying their demands for better standards. It therefore is the tost of Indian democ­ racy to effect improvement within these two inflexible limits without sacrificing the democratic values which both government and people en joy. Staley's position involves an increase in national wealth through the construction of buildings and roads on a voluntary basis. His approach is more limited than Higgins' and has already been successfully tried in technical assis­ tance programs the world around. In 19^3, Korean villagers were inspired to such self-help; with no outside material and only slack time labor, they enlarged reservoirs and irriga­ tion ditches, built retaining walls and salterns. All were

2£.* ^and, 0£. cit., pp. 137 ff. "The Indian economy is dynamic — but only just. It can afford no slowing down or interruption. Its pace is almost certainly the slowest that still allows for momentum. But it may also be the fastest that popular opinion will allow . . . . [This is one of the dilemma'sj induced by Indian's unique combination of national poverty and liberal politics." One of the rea­ sons publicists advanced for the Chinese attack on India in late 1962 was a desire by the Chinese communists to slow down India's economic development. 88 badly needed and long discussed projects, but nothing had been attempted until a push came from outside the village Such community development projects have also been undertaken in Vietnam, the Philippines, and Indonesia, but the best statistics come from Iran and India. In the former, villagers have constructed or rebuilt over 800 bath houses, developed over 5)00 clean water supplies, and dug over 1000 wells. Hear Isfahan alone, sixty new schools, nineteen clinics, seventeen reservoirs, sixty bath houses, twenty-five mosques, 300 ‘ bridges, and 6^0 kilometers of sub-roads were built in two years, while three clinics, 360 bath houses, and eighty mosques were repaired. Only six of 900 finished projects required loans. Such self-help projects in India took the form of the community development program, begun as a central government project under American initiative in 1953 &nd incorporated into subsequent Hive Year Plans. By 1957, 5.5 million acres of new, reclaimed, or irrigated land were in use and 22,000 schools and 6i|,000 miles of roads were in evidence.Higgins noints out that roads are useless without investment in some

^‘^McLaughlin, op. cit., chapter vi. h 9 ^ United States, International Cooperation Administra­ tion, Technical Cooperation (Washington, 1959), pp. 29, 1|Ij -1|5. 89 vehicle, even an ok cart, thus substantiating his claim that self-help projects cannot be carried on completely free of funds. The discussion then returns to the inevitable question of money. The question of private versus public investment arises once the source of developmental funds has been established. Both taxes and loans (or grants) provide governments with operating funds. Private savings can either be borrowed by the state or can be utilized by private investors so that once saving has been stimulated, as through an enforced austerity program, the problem of how to put it to active economic use arises. Some authors have a general aversion to governmental interference in development through borrowing, holding that more productive use of the money would come from its being left in private hands. Private investment, however, carries the risk of development of projects of only marginal use to the nation's overall advancement, such as a factory producing luxury goods. Government initiative in an integrated program which would set up about a hundred small factories all utilizing previously unemployed persons and whose products were keyed to cover the widest possible range of nor­ mal, rather than marginal, consumption has been considered preferable. In this way, the production of everything from fertilizers and plows for the farmer, to shoes and hats for the businessman, to flour and furniture for the housewife would be enlarged simultaneously with the result that the 90 economy v;oulcl proceed evenly, A considerably smaller number of factories would limit development and too large a number would prove impractical to manage. Thus the planned invest­ ment of the state would seem superior to the haphazard es­ tablishment of several isolated industries. Per investment to be considered by i)rivate individuals, there must be an assurance that a profit will be forthcoming — such is the nature of capitalist economics. Without the assurance, or faced with rigid governmental controls on either profit or asset liquidation, or both, a private investor may lose interest in his project. Traditionally the wealthy class of tho underdeveloped countries has failed to invest heavily in local industry. Foreign private investment, which meant essentially Americaji in the decade after World War II, has also been cautious in entering the newly independent Asian states, preferring the greater security of the Americas. Expectations in Asia did not seem large enough to warrant the risks: southern Asia lies on the border of communist territory with the southeast part in a state of political instability, often guerrilla warfare, and general mild chaos. Total American investments in India in 1950 were ^38 million, Pakistan 07*8 million, the Philippines yl^9 million, and Indonesia 058 million, compared to some :jl|.7 billion in Latin America and over 03 billion in Canada.

5 0 "United States Direct Investments in Foreign Countries," in Survey of Current Business, August 1958, p. 19. By 1955, 91 Ninetoenth century European foreign investments resulted from a need to increase imports. The American position has been quite different. Relatively well-endowed regarding food and raw materials, the United States has seen its rate of investments decline from about 9 per cent of the annual national product in iS^O to a present 3 por cent."" Without a compelling need which would serve to offset such risks as political instability, economic restrictions, and the nation­ alization threats of the ultra-nationalistic new states, private investors tend to be restrained in their attitude toward foreign enterprises. In consequence, the American government sought both by intensive propaganda drives and treaties of friendship and corrtmerco to stimulate national in­ terest and smooth out foreign obstacles. In many instances a young state’s internal policies, outmoded fiscal programs, and the like, inadvertently restricted its desire to benefit to the full from its planning, but sensitive nationalist feeling often prevented a foreign power's making suggestions respecting possible changes. Hence, although urged by some citizens to follow the old Rooseveltian policy of "talk figures had improved somewhat: India ^96 million, Indonesia w86 million, the Philippines y226 million, Latin America ;-)6,6 billion, and Canada §6.5 billion. ^^Wlllom Brand, The Struggle for a Higher Standard of Living- (Glencoe, Illinois : The Rree Press," 1'95'6), p. 277* 93 softly but carry a big stick,” the United States Government, aware of the changed overseas sentiment which outmoded this brand of aggressiveness, generally refrained from interferring.

Because governments remain fearful of a resumption of detestable alien control of businesses, political regulations adverse to desired economic goals may still be found. Such nationalistic policy discourages private foreign investment which is needed in building up both the economy and the pride which would make such overt nationalism passe. This is one of the vicious circles affecting development, and its roots are political as well as economic. The intensive concentration of a plantation economy in most Southeast Asian states was of foreign origin. Europeans moved in on a primitive or medieval society which existed on a virtually subsistence level and which, as in most isolated communities, lacked awareness of any other type of life. Expansion of the new agricultural ex­ tractive industries was aided by colonial government policy.

In many instances, incentives were at first needed to induce the populace to abandon its self-satisfied existence for re­ gulated hours on a plantation or in a mine. Such compulsion soon became unnecessary, however, as the peasant worker discover­ ed he could acquire previously unknown items with the wages earned. As increasing numbers joined this rank of wage earn­ ers, social and political inequalities soon became apparent to them. Is there any necessity to suppose that men had to read Western philosophy in order to feel discrimination on N

93 the part of local ovorsoers or on the part of supervising government administrators? The ex-colonial states felt that foreign corporations made excessive profits which were usually drained away in the form of exported local resources dT and contributed nothing to the colony.'' The aloof residen­ tial practices of the Europeans also elicited unfavorable reaction. The anti-foreignism which resulted after fifty or a hundred years of this interaction is consequently a politi­ cal-social feature of development which will be hard to eliminate. Today it hits in a vital economic sector, namely investment. Since nationalism, anticolonialism, and even revolutionary activity have been dominant themes of more than a quarter century, they are not easily cast aside. The result has been a passage of nationalistic legislation dis­ couraging foreign investment which is, if not essential, at gi, least a vital part of rapid economic development.^' These controversial regulations call for a national partner in all j: businesses, require that 3l por cont of a company be nation-

g2 Based on an idea expressed by Thomas Hodgkin at the Phi Alpha Theta initiation ceremony. The Ohio State Univer­ sity, February 28, 1962.

^^The fabulous 3^0 per cent returns per trip of the Dutch East India Company in the seventeenth and eighteenth centuries do nothing to dispel this idea.

^^United Nations, Financing of Economic Development: Recent Governmental Measures Affecting the International Flow of Private Capital (New York, 19^31• 94 ally owned, compel the employment and training of nationals, set. up exchange controls which bar the ready withdrawal of profits in an attempt to force them back into the local economy, Impose inconvertibility of exchange, and the like.

All these are understandable in terms of blocking alien in­ fluence which might lead to a renewal of foreign domination.

At the same time they also reflect national concern over ex­ ploitation and the draining off of resources to little nation­ al good. They tend, however, to discourage private foreign investment. Suggestions that Western nations give their nationals financial guarantees against loss by foreign nationalization smack of blackmail by the underdeveloped powers which might alienate more businessmen than they would attract; nevertheless, such guarantees are now furnished for 55 certain types of investments under foreign aid programs.

That the vicious circle described above has to be broken is a fact the leadership of many new states is often not mature enough to recognize. If recognition does exist, the government is frequently too inexperienced to lead a national-

^^Government insurance guarantees covering currency devaluations, repatriation of earnings, and compensa­ tion in case of nationalization of properties, are cur­ rently available from the Export-Import Bank for stipu­ lated types of investments in certain underdeveloped countries. However, in the I962 foreign aid act. Con­ gress insisted on a provision (said to have been aimed at Brazil) barring aid to any country which nationalizes American property unless satisfactory arrangements for compensation are made within six months. In southern Asia specific guarantee agreements have been negotiated by the 95 istic public to moderation of its policies. The urban masses 56 are particularly outspoken in this regard. Consequently, nationalistic policy serving to decrease private investment, as well as economic factors such as lack of savings, the tax structure, and basically the failure of the wealthy class to develop an enterprising drive, have thrust the governments of 57 southern Asia into public financing. Indeed, in view of the very nature of developmental economics there has been

United States with various countries, as, for instance, Malaya and India.

5^That even the rural populace is sometimes conscious of the inter-relationship of loans and foreign control is evinced in a Point IV story from Paraguay where attempts to establish a farm credit system were proceeding slowly. One peon told the administrator, ’*0f course I take the loan. % o , being poor will dare refuse . . . ? Pablo, myybrother, says the same. But we are not so foolish. If tomorrow we don't pay, maybe we will be slaves to the Nortes. Maybe all my country must be sold one day to Nortes to pay for this nice help.” Bingham, op. cit., p. 75.

^^Between 1956 and 1961, governmental expenditures on development have risen in all countries of Southern Asia ex­ cept Laos and the city of Singapore. In millions of dollars these declined from 20 to 10 and ?0 to 64 respectively. Bur­ ma's developmental expenditures rose flom $70 million to $139 million,, Cambodia 22 to 46, Indonesia 303 to 500, Malaya 154 to 256, North Borneo 5 to 10. Sarawak S to 13, the Philippines 393 to 502, Thailand 42 to loO, Vietnam 51 to IO6 , Ceylon 104 to 132, India 2379 to 3799, and Pakistan 337 to 4o9. Even Nepal's developmental expenses rose; they amounted to $4 million in 195& and had increased to $14 million by I96I. The totals were figured at constant rates of exchange. Con­ sultative Committee. The Colombo Plan for Cooperative Economic Development in South and Southeast Asia, Annual Reports. 96

virtually no choice, so closely entwined are such problems

as increasing investment, cutting luxury imports, stimulating

exports, instituting public education, and selecting priority projects. Even the scale of most developmental schemes, many

of necessity remalcinr entire regions along TVA-lines, is too

large for private consideration. That this public role

corresponds to the learned views of the intelligentsia is 3'8 coincidental.

Certain problems, however, are connected with govern­ mental initiative in this economic drive. Administration 3 g suffers if too much official time goes into national planning^'

Bad. administration, and most new states are plagued by this problem in any case, is a prime obstacle to economic develop­ ment and another circular cause and effect coraes into being.

Then, too, government planning injects both local politics and nationalism into the program. A regional example of the

dfj Despite references to the extent of s tat ism in south­ ern Asia, comparative figures do not reveal an excessive percentage of national investment as coming from the govern­ ment except in Ceylon and India. There, between 19^0 and 19^6, the figures were 72 and 70 per cent and 60 and 71 por cent respectively. In Malaya there has been a decline in public investment from 38 to 28 per cent and in the Philippines from Ljii to 26 per cent. On the other hand, like India, Burma and Indonesia have increased the government share of national investment; it runs from .3^1 to 1| 8 per cent and from 2c to 37 por cent respectively. . Since 1956 the three heavy investors have all undertaken extensive programs and legislation which wore designed to increase private investment within their territories. ECAPE, I960 Survey, op. cit., p. 71. 59Singer, op. cit., p. 21. 97 latter may be seen in Indonesia's expropriation of Royal Dutch Shell's Sumatran oil holdings, an anti-colonial move aimed at curtailing exploitation of local resources. Tech­ nical inability efficiently to operate the seized industries hampered the full utilization of their economic potential, thus reducing the real value of the move to the nation. A similar case involving Iranian oil nationalization was favor­ ably resolved for both interested parties -- nationalization and restitution went hand in hand with multinational foreign management pending Iran's ability to take control herself.

Such a successful adjustment of practicality and pride is, however, comparatively rare. Specifically, what the developing state needs is a central authority which can get things done. There must be a plan, a comprehensive over-all interrelated one which has given full consideration to the side effects which may arise through development. Rarket data as followed under tradition­ al -economic theory, even if such were available, would have little effect in setting up an industry in an underdeveloped state since a great deal of work has first to be done in creating the demand which at present exists only in a poten­ tial form; the people lack the wherewithal to transform dreams into reality. Planning has been called the greatest challenge of developmental diplomacy.Economists contribute to it by

°^Black, p£. cit. , pp. 31ff, 98 elaborating choices, sociologists and political scientists by weighing extenuating factors. Outside the state, ideal­ ists, guided by their aspirations, and critics of planning, guided by general distrust of socialism, bedevil the work.

A good plan enables the politician to anticipate the results of his decision before it is implemented. One essential consideration is what the people are willing to sacrifice.

This ranges from the complete donation of labor by one gener­ ation in the Soviet fashion so that the next may reap the harvest of better living standards, to the Indian compromise position previously discussedOnly firmness can invoke an austerity program. India and Ceylon, as well as ilalaya and. the Philippines, have so far remained on the democratic path in thoir development process. Such is not true in ilepal, Pakistan, Burma, and Indonesia, while democracy in the

Vietnamese Republic is a. faint shadow. Thailand, Cambodia, and Laos have had little beyond the empty forms of democracy.

Some self-denial is an essential of modernization; the more there is, the faster the development and the more authori- / g tarian the government, the easier the path to austerity.^

Austerity's head-on conflict with the Revolution of Rising

Expectations is likely, however, to lead to serious compli­ cations. V.'hen suppressed, desires break forth under such

^^See back, note this chapter. / g ■'Sec back, note 32 this chapter. 99 circumstances, the government in control will be discredited.

It might be to the democratic advantage to have authoritarian regimes on hand to render the accounting.

The economic problems facing the developing states, and the socio-political-psychological complicating factors inter­ mingled withthem, make the advancement of the economic standards of poor lands a most difficult task indeed. Determination

^Even if such a drastic event does not occur, previous experience has provided some grounds for a faint hope that democratic evolution may result from economic development. Japan, the first Asian state to modernize and the very first nation which deliberately set out to do so, began its efforts in an authoritarian atmosphere. So did the U.S.S.R. and Turkey. In Russia, the political situation tightened up from a benevolent dictatorship to an authoritarian extreme, but a hint of liberalization has been noticeable since World V/ar II experiences revealed to members of the armed forces that better living conditions existed elsewhere. Recently mass reaction to the "guns instead of butter" policy has be­ come evident. A more positive indication of expanding demo­ cratic tendencies occurred in Turkey and Japan. In the 1920's in the latter, and in the 1940’s in the case of the former, an increase in the activity of democratic forces became apparent. Japan and Germany are the two most frequently cit6d ex­ amples of the failure of democracy and industrialization to gohand in hand; and the reason given is usually their author­ itarian background. It should perhaps be held that time alone was lacking to these powers in achieving the demo­ cratic level of the Anglo-American countries, the failure of German democratic forces in t]kie 1920’s was partially the re­ sult of economic policy, particularly of international eco­ nomic policy, while the halt in the Japanese democratic trend might be laid to social unrest stemming from the failure of the modernization process to advance simulatneously in the agricultural field as it had in the industrial one* In neither country was there an extensive middle class in the Anglo-American sense; extremes of wealth and poverty pre­ vailed in this early industrializing period. It seems 100 to persevere, to endure the privations essential to social oil ange and to sufficient capital accumulation, is the prime requisite of nodcrnization. Given this, the people of a state will most lil:ely succeed, but they will succeed faster and with less distress if given a big shove in the right direction. It is this boost which is envisaged in the loans, grants, and technical assistance of the raoro advanced states.

Just as utilization of aid is restricted by conditions surrounding the recipients, conditions examined in the next chapter, the type of aid chosen, the extent to which such aid is given, and the motivations for giving it are often the result of economic and social as well as political factors within the state making the offer. These motivations will be considered in succeeding chapters.

rather shortsighted to lay all of the blame for democratic failure in these countries and their subsequent international excursions into violence on autocratic tradition compounded by the industrial process. .Democracy in both instances grew through the period of industrialization, but faltered be­ cause of certain compounded reasons. Since the war, the democratization process has continued in both countries supplementing an economic boom. It may be that Occupation democratization policies, by wiping out authoritarian forms and models, merely hastened a process already underway despite these social handicaps. In any event, it would seem that, after a decade, alien reforms which had not met with favorable public opinion would have been scrapped. CHAPTER III

SOUTHERN ASIAN ATTITUDES TOWARD DEVELOPMENT AND AID

Developmental conditions within the various states of

southern Asia and the attitudes of the leaders of these

countries toward the receipt and utilization of foreign

economic assistance form the limits within which a donor

program operates. Over such restraints the donor has lit­

tle control. These considerations form the subject of

this chapter.

Determining the real attitude toward foreign aid of the

various countries of southern Asia is a difficult problem.

Emotionalism, based on a feeling of inferiority and a desire

for equality, runs strong through the majority of the under­

developed countries often dictating Irrevelant verbal blasts

merely to assert "independence". Lack of understanding of

the complexities of modernization and the absolute necessity

for foreign public and private assistance if the task is to be completed within a reasonably short period is often appar­

ent, Criticism of the aid given by foreign powers is rampant,

and even rash; the minimum of courteous gratitude, without

subservience, is appreciated by the donors but often grudging­

ly given by recipients who consider aid received as merely

their due, A leader will one day criticize and the next day

praise a particular donor's contributions, or one branch of 101 102 the government will condemn and another hastily laud the assistance provided. The sincerity with which a spokesman expresses his country’s gratitude for aid is another aspect which makes effective analysis of a government's verbal atti­ tude difficult. A statement can be sincere, it can be oppor- 2 tunist — in any event it is likely to be tinged with some apparent or concealed resentment.

Despite these complications, an attempt has been made here to examine the attitudes of the southern Asian states on the issue of foreign aid and to classify recipients into broad groups. Inasmuch as a state’s attitude toward assis­ tance is compounded by historical and geographic factors which in turn affect the process of economic development, the cour­ age or helpless resignation with which the states of southern

Asia have attacked their developmental problems provides a positive clue to their basic views on aid.

Reasons for, or conversely deterrents to, the growth of 3 an economy are many and the more striking ones affecting

A, case in point occurred in Pakistan in 1952 when one government official announced that proposed aid was "not enough’’ to the embarrassment of pro-American elements in the cabinet. The New York Times, January 22, 1952, p. 3.

Even though at home readily prone to criticize Western actions, often in barbed fashion. President Sukarno and Prime Minister Nehru, as well as less controversial figures, go on record when in the United States as praising American assistance.

^EGAFS, 1961 Survey, op. cit., pp. 21-60. 103 southern Asia Mill nov; be considered. Here central planning or an official stance on development are not enough; all of the states of this area have had one or more national plans, but before ajay constructive change con effectively begin, several political-social conditions must be met. So long as negative situations prevail, economic progress is delayed.

The first of these conditions is freedom from external threat.

Laos, Vietnam, and just recently India, have had their econom­ ic progress blunted by actual military threats from outside their borders. India, ITepal, and Burma have been for some time, bothered by territorial disputes over their borders with Communist China. Cambodia rails against the threats poised by Thailand and Vietnam to her western and eastern frontiers while Pakistan and India have been at military odds ever Kashmir throughout the entire post-independence period.

Indonesia has made an international issue out of its relations with the IJetherlands in New Guinea; with the problem now settled, economic affairs may at last be given their proper due. Distracted by such troubles or fired by imagined ills, the governments of those states have been unable to devote themselves wholeheartedly to developmental problems and con­ sequently to a truly constructive approach to the use of foreign aid. This has been particularly noticeable in the press of Pakistan and Indonesia. Vitriolic denunciations are common in the Pakistani attitude toward India’s Prime Minis­ ter; virtually nothing good can be said about him or his TABLE 9

AVERAGE ANNUAL RATES OF GROWTH IN SOUTHERN ASIAN PRODUCTION AND TRANSPORTATION, 1950-1959

Per Real Agri- Manufac­ Rail I-Jumber of Country Capita National culture Mining^ turing Freight® Commercial Product®- Product^ Vehicles

Burma® 5.9 5.1 1.6 » 16.7 6.1 Cambodia^ 1.5 4.0 - - --- Indonesia® 1.6 5.6 2.5 8.5 - 5.0 6.8 Maiaya/Singap ore - - 1.1 - - 5.8 6.5 Philippines 2.7 6.0 5.5 9.0 11.1 0.6 2.2 Thailand® 1.9 5.0 5.2 — 9.1 15.6

Ceylon 1.4 5.9 - — -- - India 1.1 5.1 5.5 4.7 6.1 6.8 7.6 Pakistan 0.4 2.6 1.2 8.8 19.7 5.9 5.5

Japan 7.9d 9.1. 4.6 4.1 17.1 5.5 19.7 1878-1907 5.4^ 4.6* -- - - - United States - 5.5% -- - - - 1869-1908 2.2^ 4.)d

a. UN, Economic Commission for Asia and the Far East, Economic Survey of Asia and the Far East. 1961 (Bangkok; 1962), p. 11. Population deflators used were assumed to be underestimates.

b. Ibid.. , p. l40.

c. Period begins with 1951* O d. Ibid.. p. 12. 105 problems.^* Sinllar Indonesian attitudes are evident in a preoccupation with Dutch matters.^ In both cases, any evi­ dence of United States support for the object of their vin­ dictiveness becomes an issue. In I960 the Indonesian Labor Federation, for instance, urged seizure of United States- oxvTied business in protest over the American position on Dutch military moves in West Irian.^ Those states not quar­ reling with others, Malaya, the Philippines, Thailand, and Ceylon, have advanced farther economically.

A second socio-political condition for economic develop­ ment is internal security and the maintenance of public order.

Burma and Indonesia have been plagued with an almost contin­ uous internal dissention while the Tamil problem in Ceylon led to extensive civil unrest. Communist insurrections in

Malaya, the Philippines, Laos, and Vietnam, and communist participation in Burmese and Indonesian troubles have also diverted financial and physical strength from the problems of development ajid from the best utilization of non-military foreign assistance. Reflecting on a near decade of insurgency in Malaya, Prime Minister Rahmaji, whose newly-independent

^Içf. Karachi's Dawn and Peshawar's Kyber Mail, I955-I96I; or Lahore's Pakistan Times, 1956-1962.

^Cf. Djakarta's Times of Indonesia, 1955-1960 and the Indonesian Observer, 1959-1961. °The Hew York Times, July 10, I960, p. 2. This, like many other Indonesian events including speeches by President Sukarno, went unreported in the Indonesian papers reviewed. 106 nation is a nioraber of the British Commonwealth but not in the Western military alliance in Asia, recently condemned the attitude of the neutralists who, he said, willfully attacked Western policy but ignored communist records of aggression, aggression which threatened country after country either directly or through ideological infiltration.? Subsequent Indian experience with Chinese communist invasion prompted the former leading apologist for communism in Asia, to term Chinese action the equal of 19th century imperialism. Prime Minister Nehru further expressed the opinion that this action will mark a turning point in Asia's history, A third necessity for economic advancement is political stability. Here, too, Indonesia has suffered, while Ceylon has had its difficulties, and Burma and Pakistan have suc­ cumbed to military dictatorships because of inefficiency and corruption. The essential problem facing Burma, Indonesia, and Pakistan, and to a very considerable degree all Asian underdeveloped countries, has been a lack of education and attendant administrative inexperience. An efficient adminis­ tration would have stabilized the government despite vacilla­ tion at the top. In general, corruption is rife throughout the southern Asian states and until this phase in administra­ tion has passed, economic progress will be slowed and foreign

^Ibid,, Hay 7, 1961, p, 2, ^Time, Hovember 16, 1962, p. 32, 107 aid will tond to be dissipated unless carefully controlled. Such control is resented by local administrators who regard it as an extension of imperialist rule -- Vietnam, for in­ stance, frequently refused to permit an audit of her counter­ part funds and deficient Indian government reporting on the status of the American aid program was noted by the United. States General Accounting Office in its review o.f assistance offerings in 1959.^ A fourth essential for effective implementation of economic development plans is the absence of extensive eco­ nomic nationalism. In Indonesia, where national sentiment has had the most detrimental effect on the economy, the most serious results of this virus can be found^^ while in Malaya, where nationalism per se is practically absent, and in the Philippines where it has just begun to be felt eco­ nomically, conditions for the effective receipt and utiliza­ tion of foreign public and private assistance are infinitely greater. President Garcia, explaining growing nationalist sentiment in the Philippines, attempted to emphasize that it was neither anti-American nor anti-alien, its major slogan

^The Uew York Times, Uovember 23, 1959, p. 1. ^^Threats against non-Dutch oil holdings so disturbed operating companies that exploration was abandoned and main­ tenance suffered, oil production fell off and government revenues consequently declined. Beginning in 1956 and as late as 1958, Indonesia, out o.f spite over the state of negotiations on West Irian, nationalized Dutch holdings, in­ cluding inter-island shipping. This virtually paralyzed the 108

"Filipino First" notwithstanding.Action taken in Burma against Indian businessmen, and the anti-Chinese movements in Thailand, Indonesia, and the Philippines are also forms of nationalism which, although not directly affecting foreign aid as does the anti-Western variety, have hindered the effective development of the various countries' retail trade until national entrepreneurship was able to replace it.

Another political-social condition is the existence of a consciousness of "rising expectations" including common­ place attitudes like willingness to work and to make sacri­ fices. Encompassed within this group are all of the social 12 barriers to advancement inherent in a culture. The Lao, because of their isolation, have probably been the least touched by the demand for modernization. On the other hand, urban dwellers throughout Asia are conscious of the differ­ ences between their conditions and those of the Western world which most hope to emulate. The difference is a matter country when the ships fled the area. As much as 3l| per cent of total public investment within this period had therefore to be spent on restoring sea communications. ECAFS, 1961 Survey, op_. cit., pp. 111-112. ^^The Sunday Times (Manila), January 1?» I960, p. 1. Despite his assurances, foreign companies were reported fear­ ful of nationalization. The Hew York Times, January 1?, I960, p. 1|. 12 The previously cited examples of some Indian reluctance to working with their hands is a case in point as is the in­ fluence of Buddhism against the acquisition of materialistic goods. 109

of exposure and more particularly of education. This group of political-social conditions is, then, closely connected with that category of developmental features necessitating positive governmental action. Even an Isolated individual, if educated, could be aware of significant improvements possible to him. In the matter of expectations and in the field of education the Filipinos have the highest rating in southern Asia, 1 ’ At the other extreme are the Lao. Before World War II only a dozen had a college education: the governing elite consists even now of ninth grade graduates of a French lycee in Vientiane.

not only is education vital to the spread of the desires which prompt economic development and therefore the need for foreign assistance, but it is essential for the developmental process itself. Little can be done for the future of a country through adult education programs; for mature people it is perhaps essential only that they are trained in the use

'^.■Jurfel, o£. cit., p. I)75* Illiteracy in 1903 amounted to 79.G percent of the population but by 19li9 it had fallen to ^1.0 per cent in spite of a three fold growth in numbers during that time. See Van der Kroef, "Philippines,” o£. cit., p. 8l. In 192l| there were said to be seven times as many '**" Filipinos in high school as there were youth in the corres­ ponding grades of the country’s former mistress, Spain. For a discussion of American rule and impact, see Maurice Zinkin, Asia and the World (llew York: The Institute of Pacific Rela­ tions*]! 19*^?)'. Joel M. Halpern, "Observations on the Structure of the Lao Elite,” in Asian Survey, July 1961, pp. 26, 30. 1 1 0 of certain machines and. tools. It is in this field that Japanese "economic cooperation" and Japanese and Australian technical training programs become important. They will not, however, be sufficient to form a modern technological society. The future lies in a well-grounded youth inasmuch as real skills come only in the second and third generation. Mass education of the upcoming young people will yield excellent results for the expansion of the crucial administrative, economic, and scientific functions of the future. Ceylon, the Philippines, and iialaya-Singapore seem best to have realized the value of education: some 18-25 por cent of their populations are in school. In Burma, Indonesia, Viet- nam, and India the figure runs around 10 per cent.

1 r ' “ SGAPS, 1961 Survey, op. cit., p. 33* In Cambodia, the number of elementary schools has risen by about half and the number of children attending them has doubled since in­ dependence. Likewise the number of students in high school and college has increased five fold; facilities have been expanded to nearly four times their former size. Prince Norodom Sihanouk, speech, Kent State University, Ohio, October 3, I960, in Cambodian liews, III, no. 7# pp. 2-3. Despite these comparisons, educational advantages still are not available to a great number of southern Asians, The percent­ age of the total population enrolled in Burraan schools rose from 2.1 in 1951 to 9.6 in 1958; Cambodia I| .1| to 11.7; In­ donesia 7.3 to 9.2; Laos 2.8 to 6.0; Malaya 12.I| to l8.L|; Singapore ll| . 9 to 19.5; Brunei 11.0 to lI|.o; ^orth Borneo 6.1-1 to 8.5; Sarawak 7.1-1 to l5,1| ; The Philippines 20.8 to 19.3; Thailand remained constant at 15*6; Ceybn 17.2 to 21.0; India 6.6 to 8.7; Pakistan 5*8 to 6.l|. Vietnam was 9.1-1 and Nepal 0.9 in 1958. Japan’s percentages are 22.7 and 25.0. EGARE, 1961 Survey, op. cit., p. 33. Ill

Expaiidinc education is difficult because of the teacher shortage. It is also a costly investment, one not yielding immediate and noticeable contributions to national production and per capita income, Along v;ith Western efforts to elimi­ nate the health scourges of Asia and so raise the physical standards and capabilities of the people, expansion of edu­ cation has been the first step in all developmental programs.

The early building of schools, training of teachers, cleaning of wells, and spraying of houses inspired less criticism and less dispute than subsequent forms of foreign assistance.

The Australian aid program has leaned heavily to educational work; perhaps in consequence it has been spared condemnation in Asian circles. This early aid was direct. It touched. 16 the people. It involved relatively few decisions and vir­ tually no controversial legislation. It necessitated no drastic adjustment of social relationships and no immediate threat to vested financial or political interests.

When, however, foreign aid entered the industrial field or touched on major agricultural reforms, a proliferation of

lé) °One official in an unspecified country told an Ameri­ can aid representative that his government preferred Soviet to United States aid because it came as a package-deal -- no decisions on type of plant, its location, or other specifics were required as under an American grant. Self-help and stimulating self-reliance have been major features of United States assistance. Alvin Roseman, "An American Aid Mission Director’s View of Technical Cooperation," in Fartnershin for Progress; International Technical Cooperation (Phila- delphia; American Academy 'of Political and Social Science, 195^), p. 2. 1 1 2 changes resulted, and. the initial progress often ground to a halt as the complexities of an involved and interrelated economic structure loomed before Aslan administrations. This has generally proven too much of a challenge for old line colonial politicians and the greatest efforts toward economic advance have usually come under the guidance of relatively new names and faces. It was often the local elite o.f the colonial period which became the ruling elite of the new in­ dependent state. The former had. the wealth and social stand­ ing which the latter were unwilling to surrender in social reform. Thus sound, fiscal policies, regulation of imports, and land tenure reform, all essential to a progressive atti­ tude toward economic development, became virtually impossible until a new generation had arisen. This is most obvious in the middle East where old line nationalist leaders in Egypt and Iraq disappeared before the onslaught of social-reforming "republicans". In the Philippines the democratic administra­ tions of Presidents I-Iagsaysay and I-iacapagal spurred economic

and social change neglected by the prewar politicians in office after independence. In both Burma and Pakistan (as well as in South Korea) extensive reform marked the advance of military regimes. In Ceylon, the premiership of 11rs.

Sirimavo Bandaranaika has been explained as a nationalistic

surge against Europeans and rich C e y l o n e s e . The lesser

^'^The Hew York Times, October 2^, I960, p. 113 privileged groupa are on the rise. Conversely, the retention of power by the old. time nationalist leaders of Indonesia coincides with economic stagnation. Opposition to a rising younger generation of intellectuals frequently at odds with the administration is noticeable. 18 Similarly, in India, Prime Minister Nehru’s determination to resist Chinese in­ roads in the fall of 1962, contrary to his previous tendency to equivocate on the subject of communism, was greeted with lusty approval by parliamentarians, 19 again signifying that, despite his popularity,this loader could easily be out of step with public feeling. So it is that, as in the Diem administration in Vietnam, after taking a few forward steps the old-line nationalist leaders become enmeshed in opposi­ tion politics and entangled with vested interests: both economic development and sometimes democracy then stand still, Other determinants of development applied to conditions in southern Asia will serve to round out the survey of pro­ gress made by these states with, and in some cases without, foreign aid. A good administrative organization for coordin­ ating and implementing not only the country’s development plan but general governmental regulations, particularly

For an exposition by one such young economist, see Soedjatraoko, Economic .Development as a Cultural Problem (Ithaca, New York: Cornell University Press, 1956). 19Time, November l6, 1962, p. 32. l l l l 20 monetary and fiscal controls, is an essential. Such a machine, efficient, incorruptible, and integrated is rarely found among young states. In southern Asia Malaya is an exception, while the Indian Civil Service has been credited 21 with being one of India's major developmental assets.

Colonial practice generally negated both the education and the experience essential to the development of a sound ad­ ministration. An economic base is also a requisite for in­ dustrialization: transportation, communications, and power, in particular, have been given the initial attention of foreign developers both because of their scope and because of their cost, by nature too complex and too expensive for local financing and planning. Once power dams, roads, and irrigation facilities are established, the question of in­ dustrializing becomes more acute. Thus it was that by 195’5» when a major shift in the attitude of Asian states to Ameri­ can aid was most obvious, the initial projects, education, health, power, and transport, were well underway. One fea­ ture of Asian criticism during this controversy was the

At the time of independence, there was no statistical department and no system of budget and accounts in Burma. See John S. Purnivall, "Burma Past and Present," in Far East­ ern Survey, February 25, 1953, P» 26. In Laos, the govern­ ment does not even know how large the population is, a fact which presents obvious disadvantages to public administration. In 1959 the International Bank estimated it at from 1.5 to 3 million; the Central Bank figured 2.5 million. ECAPE, 1961 Survey, op. cit., p. 101. 2^Ibid., p. 22, Since Muslims were less active in the civil service, this benefit did not extend to Pakistan. 113' apparent lack of awareness of the uses to which foreign aid had previously been put. There is little editorial comment on Colombo Plan assistance and while there is more on Ameri­ can aid, it is usually inspired by crisis rather than by appreciation. One obvious explanation for this lack of public knowledge lies in the fact that many of the expensive dams and power projects, Morgenthau’s "development aid", are remote from urban areas and so are unfamiliar to the articulate masses. Close association of Western funds with specific pro- jects was not as common in South Asia as elsewhere. 22 Fiscal reforms providing for a redistribution of capital through greater taxation of wealth is a step essential to the creation of local developmental resources but largely neg­ lected by most Asian states. Ceylon has been reported by ECAFE to have taken the most positive step in this direction. Por the expansion of commercial activities, specialized bank­ ing or credit facilities and commercial know-how involving distribution, warehousing, and the ability to coordinate

^ The American aid highways of Burma, Cambodia, and Vietnam are popularly known while in the Philippines the annual Progress review of The Manila Times contains pertinent aid details. Cf_. "Reconstruction and Rehabilitation" and "Foreign Aid," in Progress, 1955, pp. 72-89 and 90-115. ^^ECAPS, 1961 Survey, op. cit., p. 15^. 1 1 6 the arrival of essential factors in manufacturing are also necessary. Investment has been found to be the principal, although not the only, criterion for advancement. The question arises, should it be in agriculture, mining, or industry, and in what proportion? Should it be concentrated, or should it be bal­ anced? In Burma, because of the traditional colonial reliance on the agrarian sector including extractive and lumbering industries, developmental attention of the independence period was shifted directly to the commercial-industrial field. Burma's reaction against agriculture was an emotional one, a rejection of agriculture because this had been the basis of colonial exploitation. In part because of the re­ sultant lopsided national development, the original economic plan was halted until farming and related industries could o c( be brought up to a level with other sectors of the economy.

Z^The case of the Indonesian ramie plant is one illus­ tration of both these necessities; three years after the Ministry of Industry established a plant to process this cotton substitute, the Ministry of Agriculture undertook to expand ramie production which, as it existed at the time the plant was opened, could supply enough material for only six days work annually. For over three years, therefore, the plant had to operate with expensive imported raw products. Indonesia, State Planning Bureau, Report on the Execution of the Five Year 1956-1961 Development" Plan (Djakarta, 19611, pp. iBTTTf. 2d ^Frank IT. Trager, Buildina a Welfare State in Burma (New York: Institute of Pacific Relations', 195^), p . 100. 117 Investment in Asian agriculture has run far higher than in Latin American or in African because of large populations and the resultant necessity for reclamation or for large- 2^) scale irrigation by which new lands can be put into use. This is essentially more true in South than in Southeast Asia, Agricultural investment generally aims at self- sufficiency in foods and oils and at diversity in the pro­ duction of raw materials both for export, in order to re­ duce the usual dependence on one or two staples whose prices often fluctuate wildly, and for local industrial use. Diversification also aims at the production of adequate food supplies and at an improved balance of payments by cutting imports and stimulating exports. To achieve these goals, total output must be increased either by expansion of acres under cultivation or by raising the productivity per unit of land. Land reform to increase the numbers of the small landed proprietors and eliminate absentee landlords uninterested in improvements in production; agrarian credit reforms to free the individual from the stranglehold of the usurious local money lender; and improved marketing practices to eliminate the sleek engrossing middle man have been es­ sential changes. In all states of southern Asia, land tenure reform has made some headway. Burma undertook a wholesale

^^Sorae 25 per cent as compared to 9 and 10 per cent. EGARE, 1961 Survey, op. cit., p. 23. 1 1 8 distribution of absentee landholdings when she alienated Indian property and the Thais, attempting to eliminate all possible communist grievances, adjusted even the small land, tenure problems they encountered by limiting the size of landholdings. Extension services, irrigation or drainage, and ferti­ lizer production have been the major methods for increasing agricultural output. All of these schemes are expensive and most are handled by central authorities.Examples of technical assistance programs, either international, European, American, Japanese, or Australian can be cited to illustrate each point. The interesting feature is that on the people- t0- people basis necessary for such programs, close harmony and friendly relations can be found at virtually every level. 28 The reasons for this favorable Asian reaction to such assistance are debatable, but it would seem that person­ alities would play a major role: when Dr. Tom Dooley drank from an unsterile Laotian cup or aid representatives swallowed ceremonial "dishwater" rather than offend their humble hosts, they created effective working relationships between individ-

27'Even fertilizer production, at least in its initial years, because its production in Asia is widely subsidized. Further, the tendency toward statism in Asia dictates govern­ ment ownership of many new industries. 28 Gf. the previously cited works by McLaughlin, Bingham, and UNESCO. 119 Liais. Further, improvements in health and agriculture directly affect life and once demonstration has shown the effectiveness of a new hoe or scythe or an improved strain of seed or a new planting or plowing technique, its accept­ ance is rapid and gratitude rather than harping criticism abound. 29 Relatively few technical assistance examples relate to Southeast Asian agriculture. One exception is fish farming which is widespread in Indonesia and is being exported by PAG experts to Thailand and even as far away as the Americas. V» Probably because it has traditionally been a food surplus area. Southeast Asia’s need for improvements in farm tech­ niques has been less acute than that of South Asia where hun­ ger abounds. It is, therefore, in International Labor Organi­ zation publications that examples of Southeast Asian training programs appear most frequently. Point IV and technical assistance, and today peace corps activities, continue the people-to-people relationship, but aid. of this nature is limited and its effectiveness for industry, aside from the

29See McLaughlin on the UM-sponsored agriculture revolu­ tion in Afghanistan and Bingham on the Etawah project of India. The latter book also cites two amusing incidents: in Iran communist propaganda against distribution of new donkey and chicken breeding stock available from "Uncle Jackass" back­ fired when it served to spread the news of available offerings to far flung areas of the country. In Central America, a sig­ nal honor was accorded an American technician for whom a grateful people named the locally-produced outhouses. 120 cottage variety, is not extensive. There money is the cru­ cial need and over its giving and receiving many hot words have been said. Regarding industrial investment, two major approaches are currently found in southern Asia. The more widespread, in­ volving the greater number of political units, but not the largest number of people, tends to follow the British- Japanose pattern of moving from light to heavy manufactur­ ing. 3 ^ The second applies to India (and mainland China) which are trying, in the face of an estimated natural limitation on income-earning export capacity, to develop a heavy industry which can subsequently supply the machinery and equipment for the development of consumer production. The first process is a gradual one but involves a more rapid rise in living standards, other factors remaining constant, attendant upon an expansion in the production of consumer items. The second process, like mining development, is "capital intensive", that is, vastly expensive at the outset, and does not result in a rapid rise in living standards. In order to cut inflationary

^ Thus in Malaya, it is noted, the output of goods and services rose some 20 per cent with an increase in rice production, in smallholders* crops, in iron ore mining, and in the output of manufactured goods. Factory employment was up 22,000 while handicraft activity declined. See "Malaya: Second Five Year Plan,**- in Current Rotes, June 1961, pp. 31" 33» In the Philippines, importation of tires and tubes dropped by P 23 million to ¥ 2 million between 1933 and 1938 while cotton fabric production rose three times over that of 1933 in the same period and imports were eliminated. Carlos P. Romulo, "The Philippines Since Independence," in Current History, March 1961, pp. 139ff. 1 2 1 trends, it necessitates austerity and enforced savings until consumer items become available. Even though Americans sometimes may question the gains made from the various economic assistance programs available to Asia, it is almost without doubt safe to assume that the Asians themselves can notice some improvement in their way of life. Arranging the states in Table 9 in descending order gives the following picture of development on the basis of average annual rates of growth. Population pressure is the greatest deterrent to a spread of economic benefit thickly over the masses. This is particularly noticeable in the statistics for the Philippines and Cambodia although Java, ■31 in Indonesia, and India also suffer acutely from this problem. Resettlement of Javanese on the underpopulated Outer Islands has not yet proven highly successful and the Indian program for birth control is still in its beginning stages. To achieve economic improvement in their standard of living, the problem will have to be met. Although Sweden is currently working with Pakistan on this difficulty, it is not one in which extensive foreign assistance can be helpful, particularly from the American side, in view of the political nature of the argument over birth control.

31ln Java there has been an increase in population of 23 per cent compared to a rise in food production of 9 per cent. It is interesting to note in passing that in 1900 the population of this island, now around ^0 million, stood at 28 million. Van der Kroef, "Philippines,^, o£. cit., p. 8l, 1 2 2

TABLE 10

COMPARATIVE AVERAGE AI'JIRJAL RATES OF PRODUCTION GROWTH, 1950-1959

Real Per Capita National Product^ Agriculture^ Producta Philippines 6.0^-2 Burma° 3.9y^ India 3.3$^ Burma^ 5.1 Philippines 2.7 Philippines 3.3 Thailand 3.0 Thailand 1.9 Thailand 3.2 Cambodiaf I] .0 Indonesia^ 1.6 Indonesia^ 2.3 C ey 1 on 3.9 Ceylon l.I| Burma 1.6 Indonesia^ 3.6 Cambodia^ 1.3 Pakistan 1.2 India 3.1 India 1.1 Malaya 1.1 Pakistan 2.6 Pakistan 0.i|

^EGAIHE, 1961 Survey, op. oit,, p. ll|0.

‘“‘ibid., p. 11. Population deflators used were assumed to be underestimates. ^Period begins with 1951.

Following this survey of the geographical, historical, and economic problems affecting the southern Asian states in their approach to the problems of economic development, under­ taken in an effort to see whether a realistic attitude is being shovm by the various governments toward the problems confronting them, the second component of an assesraent of attitudes remains to be examined. On the basis of leaders' public pronouncements reinforced by a sampling of editorial comment and supported by the practical economic approaches outlined above, the twelve states of southern Asia seem to fall within a pattern which further corresponds, with slight 123 adjustment, to the democratic tendencies of these states. Malaya has the most sound attitude toward economic assis­ tance; second comes the Philippines; third, the neutralist states of Burma, Cambodia, Indonesia, Ceylon, India, Nepal? and fourth, the allies Thailand and Pakistan; fifth, the beleaguered former lh?ench territories of Laos and Vietnam. One phase of development, outside the scope of this paper but meriting further attention, is the relationship, if any, which might be found between economic betterment and the advance of democracy, particularly in the long run. An initial impres­ sion exists here that such a correlation exists both historic- ally and in southern Asia." Malaya, the Philippines, and India have best maintained the democratic practices and spirit; Laos, Vietnam, and Thailand (long democratic in form only and not one of the new states) fall within the least democratic group; the other states remain in the middle, divided between the quasi-restricted democracy of Burma, Cambodia, and Ceylon, and the new democracies of Indonesia, Nepal, and Pakistan. Malaya has been placed in a category by itself because of its unusual attitude toward both foreign aid and economic development. The youngest of the southern Asian states, it was blessed, during its pre-independence period with a tute­ lage which it was anticipated would lead to independence

op Contrary to the views of such authorities as Staley, op. cit.. Chapter IV and Emerson, 0£. cit., p. I|l5. 124 within a foreseeable period. This contrasts with the situa­ tion in Burma in 1936, for instance, when self-governmentwas a vague, far removed possibility. This tutelage, further, has HE ant, therefore, that the transfer of administrative power proceeded with a modicum of disarrangement. The pro­ cess was further favored by the orderly and peaceful with­ drawal of the ruling state. In consequence there was no nationalist surge which forced the injudicious ouster of foreign advisers, the untimely nationalization of foreign investments, the inordinate fear of foreign economic domina- 33 tion, and the attendant unproductive consequences. Therefore it is not startling to encounter references to the fact that

Japanese and other foreign investors are actively sought by 34 the government or to come across a statement by the Singa­ pore Chief Minister, Lim Yew Hock, urging Western economic aid to halt the spread of communism. Raising living standards, he maintained to a local press conference, was a vital weapon 35 for democracy. Such statements, elsewhere in Asia, would

3E The odd thing about Malaya is that there is relatively little Malayan nationalism, a condition the Alliance group is attempting to remedy. The three dominant national groups (Malay, Chinese, Indian) have remained separate corjnunities. Assimilation, if it can be realized, will create an entirely new feeling within the country.

^^The New York Times, March 22, 1959, p. 16.

^ ^The Straits Times (Singapore), January 6 , 195Ô, p. 2 . 125 often give pause for thought. It is likewise unusual for a newly appointed foreign minister in this area to affirm with­ out creating a political crisis, that a modified form of American capitalism was the ideal toward which his country should aspire.Where most of the states are socialist- inclined, such a comment is rare indeed. From a Western viewpoint, this overall attitude might be called "mature", from an Asian viewpoint, "irmuature"; in any event, it is unique. Malaya has received relatively little American aid (^21.5 million from 1951-1960) in comparison with other states in the region. There was an additional ijpijB.O million from Co­ lombo Plan sources exclusive of Australia's $2.8 million. Japan's contributions to Malayan development consisted of pri­ vate "economic cooperation", principally in the development of the country's iron ore deposits. These contracts are pro­ tected by liberal private investment laws and limited re­ straint on the repatriation of profits or assets. Such arrangements mark the intelligent and constructive approach of the Malayan administration to its economic development program. The second category of states includes only the Philip­ pines. Its attitude toward foreign aid and economic develop-

S6 Retiring Ambassador Ismail Rahman enroute from Wash­ ington to EogiLa Lumpur to become Malayan Minister of Foreign Affairs. Ibid., February 2, 1959, p. 126 ment has been similar to that of Halaya but certain distinc­ tions exist which justify separate consideration. First, corruption has been more prominent in government and, in consequence, the effectiveness of aid has been lessened. President Hacapagal, after three months in office, stated that the major aim of his administration was to convince people that the government could be honest. Corruption, ho declared as he outlined the country's political and economic 37 sBZbuation, was the greatest issue to be faced. Various historical features have been held responsible for this con- dition.^38 A more paternalistic guidance during the Malayan period of tutelage, may have served to confirm a higher de­ gree of honesty in administration there. Second, the United States sought to increase the effect­ iveness of its assistance to the Philippines by utilizing the leverage available in aid to force reforms on the govern­ ment. The Bell Mission of 19^0 offered the Filipinos, a’, five year program involving million in closely supervised loans and grants, on condition that certain reforms be made. The Report was well received by press and public, but, naturally enough, supervision was said to have been opposed

^^The Hew York Times, April 2, 1962, p. 8. •^^Spanish provincial administrators seeking to line their own pockets; Chinese merchants seeking to buy entry into restricted areas; and wartime deception resulting from consumer goods' shortages. 127 39 by government officials. It is interesting to note that

the public repeatedly was said to favor supervised aid; this

is one of those cases where public leads government. Since

government corruption was severely and specifically criti­

cized in the report, official reaction could have been antici- 4-0 pated. When the Foster-Quirino agreement was drawn up

creating a partnership council to supervise aid and reform,

Filipino cooperation, though reluctant, was assured and has lu been thought to have been generally effective.

The changes recommended were considered essential to

development, but vested interests and corruption were held

to be so strong that voluntary implementation of the required

reforms was not expected. The American preconditions were,

however, interference by one sovereign state in the internal

affairs of another, and could not have been set in most coun-

^^The New York Times, October 29, 1950, p. 69 and Novem­ ber 3, 1950, p. 9 . J’or the Commission's report see U.S.,

4-0 The New York Times. October 22, 1950, p. 7» President ftuirino was even charged by the Philippine press with Jeo­ pardizing United States aid. Ibid.. October 29, 1950, p. 69. For Philippine reaction see The kyiila Bulletin for October 29, 1950, p. 1. A decade later, in an entirely different connection, one involving American financial help to continue the medical work of Dr. Tom Dooley in Southeast Asia, a Filipino technician in Laos commented, "We have faith in America, maybe because we lived with them (sic) so long". Columbia Broadcasting System news report, January 22, I961. ill For details on the subsequent developmental legisla­ tion and its difficulties see Wurfel, op. cit. 12g tries, as for instance, in ultra-nationalistic Indonesia.

Two features made acceptance possible. First, a dire economic k-? crisis necessitated assistance in some form. ‘ Second, the lack of animosity and the close working relationship between the Philippines and the United States facilitated the arrange­ ment. Although many states might surrender their administra­ tion to international supervision in such circumstances, only intimate relationships, such as existed in the Philip­ pines, or in Occupied Japan, or in financed-regimes like

South Vietnam, can inspire unilateral action of this nature.

The Filipinos share with the Malayans an uncompromising anti-communist attitude. Uncompromising in the sense that, unlike the Thais, these governments have never threatened, in seeking aid, to turn to the communist bloc for assistance 4-3 not forthcoming from the West. Nevertheless, this alert attitude toward the outward menace of communism has not blinded the country. President Magsaysay coming into office following the dark days of the Bell Report period, stressed the necessity for economic rather than military aid in build­ ing up the country, on the ground that Asia's fate depended

ho Inflation was rampant and the government bankrupt. Its checks were returned marked "no funds". In February the ad­ ministration confessed to a national deficit of over one- quarter billion dollars for the five year period since in­ dependence, The operating deficit alone was $159*5 million. The New York Times. August 6, I55O, p. 9 and August 7, I950, p. 4. 4-33ee ibid.. May 11, I96I, p. 1 and July 20, I96I, p. 2. 129 on economic gains and not on its military strength.He em­ barked on a reasonably successful land reform program, and followed a policy of welcoming foreign capital investment as outlined in his 1955 state of the nation message to the Philip­ pine congress.This policy of support for foreign invest­ ment and aid was maintained throughout his stay in MalacaXan.

In the Philippines, foreign investment and aid have primarily involved American money. There is outspoken, but apparently not extensive, opposition to this type of assistance.

Speaker of the House of Representatives, Jose P. Laurel, Jr., son of the wartime puppet president, joined with others in complaining that the United States discriminated against the

Philippines by giving more aid to an ex-enemy than to a former colony. His remarks were more lament than opposition and met with a denial by Vice President Carlos Garcia, allegedly speak­ ing for President Magsaysay and the latter*s successor in office. The issue was a reflection of local politics, he told a Manila Bulletin reporter.

Two other, more positive, forms of criticism have arisen over American aid. Senator Claro Recto, long favor­ ing less relations with the United States and closer ties with

^^Ibid., March l8, 1955, p. 17.

^^-^The Manila Times, January 2l.|, 1955, P* 12.

^^March 30, 1958, p. 13* President Magsaysay blamed this 1958 rash of criticism on opposition to his land reform program. Ibid., April 9, 1958, p. 50. 130

Asia, has charged that the Americans stressed aid to agri­ culture to keep the country as a producer of raw materials 47 and consequently blocked industrial development. This is one of the local opinions which can be laid to ignorance of developmental processes — agricultural exports provide the income on which the underdeveloped states operate; when income falls, as during a Western recession, government revenue declines along with foreign sales, and normal activities and developmental programs suffer. Expansion of production and diversification of agriculture are stressed to increase and to stabilize government revenue so that additional funds will be made available tn fairly constant quantity to meet govern­ ment needs. In 1957 Senator Recto, in league with the Manila

Chronicle, again spoke up against American, particularly private, investment. Although proclaiming no desire to na­ tionalize existing American operations, he told a Rotary audience that loans, rather than investments, should be util- ized for future developmental purposes.

^^The New York Times. July 10, 1955, p. 9» 43 The Manila Bulletin. March 29, 1957, p. 1. The diffi­ culty in a nation's relying solely on loans was pointed out in Chapter II. As in Malaya, nationalization has made no great headway althou^ there has been a tendency, discernable in many underdeveloped countries, for the government to create public corporations and industries. ECAFE has noted that the Philippines disposes of these industries once the business has become profitable and local capital can be interested in it. Cf. 1961 Survey, op. cit. 131 A third critic of American aid activities in the Philip­ pines has been Diosdado Macapagal who, as a representative in

1956» criticized President Maysaysay's subservience to the

United States in a commencement address at West Negros College,

He has consistently maintained that the Philippines should conduct itself in a friendly but equal manner in dealing with the United States. As president he has continued this atti­ tude. Relations have been close, but handled with an inde­ pendent air which bespeaks a growing nationalist feeling amongst the younger generation of Filipino statesmen. Their friendship and cooperation in all probability should not be- questioned; their awareness of political and economic ills 4-9 seems apparent, and their determination to attack them with vigor speaks well for the country's future.

The six non-aligned states of southern Asia share an unconcerned attitude toward foreign aid; generally speak­ ing they would rather do without— and have boasted of hav­ ing done so~than take aid with "strings" attached.

^In his first State of the Nation address, President Macapagal stressed his view on the need to check the rising population increasing at the rate of 3.2 per cent annually. See "Address on the State of the Nation" (mimeographed, Washington: Embassy of the Philippines, 1962), p. 2. At his inaugural he had emphasized the need for further develop­ ment efforts. "Inaugural Address, December 30, 1961" (mimeo­ graphed, Washington: Embassy of the Philippines, I96I), pp.1-2.

5*^As the Ceylon Daily News proudly noted about that is­ land, these six nations have gotten along without foreign aid (ignoring international and Colombo Plan contributions) and, although it had not been easy, it had been possible "because it was her own job." March 4, 1955» P» 6 . 132 Contrary to impressions carried in the American press, which seems generally to regard non-alignment as being synonymous with pro-communist sympathies, the no-strings condition has been applied with equal care to both Western and communist hi aid. This independent attitude has been most apparent in Burma, Ceylon, and India. Despite their mistakes, these countries began to move along the path of development without waiting for outside help. India has now begun her Third Five Year Plan; nearly two-thirds of the first two were done with­ out extensive foreign assistance. Burma has examined and reexamined its plans and policies and has abandoned and changed as it became evident that the path followed was not successful. The attitude of the non-committed nations genuinely seems

di Gf., for instance, remarks of Premier U Ba Swe in The Few Tine s of B u r ^ , July l\, 195^, P . 1 and General Ne Win in The Burman, November 1, 19^8, p. 1; Prime Minister Bandaranaika in the Ceylon Dally News, March 1|, 1955» p. 6 and April 7 and 26, 1956, pp. 1 and 9 respectively; Prime Minis­ ter Nehru in The New York Times, December-22, 1956, p. 8 and in The Statesman, July I], 1958’, P« 7; Premier Sastroamid jo jo in The New York Times, April 20, 1956, p. 1 and President Sukarno, ibid., May l8, 1956, p. i| . and April 2l|, 1957, p. 6. The latter even extended his objections to cover Colombo Plan aid which the Indonesians would not accept, he said, "in the field of principles or ideology". Ibid., November 11, 1959, p. 6. He might have been referTng to oft-repeated Colombo Plan references to improving the climate for private capital. It is interesting to note that the bulk of these comments were made at the beginning of the communist economic offensive in the area and at the time when massive American aid was begun as a counter to Russian-Chinese penetration. Little of this nature has been said since by these non-committed states, although in I960 Laotian Prime Minister Prince Souvanna Phouma indicated his government's willingnsss to accept aid form all nations without strings. Ibid., August 17, I960, p. ll|. 133 to hingo on independence of foreign attachments, not merely goodwill toward all despite the faot the latter is the daily expression adopted particularly to countries not involved in nineteenth century empire-building, Western fears that Asian naivite toward communism will lead to loss of independence has merit, although hard-won freedom willnot be readily aban­ doned by these former colonial territories. Furthermore, communist bloc misadventures in Hungary, Tibet, and more recently in India gradually have disabused many previously attracted by the rapid Soviet industrialization record. Com­ munist trade policies served to alienate Burma and, if com­ munist aid to southern Asia is as shabby as that given the Middle .East, still greater shortcomings will be made appar­ ent,Despite the long-incomprehensible attitude of Prime Minister Hehru toward the communist world, Burma, Ceylon, India, and Cambodia have evidenced an internal awareness of communist influence, A crushing defeat administered to the Communist Party candidate at Buttala, Ceylon, in 1955 was heralded by the local press which, just two days before, had stated that "indigenous political stability , , , necessarily involves resistance to communism, whose victory would mean

^^The Chinese road in Yemen is reportedly filled with holes, the flimsy Russian dock at the new port there has been sheared off by an incoming ship, and Baghdad was sold an antiquated telephone center. Private conversation, Wash­ ington, D. C,, autumn, 1962, 13^ the loss of national independence".^^ The general Aslan aversion to being entangled with antl-communlst western moves may well be explained by the following observation: "The countries of free Asia wish to combat communism to safeguard their own Independence, not to protect the power Interests of the West, and they are convinced that this end must be achieved primarily by economic development, not by guns",^^

In other words, the ex-colonlal nations, still smarting from former Western handling, want to be free to develop accord­ ing to their own dictates.

Of the six uncommitted states, Nepal and Cambodia have evidenced the least difficulty In assimilating the aid re­ ceived and proceeding on their respective developmental paths.

Both have freely accepted American and communist assistance.

In 1961, Cambodia threatened to break with the non-communist world because the United States would not permit her to use 55 Its military aid against Thailand. The American Secretary of State termed this attitude an "unacceptable affront".

Cambodia's Prince Norodom Sihanouk, who has repeatedly Indi­ cated a desire to keep Laos a neutral buffer between his

Ceylon Dally News, March 4, 1955» P« 6.

5^Ibld.

55prlnce Norodom Sihanouk, speech, reported In The New York Times, October 29, 1961, p. 29.

5^Dean Rusk, Ibid., November 3 » I96I* P* 3* 135; country and Red China and who has shied from all but coopér­ ative friendliness with that power»^'ai 7 may have been rein­ forcing his position vis-a-vis the mainland Chinese In pre­ paration for an anticipated American abandonment of Laos and that country’s becoming communist. In December he called I China Cambodia’s only support,'h'8 Ceylon and Burma had early technical assistance which 5)9 was later stopped, When communist aid appeared in the region, late in 19^3, American contributions were resumed. Reflecting on the second of a series of difficulties with nationalist Chinese forces in northern Burma, a problem laid at American feet, one journal states in 195)9 that the coun­ try’s attitude showed that "neither open bribery nor dire threats will prevail upon the Burmese , , , , The bath of

C' 7 'Gf, Prince Boredom Sihanouk, "Cambodia Neutral: the Dictate of Necessit;yin Foreign Affairs, July 1958» pp, 582-586 and his speech to the United Nations General Assembly, September 29, I960 (mimeographed, New York: Cambodian Mission to the United States, I960); Roger M, Smith, "Cambodia’s Neutrality and the Laotian Crisis," in Asian Survey, July 1961, pp, I7-2I] ; Nong Kirany, "Neutralitv in the Sixties," Speech Brooklyn College, December 31, 1961 (mimeographed. New York: Cambodian Mission to the United Natl ons, 1961), ^^The New York Times, December 28, 1961, p, I| . 59 Burma voluntarily cut off her aid in order to complain freely about American culpability for Nationalist Chinese depredations in northern Burma, No bitterness regarding the aid program itself was evident at that time. See ibid,, ■ March 29, 1953, p. 1 and June 12, 1953> P . 3» Ceylon’s was stopped by the United States because of rubber shipments to mainland China, See chapter IV, note 55|. 136 friendly cooperation and mutual respect does not begin or end with bribery or snobbery or treachery".When, this editorial continued, the Burmese become certain that foreign aid is no Trojan horse, the people will be properly apprecia­ tive of it. In the spring of 1962 a rising nationalist feel­ ing resulted in the cancellation of aught but government-to- government aid, thus putting an end to Word and Asian Founda­ tion programs in the country. Previously the government had reportedly decided to cancel its Russian aid programs as too costly and too luxurious. In Indonesia the deplorable economic state into which the country has fallen has made effective aid most difficult. The government’s ultra nationalist policy toward foreign vis­ itors and foreign businesses discouraged rather than encouraged private contributions which would have stimulated the economy. Only late in the fifties did an attempt to attract foreign investment begin and this despite President Sukarno’s urging that the constitution include a provision to prevent the de- ^ 2 velopment of a capitalist system. In 1958 Parliament passed a bill to stimulate foreign investment, notwithstanding this

^^The I'Jew Times of Burma, July $, 1959, p. 1| . °^The New York Times, October 26, 1959, p. 12. This in- dicates the need for Internal implemental funds despite for­ eign contributions. Fepal also once indicated it would cut back communist programs to save funds for the other purposes. Ibid., June 11, 1961, p. 11. / P Ibid., Ilovember 11, 1956, p. 7. 137 attitude on the part of the popular representatives, the

President repeated his view and the Premier set forth the government's preference for foreign credits rather than for 63 private investments. In I960, a further reduction in hos­ tility toward foreign concerns was noted. This was interpre­ ted as a major defeat for local communists, following, as it did, a Communist Party campaign for closer ties with the Sino-

Soviet bloc, an appeal the Indonesian Observer urged the govern- 64 ment to reject in favor of continued non-alignment. Mean­ while, Djakarta's sole observation on aid has been that assis­ tance from any source is acceptable so long as no strings are attached. Indonesia badly needs foreign help and as its eco­ nomic situation deteriorates further, the need will increase.

Some change in attitude toward both aid and economic develop­ ment will have to occur if improvement is to come.

India's approach to Western aid has differed from these others'. Assistance coming from the United Kingdom and the

Commonwealth was never seriously disputed. American aid, how­ ever, originally had military overtones which did not appeal to the Indians. The United States further alienated them by the extension of military assistance to Pakistan which served,

Prime Minister Nehru told Parliament, to hinder India's

63 President Sukarno to the Constituent Assembly in The Indonesian Observer. April 22, 1959, p. 1 and Premier Su5^drio*s statement, ibid.. July 29, 1959, p. 2.

64July 11, i960, p. 2 . 13g economic Improvement by necessitating the diversion of scarce funds from development to match the Pakistani b u i l d - u p .

Beginning in mld-1956 a change came over the Indian attitude toward American investment and assistance, all prompted by economic necessity stemming from a sincere and earnest, albeit inept, development planning which had seriously underestimated financial requirements. Following an International Bank mission's suggestion that India drop its "negative and grudg­ ing attitude" towards foreign investors because development funds were sorely needed. Prime Minister Nehru told a New

York audience that private investment had a considerable role in economic advancement but that India firmly opposed force or ideology in its development,^^ In the half year which followed, India's economic situation grew progressively worse under pressures from the Second Five Year Plan, but no request was made to the United States for assistance. It was suggested that Indian leaders feared a rebuff. Over a year before, a columnist in The Sunday Statesman had referred to cabinet member T, T, Krishnamachari's "public refusal to go around with a mendicant's bowl" and expressed the view that India was not prepared to offer itself for sale in the aid market.

^5The New York Times, March 22, 1956, P. 13. See also March 11, 195&, P. 1,

Ibid.. December 22, 1956, p. g. In 1959, he expressed the opinion that Marxist economic theory was irrelevant to India, Ibid., November 29, 1959» P* 21. ^^January 9, 1956, p. g. — 139 Some eighteen months later, In discussing the prolonged reticence of the Union government in seeking American aid, editor Prem Bhatia referred to Indian minds as being still sensitive to cuts: large scale congressional debate, as on the food loan in I95I, might cause further irritation, "but the risk is worth taking". Cause of American annoyance was readily recognized by this Journalist who referred to repeated views of Indian leaders "which could easily have remained un­ expressed without loss of national honor or dignity" News of the subsequent American grant was allegedly received with "temperate satisfaction", with neither wild enthusiasm nor unkind comment which would have been unavoidable had the grant 69 been patronizing. Thus it would appear that India's reaction to American aid involves a mixture of resentment over its military nature, supersensitivity over possible rebuff, and rejection of a patronizing attitude. Apparently fairly skillful handling has kept the American program functioning since that time. Only two further comments appear worthy of note in connection with Indian attitudes toward American aid. One was a speech by the Ambassador to the United States in I96I in the course of which it was stated that the Indian people regard foreign

The Statesman. October 25, 1957, P. 6.

Ibid.. January 22, 1958, p. 6. 140 70 aid as charity. With this attitude, the government can be expected to seek, in the fastest possible manner, to achieve a position independent of the need for assistance. This type of attitude is in sharp contrast to that of Pakistan and Laos, The second development was the relatively calm approach dis­ played at the time of India's invasion of Goa which precipita­ ted a cut in aid. This threat was accepted'with unusual moderation by the local press. Economics would seem to have triumphed over political and social feelings and American aid to India now appears to have been put on a more stable basis. Replacement in I96I of direct bilateral assistance by Con­ sortium aid, the concerted effort of the United States, Japan, and Western Europe to meet India's Third Five Year Plan financing requirements, will probably further reduce Indian fears of unilateral Western motives while the crises in Indian* Chinese relations late in I962 may also alter the country's outlook, Pakistan and Thailand, allies of the West in the South­ east Asia Treaty Organization, make up the fourth category of southern Asian attitudes toward foreign assistance. Unlike their fellow ally, the Philippines, they have both, in the fashion of overly-indulged children, resorted to blackmail in an attempt to increase United States economic attention. Pak­ istan is a rather unique member of the western alliance. It is the one state with no particular grievance against the

f^The New York Times, November 29, I96I, p. 19. I4l Soviet Union, Unlike Turkey and Persia, and even non-commited Afghanistan, Pakistan's need for resisting Russian advances, geographically, was not serious. Neither did the country have an extensive internal security problem such as that which be­ set Malaya for nearly a decade. Karachi's adherance to the West was rather a prestige maneuver, a desire for status by a political monstrosity. This is verified by the remark of a "high Pakistani official" to sn Indian journalist friend: "We have decided definitely to turn Westwards, We want to be­ long somewhere, not remain unattached, in order to earn a status for ourselves. Our membership in the Western alliance 71 gives us this status". The policy was not a popular one. For instance, both the Kvber Mail of Peshawar and the Pakis­ tan Times of Lahore were opposed, the latter most violently, 72 to the administration's Western alignment. Despite these popular feelings, which followed the pattern typical of nationalist sentiment elsewhere in Asia, the government has consistently maintained its support of the free world. On the question of foreign aid, Pakistan considers assis­ tance her due, that aid is an obligation of the West and.

^^The Statesman, March 19-; 195^^ p,6, ^^The Kvber Mail. January 21, 1999, P. 3 and The Pakis­ tan Times, January 27, 1956, p, 4, 142 further, a quid pro quo of an ally. In consequence. United

States grants to India, an uncommitted nation, were greeted In Pakistan with considerable bewilderment,As time passed and conditions within the country failed to Improve markedly, this latter Idea was expanded. Neutralism, It was soon thought, paid off better tiian alliance did. Peelers from the Soviet Union In February 195^, feelers attempting to wean the country away from the Nest, met with favorable response In many quarters, particularly outside the government. The Kremlin hinted that aid would be forthcoming, without strings. In any event, but that Pakistan would get more If she broke with the West,The administration held only that Pakistan would accept Soviet aid If Russia would retract Its support for Indian and Afghan territorial claims,When subsequently warned by visiting United States Vice President Richard Nixon, that accepting the Russian aid would lead to satellite status, a government official reportedly replied, In typical Independent Aslan style, that the country would accept both Russian and American assistance,

T^The New York Times. March 20, 1953, p,4. 7^Pawn, March 2 5 , 1956, p, 4, The original Russian offer prompted the Kyber Mall to observe that Soviet actions Indica­ ted that It was not general sympathy which moved the U,S,S,R,'s llberalty, February 14, 1956, p, 3, ^^The New York Times, February 8 , 1956, p,6 , f^Ibld.. July 11, 1956, p, 7 , 143 The United States Embassy responded to these rumors of disaffection with a broadcast by the Ambassador discussing the value of American assistance and pointing out that alliance members were getting twelve times the per capita assistance of individuals in the neutral states, so to assume a neutralist position would mean, in effect, that the country would get less. 77 In one of southern Asia's more vitriolic expressions of contempt for the American position the Pakistan Times replied that Ambassador Hildreth's broadcast was , , . a gratuitous affront and pious advice , , . ugly realities of dollar imperialism , . , the people of this country know America well as a land where freedom languishes while license flourishes, where intellectuals and savants are hounded and persecuted by all manner of political adventurers, penny tub-thumpers, and slogan- mongering imbeciles. They know America equally as well as the guardian of the corrupt gang of tyrants who rule Formosa under the shadow of the Seventh Fleet, as the chief patron and helper of the present decrepit andyo fascistic regimes of South Korea and South Vietnam,' The following month this Journal announced its support for Russian aid because Western ties of the two preceding years had brought only limited value to the country; they had iso­ lated and estranged Pakistan from some powerful neighbors, had cut off the country from some valuable sources of economic assistance and industrial supplies, and had severely restricted its markets. Furthermore, sorely-needed capital goods had been received from the West in insufficient quantities. Blind acceptance of economic aid, however, was not desirable.

77pawn. January 24, 1956, p. 4, 78january 27, 1956, p, 4. 144 Offers, said the Times, should be carefully examined and even checked for strings while the opinion of other communist aid 70 recipients should be sought and reviewed. This cautious attitude should give pause to those who automatically regard the condemnation previously quoted as symbolizing a pro-com­ munist alignment; it Is, rather, an expression of Independence typical of most Aslan peoples. Later, with the rise of military control, greater efforts were made to Improve In­ ternal conditions — among other project^ austerity was started under West German guidance and village self-help programs were launched. In I96I, however, a revival of antl- Amerlcan sentiment followed the announcement of Consortium aid for future years. Its small scale, in comparison to the billions pledged for Indian development, reportedly revived suggestions that Russian aid be sought,

^^Pebruary 8, 1956, p, 4, ^^The New York Times, June 12, I96I, p, 10, The Times Indicated that the Pakistani press seriously criticised the West but the three papers here reviewed showed only moderate concern. The Kvber Mall made no comment, while Dawn spoke of America's political motives In aiding India, of an Inex­ perienced American administration, and of some fault In the Pakistani financial presentation to the Consortium, See June 10, 1961, p, 7. Later it Is observed that If military aid went to neutrals, why be a pact member? (June I6 , I96I, p, 7) only to answer, "What attraction Is there [for security] In neutralism?" See July 20, I96I, p, 7. The Pakistan Times. considering Its vitriolic blast after Ambassador Hildreth's broadcast In 1956, likewise was extremely mild In Its opinion on Consortium aid, speaking only of the comparatively luke­ warm approach" to the country's developmental efforts, January 11, I96I, p, 6, 145 Pakistan's objection to American assistance, then, has been its emphasis on military aid and its general insufficiency. The country's divided geographic position, acute backwardness, and lack of training and of known resources, have combined to make Pakistan's developiaent only partially encouraging. A more devoted self-help effort would Improve the people's mental approach to both aid and development. Thailand's ■•It.ltude has been similar in that there have been complaints about the amount of aid received and the over- 31 emphasis on mlllt.ary os sir, to nee. ' The greatest outburst of public sentiment occurred about 19^6, along with the opposition evidenced in South Asia and Burma. A flurry of press attacks appeared against the United States and its aid which had P)2 allegedly made Thailand an economic colony." Opposition 8" deputies and the leftist press were particularly outspoken. Rumors circulated to the effect that the government, despite its official pro-western stance was instigating the attacks, a situation naturally denied by the administration."^ The cause

Blçf. May 4, 1955, P. 8 , March 14, 1956, p. 10, and October 23, 1958, p. 3, The New York Times. ^^This was naturally denied by the American ambassador. See The New York Times. March 4, 1956, p. 20. It was also denied by Premier Pibul Songgrarn. The Bangkok Post. March 16, 1956, p. 1 . 83mhe New York Times, January 11, 1956, p. 6 . Attacks included comments that the local population had been abused by American military personnel. 84ibid.. June 10, 1957, P. 13. 146 for this unrest cannot definitely be pinpointed, but two facts do stand out: first, the nature of aid was under fire, greater economic assistance was desired as opposed to military help; secondly , internal politics had reached a boiling point, resulting in a military coup in November. Opposition to the

United States' aid program could have been real or it could have been fostered by the Pibul regime to divert attention from other pressing problems.

Despite these troubles, end despite the long-term corrup­ tion which has been called the major problem facing the United

States in Thailand, considerable economic advance has been noted. Two International Bank surveys in 1959 and in I960 cited gains and found the economy active and growing and mark­ ed with a healthy outlook. Beginning in I960, however, the former ambassador to the United States, Thanat Khoman, then prime minister, began complaining that committed nations were less well treated by the United States than the uncommitted ^ 5 ones. The logical followup of this remark was the report of a strong drift toward neutralism:Premier Khoman's speech

85lbid,.October 25, I960, p. 3. The comments of two non- committed states on this subject may be appropriate: "It seems incredible but the policy of neutrality which Burma, along with India and Indonesia pursues, is paying rich rewards." The New Times of Burma. July Ô, 1959, p. 4. In India the Prime Minis­ ter denounced press reports that the government could get more aid by revising its neutrality policy. The New York Times, January 23, 195#, p. 5.

G^Ibid.. May 11, I960, p.l. 147 of July 1961 indicated that his government might have to re- Ô7 examine its policies and obligations.

The cause of this resurgence of dissatisfaction was the

American withdrawal policy in Laos, The Bangkok Post had car­ ried an article in November I96I doubting, the Kennedy Admin- 88 istration’s concern for Asian affairs. Subsequent abandon­ ment of the rightist Laotians alarmed the Thais who feared any increase in communist activities in that mountain state would spread down the Mekong and into riparian Cambodia,

Thailand, and Vietnam, Increased efforts were immediately made to develop the poor and less well-integrated northeast plateau section of the country to counteract any rise in com­ munist activity within the area,

Thailand’s aid attitude has been marked by a desire for increased economic assistance for the developmental program which the government has been attacking in a forthright and progressive manner. Real concern exists in the country over the communist threat and any apparent laxness on the part of the West is viewed with considerable alarm. Were it not for the type of criticism of aid expressed by various Thais, the country’s utilization of the assistance received and its eco­ nomic outlook and accomplishments would merit a better classi­ fication than given here.

^?Ibid,. July 20, 1961, p. 2,

^^November 11, I96I, p, 7. A similar report and comment appeared in the Pakistani press. 14Ô

The final category of states includes Laos and Vietnam, both of whom the United States was supporting, militarily and economically, in spite of themselves. The foreign aid situation in Laos involved the worst example of corruption in all Asia and the American program there, prior to 1959, was a complete fiasco. In April 195#, after pouring about

$50 million a year into the country since 1954, suspension of aid was announced pending an adjustment in the exchange rate which had been so manipulated by combined government- business interests that fortunes were being made by the up­ per classes but little assistance was filtering through the economy to raise the standard of the masses. The requested revision was not made until October— Lao officials, content with the existing situation, were reportedly certain that the United States would back down because of its fear that, without American aid, the country would fall to the commun- #9 ists. The widely-expounded American concept of self-help plus aid had not been taken seriously in Laos. A more real­ istic attitude toward use of development funds would seem to have been forced on the elite thereafter. An American repre­ sentative sat on the import control board with veto power over foreign purchases, thus eliminating such situations as that in which Laos was importing and reexporting American automo­ biles to Thailand and otherwise diverting funds which should

^%gor Oganesoff, "Living it Up in Laos," in The Wall 149 have been used for the purchase of developmental goods rather than luxuries.

This policy of withholding aid pending correction of abuse is similar to that undertaken in the Philippines in

1950 , but with less satisfactory results. Under such circum­ stances, concessions are always made grudgingly and never without complaint. In Laos, the reaction was a charge by

Voix du Peuple that the United States was parsimonious; it 90 alleged that police pay was rarely on time. A United Nations aid investigator subsequently reported that coordinated assis­ tance was needed; he further observed that previous efforts 91 had not achieved adequate results.

Nevertheless, the Laotian economy made some slight gains 92 in 1959; indicating that, given peace and time, neither of which it has had, and a ”no nonsense” supervision, the coun­ try might be expected effectively to utilize the funds pro­ vided it. With the current emphasis on withdrawal of all foreign elements from the region, the future of aid — and it remains essential to effecting any progress at all — may follow the form suggested by United States Secretary of State,

Dean Rusk, at the Geneva Conference on Laos in May I96I: pool

Street Journal (Pacific Coast edition), April 9, 195#; p. 1.

^^The New York Times, October 20, 1959; p. 13.

^^Ibid., December IS, 1959; p. 14.

^^Cf. ECAFE, 1961 Survey. 150 all economic assistance, from whatever source, under the administration of the neighboring neutral states, Burma and 93 Cambodia, "

In Vietnam the administration of Ngo Dlnh Diem (popularly but Improperly called the Diem regime) had gotten off to an able start after division of the country In 1954, but by 1958 the process of economic development had ground to a virtual halt as vested Interests and repressive political actions took their toll of Individual Initiative despite official 94 preference for private Investment. By I960, the Internal political situation In Vietnam had deteriorated to the extent that the opposition was to attempt a coup. In January a petition signed by 18 "notables" had asked for more civil liberties and a liberalization of the regime, but to no avail;

In September a coup was tried but failed, apparently for lack 95 of direction. After the Vietnamese congress hampered ef­ forts at economic and political reforms the following March, the United States was moved to pressure the regime to llberal- 96 Ize Its social and economic policies. There was a natural

^^The New York Times. May 17, I96I, p. 6 . It would be most Interesting to see whether these states would allow the situation to drift or would buckle down and force the Lao­ tians to apply themselves. It would be a test for all three countries.

94ülem to the National Assembly, In The Times of Viet­ nam. October 8 , 1957, P. 1. 95Luther A. Allen, "The Issue Is Freedom," In The Nation. March 17, 1962, pp. 233-236.

9^The New York Times. May 8 , I96I, p. 14, 151 resistance on the part of the officials to this interference.

General Maxwell Taylor's recommendations to decentralize the administration to allow more freedom of expression, and to take more effective economic action aroused the press to charges of United States interference in local affairs, a campaign which continued until, apparently, halted by the president.97

In December 1961, a directive was issued authorizing 98 certain reforms but failure to implement them has been noted.

American pressure for progress has apparently not been suffi­ ciently strong to overcome the natural reluctance of vested interests to abandon their favored roles in government. Un­ til liberalization of the regime occurs and public confidence in democracy can be restored, continued stagnation and lack of effective opposition to the rebels and their North Vietnam­ ese supporters will doubtless continue; along with this civil unrest there will be little opportunity for economic develop­ ment and consequently little realization of the goals of foreign aid.

The attitudes of the southern Asian states have thus varied from eager receipt of free handouts with which to line individual pockets through various shades of acceptance to virtually unqualified implementation of effective economic de-

^7ibid.. November 28, 1961, p. 36.

98lbid.. June 3, 1962, IV, 4. 152 velopment advice and measures. The major objections to the

American program were, first. Its emphasis on military as opposed to developmental aid, and this was not only noted among Western military allies, but actually predominated a- mong them; second. Its attempt to buy allegiance to the anti­ communist bloc; third, the method of Its presentation, either

In a patronizing fashion or on a basis of equality; and fourth.

Its Insufficiency. In recent years comments along the line of the first three criticisms have faded and only the fourth would seem to remain. Developmental financial needs are, of course, virtually limitless, while the United States' ability and the necessity to allocate according to some standard of need, not excluding political ones, provoke problems which cannot readily be solved.

At the present time there appears to be a tendency toward coordinated aid and coordinated developmental planning. The

Consortium of western powers will attempt to channel aid where It can be most effective In a frank effort to reduce communist appeal to the Aslan public. Meanwhile, on Philip­ pine -Malayan Initiative, and with the approval of the Thais, a Southeast Aslan Association was formed In I96I to spur regional cooperation and agree on a broad range of mutual cultural and economic efforts. This Is a concept of self- help which had previously been rejected throughout the region.

Its formation by the three most economically advanced states In the area bespeaks their growing sophistication and Interest

In undertaking responsibility of their own. CHAPTER IV

MOTIVATIONS UNDERLYING AMERICAN ECONOMIC ASSISTANCE

Just what does the United States hope to realize from its programs of economic assistance, technical cooperation, and developmental aid? The one clear thing that stands out in a study of American economic assistance from its beginnings in 1&12 is that motivations have been both di­ verse and vague. Professor Quincy Wright, in his Foreward to Robert Mack Jr.*s, Raising the World's Standard of Liv­ ing, ascribes this condition not only to the United States but to all rich countries. These, he said, "are stimulated to assume a leadership in improving conditions and increasing the satisfactions of the less privileged by a combination of fear, pity, and hope; of political prudence, humanitari- anism, and economic interest; of realism and idealism,"^

Contemporary American motives are indeed numerous. Al­ though most citizens feel that humanltarianism is present

Op. cit., p. xii. See also the previously noted views of Gunnar Myrdal in chapter II on the impulsion of the for­ mer imperial states to improve conditions of the poorer ones. The famous American naval historian and pro-imperialist. Captain Alfred Mahan, believed that developed states had the same obligation toward underdeveloped ones that the richer parts of a city have toward adjacent slums. W. D. Puleston. Mahan (New Haven, Connecticut: Yale University Press, 1939)i p m ? .

155 15^ in United States aid, this Is not generally recognized abroad and the one question Inevitably asked when the subject Is raised In Asia Is, "Are there any humanitarian aspects to United States assistance programs?" An eco­ nomic motivation, not too well publicized In the United

States, Is also apparent upon more detailed examination:

Inasmuch as the most extensive economic Intercourse has been found to exist between Industrialized areas. It

Is held that aiding the advance of the presently under­ developed states should lead to an expansion of commerce with them. Stimulating overseas Investments and the ac­ quisition of essential raw materials are other components of the economic motive.

Political considerations, however, are the major In­ centives of American aid. Specifically It Is felt that, by

Improving the economic standards of the poor states, their

Internal stability will be strengthened with the result that world unrest will be lessened. Less positive United

States Inspiration lies In the belief that, wherever and In whatever way possible, an attempt should be made to channel the natural tendencies of the former colonial areas Into the direction of free institutions. Prom this latter motivation stems a tangential one, that of hoping to avert any threat to world peace from the rise of extremist political thought of any nature. In short, to prevent the recurrence of devel­ opments leading to such aggressive threats as shook the world in 1939. Whatever the validity of these views, and

some of their underlying assumptions can be challenged, it

is apparent that the motives prompting the United States

to indulge in foreign aid are unlimited ones. Neverthe­

less the ability of the government to realize its objectives

is fairly well restrained by alien Influences or immediate

political considerations which frequently are at odds with

long-range objectives.

After the out break of the Korean conflict, increased

Cold War tensions caused emphasis to be placed on the anti­

communist aspect of development. This takes three essential

forms. First is the strengthening of the tactical might

of the free world and therefore the actual defense of the

United States. Second comes the strengthening of the free

underdeveloped areas militarily so they will be in a posi­

tion to maintain internal control and resist military in­

cursions. Third is the concurrent strengthening of these

territories economically, politically, and socially against

subversive communist activities.

Repetitive expression of motives and aims is, how­

ever, no proof of the sincerity behind them. In line with

their colonial experience, the underdeveloped countries

naturally view all the public pronouncements of the major

imperialist states with suspicion. Consequently, inter­

national public relations become of vast importance in

carrying out the actual American aid programs. Any attempt 156

to present United States offers in purely altruistic terms would be automatically rejected by most recipients, along with considerable speculation as to what the real intentions

of the United States were. Such theorization, accompanied as

it might well be by various moves attempting to counteract

suspected evil motives, could lead to extensive international

complications. Similarly, in America's effort to build up

strategic materials for the defense of the Western world, the

United States should avoid mixing this goal with attempted

development inside the underdeveloped states. Motives must

be clearly outlined and segregated. If this is done, accord­

ing to a former official of the Technical Cooperation Adminis­

tration, substantial good-will should follow. The benefit re­

dounding from open-handed relations of this nature should be 2 more lasting than gratitude.

Historically, the American extension of economic aid to

other countries began with the relief voted in 1Ô12 for the

political purpose of supporting an aborted Venezuelan re- 3 volt agsinst Apanish rule, but the most extensive early

Bingham, 0£, cit., p. 217. The Nation, in Rangoon, editorializing on American assistance, approved the frank manner in which the United States made no" secret about the fact that its efforts to improve Asian living standards were based on a desire to keep underdeveloped areas from going communist. July 13, 195*6, p. 4.

^Harold A. Bierck, Jr., "The First Instance of U.S. Foreign Aid," in Inter-American Economic Affairs. Summer 1955» quoted in Charles Wolf, Jr.. Foreign Aid; Theory and Practice in Southeni Asia (Princetonl Princeton University Press, 1560), p. l2. 1^7 activity came a quarter century later, A detailed examina­

tion of government-sponsored or government-approved techni­

cal missions during the 1838-1938 period has been made by

Professors Merle Curti and Kendall Birr, who found that

economic, political, and humanitarian motives inspired

assistance requests and efforts then as well as now. Among

other examples cited was a parallel to contemporary devel­

opmental schemes proposed in the 1850's when the Reverend

Ralph R, Gurley, a member of the American Colonization

Society investigating conditions in Liberia, urged the

Senate to extend economic assistance to that struggling

country in a form presaging contemporary aid. He stated then

that the United States, by helping Liberia develop her re­

sources and increase her trade, would make new markets avail­

able for American products and so essentially increase com­ merce, He believed, too, that "more noble" sentiments

should prompt the building there of the first "civilized"

cities and states in central Africa and so bring that vast

continent into the circle of "enlightened" nations,^ Al­ though nothing was undertaken in support of the infant protege

until the turn of the century, the principles of aid were

^United States, Congress, Senate, "Report of Rev, Ralph R, Gurley, Washington, February 15, 1850", 31st Cong,, 1st Sees,, 1850, Doc, No, 75 p, 33, quoted in Merle Curti and Kendall Birr, Prelude to Point Four (Madison, Wisconsin: University of Wisconsin Press, 1954) p, 66, 158

thus set forth at a very early time, A further example of

the potential economic opportunities of foreign assistance

occurred In the 1880s when the Shah of Persia sought Amer­

ican technical assistance on the ground that economic benefits

would stem from the harvest of Persian mineral and agricul­

tural wealth, A few years later, the United States was even

offered Industrial and commercial ascendancy there,5 Persia

was seeking to avoid entanglements with European states

which would curtail her national sovereignty. Inasmuch as

America had no Interests In the Middle East, her citizens

were considered acceptable Investors by the government.

In the attempts of the United States to establish effec­

tive democratic administrations In Cuba, Santo Domingo,

Haiti, and Nicaragua in the early decades of the twentieth

century, efforts which somewhat parallel today's democrati­

zation moves, the functioning motives appeared to be a

"compound of economic interest, humanitarian sentiment, and

strategic considerations , , , , so mixed that American alms were never clearly defined beyond a vague desire to maintain

a series of reasonably stable repiillcs, free from non-Ameri­ can domination,"6

For example, following the Spanish-American War,

Estate Department-Embassy exchanges quoted In Ibid, . PP. 72-73.

Gibld.. p, 205. 1^9 President McKinley instructed the American commander in

Cuba to be sympathetic to any attempts to improve the liv­ ing standards of the underprivileged classes and to pay particular attention to reforming sanitation and educa­ tion,7 Subsequently General Leonard Wood, as military governor, interpreted his instructions to mean the building of a state "modeled closely upon the lines of our gréât

Republic."8 In Haiti, a 1915 treaty with the United States authorized American aid for the development of local agri­ cultural, mineral, and commercial resources as well as the strengthening of the country's financial base. In support of subsequent actions there. Marine commander General Eli

Cole is quoted as saying that the United States "had a moral duty to clean that place up and establish decency down there, because it did not , , ," while the American in charge of the local gendarmerie reported that his fellow nationals were fired with the concept that they were to "make out of

Haiti a first class black man's country , , , , What we wanted was clean little towns, with tidy thatch-roofed dwellings",9

7charles S, Olcott, Life of William McKlnlev (2 Vols,, New York; Houghton Mifflin, 1916), II, 196-202, quoted in Curti and Birr, o£, cit.. p, 82,

Qlbid. . p, 83.

9U,S,, Congress, Senate, Select Committee, Hearings. an Inquiry into the Occupation and Administration of Haiti ând Santo Domini^ (Washington, I922), pp, 516,518, quoted in Curti and Birr, og_, cit.. pp, 127-128, 160

These condescending expressions characterized the closing days of the West's major era of Imperialist expansion.

One outstanding indication of America's humanltarian­

ism during the early period Is the well-known educational use to which a portion of the Chinese Boxer Indemnity funds were put beginning shortly after the turn of the century.

Other examples Include the proposed Huai Valley project in

China, Subject to perenfolal flooding, for which the Ameri­ can Red Cross made major relief contributions, this river basin seemed a logical place for conservancy to minimize flood damage and reduce ^uman suffering. Inspired by the

Red Cross, the State Department In I91I successfully sought the approval of the Chinese government for the project as a measure of both economy and h u m a n i t y , 10 Altogether the scheme would have called for $30 million, but financing proved impossible because of the First World War and It was abandoned. It foreshadowed, however, the large-scale valley development ideas of the present day. Another developmental project in China, with strong humanitarian overtones, was the reforestratlon program initiated and carried through as a result of Major George P. Ahern's interest following a private visit in I9IO when on leave from his post in the

Philippines, Schools, nurseries, and the exchange of

lOgtate Department-Embassy exchanges quoted in ibid.. P. 145. 161

training personnel resulted from his efforts all without

advantage to his own government

Post“World War I relief work also falls under the

humanitarian category. For Instance, In the Baltic area,

the American Relief Administration under Herbert Hoover was

praised because It made no attempt to use American power to

garner future advantages.in the same Idealistic period

the Halbord Mission, Investigating the advisability of an

American mandate over Armenia, reported as some of the argu­

ments favoring this venture the fact that the Near East

"presents the greatest humanitarian opportunity of the age—

a duty for which the United States Is better fitted than any

other — as witness Cuba, Puerto Rico, the Philippines,

Hawaii, Panama and our altruistic policy of developing

peoples rather than material resources alone,"13 Although

the evidence put forward Is not without qualification, the

commission’s report concluded with a comment stressing the

extent of the respect and affection with which the United

States was regarded In that region as a result of Its past

actions as well as Its lack of commitments there.

lllbld.. p, 144.

l^Arthur Ruhl, New Masters of the Baltic (New York; E, P. Dutton and Company, 1921), p, 49. Quoted In Curti and Birr OP. clt., p , 152,

13u.S,, Congress, Senate, "Report of the American Mili­ tary Mission to Armenia," 66th Cong,, 2nd Sess,, 1920, Doc, No. 266, pp, 26 ,28 , quoted In Curti and Birr, op., cit. . pp. 153-154. 162 In addition to ordinary financial assistance. United

States technical aid during the century which Curti and

Birr examined ranged from exploratory surveys of entire regions or of specific crops for the benefit of the Ameri­ can users of raw materials, through attempts to stimulate commerce by directly Infiltrating foreign governments with special economic advisors, to remaking states In the Ameri­ can democratic Image, These efforts were primarily direct­ ed at the areas In which the United States felt definite direct concern, specifically the American Republics, East

Asia, and the Pacific, The respect for the United States in Africa and the Middle East during this period was doubt­ less due to the fact she had very few Interests In those areas and represented the Ideal of a state without an ulter­ ior motive. Of the countries of South and Southeast Asia, only India, Slam, and French Indochina received any of the

American governmental or quasl-governmental experts going abroad during this pre-World War II period. All went out

In the present century and all were In the field of agri­ culture, The appointment to India was In Mj'sore, one of the southern Princely State protectorates enjoying sovereign­ ty in domestic affairs.

In many instances, forelgn-lnitlated requests were quite successfully concluded since the local government was behind the change requested. The observation has been made, however, that occasionally such willingness to cooperate 163 lasted only so long as a request for a loan was pending; in such cases, once the money was forthcoming, receptivity to

American suggestions involving its use or methods of repay- 14 ment faded rapidly. In certain instances, public heààth missions, such as those eliminating yellow fever, proved of tremendous interest to foreign governments. Relatively lacking in political significance, such help proved attrac­ tive to states otherwise prone to reject aid as being the means of imperialist encroachment. This fear was

^Ibid., p. 206. Technically, these early experiences provided many practical lessons which, had they been corre­ lated, might have proven of invaluable help today. Although there is a divergence of opinion as to whether comprehen­ sive programs or limited objectives are more satisfactory, Curti and Birr found that history indicated there were ad­ vantages to both. Many of the latter provided lasting re­ sults, despite some fears to the contrary, while the former, often thought to be more practical, sometimes suffered from difficulty in large-scale planning and from the fact that the larger the scheme the more obstacles there were to be overcome. Certain problems came to light as a result of these early experiences, such as the bitterness over the high salaries paid to experts (for example, the American head of an IB70 agricultural mission in Japan received more than the Prime Minister), the language barrier (delicate shades of meaning were often missed), contempt for local customs and peoples (dealing with Africans proved exceedingly difficult for some race-conscious Americans), efforts to transpknt Anglo- Saxon beliefs in an alien culture (General Wbod*s experience in Cuba), difficulty in training native-born replacements to take over from the foreign experts, red-tape, and bureau­ cratic interference. Lack of a public service spirit, dishon»^ esty in government, and the absence of a middle class also became apparent as barriers to progress. The authors conclu­ ded that "missions should, clearly, be planned not only with 164

particularly prevalent in Latin America, especially up to

the 1930's. After that time, official United States policy worked toward improving relations with states there. Part

of this new approach was the developmental assistance given by the Institute of Inter-American Affairs (IIAA). This

program provided the testing ground for official American

experience in developmental economics; under IIAA direction,

local governments and the United State ; worked Jointly to

improve health, skills, and education on the village level.

The difference between the assistance efforts of the

pre- and post war periods lies in scale rather than in na­

ture; it was not until January 19^9 that American participa­

tion in economic development approached the concept of pres­

ent-day programs. Prewar attempts were either private, such

as missionary efforts, or small-scale government activity,

such as the lending of technicians or the making of loans.

There was nothing corresponding to a national commitment to

the principle of improving life in other lands, a commit­ ment first suggested in the Point IV announcement of 1949,

care but with imagination, and in both the planning and the execution men and women should participate who really know something about the country being helped. Technical skill is not enough— there is needed also appreciation of the ideals and the accomplishments of the other land. Firmness and confidence are necessary in dealing with the inhabitants, but courtesy and tact are Just as important" (p. 218). The comment could have been taken from any work on contemporary developmental aid. For a summation of such problems see Bock, Fifty Years of Technical Assistance, op. cit. 165

Some analysts, however, open their consideration of postwar public developmental assistance with the earlier

Greek-Turkish aid and the. Marshall Plan. ^ These, al­ though national in depth, were both limited in scope and application. The latter proposal, in particular, bore little resemblance to the developmental economics of later days. The Truman Doctrine of March 12, 1947, seeking funds for Greece and Turkey, did, however, imply principles which were applicable to other areas. The President requested military and economic assistance to help these two countries

"maintain their free institutions and their national in­ tegrity" against aggressive totalitarian movements. Such authority, when forced on free peoples either by di­ rect or indirect aggression was held to undermine inter­ national peace and,iin consequence, adversely affect the 16 security of the United States. The Marshall Plan was an extension of the same aim with the specific objective of

For details on these subjects, see William Adams Brown, Jr. and Redvers Opie, American Foreign Assistance (Washington: Brookings Institution, 1953), pp.'123-141* Contrary to Administration wishes, Congress extended the Marshall Plan idea into the entirely different and unre­ lated atmosphere of postwar China in what could be called the first vague developmental (as opposed to reconstruction) aid program. This vague and ill-defined project anticipated organizad Administration proposals and, when the latter appear­ ed, failed completely to correspond to them. Thus the Admin­ istration's efforts to institute a developmental economics program prior to the Point IV announcement failed. See ahead. 16 Raymond Dennett and Robert K. Turner, eds.. Documents on American Foreign Relations. 1947 (Princeton: Princeton University Press,1939 - ), p. 648. 166 restoring the economic imbalance resulting from the war.

Because of this, and the cultural affinity between the United

States and Europe, Eugene Black holds that this European

Recovery Program, despite its success, bears almost no com­ parison to the world-wide development problem but is use­ ful only as a contrast. He stresses that not only is there no common heritage between the rich and poor lands and no specific definable solutions for their problems as was true in regard to Europe and the United States, but the political and economic aims of one underdeveloped nation often com­ pete or collide head-on with the immediate political and economic aims of the others — a situation in violent, con­ trast to that existing among Western European states.^7

Restoring industry in a country already gone over to mech­ anization and trained in machine techniques is vastly dif­ ferent from building industries in areas lacking technical know-how, managerial skills, and labor experience, to men­ tion only a few of the differences between the intended beneficiaries of the Marshall Plan and of Point IV-develops mental programs.

In theory at least, the first step in the formal phase of American governmental dedication to the idea of helping to raise the living standards of the world's under­ developed peoples originated in President Harry Truman's

l^Black, 0£. cit.. pp. 21-22, 167

19^9 Point IV Proposal, This marked, for the first time in world history, the beginning of an entire nation’s commit­ ment to improving the way of life of the poorer states. The

idea for this program originated with a State Department

employee, Ben Hardy, an ex-newpaperman who, when unable to interest anyone in the Department, referred his proposal to the White House. It then appeared in President Truman's

1949 inaugural address^^ despite objections from Under Sec­ retary Robert Lovett and Charles G. Bohlen, who felt that

it was too vague and immature.19 Specifically the President urged

, , . making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas .... Our aim should be to help the free peoples of the world, through their own efforts, to produce more food, more clothing, more materials for housing and more mechan­ ical power to lighten their burdens . i . . It must be a world wide effort for the achievement of peace, plenty, and freedom .... Old Imperialism . , . has no place in our plans. What we envisage is a program of development based on the concepts of democratic fair-dealing. All countries, including our own, will greatly benefit from a constructive program for the better use of the world’s human and natural resources. Experience shows that our commerce with other countries expands as they progress industrially and economically. Greater production is the key to prosperity and peace .... Only by helping the least fortunate of its members to help themselves can the human family achieve the decent, satisfying life that is the right of all.

18As part of a major United States course of action for peace and freedom. The preceding three points dealt with support for the United Nations, continuation of econom­ ic recovery programs, and military assistance. Documents on American Foreign Relations. 1949. op. clt.. pp. 9-11.

ISBingham, o£. cit.. p. 10. 168

In this statement he set forth the humanitarian, political, and economic motives which reappeared frequently in subsequent years.

Similar technical assistance projects sprang up on all sides: in the United Nations, among the British Commonwealth countries, and in bilateral arrangements between several

European states and the underdeveloped ones. The concept of such assistance, both practical and humanitarian, involved the following observation from historian Arnold Toynbee as it spread throughout the world: "Our age will be remembered chiefly for its having been the first age since the dawn of civilization in which people dared to think it practical to make the benefits of civilization available for the whole human r a c e , "20 critics, however, claimed that it was not the "bold new program" asserted by its sponsor, but that such humanitarian activities had been common for years among missions abroad. This opposition was countered by the obser­ vation that previous developmental schemes had never before had the entire resources of a nation committed to their ful­ fillment.

Economic aid to southern Asia was slow to develop.

Prior to the first real thrust of United States developmental assistance into the region, aid was extended only to the

^^The New York Times. October 21, 1951. 169

Philippines as a reconstruction measure necessitated by

American interests in that c o u n t r y , interests not reflect­ ed among the colonial dependencies of the rest of the region despite the critical situation within that area. Wartime destruction, inflation, disruption of trade, the fall of per capita income below prewar levels, agriculture so dis­ turbed that it failed to regain prewar productivity for a decade and more — all were widespread, yet American inter­ ests were not considered sufficiently great to warrant re­ construction aid outside of her former territory. The major reason for this is obvious. Except for Thailand, the states of South and Southeast Asia were all dependencies of

European powers which were expected to care for their own,

19^7 was the year in which Britain relinquished control over India, Pakistan, Ceylon, and Burma, thus inaugurating a new period in their world relationships.

The firat positive step in the direction of regional assistance came during the 1948 congressional hearings on the Marshall Plan when the Secretary of State was asked whether or not European recovery depended on reestablishing

21u,S., Congress, The Philippine Rehabilitation Act of 1946. Public Law 370, 79th Cong,, 2nd Sess,. 1946. From 1946 to 1950 this aid amounted to $920 million, $400 million of which was for private claims. As these were usually of relatively small amounts, under $900 each, they generally went for consumption rather than developmental use, Shirley Jenkins, America's Economic Policy Toward the Philippines (Stanford; Stanford University Press,'1954)^ PP. 49-52, 170 trade with these colonial areas and consequently whether or not the United States should make an effort to extend 22 aid to Asia. It was at this point that congressional action hindered an administrative attempt to separate

Marshall Plan aid from the different assistance required hy an Industrially undeveloped China. Democratic and Re­ publican congressmen alike repeatedly urged that National­ ist China, for which there was widespread goodwill, be In­ cluded In the general scope of the pending foreign assist­ ance legislation. Title I of which ultimately authorized the European Recovery Program (ERP) under the Economic

Cooperation Act (EGA). The Administration opposed this congressional action on the ground that, although the prin­ ciple of aid was sound In general application, practical conditions In Asia were quite dissimilar to those existing

In Europe, Congress* desires were not to be denied, however.

It supplemented European recovery by allocating aid to the

Nationalists under the China Aid Act, Title IV of the Por- 23 elgn Assistance Act of 19^2,

S., Congress, House, Committee on Foreign Affairs, Hearings, U.S. Foreign Policy for a Postwar Recovery Program, gÔth"(3ohg.,' 2nd Sess. W . ------^^Publlc Law ^72, 80th Cong., 2nd Sess., 19^2, In tak­ ing this stand, both Congress and the Administration repeat­ ed their positions taken on the Foreign Aid Act of 19^7 which In December had authorized, at the President's request, some #500 million Interim aid funds to relieve food and fuel cri­ ses In France, Austria, and Italy. Congress Insisted upon adding China to'the list of eligible relief recipients. 171

Certain portions of ERP funds found their way Into the

Netherlands East Indies In the years which followed. Over

$100 million In commodity aid, spent chiefly for textiles

and food, went to the Islands before the close of 1950,

representing the first American assistance reaching any

country within this region other than the Philippines. In

actual fact, this Indirect use of ERP funds led ultimately

to direct United States participation In political develop­

ments there and set a fair precedent for the use of funds for

specific goals. In the fall of 1948, the Indonesian Re­

public, then a member of the Netherlands Union, successfully

put down a communist revolution. Later that year. In Decem­

ber, when the Dutch embarked on a "police action" within the

Republic, the United States cut off that portion of ERP aid

to the Netherlands which corresponded to funds used for

Indonesian Imports. This, plus the Implied threat that the

entire Dutch allocation of EGA funds would be lost unless

The Hague mended Its ways, contributed to the peaceful solu­

tion of the problem and the ultimate complete Independence

of Indonesia the following year. In like vein, certain

French expenses under ERP contributed to Indochinese relief

during the period. Although franc not dollor outlays, these

funds used In France proper rather than In Indochina could

24u.S., International Cooperation Administration, Operations Report (Washington, 1956), p. 43. 172 have reduced French dollar receipts under EEIP.^^

It was from the China Aid Act that the lessons were learned which were ultimately to be applied in direct assistance to the southern region. Congress and the

Administration were as much at odds over the question of military versus economic help to the Chinese as they had been over the question of economic aid between China and

Europe, The State Department held that it was not lack of military supplies or equipment, in short it was not for military reasons, that the Kuomlntang government was los­ ing its fight against the insurgent communists. It main­ tained that the reason was lack of public confidence re­ sulting from the venality and governing efficiency of 26 the Chinese administration. Congress, however, felt that for economic aid to succeed, stable conditions were needed and military aid would make them possible. President

Z^Thls Indirect aid to French Indochina has been esti­ mated at $^75 million for the 19^2-1950 period, an amount roughly half the average annual ERP contribution to France. Wolf, op. cit., p. 37,

^^ouse. Hearings on Postwar Recovery, op, cit,. pp. 1562-1563. Secretary of State Ceorge Marshall testified: "The lowest [feeQ that the Government does not regard their Interests as of great Importance , , , . You can pro­ vide unlimited quantities of material, but you must have certain fundamental things in the military force, or the material is of very moderate importance .... You must have effective leadership, you must have a leadership which does not lose morale by its characteristics," 173 Truman requested of Congress In February 19^3 some $570 million for economic aid only, on the grounds that if this

led to governmental reform and to reduction in inflation­

ary tendencies, stability might possibly result. Congress

scaled down the Administration request. It authorized only

$538 million for economic assistance, but earmarked an addi- 27 tional $125 million for military purposes.

Use of these funds provided one lesson for subsequent

aid to Southeast Asia. There is some small indication that

the Administration’s view, given time, might have worked

successfully in slowing the communist advance. The ECA, in

a report on its activities to Congress, expressed the opinion

that United States aid had been crucial in reducing unrest

within several of the port cities. Furthermore, the community

development activities of the Joint Commission on Rural Re­

construction were held to have contributed substantially to

eliminating some of the bases of dissatisfaction throughout 2S5 the areas in which they operated. Militarily so much equip­

ment was lost and so many areas were surrendered despite the

^TActually the President's request was to stabilize conditions over a fifteen month period in seven major cities. Congress pro-rated the request over twelve months, arriving at a figure of $.^63 million of which $125 million was set aside for military purposes, leaving only the aforementioned $33^ million for economic assistance. Brown and Opie, op. cit., p. 335. ^^U.S., Economic Cooperation Administration, Fourth Report to Congress, January-April 19^9 (Washington, l9^9)> p. 77, These provinces, for what it is worth, were the last to fall to the communists. 174 considerable size of the Nationalist forces as obviously

to lead to the Administration*s'conclusion that military

aid could play only a limited role in stemming a disaffected 29 popular revolt against established authority. Such were

the lessons of the fall of China on the subject of economic

and military assistance.

The loss of the Chinese mainland in late 19^9 thus led

to the assumption that economic assistance was a better

choice than military aid in cases of internal unrest. Those

favoring this point of view, and they included the group

approving technical assistance under Point IV which had been

announced the preceding January, were enthusiastic in the

extreme. This fervor was dampened by the Korean War which

pointed out to some that economic assistance, successful

as it had been in Korea,was no barrier to communist

^^See back, note 26.

^^Initially Korean aid was a relief matter. It was handled by the Army as a means of reducing unrest and aiding the Occupation. Known as the appropriation for Government and Relief in Occupied Areas (GARIOA), it was an extension of the Army’s Civilian Supply Program providing Imports essential to the maintenance of life in Korea and Japan. In Korea, GARIOA aid totaled I326 million from the close of World War II until 19^9. At the beginning of that year, with the end of the Occupation, the aid program was transferred to the Economic Cooperation Administration which received also some $30 million in unallocated GARIOA funds. Emphasis then shifted to rehabilitation in order "to assist the Korean people in establishing a sound economy and educational system as essential bases of an Independent and democratic state." See ECA, Fourth Raport, op. cit., p. ^7* It was ECA's pro­ posal to send million over three years for regaining prewar per capita food production levels and expanding textile 17S aggression. Here, however, it seems that thinking tended to get fuzzy. Economic assistance was designed to develop, over a period of time, a stable society with such vested

Interests that It would resist, with violence of necessary, any external threat to Its existence; this certainly oc­ curred In South Korea, It was also intended to counteract those social forces which Invite unrest and encourage a populace to seek an out to Its discomforts, a change such as turning to communism. The lesson which should have been learned from the Korean War would seem to have been that military assistance was essential to resist direct attack — not that economic aid was faulty. It is never a case of black and white. In certain instances one type of assist­ ance might bring greater rewards in terms of international

and extractive industries in order to cut imports and establish some exportable surpluses. Congress, apparently disturbed over the failure of economic assistance to halt the fall of China, appropriated only $60 million in two interim acts in October 19^9, following this with $90 million in February 1950. Congressional delays were apparently caused by a desire to force Administration clarification of its Asian policy which, unfortunately for the Korean aid bill, was so worded in Secretary Acheson's speech of January 1950 as to put Korea outside the defense perimeter of the United States, thus making it a place of apparent marginal interest. Despite these handicaps, some progress was noted in the eighteen months available for ECA rehabilitation activities in Korea, With their $140 million, agricultural production was raised 20 per cent above prewar levels and industry ex­ panded 50 per cent, ECAPE, 1955 Survey (Bangkok, 1956), pp, 195, 209. 176 peace, local stability, and American security than would the other; at still a third time, a mixture of the two types might be needed; and, in Wolf's analysis31 in still a fourth instance, foregoing all aid in favor of national American military outlays might by the most profitable form of in­ vestment, The real question arises over who decides which policy to use. The rethinking of assistance policy which resulted from the Korean War directly affected the course of grants to Southeast Asia,

Meanwhile, however, economic assistance had slipped into the region via a military back door. In October 19^9 to implement the North Atlantic Treaty, Congress gathered all military assistance programs which, prior to that time had been separately appropriated, into one general Mutual

Defense Assistance A c t , 32 Two features of this bill, other­ wise of little interest in view of its military emphasis, apply to southern Asia, First it contained a hope for the creation of a NATO counterpart in Asia and included a state­ ment urging that such a grouping encourage the economic and social well-being of its members in addition to their mili­ tary security. Second, Title III of the Act authorized.$75 million for use, at the President's discretion, for promot­ ing peace and security in the "general area" of China, Its

cit.., p. 51.

32u.S,, Congress, Public Law 329, 81st Cong,, 1st Sess,, 1949. 177 terms were so loose that $750,000 was used for technical and economic aid to Vietnam in June 1950, Since this oc­ curred subsequent to the fall of China and prior to the

Korean War, it bears out the thinking then current that economic assistance in building internal confidence and security would cut the need for large national armies.

The first actual reference to developmental aid to this area appeared in Secretary of State Dean Acheson's famous

"defense perimeter" speech of January 1950, Here he sat forth the concept that resistance to subversion and infil­ tration depended not only on military means, which actually were ineffectual against this method of spreading communism, but required sound administrations and the development of the resources and the technical skills of the Pacific area so that states there would not fall either through ignorance, or through belief in false promises, or through economic distress,33 His remarks stemmed directly from the China aid experience in pointing out the potentials inherent in econi- mic assistance and the limitations on military defense again­ st communist subversion.

With the fall of China, some $89 million remained still

^^Doc^ents on American Foreign Relations. 1950, op, cit,, p, 4È9, ÏHe AcHeson speech allegedly had another effect — namely that, by excluding Korea from the area of strategic American interests, it precipitated the communist invasion of South Korea in June 1950. 178 uncommitted from the Initial 1948 China Aid appropriation.^^

Unfortunately by that later date, Formosa alone remained to the Nationalists, The China Area Aid Act of 1950> Title II of the Foreign Economic Assistance Act of that y e a r , 35 made these uncommitted funds available for use in the same "general area" of China prescribed in the earlier military bill. It was this measure which provided the legal basis for develop­ mental aid to Southeast Asia, This assistance was under the supervision of the Economic Cooperation Administration's

Special Technical and Economic Missions (STEM) established in recipient countries.

In June 1950 Congress also passed the Act for Inter­ national Development (AID) which activated the Point IV program, but this did not become operational in Asia until

1952,3^ The essential difference between the two

34The act had been extended until June 30, 1950 for those areas of China free from communist rule,

35u.S,, Congress, Public Law 535, 81st Cong,, 2nd Sess,, 1950

3^It then concentrated primarily on the Indian penin­ sula rather than penetrating the southeastern region where ECA-STEM programs were already functioning. In these early days. Southeast Asia, adjacent to now-communist China and since 1948 plagued with widespread communist unrest, was considered to be a more essential area for assistance, than the Indian subcontinent which was farther removed from the communist menace geographically, was under British Common­ wealth economic protection evidenced in the new-born Colombo Plan, and was stable internally. Consequently, relatively little attention was given to aiding South Asia, It is inter­ esting to note that concentrated aid began only after the communist bloc initiated an aid program in the area in late 1 9 5 5 . 179 assistance programs was ECA's underscoring of Improved pro­ duction through increasing the supply of local capital and

AID'S emphasis upon improving production through technical change. There was widespread public interest in the low- cost aspect of technical assistance for developing the poor­ er states of the world and supporters of the program encour­ aged the spread of a belief in this feature. Congress in­ itially interpreted Point IV to be an inexpensive high-yield operation and later found it difficult to accept proposals for more expensive developmental assistance to South and

Southeast Asia, Such administration requests were out sub­ stantially during the next few years as a result of this legislative outlook. The American public is consequently subjected to annual governmental battles over foreign aid bills. In contrast to the late 1940's when Congress was more anxious than was the Administration to extend aid grants, the 1950's witnessed persistent modification of presidential requests.

One basis for a belief in low-cost aid for Southeast

Asia was the report of the Griffin Mission which had been sent to study the economic situation in French Indochina,

Indoesia, Thailand, and B u r m a , 37 Headed by a deputy chief of the old China aid mission, R, Allen Griffin, the group

37Malaya was included originally, but was subsequently dropped as a British Government responsibility. The classified report of the Commission has long been unavailable. 1 8 0 apparently stressed the triggering power of United States aid in sparking an internal development cycle. It was envisaged that American funds would help unlock the ex­ tensive resources of the countries in question both for their own and for the world's good,38 as with the European recovery program, aid was to be based on self-help, but, contrary to the European case, the situation was seen not primarily as a dollar shortage problem but involved a dearth of internal funds, a scarcity of trained and ex­ perienced technicians and administrators, and a lack of technical skills and equipment. In short, Europe required more dollars and less technical assistance; southeast Asia generally required fewer dollars and much more technical assistance,39

In the Philippines a similar body was at work. This was the United States Economic Survey Mission to the Philip­ pines, popularly termed the Bell Mission after its chief, former Treasury Undersecretary Daniel Bell, It was designed to advance proposals aimed at making the Island sel&support- ing. The Bell recommendations^^) differed from the Griffin

38u,S,, Congress, Joint Hearings. Mutual Security Act of 1951. 82pd Cong,, 1st Sess,, 1951, p, 579.

39u,s,, Economic Cooperation Administration, Ninth Re­ port to Congress. Aoril-Julv 1950 (Washington, 1950% p, 100,

^Osee note 39, chapter III, This group followed two 1947 investigations, one by the Joint Philippine-American Finance Commission and the other by the Phlllppine-Unlted States Agricultural Mission, I8l ones in that the United States, as a requirement for its assistance, specified more stringent domestic action in:the

Philippines than in Southeast Asia generally and proffered, albeit without commitment, a specific amount of capital out­ lay over a specified period of time. In both cases, techni­ cal assistance and the impetus toward a developmental change were implicit in the recommendations. Underlying each report was the premise that economic and technical assistance would promote political stability in Southeast Asia, a belief stem­ ming from the then current China and aid lesson.

In the military field, the southeastern part of Asia was the subject of another survey mission immediately fol­ lowing the outbreak of the Korean War. The subsequent Mu­ tual Defense Assistance Programs (MDAP)in the countries there, although varying in objectives, were generally small in scope and designed to create local constabulary units rather than crack military forces.

In 1950-1951, two general reports appeared which also had an effect on assistance programs in Asia. The first was the Gray Report which, in connection with development, put heavy emphasis on the production and dis-tribution of raw materials in the new states and upheld the concept of technical and economic assistance^^ for the prime purpose

^^Up to $500 million annually for several years. United States, Report on Foreign Economic Policies (the Gray Report) (Washington: U.S. Government Printing Office, 1950), p. 6 9 . 182 of affecting their political stability. This attitude, to­ gether with the financial recommendations, was endorsed by the Rockefeller Report^^ of the following year and presaged the actual appropriations, scaled downy: under the Mutual

Security Act (MSA) of 1951. The later consolidated under one head for reasons of supposed efficiency, the administration of military, economic, and technical assistance. In Europe, emphasis was thereafter placed upon military requirements, but the primary efforts in Southeast Asia remained the same as outlined in the Gray-Rockefeller reports. Congressional concern over value received, however, led to a provision that any country accepting military aid had to pledge "its manpower, resources, facilities, and general economic condi­ tions to , , , its own defensive strength and the defensive strength of the free world,"43

In Asia the results of this pledge were explosive.

Public opposition brought the fall of the Indonesian cab­ inet, the withdrawal of the agreement, the end of military aid there, and an eight-month cessation of economic assist- ance,^^44

^^Partners in Progress, op, cit, . pp, 61-52, 69, It further emphasized the need for a single unified aid admin­ istration,

^3u,S,, Congress, Publis Law I65, 82nd Cong,, 1st Sess,, 1951, Sec, 511 (a) 4,

^^Burma also refused further military help. The New York times, February I7, 22, May 18, September 19, 25, 1952, lG3

The goals implicit in the pledge were incompatible with the neutrality principles held by the new Asian states and point up the problem of "aid with Strings", Nevertheless, the total funds obligated in southern Asia for fiscal 1952,^^ the first year of operation of the Mutual Security Program,

(MSP), were double those of 1951.^^

The result of this confusion in southern Asia over military aid recipients being obliged to give pledges of their devotion to the free world led, in 1952 Mutual Security legislation, to a change in non-military assistance admin­ istration, All such then became the responsibility of the

^5it should be understood that the Mutual Security Act of 1951 (or 1953 or 1955) authorizes the Mutual Security Program of 1952 (or 195% or 1956); the actual authorizations and obligations as well as political repercussions occur in the later years,

^^See Table 11, In 1951, $70.3 million in aid was ob­ ligated for southern Asia while in 1952 the total was $149 million. Wolf concerns himself with the intercountry and intercommodity analysis of aid. Obligations in India rose from 7 to 35 per cent of the regional total, while those to Pakistan rose from less than 1 to over 7 per cent, in South­ east Asia, however, only in the Philippines did the total assistance obligated maintain itself at the same percentage level as in 1951. The rise in American public investment in the Indian area is ascribed to a congressional revaluation of the danger of communism there resulting from an aborted coup in Pakistan, communist gains in the Indian elections of 1951, and increased evidence that the first Indian Five Year Plan would run into financial difficulties the Commonwealth coun­ tries would be unable to meet. The decline in the percentile assistance given Southeast Asia is laid to a decrease in the ■ miarglnal productivity of aid -- in short, obvious and immedi­ ate returns, as from increased agricultural production result­ ing from better seed, could no longer be expected. This was evident in Administration proposals for capital funds for investment, monies Congress was not to make available until 1954. Op. cit,, pp. 127-130, TABLE 11

UNITED STATES NON-MILITARY AID TO ASIA COMPARED TO TOTAL ASIAN

AND TOTAL GLOBAL ASSISTANCE, 1951-1957*

Obligations Total Aid Southeast Asia South Asian for Global Asian Total % Asian % Global Total fo Asian fo Global (millions §) (§m) (§m)

1951 2607.1 165.2 64.6 59.5 2.5 5.7 5.5 0.2 1952 1887.2 250.0 85.5 57.2 4.5 65.5 27.6 5.4 1955 1876.4 255.2 58.9 25.0 5.1 70.8 50.1 5.8 1954 2151.9* 1170.6 750.1® 62.5 55.9 110.5 9.4 5.1 1955 1688.0 1072.5 545.5® 50.9 52.5 158.2 14.8 9.4 1956 1428.1 941.8 570.7 59.4 26.0 175.4 18.6 12.5 1957 1500.1 1025.6 458.5c 44.8 50.6 177.8® 17.4 11.9

^'Compiled from United States government source figures appearing in Charles Wolf, Foreign Aid* Theory and Practice in Southern Asia (Princetonî Princeton University Press, i960). Tables 5, 4, 6, 8, 11, 12, 14, 16, 19, 20, 227 24, 26, and 27.

^This figure exceeded the appropriation by $800 million, made up through Military Defense Assistance Program transfers and the use of deobligated funds from previous years.

^Operational (not covering equipment) costs of military forces in Indochina (195^» 0678.6; 1956, $257.0 ; and 1957» §272.5); Indochina, the Philippines, and Thailand (for 1955)» and, in South Asia, Pakistan (1956, §40.9 }and 1957» $57*0 ). The 1955 total was §455.7*

03 185

Technical Cooperation Administration working under the Act

for International Development, Emphasis was thus shifted

to non-military motives for development in such countries,

serving to emphasize the fact that the United States was

indeed inspired by such feelings. In the case of French

Indochina, Thailand, the Philippines, and Pakistan, all of

whom continued to receive military aid , the 1953 MSP turned

all assistance to military ends, that is each grant or loan,

even vAien creating an operation equally adaptable to civilian

needs, was justified as increasing internal defense efforts

either by developing facilities of military supply or by

releasing local factors, for military use. This is termed

"military support" and is distinguished from actual arms

aid; it can be, in effect a form of developmental assistance.

The 1953 authorizations were characterized by drastic

congressional cuts for all proposals. Only Pakistan, faced with a serious food crisis, was voted more assistance than had

been originally requested by the Administration. The Indian

grants were cut by about 60 per cent, largely as a result of 47 congressional dissatisfaction with Indian foreign policy.

I r% Indians attitude toward the United Nation’s interven­ tion in Korea, her opposition to the resumption of hostilities there following stalemated trace talks, her urging of United Nations membership for Red China despite its attitude in Korea, were all viewed with disfavor by Congress. Another factor leading to congressional criticism and hence to general 1 8 6

Aid to Burma was also reduced, but did not affect that state since It voluntarily. In 1953^ out off United States assist­ ance to clear the way for Its protest to the United Nations against the presence and activities on Burmese soil of

Nationalist Chinese troops with whom the United States was

Involved, Since Nationalist China was not represented In

Burma, government objections had been lodged with American

Embassy officials. The United States had virtually Ignored previous messages on the subject and the Nationalist forces were beginning to plague Burmese local administration, Burma's rejection of American aid at this particular time represented no hardship for the Union since Its rice sales had reached a peak because of the Korean War and had built up consider­ able foreign exchange reserves.

Certain Significant changes resulted from the aid legis­ lation of 1953. It has already been Indlcated^S that major short-term developmental tasks had been completed by 1952,

Bor the first time In the history of American assistance In

South Asia, funds set aside In 195^ for agriculture and health were exceeded by those marked for use In transport and

Industry, Another change was the Introduction, by the new

appropriation cuts concerned the amount of capital Invest­ ment proposed under alleged technical assistance programs. This hearkens back to the earlier reference to the low-cost, hlgh-yleld nature of technical aid, a concept too eagerly pushed by the Administration In the beginning and now re­ sulting In cut appropriations,

^^See note 45 this chapter. 187 Republican administration, of an aid category entitled

"Special Economic Assistance" to cover capital investments, investments which had received such drastic treatment from

Congress the preceding year because they were included under

"technical" assistance.

As in times past, Asian international developments served to dictate aid and allocations. Easing of the Korean

War, a Viet Minh invasion of Laos in 1953» and intensified activity in Vietnam all indicated that stepped-up communist warfare might be expected in Southeast Asia in the months immediately ahead. The result was an increase in military- economic resources made available to this region. Congress­ ional and presidential views were more in line with each 1^9 other than during previous legislative battles. Secretary of State John Foster Dulles pointed up the new interest in

Asia by observing that "A new order of priority and urgency

^ a ^ been given to the Par East."^^

The death of Stalin, the close of hostilities in Korea, the Vietnamese settlement, and the launching of a Soviet aid program occurred in the following months and had their effect on the annual MS Programs of the years following 195^»

^Only a l4 per cent reduction compared to the 4-6 per cent cut in regional requests for the previous year. Wolf, op. cit., p. Ib4-.

50.,The First 90 Days," in Department of State Bulletin. April 27, 1953» p. 605. 188

The Mutual Security Act of that year renewed the 19^9 congressional hope that a collective organization would be formed among the states of Southeast Asia both to Increase their economic and social well bring and to protect their security and Independent status,51 This Act also featured a change In the aid program's legal structure: after repeal­ ing all nine preceding laws, It incorporated the three fea­ tures of American aid (Mutual Defense Assistance, Develop­ mental Assistance, and Technical Cooperation) Into one pro­ gram under a single legislative authorization. As a further support to the American aid program. Congress also passed

In 1954 the Agricultural Trade and Development Act, commonly referred to as Public Law 480, authorizing the disposal of surplus American farm products for local currencies which would then be Invested In development projects.52 This ef­ fectively widened the source of Investment funds available to recipients,

1955 witnessed an abandonment of the emphasis on the military aspect of assistance and a return to the aid lessons learned In China, Greater stress was thereafter placed on

Sly,8., Congress, Public Law 665, 83rd Cong,, 2nd Session, 1954, Sec, 101,

^^Prorn 1955 to 1957, $850 million was obtained fp©m sales agreements made In southern Asia alone, G, Frederick Reinhardt, "The United States Role In the Economic Develop­ ment of the Colombo Plan Area," in Department of State Bulle­ tin . November 11, I997, p, 757. By i960 the total had reached $2,244,3 million. See Table 22j, 129 the potential dangers resulting from failure to develop economically. The Ms Act of that year created a triennial

President's Fund for Asian Economic Development with an initial allocation of $100 million for expenditures contri­ buting to greater regional or inter-country economic 53 strength. As in previous years, international events brought into focus the close connection between external fac­ tors and the allocation of aid. Assistance to Ceylon, sus­ pended since 1953 over the question of her trading with Oom- 54 munist China, was resumed, presumably as a result of her pro-Western stand during the Bandung Afro-Asian Conference,

Because of a general shift in the center of world affairs, both 195^ and 1955 aid allocations showed an increase in the overall allotments for the Asian area.

The 1956 Act brought forth the first indication of the contemplated extent of the Mutual Security Program, Congress stated therein that foreign aid would be continued "as long as international communism and the nations it controls con­ tinue by threats of military action, use of economic pressure, internal subversion or other means, to attempt to bring under

^^U,3,, Congress, Public Law I32, 24th Cong,, 1st Sess,, 1955, Sec. 4l2,

^^The Mutual Defense Assistance Control Act of 1951. Public Law 2I3 (SÉnd dong., 1st Sess., popularly called the Battle Act) banned economic assistance to any state which exported strategic items to communist nations and discouraged aid to those exporting other commodities (in this case rubber). 190 their domination peoples now free and independent",55 in actual operation, the Program was marked by Burma's request for the resumption of assistance. Certain political events strengthened her application — externally these consisted of a Soviet aid offer following the Bulganin-Khrushchev visit of 1955 and Burma's anti-communist stand on the

Hungarian Question;57 economically, her financial reserves had fallen, increasing her need for assistance] while intern­ ally, communists had shown marked progress in the elections of April 1 9 5 5 , Throughout the debate on the general aid appropriations, frequent reference was made to the need for a reappraisal of the United States aid program in view of the increase in communist activity in the field of economic

55u,S,, Congress, The Mutual Security Act of 1956, Public Law 7 2 6 , 84th Cong,,' 2nd Sess,, 1956, Sec, 2,

5^just as signing of a Soviet loan agreement with Indonesia in September 1956 may have been a deciding factor in increasing the 1957 allocation for that state. Similarly aid was increased to Afghanistan from $2 million to $18 million because of Soviet economic grants there.

57only two neutralist nations (Ceylon and Burma) voted against the Soviet Union and càlled for the withdrawal of Russian Forces from Hungary, In his speech, the Burmese representative indicated his country's delicate position in the expressive statement, "There, but for the grace of God, go we", 191 assistance to underdeveloped countries. These reappraisals led to several reports, both official and unofficial, on economic assistance and American foreign policy. In the picturesque words of Professor Thomas Schelllng, a former EGA official, "A competing bidder [for Asia, and Africa] hav­ ing suddenly appeared at the auction, we looked with renewed eg interest at the Item on the block". There was a rash of public writing on the subject at this juncture. Both congressional committees handling foreign affairs, the International Development Advisory Board, and a special presidential Citizen Advisory group all presented governmental reports on the aid problem. All favored separat­ ing military from economic assistance, preferably returning the former to the Defense Department for administration and Including military appropriations under the defense budget. It was felt that this would be more realistic and would like­ wise reduce ambiguities respecting the much-vexed assistance subject In foreign circles. One of the latest developments In the foreign aid field has been the progressive expansion of the Development Loan

58 "American Aid and Economic Development; Some Critical Issues," in International Stability and Progress: United States Interests and Instruments (New York: The American Assembly, 1957), p, 122, 192

Fund (DLF), originally authorized in the MSA of 1957, at which time it replaced the "Development Assistance" category of aid.^59 It was designed to make loans to governments, to quasigovernment agencies, and to private firms in order to develop both their economic resources and their free economic institutions in industry and in agriculture.^^ Its governing ordinance specifies that It must not compete with other loan agencies and that it must make its agreements only in ac­ cordance with sound banking practices. By the end of 1959, it had loaned out a total of $948,006,000 of which 36 per cent went to South Asia and 11,8 per cent to Southeast Asia,^^ In 1 9 6 1 , a shift occurred in American foreign aid emphasis: for the first time in a decade non-military appropriations, amounting to over $3 billion along with nearly $1 billion worth of local currencies to come from surplus agricultural sales abroad, surpassed the authorizations voted for military assistance. In the same year, by encouraging more foreign aid from other democratic countries in an effort to slow the

59u.S., Congress, Public Law l4l, 85th Cong., 1st Sess., 1 9 5 7 , Title II, Sec. 6 . ^^U.S., Congress, Mutual Security Act of I960. Public Law 4 7 2 , 86th Cong., 2nd Sess., I96O, Sec. 202(a)2. Interest charged ranged from 3'1/2 per cent to governments (except Thailand which was charged 5 per cent), through slightly higher rates to semi-government groups such as power and water facilities, to 5 3/4 per cent for private loans. ^IpLF. 1959. op. cit.. pp. 18-25. TABLE 12

1958-1959 U.S. DEVELOPMENT LOAN FUND COMMITMENTS*

Country Purpose Amount

Indonesia railroad rehabilitation, harbor development, automotive parts plant # 1 1 ,600,000

Malaya wharfage, roads, bridges 2 0 ,000,000

Philippines small industry development; roads; bridges; cemeii; pulp and paper plants 58.050.000

Thailand electric development, dredging facilities, meat plant 22.500.000

Vietnam Saigon water system 19.500.000 $ 111,650,000 Ceylon irrigation and land development, highway and railroad construction 5 ,250,000

India steel importation, railroads, roads, capital equipment, public power, cement and jute plants 195,000,000

Pakistan water and sewerage works; railroad rehabilitation; dams, land re­ clamation; power development; inland water development; port im­ provement; jet runway; gas plant; industrial loans 132 750,000 $ 552,000,000

^United States, Development Loan Fund Report for 1959 (Washington: U.S. Government Printing Office, i960), pp. 18-25. H U)vO 19l|

outflow of gold which had reached alarming proportions in preceding months, the United States promoted the formation

of an international Consortium to pool the free world's aid

offerings. Thus, for example, Consortium assistance was made available to Pakistan and to India; the United States

offered the latter some $1 billion if an equal amount were

forthcoming from other members.

This survey of American aid program, with particular reference to South and Southeast Asia, has brought out the predominantly political character underlying United States economic assistance. It is political in motivation (although not exclusively so), in appropriation, and in allocation.

The nature of assistance voted at any specific time has been shown to be a congressional value judgment, usually made on a short-term basis: a reward for good behavior, a penalty for an unfriendly act, a counter to Soviet pressure, s. calcu­ lated effect on American security. Rarely has Congress followed Administration evaluations despite the fact they are based on direct field knowledge and State Department analysis and are correlated with contemporary military and intelli­ gence interpretations.

Appropriations are first planned by American representa­ tives in the field after consultation with local officials; they are then weighed through the several courses of administrative budget hearings. Priority considerations, in 19^

the eyes of the executive branch, are ultimately presented

to Congress which, as made evident in each annual appropria­

tion reviewed, has reappraised existing conditions and

appropriated according to its own interpretation of need and

derivative benefits. This conflict of presidential-congress­

ional responsibility in analyzing the use to which aid is put

seriously impedes the effectual utilization of Ameitan money

from the point of view of the national interest of the United

States, Aid given has been said to have fallen within six

categories: humanitarian, military, subsistence, prestige, 62 bribery, or economic developmental assistance. The short­

term accomplishments of these grants often tend to counteract

each other and so, in effect, nullify the larger goals

sought. For example, military assistance or rewarding a state

for "good" behavior through a prestige-bribery grant may

strengthen the existing political leadership which develop­ mental aid is undermining through agrarian reforms. The

executive and the legislature are thus found moving in opposite directions,

Aside from the fact that the aid administrators have not weighed individual projects on some over-all integrated national-interest scale, the American system of appropriation makes a resolution of this presidential-congressional

62 Morgenthau, op, cit,. p, 301, 196 conflict difficult. If the Administration falls to obligate all the appropriated funds because It disagrees on political goals, It becomes Increasingly hard for the aid agency to obtain the money It desires In subsequent years. If the agency moves In such an obvious manner as to offend Congress,

Its very existence may be threatened. Nevertheless, there are factors dictating congressional dabbling In foreign aid allocations and they cannot be Ignored — behind the congress­ man stand the taxpayers and unless a congressman can justify aid to them In terms of national security or direct benefit to some economic group, a change In office holder Is likely to follow. Another practical problem leading to congres­ sional revision of presidential proposals stems from the time lapse between formulating aid programs and voting funds for them. Projects are based on conditions within a country some twelve months before Congress formalizes the allotment which

In turn Is then spent in the year following. Many political changes can occur In the Intervening months, political changes which dictate more or less assistance. As the difficulty of accurately predicting the most useful course of expenditure has become more apparent, certain flexibility has been per­ mitted the President In switching funds from one category to another, and even from Europe to Asia, as the need has warranted.

^^Edward S. Mason, "Competitive Coexistence and Economic Development In Asia,” In International Stability, op. cit..p .64. 197 Actually, it would be utterly hypocritical to maintain that anything but national security is the prime motive behind

American foreign aid — this is the common denominator to which every other motive can be reduced. Even if humanitar­ ian impulses demanded that support be given, as for example to the starving North Vietnamese or mainland Chinese, political considerations, in this case the fear of further entrenching communism, would have, and reportedly have, vetoed the proposition. Likewise, greater trade benefits or a reduction in international tensions are also beneficial to the well-being of the country. Nevertheless, there are humanitarian aspects to United States aid worthy of considera­ tion, In most surveys of American assistance these take precedence in discussion, which raises the interesting point whether this is done to put a good face on the program or to dispose of its least important aspect first.

Historically, religious groups have operated abroad for years, spreading the benefits of education and health and even community development techniques. These missions did not function in a completely altruistic fashion, however, as spreading the gospel remained a fundamental aspect of their program. The national Red Cross has been active in foreign assistance, Post-World War I famine relief and post-World

War II United Nations Relief and Rehabilitation, 72 per cent of which was financed by the United Jtates, are other examples of the unrestrained giving of the Amerfcan people. 198

Individual contributions to the medical ship HOPS, to centers organized by the late Dr, Tom Dooley, to the world-wide activities of CARS as well as American-supported orphanages and chlld-care programs In all war-torn areas, are other examples of the personal Interest of Americans in the well­ being of their fellow men. Recently private charitable groups, such as the Ford Foundation, have contributed substan­ tially to foreign development. Grants in South Asia by this organization have even exceeded the contributions of certain

Colombo Plan countries in that region,Guggenheim and

Rockefeller study and travel grants for years have assisted in the diffusion of knowledge and in the building of better personal relationships between world peoples.

Governmental concern with United Nations' economic and social activities was preceded by interest in the older

League of Nations' work in those fields despite non-membership in that organization. Later President Franklin Roosevelt officially underscored the United States' concern for others in his January lg4l message to Congress in which he looked forward to a wafl.d founded upon four essential human freedoms

— freedom of speech, freedom from want, freedom of worship, and freedom from fear. Just prior to his death, Roosevelt reportedly was concerned over the need for the major powers

64Ibid,. p. 63, TABLE 13

œ U N m PROPOSALS^ OBLIGATIONS^ AND PERCENTAGES OF SOUTHERN ASIA AREA TOTALS FOR AMERICAN ECONOMIO ASSISTANCE FOR 3HE FISCAL YEARS 19$2 THROUGH 195^

Country Pro­ i Obliga­ fo Pro­ i Obliga­ i Pro­ Obliga­ i posals tions posals tions posals tions

Burma 14.00 8.8 15.67 9.2 18.00 7 .4 6.95 5.5 •• Indochina 29.50 18.4 24.60 16.5 5 0 . 0 0 12.5 25.98 18.5 25.00 15.2 24.45 15.1 Indonesia 8.00 5 . 0 8.06 5 . 4 8.00 5.5 5.56 2.7 4.00 2.1 5.91 2 . 4 Philippines 55.40 22.2 5 2.10 2 1. 5 5 2 . 0 0 15.1 17.92 15.8 1 7.00 9.0 14.45 8 . 9 Thailand 7 . 0 0 4 .4 7.10 4.8 7 . 0 0 2.9 6.46 5 .0 5 .00 2 .6 8 .7 5 5 . 4

Ceylon .24 .15 .01 _ .45 .2 -——-—— India 54.57 5 4.5 52.71 5 5 . 4 1 1 5 . 0 0 47.1 45.58 5 5 . 6 110.00 58.2 8 6 . 8 5 5 5 . 6 Nepal .06 .05 .20 .1 .25 .1 .45. .5 .60 .5 .74 .5 PakisWi 10.78 6.8 10.60 7.1 5 5.50 15.7 26.80® 20.7 27 . 5 0 14.6 22.75 l4.o

1 5 9.55 100.08 149.05 100.0 244.20 100.1 129.68 99.9 1 89.10 100.0 161.86 9 9 . 9

a. In millions of dollars. From goTomment sources in Wolf, 0 £. cit.. Tables 7, 8, 10, 11, 1$, 16, 18, 19, 25, and 24. b. This figure represents MSP expenditures only. It excludes $0 million north of vheat shipped to Pakistan under separate legislative authorization although it includes the $1$ million freight costs on this grant which were charged to 19^) authorizations for Pakistan. v £ ) v O TABLE 13 (Continued)

1955 1956 Country Pro­ 2 Obliga­ i Pro­ % Obliga­ i posals tions posals tions

Burma Indochina 25.00 1).4 26.77 10.7 58.60 14.5 41.55 16.7 Indonesia 4.00 2.2 7.00 2.8 8.00 5.0 11.10 4.5 Philippines 20.00 10.8 19.64 i n 26.20 9.7 26.58 10.7 Thailand 5.00 2.7 58.16 15.5 57.50 15.9 54.46 15.9

Ceylon : ----- 5.00 2.0 India 104.50 56.2 84.45 55.8 85.00 51.6 60.88 24.5 Nepal .78 .4 2.57 .9 2.00 .7 1.96 .8 Pakistan 26.70 14.4 71.36 28.5 72.00 26.8 66.68 26.9 185.98 100.1 249.75 99.9 269.10 100.0 248.19 100.0

a. In millions of dollars* From government sources in Wolf, 0 £,* oit». Tables 7, 8, 10, 11, 15, 16, 18, 19, 25, and 24.

rv> o c 201 to help the underdeveloped areas;so concern already existed on government levels even before postwar reconstruc­ tion of the Industrialized states was begun. His voice was not the only American one during this period which urged better living for others, but the first concrete official proposal to this end was President Truman's Point IV sugges­ tion. Concern for human misery was a motivating factor in this idea, and testimony at the congressional hearings indicates that it appealed to virtually all sections of the

American public, to labor, to agriculture, to youth, and to religious affiliates. More recently the Peace Corps proposal also met with similar nation-wide response.

It is no exaggeration to say that humanitarian motives continued to be felt in the years following 19^9. Pew remain unmoved by the sight of extreme poverty and misery. Humani- tarianism does not pull much weight, however, as a motivating force in foreign policy,Despite the wording there is

^Soean Acheson, "V/hat is Point IV?" in Department of State Bulletin, February 4, 1952, p. 1 5 6 .

^^In Dr. Staley's opinion, "a considerable amount of genuine humanitarian sentiment is dressed up in hard-headed arguments because, in some circles at least, people are fear­ ful of seeming to do good for its own sake. Op. cit., p. 54. On the other hand. Secretary Acheson said the United States was not "embarrassed to admit to disinterested nationalism" but he went on to remark that other nations "will cooperate with us with more confidence if we say bluntly" what we are doing. It was his view that through Point IV, the United States should become associated with the national aspirations for change which were current among underdeveloped peoples. 202

nothing basically humanitarian in Secretary of State

Acheson*s remark that "Poverty, disease, illiteracy, and re­

sentment against former colonial exploitations are our en­

emies; the comment was a prelude to a statement that it was in the best interests of American national security

that these forces be eliminated. To illustrate further, the

United States extended a $190 million food loan to India in

195I; assistance which was both an expression of humanitarian

interest and of concern over the threat famine posed to

India*s economic development. Humanitarianism was bruised

somewhat by the fact that passage of the bill required three months of debate, primarily because of congressional concern over what it considered to be India*s less-than-friendly 6S policy toward the United States. On the other hand, when a famine threatened Pakistan in 1953» relief was extended with fewer political complications inasmuch as relations between donor and recipient were not strained. Humanitarian motives for American economic assistance programs definitely

exist, but when contact rises from the individual to the governmental level, the entire matter becomes tinged with practicality and politics. The unadulterated hu­ manitarian elements in American aid are in all probability

^7u,S,, Cojjgress, Senate, Committee on Foreign Rela­ tions, Hearings. Mutual Security Act, 1951. S2nd Cong., 1st Sess., 1951, p. 5*

G^See back. 203 limited to the sympathy v;hlch has Inspired so many to give of self, of resources, and of moral support to developmental legislation; on the government level this can be translated Into a century and a half of sympathetic understanding for the aspirations of colonial peoples to achieve Independence.

In view of the fact that In the past two decades: subject peoples have made independence synonymous with Improved living conditions, the official American tradition has been expanded to cover the now concept as well. Economic benefits are also cited as motives for the American assistance program. As early as 19^2 President Roosevelt was countering objections to the theory that raising the living standards of under developed areas would benefit 69 the United States economically. He then cited the example of the American South’s development and the benefits that accrued from it. Since the bulk of the world’s commerce Is between Industrialized areas. It was held by Secretary of State Marshall In 19^7 that Western Europe’s recovery would favorably affect such trade. It was an easy step to extend such views to the potentials resulting from enriching the poorer states. In the Point IV proposal the suggestion of benefits accruing to American traders and Investors was

The Hew York Times, Hovember 25, 19^2 quoted In Staley, op. cit., p. 31. Wolf, however, contends that such arguments are unrealistic. He presents correlations between Income and trade In support of his position. Op_. clt., pp. 277-278. 20!.| reiterated. Economic motives are thus found supporting the earliest arguments in favor of the United States' aid policy. Testimony on the implementation of the American technical assistance program, the 19^0 Act for International Development, included references by several prominent administration offic­ ials to the economic advantages of a foreign assistance pro­ gram. For instance, mention was made that development would open up new sources of requisite materials and goods and new markets would thus be created for American products and investors.The Secretary of the Interior stressed the fact that in view of the greatly enlarged postwar needs of the United States for imported minerals and raw materials, special benefits could be realized from expanding the economies of these areas; 71 indeed, financing their development might become essential if these expanded needs were to be met. Con­ gress accepted these interpretations and the Act itself stated that the economic and social progress of obher peoples could further the expansion of commerce beneficial to both donor and. recipient.7^- This argument was not exclusively a

^ U.S., Congress, Senate, Committee on Foreign Relations, Hearings, the Act for International Development, olst Cong., 2nd Sess., 1950, p.' 3" 71 U.S., Congress, House, Committee on Foreign Affairs, Hearings, the Act for International Development, 8lst Cong., 2nd~""SesT7ir~r9FÔl pp. 298-299. ^^Public Law 533^ cit.. Sec. [j02 (a). 205 democratic one. In 195& President Dwight Elsenhower men­ tioned our economic Interest In promoting the development of the free world, In providing growing markets for exports,

In Increased Investment, and In supplying more of the Im­ ported basic materials America needed,

United States economic Interests Include not only mar­ kets and Investment opportunities but also the availability of raw materials. Development of the present underdeveloped states was expected to augment the supply of Increasingly essential minerals. This was point three In the priority of 7i|. American Interests outlined In the 1950 Gray Report. The

International Development Advisory Board's survey of the fol­ lowing year contained the observation that while the United

States had only 6 per cent of the world's population and covered only 7 per cent of Its area. It produced roughly 50 per cent of Its Industrial goods. Many supplies are needed for such production but a large part of American uranium ore, "virtually all of our natural rubber, manganese . . . , chromium, and tin, as well as a quarter of our zinc and cop­ per and a third or more of our lead and aluminum come from

^^The New York Times. February 20, 195&, p. 6. One es­ timate foresaw by 1970 the possibility for the United States market alone of a 100 per cent Increase over I958 exports to underdeveloped countries If their per capita Incomes could be raised by one per cent a year for ten years, Hoff­ man, op. cit., p. 6.

7^0p. cit., p. 49 . 206 abroad, mostly from the underdeveloped areas." 75' The urgent need for raw materials as expressed in these two reports led to further investigation. The Paley Commission estimated in a five volume study published in 19^2 that America’s depen­ dency on imported raw materials would rise from 9 per cent in 19^0 to 20 per cent by 1979, while similar rising needs could be expected in the west European and western Pacific industrial areas. Economists also advocate an increase in the production of raw materials. Their purpose is to build rapidly a poor state’s foreign exchange reserves and so provide it with additional developmental funds. The expansion of extractive industries is the easiest method for achieving this purpose. Underdeveloped countries, however, generally find the stress­ ing of primary production to be unpalatable because it recalls the economic emphasis of the colonial period. Another inter­ national aspect of this problem of trade in minerals arises as a country develops industrially. Its own. consumption of metals then grows a & international competition for them con- sequeritly increases. 77 ‘ VIhen the subject turns to the accumu­ lation of strategic items for the free world’s defensive

7^Partners in Progress, op. cit., pp. I|-9« 7^U.8., President, Materials Policy Commission, Resources for Freedom (the Paley Report) (9 vols., Washington: U.S. " Government Printing Office, 1992), I, 2, 11-12. 77Harrison Brown, et. aU., The Next Hundred Years (Hew York: Viking Press, 1997), pp. I|Off. 207 stock pile, the supply problem is pushed from the economic into the political field; the loss to the West of accessi­ bility to the resources of the underdeveloped areas or the addition of these supplies to communist stocks would be a 7g vital blow to the western states. Although it is debatable that an increased trade between the United States and a de­ veloping nation would automatically follow American assist­ ance and the launching of economic growth in the latter, there is no gainsaying the fact that arguments stressing the economic value of a developmental assistance program will have a pronounced effect on drawing support from parts of the business world for the government's proposals. The main reason for this would seem to be the need for maintain­ ing a ready supply of foreign materials essential to the production of industrial goods.

The political motives behind American aid are roughly threefold. First, the encouragement of freedom and democ­ racy; second, strengthening the internal security of the un­ derdeveloped areas; third, and basic, the promotion of Ameri­ can national security. About the first, the encouragement of freedom and democracy, Dr. Staley says, "American interest is harmed wherever the future of freedom is foreclosed by systems

7^"Equivalent of a grave military set-back" inasmuch as three-fourths of the critical materials come from underde­ veloped areas. Partners in Progress, op. cit., p. 46. 208 which exalt the state above the citizens, suppress free communications, and trample on civil liberties."?^ Care must bo taken at this juncture to distinguish between this longer term motive and the policy of little-qualified support for unsavory adrainistrationsmerely because they are "friendly" to the liest. This latter practice, which apparently passed its peak with the widespread 1952-1959 uprisings, revolves around the debatable right of the United States to advocate, urge, or insist upon those reforms which essentially lead to social change. In many instances and for many years American policy was to deal with a governing elite even when the latter acted contrary to public Interest, here recently a change has been noted, but different situations call for different tactics Further, it has been learned that many liberalizing changes can be effected by indirection: fiscal reforms which heavily tax the rich, agrarian and labor reforms which uplift the poor, industrial help which strengthens the middle class, all contribute to change. Through financial and technical assis­ tance, then, American officials can initiate democratizing Influences positively and subtly.It is important, however, that these changes are effected without violent upheaval, as

cit., p. 38. ^Opor"'^Por a discussion of this problem, see Uurfel, o]o. cit.. pp. ij58-i|62. 209 that might result in the rise of non-demooratic elements. Financial assistance is also a moans of stabilizing o. state during the critical period of social readjustment. The main objection to a positive program of advocating social reform arises over the extent to which it constitutes interference in the domestic affairs of a sovereign nation. Under circumstances of occupation, as in Japan, or virtually complete dependence on United States assistance, as in Taiwan or South Korea, the conditions favoring American pressure for change are the most extensive even though they may not always have been utilized. Similarly in times of acute distress or in cases of close relations between countries, the possibility of pressuring for a democratizing change is greater than in ultra-nationalistic neutralist states. The acute distress- close relations formula applied to the Philippines in 19^0 when the Bell Mission established preconditions for United States financial aid. In 19^1| the situation was similar in new-born South Vietnam, when President Eisenhower set forth in a letter to President Hgo Dinh Diem the purpose of impending United States assistance as the maintenance of a strong viable government there. To assure achieving this goal, local re­ forms were listed as an essential complement to financial assistance and it was stated that only if these two features were blended might the intended outcome be realized.In

^^Department of State Bulletin, November 1^, 195^, pp. 73^^^736V 210

1962, when internel security problems compounded by several years of increasingly autocratic tendencies on the part of the government resulted in a serious crisis in South Vietnam, conditions were again ripe for the application of outside pres­ sure for social reform.

Such situations are delicate ones in which a great deal depends on the personality and astuteness of foreign service and aid personnel in a country. The extent of the pressure applied depends also upon a value judgment at the time of de­ cision. Increasingly in recent years this judgment would seem to have favored the rising aspirations of the bulk of the un­ derdeveloped peoples, rather than to have endeavored to pla­ cate a dictatorial but friendly governing elite. It is as if realization has come that the people will outlast the elite; it is therefore the people whom the United States should strive to please. Nevertheless, sustaining existing democratic govern­ ments either with or without advocating changes is an old-estab­ lished American policy.

In the 1947 Truman Doctrine, one of the stated underlying intentions was to maintain the free institutions and national integrity of Greece and Turkey against aggressive totalitarian 82 alien movements which sought to dominate them. The follow­ ing year the President, vhen outlinging the aims of American

fin Documents on American Foreign Relations, 1947, op. cit., pp. 648-649, 211 policy, included the giving of assistance to independent na­ tions for the purpose of creating those economic conditions under which free institutions could survive and grow.

Congress inserted a similar reference in the China Aid

Act of 1948; one of its stated objectives was the achieve­ ment of internal peace and economic stability there so that

China could maintain its independence and integrity and up­ hold and strengthen the principles of individual liberty and the free Institutions on which the government supposedly rested. In January 1950 this point was extended by the

Secretary of State to the countries bordering America’s Pa­ cific defense perimeter. Secretary Acheson later stated that the United States' interest in the development of rep­ resentative and responsible governments rested on the belief that such governments alone create a favorable environment for peaceful world living and for the continued development of American society. On a long-term basis this was said to be the central purpose of United States foreign policy.

As time passed, these general references became more spe­ cific: democratic forces would be able to withstand the com­ munist menace. In Senate hearings on the 1951 Mutual Security

^^Harry S. Truman, "American Peace Policy," in Depart­ ment of State Bulletin, June 20, 1948, p. 8o4.

^^Public Law 472, op. cit.. Title IV, Sec. 402.

^^Acheson, "What Is Point IV?" op. cit., p. I57. 212 bill. Secretary Acheson was one of several who supported the view that

Poverty, disease, illiteracy, and resentments a- gainst former colonial exploitations . . . represent turbulent forces which the communist exploits at every opportunity. To achieve our objective of helping the people of this area maintain governments friendly to us, we must understand these forces at work in Asia and we must assure that the forces of nationalism and of the drive for economic improvement are associated with,the rest of the free world instead of with communism.

Although the Administration’s position has been definite­ ly set forth along the pro-democratization line. Congress did not always agree on how best to support this aspect of Ameri­ can foreign policy. The effect of local voting on United States aid is in evidence in the Indian balloting of 19^1-19^2. This was the first national election held in that newly independent state, and communist agitation during the campaign has been given as one of the reasons for increased assistance for In-

, 87 dia in the Mutual Security Proposals of 1932, The Adminis­ tration at that time maintained the position that the start­ ling strength of the Communist Party showing

, . , is essentially attributable to the discontent of many over the abject poverty and hopelessness of their lives. This discontent is being fanned by a constant flow of communist propaganda and subversion. The advice of all our observers on the ground is that, unless the newly independent government , , , can show substantial

^^Senate, Hearings, MSA, 1931, op. cit,, p, 3. ^^See note I|6 this chapter. 213

progress in economic development over the next five years, the likelihood is that in the next elections the democratic forces will he endangered.S8

The President consequently proposed an increase in aid to South and Southeast Asia from the ÇI60 million asked in the previous year to ^2^3 million for 1953» When Congress reject­ ed the proposals by drastically cutting the allocations, it inherently cast aside the assumption on which these had been based. This is indicative of the fact that administrative statements of policy may be checkmated by congressional action. A rise in communist voting strength in Burma, on the other hand, when coupled with favorable extraneous factors®'^ such as did not apply in the Indian case, have been adjudged an incentive to aid allocations. Actual guerrilla activity, as in Greece in the late 19^0*s, or local communist war, as in China, were, however, positive inducements to assistance, both military and economic. Thus, as a reward for Indonesia's suppression of a communbt revolt, during the Huk uprising in the Philippines, throughout the Prench-Viet Minh war, and following an aborted communist coup in Pakistan, American aid has been made available in an effort to maintain western-

S., Congress, House, Committee on Foreign Affairs, Hearings, Mutual Security Act Extension, 82nd Cong., 2nd Sess., 1932, p. 13. 89See back. 21k style governments in southern Asia. President Eisenhower summed up United States feeling in his I960 Mutual Security Proposals when he declared that there was a challenge for the free world "to convince a billion people in the less developed areas that there is a way of life by which they can have bread and the ballot, a better livelihood and the right to choose the means of their livelihood, social change and social justice -- in short, progress and liberty. The second political motive underlying the American economic assistance program is to strengthen the internal security of the underdeveloped areas. Essentially this was manifested through military assistance or providing sufficient power to prevent aggression or actual attack from without, through financial assistance, and through encouraging economic social, and politiaal reforms which would reduce popular un­ rest from within, thus lessening the danger of subversion. The latter means corresponds to that previously discussed as part of an effort to broaden the democratic base of the under­ developed peoples.The essential point is that a contented man is a peaceful one. President Truman included this se-

^ U.S., Department of State, Department of Defense, International Cooperation Administration, The Mutual Secur­ ity Program, Fiscal Year I960 (Washington, 1959), p. vii. Secretary Dulles supported this point, observing that the most effective proof would be practical demonstration. "^^See back. 215 Gurity motive in his foreign policy statement at Berkeley in 1948^^ and reiterated it in his 19^9 State of the Union message. Congress also held this view; the Mutual Defense Assistance Act of the latter year, primarily aimed at activating NATO, stated that both economic and military assistance were required to promote peace and security. At that time a "clear priority" was given the economic. One aim of the 1950 Griffin Mission to Southeast Asia was to find the most suitable means of securing that area against internal subversion political infiltration, or mili­ tary aggression. It was hoped that this could be accomplished by building up the economic strength of the indivual states in a way which would demonstrate the capability of existing national governments to bring benefits to their people. It was thus anticipated that political support for these govern­ ments would grow, especially among hhe rural population, and no change to more radical control would be attempted.These views, reflecting the aid lessons learned in China, were re­ iterated and strengthened in subsequent EGA comments on the mission’s goals, Mhen American faith in pure economic aid was shaken by the outbreak of the Korean War, the emphasis on military assistance, which was to dominate the next few years, came.to the fore.

no "American Peace Policy,** 0£. cit., p. 80l| . *^^CA, Ninth Report to Congress, op. cit., pp. 99-100 216

Military aid for the countries of Southeast Asia was never intended to reach the proportions it did in Europe. Rather, the Mutual Defense Assistance Program strove te provide Thailand with effective front line troops; to strengthen fairly conventional capabilities for a local war in French Indochina; to rout the Huks and scatter their forces in the Philippines; to form a trained national con­ stabulary in Indonesia; and to acquire deterent power to stop insurgents from attacking the Burmese delta area.*^^' These programs varied little through the decade and represent the extent to which military assistance was employed to maintain internal security as a force against which communist sub­ version and infiltration would be less likely to succeed. The Gray Report, 19^0, found that conditions in the underdeveloped areas made them quite susceptible to the growth Qd of communist movements. Consequently it held that the fîrst aim of American policy should be to strengthen the ability of these countries to maintain their independence. Secondly, the United States should secure the cooperation of the peoples and governments of these states in an effective system of mutual defense.In his message transmitting the 19^2 MSP

%MDAP aims quoted in Wolf, on. cit., pp. 101-103. ^^Op.95, cit. , p. [|9. 96-In view of the vague concern over the theoretical as­ pects of communism evident in most underdeveloped areas and of the widespread respect for the U.S.S.R.’s economic accom­ plishments, this second aim was never successfully achieved in southern Asia except in the Philippines, Thailand, and 217 to Congress, President Truman incorporated these ideas when he wrote that an expanding Southeast Asian economy can lead to freedom

. . . from danger of satellite slavery under the Soviet orbit .... While military aid is important , . . , security in Asia is far more than a military problem .... Long-run promise of stability and progress lies not alone in arms, but in the provision of sufficient economic and technical support to enable the peoples of Asia to conquer their old deep-seated and agonizing economic problems and to share in the benefits of an expanding world economy97

Advent of the Republican administration not only brought a greater emphasis on Asia to the forefront of American foreign policy following a Soviet tactical shift, but also brought a renewed interest in economic development per se. Mindful that Congress had rejected large portions of the 1952 develop­ mental proposals, the new Adminstration included, and won the acceptance of, a special economic development assistance fund category designed to assist underdeveloped countries in maintaining their economic and political stability. The 1955

foreign aid hearings elicited from Secretary of State Dulles the opinion that international communism was striving stead­ fastly to expand in Asia where countries lacked the economic strength to maintain adequate military defenses while also providing the foundation for political stability and bettered living standards. In consequence he held that an increase

97The New York Times, March 17, 1952, p. 6, 213 In free Asia's economic strength would constitute a further 93 effective resistant to the spread of communism. He later averred that the need for economic aid had greatly increased while that for military assistance had remained about the same. It was the Administration's view that with the assist­ ance of foreign aid a free economy could be shown to be as capable as a communist one of yielding a capital development 99 comparable to the Chinese and the Soviet.

This line was maintained throughout the Republican admin­ istration. President Eisenhower's message transmitting the

Mutual Security proposals for the 195^ program cited the main objective of non-military aid as helping to provide the social-political improvement essential to the preservation of the independence of the underdeveloped states; unless a reasonable economic advance were forthcoming there was an acute danger that the governments of such countries would be subvert­ ed by communism. Therefore convincing hope of progress was held to be the key to public support for moderate leadership.

Without hope, an underdeveloped people would be likely to turn to other leaders, whereupon extremist elements could then seize power. Revolution would follow and the resulting

9 % , S., Congress, House, Committee on Foreign Affairs, Hearings, Mutual Security Act of 1955. 3^th Cong., 1st Sess., 1955', p. 3"----- 99u.S., Congress, House, Committee on Appropriations, Hearings, Mutual Security Appropriations for 1956. 3^th Cong., 1st Sess., 1955» PP. ^-7» 219 instability would endanger world peace. Here the second political motive of American foreign aid overlaps the third, the threat to American security: "Our assistance is thus insurance against rising tensions and increased dangers of war."-°0 The third and basic political feature of the American foreign aid program is United States security. Throughout its history, the assistance idea has stressed the strengthening of politically unstable countries for the general peace and security of the world. The maintnnance of peace concept is encountered in Point IV, the 3CA legislation, and Acheson's defense perimeter speech of January 19^0, Maintenance of peace, particularly a large-scale peace, is essential to American security. The fear of communism’s threat to American security through the underdevloped countries has become so prominent that the assistance program is frequently considered as if it were a tactical weapon in the Cold bar, and yet, as recently as June 1962, Professor Hans Morgenthau in a previously cited article was criticizing the off-hand approach to the use of foreign aid as an implement of Ameri­ can foreign policy. In the view of Eugene Black, Cold War manipulation of the assistance concept implies the existence

U.S., Department of State, Department of Defense, International Cooperation Administration, The Mutual Security Program, Fiscal Year 19^0 (Washington, " 220 of a strategy and the treatment of aid as If It were a compe­ titive bid for favor between the two power blocs.

Ald-glvlng competition with the communists, or a deliber­ ate attempt to embarrass them, or an endeavor to force recipients Into choosing between the two major world states, are all dangers for American policy. These aspects of Soviet-

American aid were emphasized In various of the 1957 studies on the assistance problem. The House committee draft report warned against making the uncommitted nations formally choose sides. The Council for Economic and Industrial Research saw a danger In competing with Soviet aid because the communist bloc could play competitively also. It could make empty offers solely to draw the United States Into high cost projects of doubtful value; "Of course the United States could attempt the same game, but the duplicity required seems more congen­ ial to and plentiful In, the U,S.S,R, In short they (sic) could perhaps play It better," On the other hand, the Senate survey of the Southeast Aslan programs conducted by Clement

Johnston, Chairman of the Board of the United States Chamber of Commerce, concluded that an aid race might be avoided by making the fact clear that American programs were based on a country's total need and a reduction In United States funds would follow If another contribution fulfilled some of these overall total requirements. It was hoped that In this way

cit., PP. 45-47. 221 the United States could avoid being trapped Into an aid race wherein It sought to outbid Its rivals for the privilege of giving money away.^02 Black concluded that the West might have to content itself with the view that virtue Is Its own reward, a policy which would be "quite In keeping with [its] real security Interests."^^3 %n short. It was the best and most effective means by which Western states would realize their objectives In regard to the underdeveloped nations, particularly since, being without strings. It did not antag­ onize ex-colonial sensibilities.

Another aspect of United States national Interest Is the. stabilizing of present International line-ups. Although pre­ ferring to count on large numbers of "friends" rather than on numerous "uncommitted nations", America has been dedicated to the principle that neither friend nor neutral slips behind the Iron or Bamboo cudaln merely by default. Part of this guardianship of the free world depends on national prepared­ ness which. In turn, gains strength from the stockpiling of strategic materials currently so much under discussion. This

lO^Quoted In Schelllng, op. cit., pp. 149-150. It should be recalled that unlimited funds made suddenly available to an underdeveloped country would be more of a burden than a bless­ ing, Inasmuch as skilled labor, managerial skill, and other Intangibles are as Important as capital In building an Indus­ trialized nation. See chapter II.

cit.. p. 47. 222 was the essence of the Gray Report in urging a rapid increase in the production and trade of raw materials from the under­ developed areas, a view seconded by the Rockefeller group.

That economic development was a factor in American defense preparations became a matter of official record in the Truman

Doctrine and in the necessity for revitalizing Europe through the ERP, In the Economic Cooperation Act of 1948, Congress pointed out that the deteriorating European situation en- 104 dangered America's general welfare and national Interest.

Congress set forth the purpose of the 1951 Mutual Secur­ ity Act as the maintenance of national safety and the promo­ tion of United States foreign policy "by authorizing military, economic, and technical assistance to friendly countries to strengthen the mutual security and individual and collective defenses of the free world, to develop their resources in the interest of their security and independence and the national interests of the United States and to facilitate the effective participation of those countries in the United Nations system for collective security". The director appointed to super­ vise the program was specifically charged with making certain that the defensive strength of the free world was built as 105 quickly as possible.

It was under the above Mutual security Act that the

lO^Public Law 472, op. cit.. Sec. 102(a).

105pubiic Law 165, OP. cit.. Sec. 2, 50I (a)l. 223 pledge of full devotion to Western military alms was required of military assistance recipients. A less stringent pledge was sought from those accepting only economic aid: they agreed merely to Join In the promotion of International understand­ ing and good wlll,^^^ a sufficiently Innocuous declaration permitting most Aslan states to accept aid without qualms.

Justification for the foreign assistance programs has been publicly tied to American defense by financial strings.

In terms of cold cash. Secretary Dulles estimated In Senate hearings on the 1957 MSA that It would probably be necessary to Increase national defense expenditures by considerably more than the $4 billion of the MS budget were that program not put Into effect. The Mutual Security Program was thought to be the most economical way to get essential defensive pro­ tection. Secretary of Defense McElroy, supported by the

Chairman of the Joint Chiefs of Staff, subsequently backed up this view with the observation that a greater contribution would accrue to the United States by the restoration of aid cuts than through an Increase In defense appropriations. This stand was repeated In 1958 when President Elsenhower told

lOGlbld.. Sec. 511 b.

lOÏTestlmony quoted In U.S., Congress, Senate, Special Committee to Study the Foreign Aid Program, The Military Assistance Program of the United States (Washington: U.S. Government Printing Office, 1957), P. 155. 22lj

Congress that American aid expenditures were as Important to

United States national defense as expenditures for national forces and "dollar for dollar they buy us more In security".

He continued with a criticism of past labeling of economic aid as "giveaway" programs, a practice which tended to play down their great material value to American national security. He held that "no Investment we make In our own security and peace can pay us greater dividends than necessary amounts of economic ald",^^^

Throughout the history of both the early American econ­ omic and technical assistance programs and the contemporary post war one, no fact Is clearer than the diversity of motives

Inspiring planning for foreign development. Only the posi­ tion of the United States In world affairs and the technolo­ gical advances In communications have changed so that today

America's vital Interests are more prominent. The American people have a genuine and wide-spread humanitarian Interest

In other peoples; the Government, however, because It Is susceptible to voting responses, tinges Its humanltarlanlsm with practical politics In order to avoid rejection by Insen­ sitive people auditing the use of their tax dollars. Potential

108rhe most quoted opponent of foreign aid Is probably Eugene W, Castle, His Billions. Blunders and Baloney (New York: Devin-Adair Company. 1955) and The Great Giveaway (Chicago: H, Renery Company. 1957) are highly emotion packed and grossly distorted. His "Foreign Spree for Our Super- spenders" In The American Mercury. May 1958 was refuted point ty point by the International Cooperation Administration, 109u,S,, Department of State, Department of Defense, 225 trading benefits exist from the increase in living standards of the underdeveloped people and the government seeks to encourage popular support for development aid on the basis that this increased trade will, in turn, contribute to

America's continued growth. Inasmuch, however, as commerce is entirely in private hands, there is a limit to the value receivable from this argument. In consequence the basic motivation of the United States foreign aid program is

Secretary Acheson's “hard-headed self interest",that is the strengthening of America's international position by the development of stable mutually compatible states with simi­ lar democratic leanings and so indirectly reinforcing world peace and allowing for the continued development of all the states of the world.

The process is supposed to work in the following manner:

Through an expansion of food output, diversifica­ tion of diet, multiplication of material needs and consequent stimulus to internal and external economic activity in the poor countries, the United States seeks to reduce the misery and to raise the living standards of peoples of the underdeveloped world so that stable administrations can build upon this economic base states imbued with Western concepts of liberty, individual dignity, rights, and privileges, with a people free to pursue happiness according to its own beliefPoliti­ cal stability would stem from economic and social sa­ tisfaction; and with wide-spread political stability

International Cooperation Administration, Mutual Security Program, Fiscal Year 1959 (Washington, 195&), PP* 1-2.

^^^"What is Point IV?" op. cit., p. I56. 226

International disturbances would be lessened, the danger of subversion would be decreased, and ability and desire to resist armed aggression would follow — all further restricting the spread of communism which Is held by the United States to be the greatest extant menace to the liberty and dignity of the Individual and hence to Its own security.

It Is unfortunate for the fulfillment of the American objec­ tives that the psychological climate of the recipient states, geographic and political barriers, serve to limit the practical results obtainable. Whether the Japanese and

Australian motives for assisting In the development of this area supplement or hinder the American goals. Is the substance of following chapters. CHAPTER V

JAPAN'S INTEREST IN ECONOMIC DEVELOPMENT IN SOUTHERN ASIA

Japan is the only non-European state to have truly achieved, the capability of assisting, on a substantial scale, in the economic development o.f other, less-favored areas. It has, however, no great surplus of worldly goods to be given freely for humanitarian purposes; it need not, and indeed could not in view of its recent war effort, allay neighborly suspicions by playing a "big brother" role in their advance­ ment; and it is not activated, emotionally, to utilize eco­ nomic aid as an ideological weapon in the cold war. Economic self-preservation almost alone underlies and motivates Japanese efforts at building up the economies of southern Asia. The problem facing Japan, and dictating her limited approach to foroign aid, is to maintain an advancing standard of living despite inadequate resources and a large and grow­ ing population. To do so, the country must import extensively and as economically as possible and must counterbalance these purchases with exports to the appropriate currency settlement area in view of the contemporary inconvertibility of exchange . Southern Asia's resources fill the specifications, being potentially cheaper and involving less transportation expense

227 228 than the Immediate heavy postwar purchases from the United States; they have the added advantage of coming mostly from sterling rather than dollar areas. Development of these resources, many just discovered and others being exploited inefficiently, has therefore become of great interest to Japanese commercial concerns and to the government. As an industrialized state, Japan can supply the capital goods necessary for modernization within southern Asia, and the cultivation of its markets thus becomes a second aspect of her trade program. To this point, then, Japan’s approach to Asian development is coincidental to her own needs; it has, however, necessitated allaying old suspicions of Japanese intentions. The country’s limited motive for improving the economies of southern Asia is therefore different from those previously discussed, but it is no less vital to the Japanese than are the defense motive of Australia and the world strategy need of the United States because Japan’s very life depends on a sound trading system. The problem is based on geographic limitations, demo­ graphic complications, a high standard of living, and an unfavorable trade pattern. The roots of the situation lie in a small land area only 12 per cent of which is cultivable and in an acute, shortage of major resources.^ Aside from

Japan Proper has about ll|2,370 square miles, an area somewhat smaller than Sweden or California and about 8^ per cent mountainous. It has only 16 million tillable acres. 229 chromite, ordinary coal, gypsum, magnesium (extracted from sea Mater), pyrite, sulphur, and zinc, the country lacks practically every essential mineral. There is a shortage of iron, aluminum, lead, lumber, salt, glass sand, nitrate, phosphate, tin, coking coal, ferroalloys, oil, and potash; even food and fibers do not meet demands. A survey made in 19^18 found that 22 of 33 metals used in modern manufacturing had been mined or were knoMn to exist in deposits in Japan, tut only seven were possibly adequate. Of these, but one, p zinc, was felt likely to be sufficient to fill major needs. Of 20 other minor minerals not extensively used but valuable, and sometimes even indispensable, to processing, only about one-third were considered fairly adequate for domestic re- quirements SOAP planners estimated that to maintain the then 60 million Japanese at the 1930-193^ level would necessitate the importation of "at least one-fifth of its food requirements, two-fifths of its wood and fiber requirements (taken together), nine-tenths of its petroleum requirements, nearly one-half of its phosphate, more than one-fourth of its salt, all its aluminum and nearly all the tin, antimony, manganese, and

^Supreme Commander Allied Powers (SGAP), A Report on Japanese Raw Materials (Tokyo: Hosokawa Printing Company, 19q8),' 299. For a review of the May 1961 government "White Paper on Resources" see The Oriental Economist, June and August 1961, pp. 36I-367 and Ij66-L|70. ^SCAP, ojc, cit., pp. 328-335. 230 many other minor items" for domestic use alone.^ In the postwar period both the population and the living standard have risen. Obviously, then, these figures had to be ad­ justed to meet the change. In 19^2, at the beginning of the postwar boom, a Japanese economist concluded that im­ ports for such home use would approximate r;j;l.[j billion at then current prices, but since every export necessary to pay for this import would require an importation of processing materials, the export requirement in goods and services would have to rise to (;2 billion to meet the cost of basic import d needs. Thus it is that the life of Japan is intricately bound up with trade. Population pressure has also had a hand in Japan’s postwar problems. The Japanese in 1961 numbered over 9l-| million and the total is expected to rise to 108 million, despite legalized abortion and extensive birth control cam­ paigns, before leveling off around 99 million in 201^.^ An

^Ibid., p. 527. The period 193^“1936 is usually taken as a base year in Japanese statistics because it climaxed a time of unusually fast development between the depression of 1929-1931 and the outbreak of war with China in 1937. Ab­ normal war demands affected subsequent figures. 9 Shigeto Tsuru, Essays on Japanese Economy (Tokyo: Kinokuniya, 19^8), p. 32. 6 / Ayanori Okasaki, Histoire du Japan : l ’Economie et la Population (Paris: Presses Universitaires" de.France, 1958), pp. 160-166. Cf. also T. Hondo, "fostwar Population Problems, in The Oriental Economist, November PP» 553ff» Abortion- was authorized under the Eugenics Protection Law to protect 231 expanding population with no expansionist outlets thus con­ fronts a relatively fixed agricultural potential presaging a shortage of food and drastic unemploymant with about one million people being added yearly to the labor supply after 7 1962. The situation is so critical that Japanese authori­ ties have taken official cognizance of it and have established the only government-sponsored population institute in the wcrld. The population problem nevertheless serves as a vital factor in extending the government's concern with the economy and with foreign trade. Despite these two fundamental disadvantages, the Japanese economy has reached an all-time high. The country has made a phenomenal recovery from the devastating effects of the war Its standard of living has risen rapidly in the past decade and per capita consumption in I96I was from 30 to IjO per cent the health of the mother on both physical and economic grounds; the birth control campaign was authorized by the Ministry of Health and Welfare in 19l|8. 7 'Ayanori Okasaki, Japan's Population Problems (Tokyo: Ministry of Foreign Affairs,1937), p . 19. ^In the last six months of the conflict, the main in­ dustrial areas were systematically and frequently bombed. Fire leveled most of the large cities. Approximately one- fourth of the country's total reproducible wealth was lost, the major loser being the merchant marine which did not re­ gain its prewar level of gross tonnage for a decade and a half. Although otherwise spared the destruction of a land war — agriculture being the least affected part of the economy — losses included ^ 8 per cent of the country's re­ fineries, per cent of its ammonium sulphate plants, 30 per cent of its thermo-electric plants, 27 per cent of its cement plants, and 25 per cent of its machine-tool making plants. Shigeto Tsuru, Business Cycles in Postwar Japan (Tokyo: Science Council of Japan, 1953), p. 1. 232 higher than before the war.^ Only fourteen years ago, in 191.18 with reconstruction still underway. Occupation authori­ ties were speculating over the possibility of regaining the I93I-I93I1 standard. In 19^7 postwar temporary shelters were still oommon and only a scattering of woodburning taxis plied the metropolises. In all Japan there were only 201,023 registered motor vehicles. This figure had doubled by 1950 and by 1955 there were 1 ,501,7[|0 such, with 3,573,188 in 1960.^^ Radio subscribers jumped from around seven million in 191)3 aiid 191)8 to nine million by 1950, over 11 million by 1953, and reached a peak of ll).6 million in 1958.^^ In I960 people moved about the streets with vigor and enthusiasm, neighborhood or subway brokerage houses sold stocks to aproned housewives and shopkeepers while an inter,gsted audi­ ence watched the changing board. Department store sales rose from ¥l)5,81.)l million worth of merchandise related to daily life in 118 stores in 191)9 to ¥212,272 million worth in 156

"Living Standard White Paper," in The Oriental Econo­ mist , February 1961, p. 77. Gf. also "Postwar Transitions of National Life'," in ibid., January I960, pp. 13-17 and "Rise of a Few Middle Class,'^ in ibid., February I960, pp. 66-69.

Japan, Office of the Prime Minister, Japan Statistical Yearbook, 1961 (Tokyo, 1961), p. 215. For pre-1952 figures, see 1 9 ^ (Tokyo. 1958), p. 218.

^^JSY, 1961. op. cit., p. 227; for pre-1955 figures, see JSY, 1958, op. cit., p. 209. In I960 there were only 11.8 million as TV replaced radio. 233 stores in 1955 to ¥46^,284 million worth in 222 stores in 12 i960. Resorts, trains, shops, and shrines all did a flour­ ishing business. Many humble homes abandoned traditional charcoal heaters for gas and electric ones; refrigerators 13 and washing machines appeared in many. Practically every farmer had a radio and a bicycle, if not a motor scooter, and 14 mechanized paddy equipment as well. Today the peasant is prospering and television aerials, nearly 7 million of which dot the islands, signal his rise from endless hand-grubbing labor to a position of respectability. Average monthly pay­ ments for national credit purchases nearly doubled between 15 1953 and 1959. There has been a steady advance since 1953 in private savings or funds available for non-essential spending; in I960 this was estimated at 18.5 per cent of

J-2JSY. 1961. op. cit.. p. 235; for 1949 figures, see JSY. 1958. op. cit.. p”. 234. The Oriental Economist gave the 1961 saTes figure as ¥581,873 million. October 1962, p. 616. 13 A servant in the home of the Director of an American Cultural Center was overheard lamenting,’♦All I do is scrub, scrub, scrub. Sometimes I feel like taking this wash home and doing it in the machine.” Private conversation, Hiro­ shima, February I960. In 1961 one of every two urban house­ holds was estimated to have a TV, a camera, and a washing machine, "living Standard White Paper," op. cit., p. 79.

^^The 1961 Agricultural Census revealed that there were then eight times as many owners of powered equipment as in 1955. The Oriental Economist. January I96I, p. 25.

^^JSY. 1958. op. cit.. p. 377; JSY, I960 (Tokyo, I960), p. 372. This marked the highest annual average to date. JSY. 1961. o p . cit.. p. 372, 234 total personal income, an increase of ^.2 per cent over 1950. The Index of Household Consumption shows a general rise in use of consumer goods from 86,8 in 19^2 on a 1955 17 base to 12[j.9 in I960, An increasing array of items has shifted from the luxury class and the standards of 193^ have faded into the past, What all this demand means to Japanese trading is that even more raw materials and the corresponding outlets for mam factures to pay for them have had to be found. The develop­ ment of an internal market was an unexpected event in the field of Japanese economics; it would seem, however, to be living proof that a rising standard of living will create new markets for many industries in unsuspected areas of the world. The role of trade in Japanese economic life has always been important although to varying degrees according to different writers. Some prewar specialists tended to empha­ size the need for trade,In 1937 Freda Utley objected to

JSY, 1961, op, cit.. p, 399. In 1961 the rate was 13.9 per cent for urban and 10,1 per cent for rural households,, ’’Living Standard White Papei,** o£, cit., p , 79, 17 JSY, 1961, op, cit,. p. 385. The urban rate went from 8^,1 to 129,1; the rural one began higher, at 90,0 but lagged in i960 at 118,6 . On a I960 base, the urban rate in 195^ was 7l| ,3 and 1961, 106,5; the rural rates were 83,9 and IO7.0 showing the I960 gap had bean closed. The Oriental Economist, October 1962, p , 6I6 , ^®John E, Orchard, Japan's Economic Position (Hew York: Whittlesey House, 1930); Harold 0, Moulton, Japan: an Econom­ ic and Financial Appraisal (Washington: The Brookings Insti- tution, 1930); E. F, Penrose, Population Theories and Their Application , , ,to Japan (Stanford: Stanford University Press, Ï93V)• 235

TABLE 111

JAPAN'S DEPENDEITCE ON IMPORTS^

I be in Imports as fo of Total Material Supply 193^-36% 1950 1955 I960

Rice lG.6 6.5 9.1 1.3 Wheat 2i| Jj 54.0 60.9 63.6 Soybeans 61| .6 31.3 61.4 77.5 Sugar 96.0 94.9 95.5 90.4 Goal 9.0 2.1 6.3 14.0 Crude Oil 90.G 81.0 96.0 98.1 Oil 1^.0 36.6 21.7 9.7 Iron Ore 89^6 63.4 84.2 92.1 Hides 67.5 83.4 48.5 53.7 Pulp 26.7 7.7 4.9 4 .0 Salt 67.2 60.1 77.3 73.9

^Japan, Office of the Prime I-anister, Japan Sta- tistical Yearbook, 1961 (Tokyo, 1961), p. 21] 0. Phos- &hate rock, raw cotton. wool, bauxite , crude rubber. and abaca have been imported 100 per cent throughout the period covered. Sulphur ore and limestone , on the contrary. have been 100 per cent self sufficient. ^Average 236 an OVER-emphasis on the Importance of international commerce. She stated, in essence, that there was a great deal of room for improvement within Japan before it could seek any special economic favors internationally.^^ Were these improvements made, she held that Japan’s dependence on trade could be reevaluated. PO One British specialist has reevaluated the postwar situa­ tion and also adds a word of caution against blind acceptance of the country’s dependence on trade. 21 The cause of the

^/Japan’s Feet of Clay (New York; W. VJ. Norton and Com­ pany, 1937)• Among her suggestions, were land reform which would free the peasant economically, raised wages which would stimulate local demand among industrial workers, and improved use of local resources. Many of these suggestions have been acted upon. The Occupation Introduced certain reforms which stimulated increas­ ed use of local resources. For example, a domestic tree, rather than an imported log, is now used in making pulp; ni­ trate fertilizers are now made from Japanese ammonium-sul­ phate rather than from imported soya bean cake; technical improvements have led to the use of Japanese iron sand and sulphuric acid dross in making iron; and, finally, Japanese officials were able to state in 1956 that, despite the 17 million increase in population, there had been no correspond­ ing rise in the import of food. Saburo Okita, The Rehabili­ tation of the Japanese Economy and Asia (Tokyo: Ministry of Foreign Affair's, 1956), p. 6. ^^George C. Allen, Japan’s Economic Recovery (London: Oxford University Press, 1956), P• 1757 Without overstressing the point, he observes that "the ratio between [Japan’s] trade and her national income is now one of the lowest in the world", having fallen from a prewar peak of 20 per cent for imports in 1937 to 13 per cent in 1955# and 11 per cent in 1959 while in most countries the percentage has risen from below to above 10 per cent. For exports, the shift was from a peak of 17.3 per cent in 1935 to 12 per cent in 1956, and 10.3 per cent in 1959. Figures from JSY, I960, op. cit., pp. 237 and 396. In 1956 Japan ranked fourth after the Nether­ lands, Great Britain, and Denmark in the percentage of her imports of foodstuffs, raw materials, and fuels to national 237 present trend can be found, he believes, in part in the fact that the engineering industries, which have under­ gone the greatest expansion, are those in which the ratio of imported raw materials’ cost is low in relation to the cost of other factors. ?2 His views run counter to those of an American colleague who cites Japan’s 19^^^-19^6 un­ favorable trade balance as proving a persistend dependence 2": on trade. Saburo Okita, writing as chief of the Planning Divi­ sion of the Economic Planning Board, concurs in Plr. Allen’s restrained international view. That this argu­ ment cannot be pushed too far is evident when one surveys the list of essential Japanese imports. Okita further notes that present purchases are of such a nature they

income; in the ratio of exports to gross national product she placed ninth out of eleven. ^^Allen, o£. cit., p. i?3. 23 Benjamin J. Cohen, Japan’s Postwar Economy (Blooming­ ton: Indiana University Press, 19^B), p . Ill. Un like Economist Allen, Professor Cohen does not regard United States military procurement expenditures, which would have narrowed the gap, as the equivalent of dollar exports. However, had there been no procurement, imports would probably have been smaller and the accounts adjusted accordingly. When included as an export item, procurement reduces the 1950“195^| imbalance from ^2 ,063.2 million to ^313.2 million. This view is shared by The Oriental Economist which calls any other consideration of procurement’s role unrealistic. See December 19^3, p. 389. Dr. Cohen’s argument, taken in a broad sense, also dis­ regards the inability to export in the immediate postwar years during which time American aid, amounting to $2,0^^ million when it stopped in 19^1, covered import costs of essen­ tial food, medicine, and raw materials. 238 cannot further be reduced, so that "viewed qualitatively . . . it is obvious that imports are vital to the economy," ^ Pood, textile fibers, iron ore, and coking coal are essential imports. In the three year period 19^6-19^8, the cost of imported food averaged million; textile materials aver­ aged 0728 million; fuels averaged 0538 million; and metal ores and scraps averaged 0^89 million.In 1957 the Economic Planning Board stated that while the ’50s saw in­ dustrial production rise 100 per cent, imported raw materials consumption Increased by 135 per cent, indicating that Japa­ nese industry had a "deep-rooted tendency toward higher dependence on imports". ^ The basis, then, of Japanese planning at the time her foreign aid program was begun, was the fact that her dependence on trade would gradually increase because there is an economic limit to improving domestic food production and because essential imports for industry would rise as the scale of production expanded. The problem became the acquisition of and payment for these essential im-

^^Okita, o£. cit. , p. 8. 29 ^Based on Ministry of Finance statistics in Japan Eco- nomic Yearbook, 1959 (Tokyo: The Oriental Economist, Ltd.)' i 9 8 ô 7 " p “ T r 5 7 '“ ...... 2^ Japan, Ministry of International Trade and Industry, Foreign Trade of Japan, 1957 (Tolcyo, 1957), p. l8. See also the" comments on bhe need for trade in Japan, Economic Plan­ ning Agency, Pew Long-Range Plan of Japan, 1981-1970 (Tokyo: The Japan Times, Ltd.,' 1981). 239 ports: the supply situation and the inconvertibility of exchange made this a vital matter for the Japanese. Foreign trade, however, was the one facet of the Japanese economy which had been slowest in regaining its prewar position. In 19^1, when both agriculture and industry had revived, exports had risen but still stood at about one- third and imports at about one-half of their prewar high on a quantum s c a l e . many interrelated reasons combined to create this situation, most of them domestic problems, ilo foreign trade was permitted by SOAP in the immediate pest- war years but even had this not been true, markets had been lost, hostilities had raised psycholegical barriers to threaten those which remained, and other peoples lacked the foreign exchange necessary for trading purposes. Dissolution of the aaibatsu had resulted in the splintering of trading companies to such an extent that, when exporting was resumed, 28 competition between various houses was acute. Wartime

JSY, 19!pl| (Tokyo, 195^1 ), p. 272. On this basis it was past the middle of the decade before prewar figures were equalled. A change in the composition of exports can affect its weight on a quantum scale and therefore the Chief of the Statistical Standards Division of the Administrative Manage­ ment Agency prefers measuring Japan’s foreign trade in terms of the 1926 dollar. Using 1926-1937 as the base, exports rose from 37*6 in 19^9 to 110.7 in 19^1| while imports jumped from 62.2 in 19^9 to 121.1| by 1951» This places foreign trade in a better position. Ryokichi Kinobe, "The Real Scale of Foreign Trade,*' in The Oriental Economist, May, 1956, p. 2 3 7 . 2^Some 70 per cent of Japan’s prewar trade was handled by Mitsubishi Shoji Kaisha, which had formed a prominent part . 240

destruction of the merchant marine was another deterrent to

the revival of trade; the fleet regained its prewar level

only in 1959» thus ending a drain on reserves caused by the

expense of shipping in foreign bottoms. Inflation, resulting

from the booming domestic trade of the early fifties, also

discouraged exports until the government adjusted prices in

1953* Finally, certain industrial features prevailed which

priced Japanese products out of world markets; labor reforms

had ended the advantage of low wages, raw materials imported

from great distances increased costs, and relative produc­

tivity per worker was often lower than in other countries.

Internationally, Japan faced other problems as her ex­

ports rose. She has always been extremely vulnerable to the

fluctuating commercial policies of the other countries, as

demonstrated, for example, by the effect on Japanese exports

resulting from a cut in Commonwealth imports necessitated

by a high sterling demand in 1952. To avoid a recurrence

of this situation, Britain and Japan initiated a policy

of the Mitsubishi group, and by Mitsui Buasan Kaisha, which was the "nucleus" of the Mitsui interests. Mitsui Bussan alone splintered into 1^0 trading companies. As for compe­ tition, fifteen importers are said to have once run the purchase of 30,000 tons of coal into an order for some 450,000 tons. Katsujiro Takagaki, "Mission of Trade Firms," in The Oriental Economist. February 1955» P. ^^Ryokichi Minobe, Japan's Foreign Trade (Tokyo: Minis­ try of Foreign Affairs, 1957)» P» 15* 241 continually balancing their trade. This inconvenience re­ flects another deterrent to international commerce, namely the inconvertibility of exchange nhich restricts business to currency settlement areas, dollar, sterling, or Open Ac­ count, This forces Japan to buy disadvantageously merely to use up credits, and places exporters under a strain to build markets. A third drawback lies in the fact that certain important trading states such as France, the United Kingdom, and several British Commonwealth members invoked Article 35 of the General Agreement on Tariffs and Trade against Japan, 30 thus discriminating against her goods. In the fifties, with the end of Allied control over Japan's foreign commerce, the government examined its trade position in light of changed events internally, in Asia, and in the world. Prewar territorial ambitions and former govern­ mental trade restrictions and advantages no longer applied. The entire face of Japan’s international trade had changed, but three features predominated. Internationally Japan had to adjust to the fact that shoddy merchandise would not be acceptable in lies tern markets. The label "I lade in Japan" had become a symbol for cheap goods, and "Imitator" was a deroga­ tory term often applied to the Japanese. To improve this situation, the government undertook an extensive campaign to

3^This exempts a member state from GATT benefits, specifi­ cally the most Favored Nation clause. Japan adhered to the Agreement in 1955. It was not until 1961 that any noticeable easing of these discriminations occurred. Of. The Oriental Economist, October 1961, pp. 10-11. 2H2 impress upon manufacturer the necessity for avoiding the ’*copy” stigma. In 1959, to stress this point with the public, it opened a display of products to show the extent to which such merchandise dominated the market. As the years passed, a type of export policing furthered the official effort to build a good name in international commerce by preventing distasteful trade practices, such as prewar dumping, from marring the new image of Japanese business.^11 Today, in^ genuity and excellence mark most fields of Japanese indus­ trial endeavor. In southern Asia Japan faced still another problem. It was necessary for her to allay postwar suspicions of her Intentions, Memories of her militaristic economic drive into Southeast Asia remained strong and projecting the image of a new Japan was a necessity for trade promotion. Reparations helped to accomplish this purpose and served also to demonstrate Japanese capabilities in the field of capital development. The second noteworthy feature of Japan’s postwar trade was a shift in emphasis. The prewar pattern was based on the sale of silk to get funds to buy cotton in order to make cheap textiles for sale abroad,At the peak of the prewar

3 ] Tart of this program was a government certification scheme to eliminate shoddy goods. See The New York Times, September 11, I960, 111, lL|, p ^ In 1929 textile concerns hired over one-half of the factory workers while metals, engineering goods, and chemi­ cals together accounted for only one-fourth. By the mid fifties, textiles had fallen to 25 per cent, Allen, oja, cit., p. 5. 243 period, textiles represented 22.2 per cent of the total value added to the national economy, but by 195^1 they had fallen to 1L| .1.) per cent, third after the machinery and equip­ ment industry and the second place chemical industry.This shift in emphasis began late in the 1930s. There was a grad­ ual shutting down and even dismantling of textile facilities; attention was focused on machinery, most of which Japan was able to build for herself by 1937. Prom mid-1930 to mid- 1952, manufacturing capacity increased 1? per cent per annum spurred and financed by the Korean conflict.The index of manufacturing production rose from a point of 100 on the 193^-1936 base through a low of 29 in 19l|6 to 273 by 1937 when Japan's foreign aid program was announced, with an emphasis on durable goods clearly evident. lion-durable goods rose from a low of 22 to only 219. 3 3

Q O ^^Shlgeto Tsuru, "Internal Industrial and Business Trends," in Japan Since Recovery of Independence (Philadel­ phia: Annals of the American Academy of Political and Social Science, 1936), p. 83. This was quite a rise over the 8 per cent of the national product furnished by.mining, metallurgy, and machinery in 1930. In I960, textiles represented 11.8 per cent. JSY, 1961, op. cit., p. 132. 3l\ Tsuru, Japan, op. cit., p. 88. JSYj i960, op. cit., p. 198. The index for durable goods production jumped from 37 to 303. The subsequent rise on a 1933 base has been equally substantial: by 1961, manu­ facturing production had reached 290.1, non-durable goods 241.3, and durable goods [|Ol|.l. The Oriental Economist, October 1962, p. 6l3. 244 The Government's attitude greatly facilitated, the advancement of the durable manufacturing industries. It anticipated the rise of consumer manufacturing in the under­ developed areas and envisaged participation in their trade as a supplier of advance technical equipment rather than g / textiles and consumer items. Consequently, the coal mining, iron and steel, electricity, and marine transport industries all received special attention in their rehabili­ tation efforts: that is, they obtained a larger share of government licenses and funds for reequipment, and adminis­ tration pressure was put on private lending agencies to favor these four fields. Foreign trade has reflected the changeover. Textile exports are still dominant although they now emphasize synthetic materials which the new states have not developed. Nevertheless, under the combined weight of the machinery and chemical industries, they have been losing place in Japan's foreign commerce. The third notable feature in postwar Japanese trade has been the shift from prewar trading patterns: the United States rose to the number one position. In the thirties, the Asian market dominated with 63.6 per cent of Japan's exports, by value, going to and .6 per cent of imports coming from that area. An item by item analysis shows an even greater concentration: in 1938 98.2 per cent of Japan's' food

Q ( ^Long-Range Plan, op. cit, 245 TABLE 15

a THE IMPORT-EXPORT TRADE OP JAPAN PROPER V.ETH ASIA, 1936

Imports (by value) Exports (by value)

Empire 32.7 Empire 39.5 Korea 13.8 Korea 17.9 Taiwan 9.3 Manchukuo 13.7 Manchukuo 6 .1-1 Taiwan 6.5 Karafuto 3.2 Karafuto 1.4 British India 10.0 British India 7.1 China [j .1 China I] .I| Netherlands Indies 3.1 Netherlands Indies 3.6 Halaya 2.1 Malaya 1.7 Philippines 1.0 Hong Kong 1.6 Indochina .5 Philippines 1,I| Thailand .2 Thailand 1.2 Other .9 Indochina 0.1 Others 3.0 Total Asia Total Asia 63.6

^■Adapted from Norton S. Ginsburg, Japanese Prewar Trade and Shipping In the Oriental Triangle (Chicago: University of Chicago, Department of Geography Research Paper No. 6, 19i|9), pp. 30 and 35. imports came from her neighbors and 65.6 per cent of her tex­ tile exports went to Asian states. These countries also took 98 per cent of Japan’s exported metal goods, 97 per cent of her machinery, 96 per cent of her minerals, 95 per cent of her dye stuffs, 9l| per cent of her paper, and 89 per cent of her pharmaceuticals. Present communist territory formed the principal market. 37

^Txenji Katayama, Japan’s Role in Asiatic Trade (Tokyo: Japanese Council, Institute of Pacific Relations, 1950),p. 22. !246

The war provoked many conditions which upset this pat­ tern. As a result of the close connection between Japan and the United States during the Occupation, with aid providing over half of the funds for the islands' imports, and with closer sources ravaged by war and unfriendly by inclination, it was not unnatural for America to predominate as supplier and market, further, economic starvation and consequent in­ ternal consumption in Europe blocked its early reentry into world trade; unsettled conditions prevailed for several years on the mainland and in the ew-colonial territories of Asia, thus curtailing their rehabilitation and, in conse­ quence, their value to Japan. To all intents and purposes, the Americas wore Japan's only possible trading partners during those early postwar days. In the prewar period the basis of trade between the United States and Japan was in silk, which provided the latter with a favorable balance until first the Depression and later the rise of nylon practically eliminated demand for this item.^ Today only silk fabric plays a respectable role. Japan's postwar commodity balance with the United States has

' oo been unfavorable.Her imports traditionally were machinery

O ^ See "A Century of American Japanese Trade^* in The Oriental Economist, June I960, pp. 311-31^ and "United States- Japanese Capital Transactions/*, in ibid., pp. 313“320.

o . Q In its totality, Japanese trade usually has been un­ favorable although the invisibles of commerce generally over­ came the adverse commodity balance. Prom 1900 to I960 there 247 and raw cotton and this pattern has continued. Machinery remained in heavy demand as damaged and aged equipment was replaced and innovations were absorbed, but the quantity of raw materials expanded mightily. After the war practically all Japanese raw cotton imports wore from the United States along with coking coal, both of which had previously been supplied from Mast Asian sources. This has been.a distinct disadvantage because of the oft-times higher initial cost and greater transport charges resulting from the longer haul and, in many instances, the legislative provision that Ameri­ can aid goods had to be shipped in American carriers. Thus the price of the finished product, which often went into the export trade, was raised, sometimes to the point where Japan was undersold on foreign markets. With the preponderance of Japan’s imports coming from America, exporters were forced to find suitable sale items to balance accounts. For the United States this has frequently meant a run of merchandise involv­ ing a hasty hit-skip market, one developed and expanded until American producers rose in rebellion and threatened pressure towards the imposition of import restrictions. To forestall was a favorable balance, for Japan proper, in only eleven of the 61 years (1906, 1909, 191^-1918 inclusive, 193^, 1938-1.|0, and I9I-I2 ). For 1900-1926 figures see Miriam S. Parley, The Problem of Japanese Trade Expansion in the Postwar Situation (Uew York: Institute of Pacific' Relations, 19l|0),' 73'". For post-1926 statistics, see JSY, 1961, op. cit. , p. 239. 248 such a move, the Japanese would "voluntarily" limit their exports and then seel; a new lino whose existence in turn was frantic and short-lived. I'luch of Japan’s dealing with the United States was possi­ ble because of the surplus dollars resulting from procurement, Paced with the fact that this dollar so urce would ultimately disappear, Japanese authorities early began seeking alternate sources from which to get raw materials. This search has be­ come a major feature of Japanese policy, ITot only would curtailment of American purchases cut down the unfavorable size of Japan’s imports from the United States, but it would result in a lower cost of materials because of more favorable shipping rates and possibly lower prices for the material it­ self. Although Latin America and Africa, as well as Europe, were all possibilities, the most logical connections were the older and far closer ones of Asia, which have the added ad­ vantage of being, generally, in the sterling rather than the dollar settlement area. The more distant sources were not neglected, but major attention has focused on Asia with particular emphasis on the southern portion in view of ab­ normal political conditions which have thwarted postwar ef­ forts to reopen mainland markets. Japan’s prewar trade with East Asia was considerable. In 1936 it accounted for 36.8 per cent of all imports and I|5’.> per cent of all exports. This included trade with Taiwan and Korea, of which only the former is now an active 249 trading partner. Pre>;ar colonial connections and the in­ vestment opportunities nhich were developed extensively in Manchuria, are nov; lost and with them has gone, in all probability irretrievably, chances for a resumption of equally profitable relations, Tvith the end of the Rhee re­ gime in Korea, one of the barriers to trade with the south­ ern part of that peninsula was removed, but Japan’s great­ est need is for mineral wealth of which the preponderance came, in prewar times, from Manchuria and North Korea, both of which are now behind the Bamboo Curtain. Private invest­ ment opportunities in those countries are now closed, further, the peculiarly aggressive and independent economic actions of communist states, where in, people and resources can be man­ ipulated at will without regard, for economic advantages, makes trade undependable aid often subject to the vagaries of political manipulation. Japan sees in East Asia a source of needed raw materials, but a competent and effective government in China has, as never before, turned its attention to indus­ trialization. Resources that earlier were unexploited, or allowed to fall prey to foreign exploitation, are now being developed for national ends. Consequently Manchurian beans and cereals, iron, aluminum, coal, and magnesium will be in demand for Chinese industrialization and available for export only after local needs are supplied or for a political purpose. As a market, too, continental Asia will have lost its earlier significance. Textiles which.led Japan’s export 250 field, except in Hanchuria, are non being manufactured in China proper and are even being exported to southern Asia in the process of nhich they are biting into Japanese markets there.Heavy industry, although it could supply essentials to China, was initially faced v;ith stiff competition from the U.S.S.R. nhich had an ideological and financial corner on the trade, nhile use of Japanese knon-hon met resistance stemming both from nartime prejudice and. from ideological considera­

tions. The effect of the recent Sino-Soviet estrangement has

yet to be scon, it might have contributed to the Chinese decision to resume trading with Japan in 1960-1961. Desire for a greater share in the Chinese market, however, ran high among Japanese businessmen and parliamentariais, throughout most of the fifties.The public also supported

^ In 19^7 Chinese textiles reportedly rai about ^-1^/ cheaper than Japanese goods. Chinese agents thoroughly analyzed, cultivated, and catered to the market aid a 200 per cent greater increase in Chinese thai in Japanese textile exports to five southern Asian states was noted between 19^3 and 1956, but this fell to only 110 per cent by 1937» See The Oriental Economist, September 1938, pp. ^71-^72. The initial spurt'could be laid to the fact that the corrimaiists were developing their trade from scratch. Personal contact has revealed that there is a growing opposition to cheap Chinese goods flooding southern Asian markets. ^^Harly in the decade the Diet passed a resolution urging expansion of the China trade and many members of parliament belonged to the Diet Members’ League for Sino-Japan Trade Promotion. Even in the sixties, although hope for more trade was dwindling, the 1961 ten year plan anticipated normalized trade relations with China. Long-Range Plan, op. cit., 251 it: a newspaper poll in Hay 1952 showed that 57 per cent of the people queried favored attempts to increase trade, 11 per cent opposed it, and 32 per cent had no opinion on the subject The government, while not opposed to trade con­ nections, has consistently maintained that commercial con­ tacts did not involve formal recognition which Peking con­ stantly endeavored to obtain in the four informal trading agreements which have been arranged. Despite the enticing terms of these pacts, the Chinese commitments were never realized. The subject is emotion-packed for the Japanese and emo­ tionalism frequently clouds objectivity. Arguments that China needs Japan's equipment, for instance, seem unrealistic

^2^n Asahi Shinibun poll reported by The Oriental Eco- oniist, Hay 31, 1952, p. )-il8.

1, n ^^The first agreement, running from June 1952 to Octo­ ber 1953, realized only 5 per cent of its goal; the second, October 1953 to December 195^-1, achieved 38.8 per cent; the third. Hay 1955 to Kay 1957, reached 58.1j,per cent, while the fourth and most promising lasted for only two months from March to Hay 1958 before trade was suspended. See Cohen, ©n_. cit., p. 181. Not only was diplomatic recognition sought,' But" the Chinese consistently pressured for abandonment of the strict embargo on strategic goods, to which Japan was com­ mitted, by tying the supplies the Japanese most wanted to the sale of a banned item. After each relaxation of the ban, there was a tempting spurt in the volume of business con­ cluded. In 1961, as a condition for the full resumption of trade which had begun in limited fashion late the preceding year, the Mainland demanded an end to Ja^aan ' s two-Chinas policy, to her hostile attitude, and to her.failure to re­ sume normal relations. The Oriental Economist, March 1961, p. 133. 252 in view of the arbitrary cessation of over thirty months’ duration in the fourth trading agreement Jl'l Trade with China could, however, have value to Japan; in 193"1 a. barter deal included the delivery of high calorie coal at half the American price. There is, on the other hand, more than a suspicion that this early arrangement was a teaser — during the Suez crisis the Chinese doubled their price for such coal. ïïnpedioncy dominates in Peking, and with a central trading organization operating in a field of many eager Japanese traders, China has a distinct advantage. A further hardship for Japan lies in the fact that deliveries of pro­ mised items have been erratic throughout the fifties; a stable price and. a stable, reliable supply are important factors for Japanese manufacturers. Inasmuch as the Chinese are wont to indulge in political manii^ulatlon, it does not seem likely that either of these factors will be found in the Chinese market. The communists have also utilized their trade connections to pursue domestic political advantages in Japan, which does not augur well for internal security

I^During the 19^8-1960 boycott, Peking Radio was heard to boast that China had produced an item better than its British counterpart and that some machinery previously scheduled for import from Japan had been produced domestical ly. EGARE has officially noted that China’s emphasis is on the development of heavy, not light, industries and less rather than more need for Japan’s help ca.n be expected in the future. See Chapter III. 253 either.Based, then, on past experiences, the future of

Japan’s mainland trade does not appear too favorable,and

Increasing number of Japanese are abandoning hope for It. While not discouraging the opening of new markets In China, the government has tended to emphasize the Increasing of Japanese contacts with southern Asia. In the prewar per­ iod, this region ranked third In importance In Japanese

trade, but, by I960, it approached the United States’ posi­

tion.The official Japanese policy alms at the reduction of dependence on American sources In order to cut oosts and to alleviate both the export strain (or dollar-earning wor-

^^Ono company reportedly engaged a Japanese Communist Party member to facilitate the conclusion of a trade deal and then was confronted with a request that part of the profits be given to the Party. See letter to Yomlurl Shimbun April 8, 1961 cited in The Oriental Economist, iiay 196~1~ p. 2li7. If the company refused. It would be blacklisted; If it contributed. It would not only set a precedent, but It would also increase Party ability to conduct subversive work within the country.

^^Boycotts against Japanese firms participating In the mainland trade have become a feature of Nationalist China’s objection to a rise in Japan’s commercial contacts with Peking. In 19^2, Taiwan-Japan trade amounted to ¥L|I|,795 mil­ lion compared to Japan-China trade of ¥6,581; In 1956, the peak year to date In the mainland trade, they were ¥^1] ,l\12 million and ¥5^4,355 million respectively, but by I960 ¥59,673 million and ¥8,1|I|3. Until more stability appears In trade with the communist area, therefore, commercial relations with Taiwan are too profitable to be risked lightly, 1 1 ry The Oriental Economist, January 1962, p. 12. This was said to^have represented a rise of nearly one-third over 1959. 254 ries) of the trade with the United States and the related tendency to build up inconvertible sterling deposits. In an attempt to reduce foreign barriers to her exports,

Japan has been able to apply some pressure on the United States market because of the latter nation’s desire to main­ tain the Japanese alliance in northeast Asia, There has been no comparable pressure point in regard to building southern, in particular southeastern, Asian connections. Economic diplomacy there was slow in getting started; it was long hampered by the unsettled reparations dispute with Burma, Indonesia, the Philippines, and Vietnam. Embittered wartime memories served to throw obstacles into the path of trade expansion efforts. Since the conclusion of the rep­ arations agreements with these states, however, relations have improved. There are two noteworthy features about Japanese trade with southern Asia in the fifties. First there was Iceon competition among the industrialized powers for the business available. Japan was in an unfortunate position in this re­ spect because, in view of high production costs, her products are not really competitive. As a result her exporters backed every conceivable trade promotion scheme including Open Account long-term settlements which ran a serious risk of default.^-1® Second, Japanese trade showed a continuously

ilSfhis policy was opposed by the Ministry of Finance which had the support of The Oriental Economist. "Future of Open Account/' in ibid. , June 19!?B’, p.'~297« 255 TABLE 16 AMETFII CAN-ASIAN PERCENTAGES OP POSTWAR JAPAITBSE IMPORTS^

Date American East Asia Southeast Asia Soutlj Asia % of Total % of Total % of Total % of Total

1937 33.6 11.8% 9.9° 12.0° 19l|6 86.4 8.1 -- 191|7 87.0 2.0 2.1 2.5 19)^8 62.3 4 .5 4.9 2.8 1949 62.2 5.8 8.8 3.4 1950 43.2 9.6 14.5 5.9 1955 31.2 7.8 16.6 5.4 I960 34.4 3.4 13.7 3.8

^Compiled from JSY, 1958, (Tokyo, 1958), pp. 2l|2, 2l\6 and JSY, 1961, pp. 2397 2lj2-2l|3, 2l|5. ^1937, only, excludes Korea, Taiwan, and Karafuto, for which no separate figures are given In Japan’s Statistical Yearbooks. Were these parts of the Old Empire Included In the East Asia figure. It would have risen to around 30 per cent; see Table 15. Burma Is Included In South Asia as part of British India. favorable balance, a situation which Is not encouraged too long by an Importing country. Nevertheless, the potential value of the area to Japanese Industry can scarcely be denied

Sind, unlike In China, political blackmail will no t disturb steady and stable contracts and prices although a decline In the earnings of southern Asia’s exports does have an adverse effect on Its ability to purchase abroad. A recession of this nature occurred In 1958. The Japanese Economic Stabilization Board envisaged con­ 256 siderable dollar savings from expanded purchases in southern Asia despite the fact that, in the early stages of trade, materials cost more there than they did in the Western Hemisphere. 9 Development of the products and of the mines of the area has therefore been the aim of many private Japanese concerns interested in supplies from the region. Both public and private technical assistance requests, in­

volving the extension of patents, skills, and training to local firms, industry, or agriculture, have been honored from, or arranged with, various countries. The most extensive private activity, however, has been in the investment field. In the early fifties, political unrest in the various south­ ern Asian states did not encourage as great an investment di there as in the Americas although interest was not lacking.

'^Ibid, July 12, 19^2, p. 5i-|6. 120,000 metric tons of Burmese and Vietnamese wheat, more rice from Indochina, and 350,000 metric tons of iron ore from iialaya and Goa were expected to reduce imports from the United States by $20 million; 20,000 metric tons of Indonesian sugar and 50,000 bales of Pakistani cotton would cut imports from Mexico by $15 million; l50,000 metric tons of Indonesia, Thai, and Vietnamese salt would reduce imports from dollar,areas by another $3 million, while the acquisition of hides, skins, linseed, and soyabeans from the sterling area would save a further $Ii million. To cite an additional example, if copper could be obtained from the Philippines, a saving of over $100 a ton was expected on former imports from Chile. Ibid., September 2, 1951, p. 752. ^0 Of. "Economic Cooperation with Southeast Asia/' in i b i d . , March 1958, PP. 137-143. 5lprom 1951 to 1954 only six instances, amounting to $315,000, were recorded compared to an investment of nearly Ô4 million in Central and South America. See ibid., December 257

TABLE 17

JAPANESE EXPORTS TO SOUTHERN ASIA, 19^ - 1960^

Cam­ Indon­ Singa­ British Year Burma bodia esia Malaya pore Borneo

1948 85 - 7589 19 1570 5 1949 1524 - 9042 555 5669 12 1950 5855 - 16661 1570 4798 78 1951 6528 - 46220 4162 20589 179 1952 7651 - 21545 4160 18525 269 1955 11905 - 5 7 0 7 2661 11555 179 1954 16417 - 45097 5560 15781 179 1955 15786 25297 4852 21555 577 1956 15057 5422 27571 5652 22596 568 1957 27510 4204 24154 5169 24452 576 1958 16705 5029 17660 4725 27806 457 1959 19214 5570 26287 6965 27102 591 I960 25205 4990 59896 11416 51511 946

Philip­ Thai­ Viet­ Paki­ Year pines land nam Ceylon India* stan

1948 % 6 1190 - 246 2078 146 1949 7879 7780 260° 1545 19480 5488 1950 7655 15515 765* 2551 7502 20021 1951 15812 16268 5488° 6257 I8858 42129 1952 7066 15096 5120° 6244 15899 42406 1955 9916 I89I8 2765° 4998 10075 5567 1954 11229 25459 4717° 6226 15957 20160 1955 18651 22691 15241° 7555 50778 15859 1956 19981 21922 14258 8752 58520 6565 1957 52058 29546 20545 8879 41267 5985 1958 52256 50159 14252 12457 51710 7950 1959 59570 57255 18955 9552 27864 9055 i960 55616 42560 22156 11584 40119 21259

^In millions of yen. JSY, 12a, ££_. cit., pp. 242-24;

^Includes Brunei, North Borneo, and Sarawak.

®01d French Indochina.

^Includes Portuguese India with which Japan did a thriving busi­ ness after developing local ore deposits. 258 Concern centered around the restrained attitude of the various recipient states towai'd private foreign investment and the closely allied inadequate Japanese protection against nation­ alization risks. A tight credit policy also discouraged many Japanese firms other wise interested in foreign operations. The aim of the private assistance program was to earn royal­ ties and the goal of the investment program was an overseas market, nevertheless, both served to develop the Asian states and so to advance Japanese economic well-being. With many of these initial difficulties ironed out, the outlook for Japanese trade with southern Asia appears to be good. Japan can use the exported items of the area and the new states will need capital goods to help speed their own development. Japan has a b e tte r chance of supplying such material than has Australia but she faces stiff competition from Western Europe. The major threat which confronts her stems from the vacillating export earnings of the new states. The motives insiiiring Japanese concern over the develop­ ment of southern Asia are intricately involved with its

195)^, p. 601. In 1959 the Americas still predominated: they had 05l million or 32.9 per cent of Japan>s_direct in­ vestments overseas while southern Asia had only (:23 million of ll| .6 per cent. See ibid., March I960, p. 132. Such Japanese investments were held to be exceedingly small. On the basis of the country’s Gross national Product and foreign exchangereserves, it was held that an overseas investment program of from (:300-()600 million was not impossible. Ibid., May 1956, p. 22l|. 259 TABLE 18

JAPANESE IMPORTS PROM SOUTHERN ASIA, 19^ - 1960^

Cam­ Indon­ Singa­ British Year Burma bodia esia Malaya pore Borneo

1948 142 _ 922 1054 » 27 1949 2221 - 4775 6792 44 474 1950 6547 - 4789 14052 181 1444 1951 11028 - 19770 21102 1472 5255 1952 10756 - 9595 19551 2598 6204 1955 I8O9O - 17585 18147 4685 7776 1954 22715 - 21662 20526 2648 6986 1955 16480 ■ — 29216 55416 5892 7707 1956 15254 1458 52925 58986 10955 10997 1957 8925 1452 25459 55499 14070 14055 1958 4410 487 15522 41177 4584 16168 1959 5465 1222 20572 59867 5251 20544 I960 4841 5051 25665 69684 4870 27896

Philip­ Thai­ Viet­ Paki­ Year pines land nam Ceylon India^ stan

1948 789 17 - 51 1651 0 1949 40l4 6721 1100° 515 4568 5105 1950 8102 15655 605° 87 6512 15825 1951 17870 18546 1095° 528 20441 56958 1952 18574 22486 1717° 827 28508 29665 1955 22582 50475 5992° 792 28466 58891 1954 24166 24901 5528° 950 20909 15028 1955 52025 22841 1982* 989 29965 16951 1956 42055 12641 568 1172 45790 18224 1957 40962 11256 1861 2268 48625 16992 1958 55914 7822 455 2611 52557 12510 1959 48572 15265 887 5725 59581 11671 i960 57218 26O5I 1712 4476 45279 11595

^In millions of yen. JSY.. I96I, oj2i cit., pp. 242-245.

Includes Brunei, North Borneo, and Sarawak.

°01d French Indochina.

^Includes Portuguese India with which Japan did a thriving busi­ ness after developing local ore deposits. 260 general economic situation, particularly the foreign trade

program essential to the maintenance and advance of the

Japanese standard of living as previously outlined. Whether

or not there is an element of humanitarianisin is a moot

point; it certainly was not at all evident until the late

fifties. The Japanese are vnthout doubt as generous as any

other people about the very nebulous idea of raising the

substandards of millions to more comfortable levels. This

is hardly a measurable point, but in the case of Japan, the

fact that the idea of development preceded its ovm complete

reconstruction and its ability to loan e x is te d for a long

time only on threat of disturbing its internal advancement, would seem to maize other motives initially overshadow the

humanitarian one. Further, to the average Japanese now en­

joying an unprecedented, foray into a materialistic, mechanized

style of living, his continued progress is probably'by far

his dominant concern. The political motive encountered in

the United States and to a lesser extent in Australia of the

barrier to communism which is inherent in the economic advance

of the new states, is usually not met in the Japanese English

press. It is, however, interestingly enough repeatedly found

in the statements of Japanese officials when abroad, tailored

perhaps to listener demand. Internally the country seems to

evidence little concern over the problem of the subversive

spread of communism perhaps, again, because economic condi­

tions and the fantastic growth of the domestic economy so 261 u'2 far outshine all other thoughts among the public. Sus­ taining internal economic development has been the nucleus of O the Japanese international development motive-^ which, through­ out most of the fifties, consisted solely of government en­ couragement to private overseas activities. Toward the end of the decade, a change occurred which may, in the sixties, see Japan play an increasingly greater public role in south­ ern development for less clear-cut coromercial reasons not the least of which is political. Until 1958 Japan did not have a formal governmental aid program aside from its multilateral commitments. These were manifest, for example, in its relations with the United Nations Economic Commission for Asia and the Par East and its work with the Pood and Agriculture Organization and the Ex­ panded Technical Assistance Program. These comiriitmonts also include participation in the Colombo Plan which Japan joined in 19fpi-i • It has given some Yu, 71 3 . million .2 million) for projects in southern Asia through June I960 and pledged, at the autumn meeting that year, to increase its contributions. Without such a concrete program, isolating the early govern­ ment aid policy is difficult.

^^The Government, of course, maintains the United States alliance and an official anti-communist attitude, but in view of the relatively strong socialist party and the active leftist groups in the country, does not usually push the issue unnecessarily. ^^Verified by The Oriental Economist, March 1958» p. 126. 262 It was during’the Occupation that the. first attempt to link Japanese trade with the development of southern Asia was proposed, in all probability to replace mainland China's trade which American authorities believed to be permanently lost to JapanIn 1951 a SCAP economics report announced the American intention of making the utmost use of Japanese industrial resources in connection with the expansion of the new Asian states.-"' This was at a time when the American aid program there was still in its infancy. General Marquât reportedly told the Director General of the Economic Stabil­ ization Board that the Japanese government should draft a con­ crete development plan applicable to the southern region based on a tripartite theme -- Southeast Asian raw materials and % labor, Japanese technique and equipment. United States funds'". Perhaps to lay a basis for such cooperation. Prime Minister Shigeru Yoshida told the Ordinances Investigation Committee on June 1, that General I lacArthur viewed Japan's role against the communist menace not as a military one but as an inspira­ tion for free world development through a display of her d or man t e c on omi c p ower .57

Prime Minister Shigeru Yoshida, speech to the Diet, in The Uew York Times, June 5f 1950» p . 3« ^^The so-called Marquât Report (Tokyo, 1951) • 56 The Oriental Economist, June 2, 1951» p. 1| l8 . 57Reported by Mainichi and cited in Ibid., June 16, 1951» p. 1|66. 263 On the basis of this tripartite division, Japanese spokesmen have built an argument concerning Japan's value to Asian development: as an Asian people culturally, denio- graphically, and up to the mid-thirties economically alcin to the underdeveloped areas of that continent, the Japanese are better suited than are Westerners to deal on a people- to-peo.ple basis with the nex-; states and to help them solve their _)roblemsSpecificallyn ' Q Japan has gone through the experience of adopting Western technology to a civilization endowed with an overabundance of manpower. In its claim that a Japanese engineers are, in consequence, better able to adapt to local Asian conditions, there is proven merit. Westerners familiar with the use of expensive equipment for building roads, dams, and such, have encountered unsuspected problems when forced to utilize mass manpower and little q machinery.^/ Furthermore, the cost to the new states in

-^^Prime minister Yoshida told the National Press Club, Washington, that "Japan understands intimately the problems 'of her fellow [Eastern] nations .... As the most indus­ trially advanced of the nations of Asia -- and as Asians ourselves — we Imow how to fit Western techniques of human advancement to the patterns of living and local conditions of the East”. November 8, 19$l\, Vital Speeches of the Day, December 1, 195^1» pp. 879-880. r'q ^'In reference to the earlier discussion on the theory of development, it could be noted here that Western industri­ alization was based on labor's scarcity; Japanese industri­ alization has successfully bridged the gap between technology and abundant manpower -- in this feature Japan can be of in­ estimable value in training all the underdeveloped areas of the world. No Vie stern state, nor any Eastern European one, has any advantage here. 264 paying for Japanese technicians is far less than the em­ ployment of American or even European specialists.^*^ There is, however, a limit beyond which one cannot push this argument. The Japanese have adapted to the Western theory of production and business exceedingly well and, while they have some distance to go in various fields, such as marketing,^" they have become more western than eastefn in their commercial-industrial outlook. In consequence they may find it more difficult than anticipated to adjust their thinking to the pattern of southern Asia, particularly to the quiet pace of the southeastern section. Japanese criticism of Burma's commercial immaturity and of the failure of its socialist philosophy to adapt to profit-making is a case in point. It is perhaps possible to interpret this lack of understanding in terms of religion, yet both Japan and 61 Burma are Buddhist countries. " Thus cultural affinity can

In there was a problem in Indian-Amer lean rela­ tions over the dissatisfaction of Indian engineers who com­ plained to parliament about the high salaries of United States personnel: it was claimed that three Indians cpuld be hired for the price of one American. The Uew York Times, May 29, 19^^, p. 3* Prime Ministpr Nehru's interesting reaction was that the country should got the best.

*^^Por example, one government survey on the slowness marking Japanese exports criticized sales promotion. See "Japan's Export Market Problem,*>. in The Oriental Economist, June 19^8, p. 317.

^^Ibid., March 1938, pp. 123-128. See ahead note 90.

^^See Chapter II. 265 be demonstrated here to have little bearing on successful developmental activity. Buddhist Japan and Muslim Indonesia are also vastly different: there is neither racial, nor religious, nor climatic, nor historical similarity. Further­ more, today Japarj is removed some 5 0 “73 years from experience with economic development from Indonesia’s low level. In general there is little apparent similarity between the bustling Japanese and their languid counterparts in the tropical southeast. Singapore alone could be said to bustle, but it is a Chinese, not an indigenous, city. These observations may partly explain the great concen­ tration of Japanese developmental efforts (aside from the major reparations) in more energetic India. There rice improvement and small industry development have been success­ fully accomplished on a people-to-people basis, while company investments have flourished. It is probably not racial and religious affinity, which would exist to greater degree between a Japanese and a Southeast Asian than between a Japanese and an Aryan Hindu, but a mental outlook on change which is important. It may be that merely because they are Asian, the Japanese will show a greater impatience with the slowness with which their racial fellows adapt to modern techniques than would the Westerner who might not be expecting as much in the way of initial results. Support for this ar­ gument can Be found among the attitudes of the Hisei when they go to Japan. They suffer two reactions: pride in their 266 ancient heritage and embarrassment at the differences be­ tween life at home and that around them. Such differences are not apparent to the native born. Prom the general Japanese view on their ability to work with the new states of Asia developed a concept that Japanese technology should be closely linked with American money in building up the economies of southern Asia, This notion pre­ vailed throughout the fifties, but no concrete triangular government program for general development evolved°^ outside of American efforts to utilize Japanese goods in filling the r f-' United States aid programs in the region. ^ In Japan, public interest was not then aroused. Where stimulated, it revolved around the possibility of greater foreign business opportunities; for instance, the Japanese

In 1951 India invited Japan to develop the iron and coking coal of Orissa which prompted then Finance Minister Hayato Ikeda to propose a joint United States-Japanese- Indian investment company. A C- •^In 1961 EGA Administrator William Poster opened a Tokyo office to extend the procurement of industrial com­ modities needed by Asian states. At that time he announced that the industrial capacity of Japan would be utilized to the full in the United States' Asian assistance program. Republican acquiescence to this Democratic policy was reveal­ ed by Party policy planner Thomas Dewey on his Asian tour late in the summer of 19^1. See, The Criental Economist, August 11, 19^1, p. 625. In i960, aid expenditures represent­ ed 10 per cent of Japan's exports to Southeast Asia but with the dollar savings program begun by the United States in 1961, these were expected to dwindle away. Ibid., December 1961, p. 701. 267 Economic Reconstruction Association organized a Council for the Southern Area to study means of tapping national resources and promoting trade in that region. One leading industrialist presented a concise summation of the Japanese view when he wrote that economic cooperation between Japan and America

. . . should be centered on the development of South­ east Asia. Japan should strive to exploit vast re­ sources left dormant on the one hand and to export Japanese industrial manufactures to the area. By so doing, we will be able to utilize our idle industrial equipment and contribute to the stability of Asia.°°

In 19^2 the government took positive steps to facilitate private Japanese investment and the attendant extension of "Imow-how." This is termed ’’economic cooperation", a usage which differs from the American one just as the Japanese "Southeast Asia" differs in that it includes South Asia and so, herein, is written "southern Asia", The Export Bank was expanded to include financing the acquisition of imports. The government also initiated a study of the means by which

Ghikara Kurata, "American Japanese Economic Cooperation", in ibid., September 29, 19^1, p. 763. His reference to the "stability of Asia" is one of the very few that appear in the Economist>s summation of Japaiese thought on economic matters. In this case, although it is not clearly stated, the presump­ tion is that his reference is to economic stability and not to the political stability which so concerns the United States and. Australia. In contrast to such a positive state, the economic instability and the ignorance of the less developed peoples on matters of investment and. cooperation are frequent­ ly mentioned. 268 it could underwrite industrial development undertaken by

Japanese companies interested in obtaining reliable supplies of raw materials. It also took fledgling steps to ease cre­ dit for the export of those techniques which would develop the resources of the area. This encouragement to foreign investment was done expressly for the purpose of acquiring vital materials from the sterling bloc and so reducing a troublesome sterling surplus formed by buying raw materials on dollar areas and selling finished products in sterling ones.Such moves spurred the development of the iron mines of Hong Kong and the Philippines in line with an earlier pattern used in Goa, This was an urgent program in itself, partially because the 1952 dollar shortage threatened a cut, by about one millien tons, in the import of American iron ore.

Administratively, a new consultative organ was formed to

draft basic Japanese policies toward Southeast Asian develop­ ment, American-Japanese economic cooperation, and other similar projects involving Japan, The Oriental Economist meanwhile urged on the government a policy of determined economic diplomacy in the Asian area, not only because it was increas­ ingly important in the intricate economic relations of all industrialized nations, but because it would benefit Japanese firms unable financially to maintain efficient liaison oversea^

^'^Ibid,, February 2, 1952, p, 95«

68lbld,, March 22, 1952, p. 228. 269

Meanwhile, Japanese firms were learning from their experiences, Shozo Murata, Foreign Office economics advisor, reported difficulty had been uncovered in introducing big machinery into India and Pakistan. It was too complicated for the inexperienced workers to handle. He suggested, instead, that less modern equipment be supplied for the initial develop­ ment operations, machines used, for example, in Japanese small 69 industries. These remarks apparently inspired further thought.

Up to this point, talk about development had been aimed solely at increasing the availability of those raw materials Japan could use in her industries. Little of this, said the Oriental

Economist, has benefited the local people in the same way as Western development of hydroelectric power or transport 70 had done. It then suggested that the specific Japanese contribution to the economic improvement of southern Asia could be advice on the building of cottage and small scale industry. This had actually begun, in India, in March 1952, just three months before. The success of this program has subsequently been attested by other sources,

Later in the year the Oriental Economist attacked another deficiency in the Japanese approach to economic cooperation

69cited in ibid.. May 31, 1952, p. 426,

70çf, June 28, 1952, p, 502 and July 12, 1952, p. 549.

^^Barbara Ward hailed the development of Japanese-style small scale industry, 0£. cit.. p, 159. Of, also Vera Micheles Dean, ’’Spotlight on India," in Foreign Policy Bulletin. August 1, 1957, p. 176. 270

ofi investment, namely the vagueness of the government's foreign

economic policy. Incompleted reparations settlements were,

of course, a deterrent to the resumption of normal relations

with at least four of the southeastern states. Nevertheless,

the official trade assistance-economic development approach

had been an ad hoc one. When problems arose, they were met;

for instance, to expedite a solution to the 19^2 sterling surplus,

credit was liberalized. This only incidentally affected the

long range problem of improving non-dollar sources of supply.

The government's complex mechanism for handling foreign trade

also came in for its share of criticism. The Ministry for

Foreign Affairs, the Ministry for International Trade and

Industry, and the Economic Stabilization Board were all

involved and this was said to leave foreign customers confused,

frustrated, and discouraged. Furthermore, the allegation was

made that the economic missions visiting southern Asia failed

in their purpose because they left behind them an impression

of crass doramercialism while not even presenting clearly

planned projects.7^

7 The Oriental Economist, July 12, 1952, p. 5^6. There are some observers of Japanese society who would say that this was completely in character. They maintain that there is a tendency to consult and a genuine reluctance on the part of most Japanese to make a definitive decision. This Asian reaction was still evident in 1957 when Roving Ambassador Ataru Kobayashi was attempting to sell Prime Minister Nobusuke Kishi's Southeast Asian Development Fund proposal. He found, according to reports, no objection to the plan on principle, but a common interest in getting more details, A Manila dispatch in The Times of Vietnam. October 7, 1957, P. 7. 271 Prime Minister Yoshida, speaking to the National Press

Club in Washington in the fall of 195^> emphasized Japan's

peculiarly well-suited ability to guide the newly developing

states and suggested the formation of a southern Asian Organiza­

tion of Economic Cooperation which, by integrated cooperative

efforts, could better utilize available aid and thus combat

communism.73 a flurry of interest in arranging some means of

triangular development for southern Asia followed. Foreign

Minister Aoi Shigemitsu, speaking in New York in January 1955>

offered Japan's industrial resources to the free world to spur

its economic development.7^ In rapid succession Japanese

spokesmen reiterated their country's eagerness to speed

"economic cooperation" -- this occurred at the ECAFE meeting

in Tokyo in March and at the Afro-Asian meeting at Bandung,

Indonesia, in April. More concrete Japanese proposals were

put forth in May at the Simla, India, conference on the re­

gional utilization of United States aid. The Eisenhower administration had just received from Congress a general

allotment entitled the President's Fund for Asian Economic

Development. This Fund might have been the fulfillment of

the Japanese desire for a triangular developmental program had

the Conference turned out differently. Despite the Japanese

73vital Speeches, op. cit. Secretary Dulles later observed that conditions differed between Europe and southern Asia; in the latter there was no economic base for a "Marshall'Plan". See The New York Times. November 10, 195^> p. 8 . The sole developmental result of Prime Minister Yoshida's visit was a joint statement with President Eisenhower that Japan and the United States would cooperate with free Asian states to promote prosperity. Ibid.. November 11, 195^, p. 8 . 7^Ibid.. January 20, 1955, p. 2. 272 proposal that the money be used to develop local industries

with Japanese technical assistance and so boost intra-regional 75 trade, the conferees, registering greater national interest

than cooperation, expressed a preference for its use in 76 individual country allocations. One positive gain from the

meeting was approval of the Japanese proposal for more training 77 opportunities for technicians. Japan, rather than the United

States, was subsequently chosen as the training center because

its facilities were thought to be less overwhelming than those

of American industry.

75ibid.. May 1, 1955, P. 1.

7&It was, however, retained for projects involving two or more states. See chapter IV.

77lbld.. May 10, 1955, p. 5. Japan has tackled the problem of giving instruction to Asians in several ways; as part of its technical assistance program handled by govern­ mental exports in the field and by bringing Asian students to Japan; and as private company projects by on-the-job training programs either at home or in Japan. Although there has been some dissatisfaction over allowances and living accommodations, the project has generally worked well. As the Ceylon Daily News commented, where better could Asians learn how to increase production rapidly than from these "remarkable people" who rose so rapidly from the ashes of World War II. See March 11, 1955, p. 6. In I96O the Japanese Minister for International Trade and Industry announced a new training program. This "Tokyo Plan" would advance 50-75 per cent of the total expenses of a six month course for train­ ing industrial students and technicians from Southeast Asia. The original proposal scheduled 90 such grants, and an expansion to 200 was planned for I96I. The scheme was developed in the hope of providing "a strong stimulant to Japanese plant and machinery exports". The Oriental Economist. February I960, p. 85.

y&The New York Times. July 9, 1955, p. 6 . The same argu­ ment was very frequently used by the Australians in discussing the attraction of their centers for Asian students. 273

It vas during this same spring of 1955 that one of two more of the rare references to communism appears in connection with aid comments. In Japan ex-Prime Minister Yoshida lauded the United States aid program because he felt that improved conditions obtained under it would prove that democracy was superior to communism.In the United States the following year the Japanese Ambassador, Masayuki Tani, endorsed economic development for the purpose of steaming communism and, like his predecessors, cited the aid potential of the Japanese in this respect.Bo

In mld-1957; Prime Minister Nobusuke Kishi sent up a trial balloon incorporating many of the proposals the Japanese had taken to Simla, but emphasizing a new line of participation.

His Southeast Asian Development Fund contained a cooperative rather than triangular approach to developmental assistance.

The proposed fund would operate on inter-country projects and in the field of price stabilization, thus avoiding any conflict with the Colombo Plan which attempts counseling in the same cooperative manner but whose financing is strictly bilateral in nature. The proposal received the hearty endorsement of the Oriental Economist which favored Japan's proceeding with the plan even if financial support should not be forthcoming

79lbid., April 29, 1955, p. 5.

BOlbid.. February 11, 1956, p. h. 274 from the United States; If the country did not do so, said

this journal, Japanese enthusiasm for economic cooperation Q-, would be questioned.

Asian reactions were not favorable when Mr. Kishi presented

the Fund proposal during a tour through the southern region

and Australia later in the year. The ghost of Co-prosperity

had not yet been laid. Some countries even felt that in the

plan there was a threat to their own industrialization and

that an attempt was being made to keep them in a state of

economic servitude.®^ Nevertheless, in February 1958? the

Japanese national budget carried an allocation of¥? billion

($13.8 million) for a "Southeast Asian Development Fund" whose

resources and activities were to be transferred to an inter­

national agency if one ever developed. This was the first

concrete public expression of Japan's official interest in

the development of the underdeveloped countries for any but a

purely commercial reason.^3 Trade promotion made its

G^The Oriental Economist. July 1957? p. 334.

B^Dean, op.. cit.. p. 176. Cf. also Stewart Fraser? "Some Aspects of Japanese Foreign Relations," in Australia's Neighbors. June 1959? unnumbered. See note 72, this chapter.

G^The only subsequent proposal to reach the Diet via the budget was the I96I Overseas Economic Cooperation Fund, also of ¥5 billion. This envisaged loans to be offered to Japanese individuals and corporations, to foreign governments, and to juridical persons undertaking developmental works in southern Asia and elsewhere provided requisite funds could not be gotten on a commercial basis from the Export-Import Bank of Japan. Tp that time the latter had been the only financial organ ready to aid underdeveloped countries. The Oriental Economist. February 1961, p. 66 . From 1956 to 196I, $12.9 million was spent out of the $21.9 million budgeted for foreign aid. JSY. 1961. o p . cit.. pp. 4-22-423. The gap between the figures occurred in the early years. 275 initial appearance in the budget at the same time indicating

that the concept of economic benefit from improved conditions

in Southeast Asia had not been shelved but merely segregated.

This program has reappeared annually ever since and operates

in part through the revised Japan Export Trade Recovery

Organization (JETRO). It was designed to counteract a drastic

fall in 1958*s exports; the southern Asian countries had

erected barriers to curb their foreign exchange losses caused

by the world recession of that year which led to a drop in

their export earnings in the face of continued heavy develop­

mental imports. To strengthen action in the vital field of

export stimulation, the Japanese government, at a special

cabinet session on August 22, laid out a six point program

involving reduction of export competition, facilitating export

loans and credits, and revision of trade and exchange

regulations.

Although Japan had made little headway in the fifties

in its efforts to establish a joint public venture with the

United States in the general development of southern Asia,

it entered the unilateral development field by the back door

prior to the 1958 Southeast Asian Development Fund when it

settled the reparations issue which had plagued its relations

The Oriental Economist, October 1958, p. %29. Slightly less definite proposals had been made the preceding year but ended up as all talk and little action. In the 19ol Long- Range Plan, the same suggestions reappeared, indicating the deep-seated nature of these problems. 276 with former occupied territories. The major programs involved

the annual delivery of some $70 million worth of goods for about a decade. ^ Capital investment under this operation will be an incentive, through service and replacement parts,

to the future expansion of Japanese public and private connections with the countries concerned, but these would have been greater had the government been able to maintain its desire to supply

primarily capital equipment. Fishing boats; fertilizer, motor assembly, and food processing plants; textile, pulp, and paper

mills; and other capital investments such as the Baluchang

(Burma) and Marikini (Philippines) hydroelectric projects, were Of honored. Requests were received, however, for expendable

consumer goods as well; to make matters worse for the govern­ ment in terms of resisting such desires, overstocked Japanese

textile and porcelain manufacturers sought a policy change in

1958 under which they could unload their inventories as reparations. At one point during the recession of that year, it was even proposed that these surplus stocks be used like

counter-part; they would be shipped abroad and sold for local

currency which would then be utilized for developmental purposes. 87

®^Burma was to receive approximately $20 million annually for ten years, the Philippines $25 million, and Indonesia some $19 million. South Vietnam was to get $7.8 million for 5 years.

^^The Oriental Economist. October 1958, p. 528 and April 1959, pp. l8l-l8if.

®^The "Takasaki Plan". It called for a Southeast Asia Trade Promotion Corporation to handle the transfers. Ibid.. October 1958, p. 527. 277

Despite these policy matters, the provision of goods and services has generally moved along smoothly except in the case of Burma which found itself, in 195^6, faced with a

shortage of funds which made domestic utilization of reparations equipment impossible. In consultation with the United States, the Japanese arranged for coordination of reparations deliveries QQ with American grants to alleviate this shortage. Reparations have not been a drain on the Japanese economy, representing, as they did in 1957 and i960 only 2,h and 1,8 per cent respectively of the year’s exports. It was therefore anticipated that they would have little effect on the balance of payments position and on the Japanese standard of living.

In addition to supplying capital equipment as reparations, provision was also made in the settlements for loans and for 89 technical assistance. Investment loans, since they were pub­ lic rather than private, proceeded without too much difficulty, but in the field of "economic cooperation" there has been some hindrance to Japanese industry’s attempts to meet local re­ quests, Strict nationalist sentiment, distrust of Japanese intentions, political unrest, economic instability, commercial

immaturity, and lack of foreign exchange have all been obstacles to private industry’s ability to extend the technical assistance and "economic cooperation" envisaged. Naturally the private

®®Ibid., April 1956, p. 158; The New York Times. March 19, 1956, p. 11.

G9lnG^ln ththe case of Indonesia, reparations also included the cancellation of unpaid postwar trade claims. 278 businessman is interested in a profit, wants some guarantee against nationalization, and needs stable political and economic conditions in order to locate the market for the new plants 90 in which he is willing to invest his money and his know-how.

Despite these obstacles, Japanese investments in southern

Asia have been rising sharply since 196O.

The evolution of Japan's foreign assistance program has thus followed two paths: first, the early period of moral support for private investments; second, the Initial govern­ mental steps in the late fifties through reparations and the

Southeast Asian Development Fund. Japan's failure in the past to participate publicly in solving the investment and technical cooperation needs of santhern Asia, has unfortunately tinged the Japanese participation with a coramerciality which did not help further its goals. The government's early passive role has been both understandable and excusable. Domestic economic problems dominated in the fifties. Public interest was naturally self-centered and official trial balloons failed to inspire confidence except when industry could envisage direct benefit in them. During this period, any attempt to direct national capital into a nebulous long-term foreign venture

90see The Oriental Economist. March 1958, pp. 125-128 for an application of this problem in Burma. A Japanese cotton machinery manufacturer failed to come to terms with Burmese representatives because they were essentially speaking a different commercial language. Among other problems, the socialist Burmese were making it difficult for the Japanese to secure their rights to a reasonable return on their investment. 279 was discouraged in favor of urgent domestic needs. Thus only with reparations, which were essential operations, could public funds easily enter the developmental field.

The failure of a joint United States-Japanese economic venture in the general development of southern Asia may well be found in assorted domestic politics rather than from any major demerits in the plan itself — innumerable examples exist of individual American expressions favoring such a tripartite arrangement. The legal provision for the transport of aid goods in American ships, the hue and cry that frequently rises over the spending of aid money outside the American market, and reluctance to pool United States funds in inter­ national organizations over which it loses definitive control may have made it impossible for the government in Washington to formalize any agreement with Tokyo. Likewise, those Asian states which had felt the weight of Japanese imperialism during the war failed for some time to react enthusiastically to their conqueror’s resurgence. They particularly objected to the eagerness with which the Japanese pressed their ideas for supplying industrial goods in exchange for local raw materials, all of which, to them, barkened of economic colonialism.

In 1961 Japan entered a third phase in her economic assistance history. The year witnessed a determined United

States effort to enlist other nations as more active develop­ mental donors. This was proposed in order to lessen America’s aid burden, with its excessive dollar drain, and also to arrange 230 adéquate free-world funds to finance India's expensive third

Five Year Plan,^^ Receipt by Japan of an invitation to Join such a group placed her officially in the class of major donor states deemed capable of contributing one per cent of their gross national production annually to the cause of foreign assistance. Japan's subsequent adherence to the

Consortium gave two political tinges to the country's objec­ tives for aiding southern Asia. First she could take a well-deserved feeling of pride In her membership as a com­ pliment to both her postwar Industrial ability and to her being the only Aslan donor In the group. Second, by align­ ing with the free world In this particular fashion, Japan was quietly but more publicly than ever before subscribing to a "stop communism" movement. Political considerations, however, remain a minute part of the over-all Japanese ob­ jective for contributing to the development of southern Asia.

The government's Initial stimulus to private Investment activity and subsequent active public developmental assistance were predominantly Inspired by economic factorsthis the

9^The Consortium thus formed was to raise $1 billion which the United States agreed to match, to guarantee the Indian program. In August, Japan pledged $30 million to this group. The New York Times. March 22, I96I, p. 1.

1962, The Oriental Economist frankly stated that "the strengthening of ecoqpmlc diplomacy and the propulsion of Ceconomic cooperation^] , In the spirit of friendly assistance to [southern Aslag countries, will eventually be the final key to the rational Increase of Japan's trade there] ". January, I962, p. I5. 281 nationalistic ex-colonial states do not fail to note. They are sometimes wont to class Japan with the imperialist group they fear and any activity which stimulates the new states' opposition is detrimental to Japanese aims, limited though they are. Nevertheless, in the final analysis, these objectives conflict in only minor ways with those of the United States and Australia, Further, as the means to a realization of a broader free world desire to stimulate .democracy in the new states, Japanese developmental procedures may actually be the most useful of all the efforts taken by these three donors in southern Asia because they broaden the democratic base by creating and strengthening new socio-economic groups. More directly pertinent to Japanese interests, any move by any other donor which builds up the underdeveloped states economically is a benefit to Japan. The country can, there­ fore, expect to profit indirectly from the developmental improvements coming from other donors. CHA.PTER VI

OBJECTIVES UNDERLYING AUSTRALIA'S ASSISTANCE PROGRAM

Stripped of all supporting guises, the principal objective underlying the Commonwealth of Australia's inter­ est in the economic development of southern Adia is national security. The social outer cover, in all probabil­ ity quite sincere, conceals a basic insecurity stemming from geographic, demographic, and economic factors. This is not to imply that there are not equally honest humanitarian and economic inspirations responsible for public support of the aid engagements made by the Canberra government but, in the case of Australian foreign assistance, these two objectives are even less dominant than they are in the

United States. Australian aims are limited ones primarily because the country's assets severely curtail its ability to support a larger program.

Prior to the Second World War, the Australian outlook on the world was a colonial one despite the forty years of virtual independence resulting from unification in 1900 and subsequent status within the British Common­ wealth of Nations. The people were predominantly of British

282 283

origin^ and so oriented toward English living^ that the ulti­

mate goal of most was a return visit to their ancestral home­

land. Even today such a trip seems as dear to the “heart of

Anglo-Australians as a pilgrimage to Mecca is to an ardent

Muslim. The commonalty was unified and shared a similarity of

thought and manner which strengthened the nation, but this

homogeneity has, today, led to two foreign Involvements, First

the question of peopling the vast empty spaces of the continent

became a matter of intense concern as insufficient numbers of

British immigrated. 3 Second, the predominantly British

character of pre-19^0 Australia served to confirm its relation­

ship to England and to the Commonwealth as a whole which, at

that time, consisted only of English-settled areas and the

^The 1933 census showed 6,659,518 Australians of British extraction and 60,259 of foreign origin. See H. L. Harris, Australia's National Interests and National Policy (Melbourne; Melbourne University Press, 1938), p. IM-O. After World War II, nearly 90^ of the population still consisted of descendants of peoples born in the British Isles. C. A. Price, "The Effects of Postwar Immigration/ in The Australian Quarterlv. December 1957, p. 28.

^This social attitude was modified in the latter part of the 19th century by the rise of an ardent nationalist feeling which explosively shook the fields of art, literature, and even politics. Of. Robin Gollan, "Nationalism and Politics in Australia before lo55/ in Australian Journal of Politics and History. November 1955 and Russell Ward, "Social Roots of Australian Nationalism," ibid.. May 1956.

^The initial desire was to accept only British and English- speaking Commonwealth immigrants. The subsequent decision to admit North and Western and later Central and Southern Europeans has resulted in a vast change in the mental outlook and general economic conditioning of the easy-going old Australians. Fortunately, the newcomers share a European heritage, and many, as refugees from German and communist aggressidn, have ardently 2Ü4

Irish Free State. This deep concern with Commonwealth af­ fairs has more recently involved Australia in the developmen­ tal problems of that association’s newer Asian members.

Economically, too, the continent was tied firmly to the

British market. Until the iSSO’s, little of the assorted colonies’ trade, predominantly primary in export, went to any other area. Only after World War I was there any growth in direct commercial intercourse between this British area and the adjacent colonial holdings of the other European states;

TABLE 19

PREWAR AUSTRALIAN EXPORTS— PERCENTAGE OF THE TOTAL

1099= 1909- 1920/ 1930/ To 1903* 1913* 1921* 1931C

United Kingdom 49.56 45.14 51.10 44.04 Malaya 0.22 1.11 1.61 0.91 Ceylon 4.70 4.24 0.22 0.42 India 4.97 2.96 1.66 2.39 Other British 13.79 7.53 16.12 7.23 Total Brit. 73.24 60.93 70.71 55.04 Indonesia 0.32 0.64 1.94 1.57 Philippines 0.49 0.70 0.32 0.36 Japan 0.42 1.53 2.36 10.53 Others 25.53 36.10 24.67 32.45 Total 100.00 100.00 100.00 100.00

^Australia, Bureau of Census and Statistics, Official Yearbook of the Commonwealth , 1918 (Melbourne, 19loi, P. 576

^Ibid., 1923. P. 230. cibid., 1932, p. 154.

reinforced the country’s natural democratic traditions. They have also energised the economy. 285

Australia's nearest neighbor, Indonesia, only 200 miles away,

might have been as far distant as that colony's metropolitan

authority, Holland, Throughout the 1900-1939 period, one of

protected apprenticeship in foreign affairs, the Australians

worked through two intermediaries when dealing with any

dependency: Britain and the parent European state, Australians,

therefore, had no sense of contact with, or of belonging to,

the geographic area of which the continent was a part.

During the true colonial period and following unification

in 1900 the Australian states relied on British naval might

for their protection. Distance and isolation were the prime

supporters of this policy, but both fell before the onslaught

of technology in the interwar years. With the transportation

revolution of the twenties and thirties, the awareness of

physical separation from the spiritual homeland began to

grow. The first fatal blow fell when Australia suddently

ceased being a month removed from England with the inauguration

of commercial air service between the two in December 193^.^

Although secure behind the British navy and content to

shelter behind the British lion, Australians had begun to

^In 1955 a trip from the Australian capital to Tokyo, Japan, took only one-third the time required in 192? to travel from Canberra across the continent to Western Australia. See R, G, Casey, Friends and Neighbors (East Lansing, Michigan: The Michigan State College Press, 1955), p. 3. Visitors to Australia never fail to note the extensive use of air facilities and the backward state of the local roads and railroads. Before the latter two reached an extensive degree of development, air travel had transformed the transportation picture. 286 agitate for local defense forces from the first days of

unification. The cause of this domestic battle was the

sudden appearance of non-British aggressive forces in Asia,

First had come the Russians as they moved westward across the

continent to Siberia and to ultimate defeat at the hands of

the rising Japanese, Britain's 1902 alliance with the latter, and her subsequent concentration upon European affairs which

left her ally in virtual command of the western Pacific, did not receive wholehearted Australian support,^ Aside, however, from the agitation for defense forces prior to World War I, neither the government nor the public felt any major interest in Asian affairs up through the twenties. Only in the 1930’s did the nearby areas, previously considered an offshoot of the

European world, become a matter of concern. Nationalism increased the tempo of its march through the southern area at the same time that Japanese troops began moving into China,

These political changes plus the technological ones of the time, slowly aroused the Australian giant to awareness of the world around him.

^Fear of Japan allegedly influenced the decisions for compulsory military training and the establishment of a separate Australian navy in 1909-1910, Australian-^Japanese relations are ably treated in a prewar Institute of Pacific Relations publication: Jack Shepherd, Australia's Interests Afifl Policies in the Far East (New York, 1939) and Ian Clunies Ross, ed., Australia and the Far East (Sydney: Angus and Robertson, Ltd,, 193&). 287

Although always previously willing to share Imperial

burdens,6 Australia suddenly turned aggressive on the subject

of its right to a voice in Pacific problems. At times this

forceful demand for consideration led to strained relations

with Britain; this was particularly evident during the 1936

trade dispute involving Japan.? Publicists as well as govern- o ment leaders took a new look at the map and a new term was

born; what the Anglo-Americans refer to by the loose expression

‘^It actively participated in the Sudan campaign of 1885, in the Boer War, and in World War I, although evidencing the least interest of all the Commonwealth in maintaining separate diplomatic status in the post-Versailles world. It took a restrained view of the Canadian proposal for individual Dominion representation at the Paris Peace Conference; it left to South Africa the agitation for ^ lure as well as de facto sovereignty in domestic and foreign affairs; and it remained in the background in the controversy over the Treaty of Lausanne. One active outburst involved the Japanese attempt to insert an equality clause in the League of Nations' Covenant. Increasingly through the twenties, the government relied on British foreign and defense administration. It even cut its own naval building program for financial reasons.

?By 1932 Japan was Australia's second-best customer; the establishment of a Trade Commissioner in Tokyo in 1935 if as the first of Australia's official foreign appointments. Japan's economic surge in the Pacific area, however, was in direct competition with British commercial interests there. In 1936 Australia was forced to choose between her profitable trade with Japan and her dependence on the British market, between her loyalty to the Imperial connection and her older fear of Japanese imperial ambitions. For six months the argument was deadlocked, but the decision was ultimately made in favor of Britain. Trade with Japan declined. I. M. Cumpston, "The Australian-Japanese Dispute of the Nineteen Thirties," in The Australian Quarterly. June, 1957, p. 53.

Suntil recently Australian cartography was done in Britain and showed the continent "tucked away down in the bottom right- hand corner — not far from the printer's name". Locally-made maps put Australia front and center, with all of Aiia stretching northward from her shores, vast expanses of water to the east 288

"the Par East", that Is the area between India and Japan, became to an Australian the "Near North". The expressiôn caught the popular fancy and has gained a permanent place in national speech.

Considering the changes afoot in Asia, the government decided, in 1939> to handle its own diplomatic affairs. In announcing this new policy. Prime Minister Robert Menzies said 9

We will never realize our destiny as a nation until we realize that we are one of the Pacific Powers. And, of course, as a Pacific Power, we are principals; we are not subordinate; we have a primary interest. . . .

With the outbreak of hostilities in Europe late the same year,

Australia prepared, as in the past, to send contingents to the

Middle East, but with the entrance of Japan into the war in

19*+-1, a new period opened in Australian history. Suddenly, for the first time, British prestige and military strength disappeared from East and Southeast Asia. There was no barrier between the Australian continent and aggressive forces to the north. In January 19^2 the loss of the Singapore bastion and the rapid occupance of colonial Southeast Asia put the Japanese within bombing range of Australia. Panic spread as bombs fell

and west, and frozen Antarctica to the south. R. C. Casey, an address to the Victoria League, Sydney, May 2^, 1951, in Current Notes on International Affairs. May 1951, p. 289.

9Quoted in Casey, Friends, op. cit.. p. 1. The first ôVesseas Australian missions were established, significantly, in Washington and Tokyo, a dozen years behind Canada, South Africa, and the Irish Free State which had hastened to set up legations abroad after the Imperial Conference of 1926. 289 on Darwin and for some time it was feared that invasion was imminent.^®

Although exposed by events of the thirties to an aware­ ness of potential vulnerability stemming from its geographic position, Australia in the forties was actively fighting for survival, and isolation became a policy of the past. Labor

Prime Minister John Curtin unashamedly and literally turned to the United States with a sharp cry for help; the continent subsequently became the base for the major Allied push north­ ward through the Pacific. The shock of this period had two profound effects on the country’s postwar diplomacy: it dictated a policy of close cooperation with the United States and it necessitated adjusting to the continent's geographic location.

^^Australian public opinion may have been born out of this sudden realization of danger. In 1938 Political Science Professor W. MacMahan Ball had lamented the lack of a coherent public opinion on world affairs. See. W. G. K. Duncan, Australia’s Foreign Policv (Sydney: Angus and Robertson, Ltd., 1938), Introduction. He followed this with an edited work which commented on the distorted press treatment of inter­ national politics. See Press. Radio and World Affairs (Melbourne: Institute of Pacific Relations, 1 9 3 9 ) . In 1952, however, the Minister for External Affairs had no complaint to make about the press coverage given foreign news but did express a desire for greater numbers of authoritative feature articles on world problems and on neighboring areas because he felt there was still some work remaining to be done in creating an informed public. See R. G. Casey, The Conduct of Australia’s Foreign Policv (Melbourne: Australian Institute of International Affairs, 1952), pp. 6-7. In the later fifties, some popular regard for the subject was evident: study groups, friendship societies, and increased study of Asian subjects could be found on every hand. One academician, familiar with Asian thinking, agreed, however, that a great deal could be done to improve the teaching of courses on the Near North; he was particularly concerned with socio-economic ones, Charles Gamba, "Some Thoughts on Australian-Asian Understanding in fthe Austra­ lian Quarterly. September 1958, pp. 2M--35. 290

These became fundamental points in both Labor and Liberal Party

foreign policy. First, and usually foremost, has been the

maintenance of a firm alliance with the major Pacific power,

the United States. This policy went hand-in-hand with the

continual strengthening of the Imperial connections — Australia has not and would not consider abandoning her traditional close

relations with Britain.

More important, however, than these emergency ties with

her sister democracies in the distance was Australia's day-to-

day relationship with her near neighbors. Within five years

of the war's end, six new states had been born from among the

colonies of southern Asia. Nationalism had triumphed with 12 an assist from the Japanese occupation but mainly from sheer

local determination compounded by British economic necessity.

The aggressive nationalist policies of these states and their revolutionary social upheavals presented a challenge to older nations. Australia's foreign minister dramatically described

these changes when he spoke of the "tumult of new nations and

llThe Labor Party usually put support for the United Nations first, the Anglo-American connection second. Cf. Herbert V. Evatt, address to the House of Representatives June 21, 19^9> in Current Notes. June, 1949, P. 763* R. G. Casey, address to the House of Representatives February 22, 1956, in Current Notes. February 1956, p. 92. The Governor General of Australia, the Viscount de L ’Isle, in his statement on the opening of the 2^th Commonwealth Parliament February 20, 1962 listed the three central principles of international policy as support for the United Nations, Southeast Asian friendship, and strong military connections, in that order. Current Notes. February 1962, p. 36. 12çf. w. H, Elsbree, Japan's Role in Southeast Asian Nationalist Movements. 1940 to 19M-5 (Cambridge* Massachusetts : Harvard University Press, 1953). 291 new forces” which had broken the quiet of the past 150 years. 1U- Asia had become of "the first importance” to Australian security: over 150 million people lived within a radius of 2000 miles of

Darwin in territories producing the world’s supply of vital tin, rubber, and rice. It was from this direction that current aggressive movements toward Australia could be expected to come.^^ In consequence, it became apparent to the government that building mutual understanding with these new states was essential, and in the process it had to disassociate Australia from the former imperial powers now in sharp disfavor through­ out Asia, Friendship had to be based on the recognition that

Australia maintained only feelings of sympathy and helpfulness toward Asian peoples.By 1957 this goal had been at least partly attained. The Minister for External Affairs, Richard

Gardiner Casey then reported that he had been welcomed by one

Southeast Asian Prime Minister with the remark, "We have come to realize over the years that Australia has no axe to grind in its interest in us”.^^

ISpercy C. Spender, radio address November 19, 195Q, in Current Notes. November 1950, p. 795.

G. Casey, address on communism in Southeast Asia, May 16, 1954, in Current Notes. May 195^> P. 3^8.

15a. G. Casey, statement on his first official tour through Southeast Asia, August 22, 1951» in Current Notes. August 1951, p. Vt2 . l^ibid.

1 7 r . G. Casey, statement on Australian relations with Southeast Asia, Sydney, November 8 , 1957, in Current Notes. November 1957, p. B76 and speech on foreign affairs in the House of Representatives, December 5, 1957, in Aid., December 1957, p. 971 292

The factors dictating a campaign for friends among the newly independent Asian states were threefold: geographic, demographic, and economic. The geographic situation confront­ ing the Australians is obvious. With the exception of New

Zealand, Australia is the only purely European community between T8 Suez and the western shores of the Americas. At times in

the past this isolation led to remarks the tone of which bore an affront to Asian hearers as, for instance, Prime Minister

Hughes’ reference to the continent as "a tiny patch of white in a great sea of color".^9 When a visiting American Professor emphasized the early Australian belief that the country was merely an extention of the British Isles isolated in an unfriendly world, the atmosphere around his audience was one of suppressed resentment.^0 It was apparent that the

Australian savants resisted the interpretation and resisted it with an intensity bespeaking its truth. This point can be emphasized by the subsequent admission that in the last decade

18%t should perhaps be pointed out that many unwittingly extend Australian conditions to neighboring New Zealand, but, in reality, there are only certain features of similarity between the two. The latter is definitely more English, more pro-English, less ready to debate potential British support, and less exposed to Asia's problems and politics than is Australia; the 1200 miles separating these two states is a distance considerably greater than most people realize,

19w. M. Hughes, The Splendid Adventure (London: Benn, 1929), p. 108.

^®Dr. Werner Levi, seminar, The Australian National University, Spring 1955. 293

there was "a widely held belief that Australia must live by

her wits in a hostile and envious world".21

The early concept of Australia as being British with no

connections with the world around her faded in the thirties.

Australia's interest in the Pacific was clearly outlined by 22 Prime Minister Menzies in 1939 and remarks of similar vein

consistently reappear. In January 19^9, Herbert Evatt, Labor

Minister for External Affairs, told the New Delhi Conference

on the Indonesian situation that Australia was geographically

closely-linked with Southeast Asia^3 while Sir Percy Spender,

his Liberal Party successor, later told a Sydney audience that plf Australia's concern with the Korean War "was a direct one",

Australia's special role in Asia and the Pacific necessitated

a foreign policy largely but not exclusively concerned with

this region.A nation wide survey early in June 19^8 revealed

that 99 per cent of those contacted believed Australia's future

was "Inseparably bound up with that of Southeast Asia". The

R, Davis and 0. A. Hughes, "The Literature of Austra­ lian Government and Politics," in The Australian Journal of Politics and History. August 1958, p. 126.

22previously quoted.

^3current Notes. January 19^9» p. 112. ^^Ibld.. December 1950, p. 88^. G. Casey, statement on foreign policy, December 31, 195^, in Current Notes. December 195*+, p. 857.

^^Australia, Office of Information, Weekly Review (New York), July 2, 1958. 294

theme still predominated in I96I: the leader of the Austra­

lian delegation to the United Nations told the General

Assembly that Southeast Asia was "pivotal in Australian

foreign policy and Australian international relations.In

consequence of this recognition, "being one of the boys" was

selected as the best means for the country to succeed in the neighborhood.

Australia consequently joined the United Nations Economic

Commission for Asia and the Far East and attended regional

conferences, among them that in India on Indonesia and one in the Philippines to discuss the extension of consultative

sessions and cooperation within the area. The country is also a member of the Southeast Asia Treaty Organization, So wide­ spread was the concept of belonging that there was considerable criticism expressed in the national press that no invitation had been extended for Australia's participation in the Bandung 28 Conference of Afro-Asian states*

2?James Plimsoll, speech of October 13, 19&1, in Current Notes. October 196I, p. 4-0.

^®The regionalism implicit in this phase of Australian foreign policy has an obvious and direct connection with the country's security. Its devotion to collective defense was justified on the ground that the United Nations had been left without physical power and other alternatives were essential to the maintenance of world peace. See Herbert V. Evatt, foreign affairs debate in the House of Representatives, February 9, 19%9, in Current Notes. February 194-9, p. 268. Since the time of the Washington Conference in 1922 Australia has relied on collective means for assuring peace in the Pacific. Regional­ ism was further held to be entirely consistent with Brit&sh Commonwealth obligations inasmuch as six of the eight members of that association were then included in the southern Asia- Pacific area. Ibid.. p. 271. 295 The demographic problem affecting Australian foreign policy is, in contrast with that facing most of Asia, a lack of numbers rather than an overabundance of population. This is true despite the fact that Australian reproduction rates have been consistently among the highest in the Commonwealth.^^

The problem, of course, is Australia’s size. Roughly comparable to the United States in area, it had only some seven million people compared to over 130 million Americans before World

War II. The sweeping generalities usually made comparing the size and expansion patterns of these two large countries completely ignore the fact that the vast center, the heartland of Australia, can support little life. For yeais virtually the only inhabited portions of the continent were the fringe coastal areas. Today vast irrigation projects are diverting into the immediate interior the abundant but wasted rainfall running seaward from the eastern coastal mountains. Extensive agricultural areas are being opened up for settlement. Still these developmental programs cannot affect much of the "outback".

The estimated maximum population the country can support is

20 million, which, while nearly three times the prewar figure, is remarkably small when set alongside adjacent countries.

^^Australia’s birth rate was the highest of the four British dominions in the 1911-1921 period and second to South Africa by a mere two one-hundredths in the twenties. These averages for the decade were two to three times as high as annual figures for European countries in 1933. Harris, cit.. p. 139, The rates per thousand mean population were 3^.5 in 1892, 27.2 in 1912, 18*2 in 1932, and 22.9 in 1952. Australia, Bureau of Census and Statistics, Official Yearbook of the Commonwealth. I960 (Canberra, i960), p. 1207. 296

There are around 90 million Indonesians scattered among the islands immediately to the north; there are some 20 millions each in Burma, Thailand, and the Philippines, vastly smaller states; and the 90-odd million Japanese, ^00 million Indians, and 600 million mainland Chinese seem like oppressive totals indeed.Thus it is that numbers alone play a decisive role in dictating Australia’s attitude towards her neighbors.

Two myths have combined to produce a national immigration policy necessitating the filling of these empty spaces as rapidly as possible. First, it is frequently held that the teeming millions of Asia will seek to emigrate and thus ease the burden on their over-crowded homelands. History shows, however, that emigration rarely is as attractive as anticipated and is of no value in solving the overpopulation problem at the source, as the basic birth patterns have not been changed by the move. Second, it is generally feared that if Australia remains empty, it might attract assorted Asian aggressors seed­ ing iRhensyaap- Consequently added numbers are required to maintain an effective resistance.The disgusted outburst of a Singapore student who exclaimed, "Who would want it?" when

30For example, in a speech on internal relations in the House of Representatives on June 21, 19^9» Mr. Evatt referred touthe differing living standards of the 1200 million "so close to our shores". 0£. cit.. p. ?6 0 .

3^W. D. Borrie, "Australia's Population Policy and Its Relation to Demographic Problems in Asia',*’ in Implications for Australia of Recent Developments in the Far East cmimeoeraphed. Sydney: Australian Institute of International Affairs, 1950), p. 3. 297 the matter was discussed in a public gathering in Canberra in 1956, is an interesting reaction to this view.^^ Her query may be laid to an irrascible disposition but cannot completely be based on dissatisfaction with the social con­ ditions of her visit. To those not emotionally involved, evident and obvious differences are apparent, between, say, tropical Indonesia and rocky, cold Tasmania, not to mention the impossibility of utilizing the center of the country with the present state of exploration, technology, and funds available for improvement. Some day the latter may blossom, but at present there are no expectations in this direction.

In consequence the country has little to attract Asians seeking living space, if only they realized it.

Suffice it here to say that, although the country could reasonably contain several million more people, fears of

Asian covetousness may be exaggerated and in consequence the political implications of this Australian belief may be faulty.

In all likelihood, Asian interest in Australian immigration hinges not on a mass desire to participate either with or with­ out political intent, but on exclusion. For the first fifty years of Australian history the government's immigration pro­ gram was callously referred to as the "White Australia" pol­ icy. The implied superiority can be compared to the British

^^International relations meeting. University House, The Australian National University, Canberra, March, 1956. 298

Insensibility over Shanghai park signs which read "No dogs or

Chinese admitted". In the past decade more temperate language has been used in describing Australian immigration restrictions, and the generally unbiased racial attitude of the population has been made evident to the several thousand students and to visiting neighbors who have traveled to Australia, The country is conscious, however, of being a small European transplant in an Asian setting, and from this stems g certain insecurity.

The economic factor influencing Australia’s foreign policy is a peculiar one. The nation is short on manpower and not overly blessed with resources, and yet, in international aid circles, Australia is a donor country. Unlike the major industrialized states of the world, she is not well developed herself and is in constant need of additional capital to implement her own industrial advance.^3 Despite this fact, and within the bounds of her own resources, she has made great efforts to help the southern Asian states. Both Austra­ lian industrial production indices and the change in the nature of her exports with the growth in machinery, drugs, and chemicals, attest to the country’s progress. However, despite the technological differences, Australian life in the 1950s seemed to resemble that of the Western world about 1910. The country

33R, G. Casey, statement to the House of Representatives; April 23, 1959, in Current Notes, April 1959, p. 198, See also Prime Minister Robert Menzies, addresses to the two houses of the American Congress August 1, 1950, in ibid.. August 1950, pp, 572* 576, 299 is young, ambitious, and now inspired by the pioneering outlook of the recent immigrants, the "New Australians", who have revitalized the land. The measure of the government's desire

for security lies in the fact that attention and effort can be taken from the exciting, stimulating task of internal development and extended to the matter of making friends with neighbors in the Near North.

The prewar Australian outlook on Asia, the shock and the reorientation of the Pacific War, and the three features influencing Australian policy toward southern Asia have paved the way for an examination of the motives underlying Australia's aid program. Humanitarian and economic ones exist, but the essential impulsion is security even though its outward appearance is often in a social guise. The country wishes to be a part of the Asian world in which it exists — wants to take part, wants to be considered a part, wants to be on friendly terms with its neighbors.

There seems little doubt that the Australians have a genuine interest in the well-being of poorer countries. Their natural generosity can be seen in their record of contributions to postwar United Nations relief funds and to assorted emergency cases not only involving dlasters in adjacent areas, where a political inspiration might prompt action, but to those in such distant lands as Central America. In 19&1 she made her first contribution to the Commonwealth African Assistance 300

Plan which operates outside her immediate interests, and also paid into the general development programs of the IBRD and to the International Development Association. Through the fifties, the decade of the development of the aid program as a major feature of Western foreign policies, varied references were made by official spokesmen to humanitarian sympathies underlying Australia's assistance projects, but these references are by no means common. One such, pregnant with sincerity, is the hint of emotional appeal contained in the report of the foreign minister on the first Commonwealth Prime Ministers' session to include the three new Asian states, Ceylon, India,

Pakistan, as full and equal partners. Mr. Evatt then told

Parliament^^

One of the contributions of the Prime Minister of India was his insistence uponthe fact that in the modern world .... you could stop the infiltration of extreme political ideas from abroad only by seeing that the standard of living of the people, the miserable standard as it often now is, was improved. That was the argument advanced by the Prime Minister of India. I wish I could repeat his words. Of course, it has been said before, but he put it in a way that was convincing and compelling.

This report was tendered about a year before the meeting resulting in the Colombo Plan. During Labor rule, all foreign

^^Current Notes. August 196I, p.

3^Pebruary 9, 19*+9? oe. cit.. p. 265. 301

assistance was channeled through the United Nations on which

Dr, Evatt worked so energetically.3^ The compulsion of Prime

Minister Nehru’s words, however, might have been brought to

the Department and might have led to the Spender proposal at

the Ceylon meeting. In any event, the most specific reference

to a humanitarian motive for Australia's assistance efforts

appeared in Foreign Minister Spender's report to Parliament on.

the Colombo Plan when he said that Australia could not ignore

the basic needs of such a large and important section of the world's population.37 As in American pronouncements, this

humanitarian objective was placed in the equivocal number one

position. In public addresses stress is usually not laid on

Australian beneficiences but on complimenting the ages- old

civilizations and cultures of Asia in an attempt to show appreciation for them.^®

^^Evatt, June 21, 19^9, o£. cit.. p. ?6l.

37p, c. Spender, statement to the House of Representatives June 6, 1950, in Current Notes, June 1950, p. 399. also Casey, statement of April 23 , 1959, o£« clt.. p. 1987

38^3, for example, Mr. Casey's March 15, 1956 broadcast over Radio Malaya, in Current Notes. March 1956, pp. 17^-175 and his broadcast over Radio Australia, March 25, 1956, in ibid. pp. 177-178. Such references appear less frequently in American pronoucements. Both countries are, however, arranging cultural exchanges in art, dance, and music to stimulate public interest in and awareness of the depth of Asian civilizations. 302

TABLE 20

AUSTRALIA'S MERCHANDISE EXPORT TRADE WITH ASIA (£A000 )

To 1952/55^ 195V55^ 1956/57° 1957/58° 1958/59^ 1959/60®

Burma 920 1,788 2,467 1,525 1,448 Oeuabodia 5 4o 58 29 Indonesia 5,064 5,702 6,820 4,051 2,157 5,221 Port. Timor 55 59 55 220 49 Laos 556 70 204 15 5 Malaya 9,544 8,410 9,088 12,266 15,167 12,675 Singapore 12,794 11,600 14,129 12,685 9,855 10,949 North Borneo 788 .927 1,027 1,251 ,996 1,550 Philippines 501 1,709 5,812 4,875 4,157 Thailand 1,224 1,157 1,651 1,627 1,785 Vietnam 19° 2 14® 102 454

Ceylon 14,687 6,552 9,819 5,959 5,852 7,711 India 17,148 19,428 28,580 11,689 10,080 16,185 Port. India 92 69 159 159 170 Pakistan 4,524 2,947 6,744 5,170 1,552 5,027

Japan 85,958 58,575 158,877 102,717 102,511 154,741

Other Asia 10,557 24,175 17,551 18,502 26,545

Total Asia 162,151 i 4 i ,i 49 240,975 182,589 180,548 Total Trade 850,875 760,446 978,679 812,799 808,184 957,154

^Australia, Yearbook,1 1955, op1 cit., p., 220

^Ibid., 1957» 22.. cit.. p. 547.

®Ibid.. 1959, p. 481

^Ibld.. I960, p. 492.

Gibid. , p. 1222 303

Economic considerations also affect the development of Australian policy toward southern Asia, The continent's economy is complementary, in many respects, to that of the northlands despite the fact that its major exports are still primary in nature— wool, wheat, and dairy products in par­ ticular are not common to tropical Asia's agriculture. Be­ cause of their mutual dependence on erratic world markets, Australia feels a certain kinship with southern Asia based on the troublesome problems frequently resulting from dras­ tic fluctuations in the world price for their major prod- 39 ucts. In recent years there has been a gradual increase in the amount of Australia's machinery, drug, and chemical exports, and it is anticipated that these will continue to rise, particularly in view of the demand for spare parts and replacements for material supplied as foreign assis­ tance; hundreds of tractors, trucks, and buses have been made available to participating Colombo Plan countries in the past decade. Before the Second World War, Europe and North America orovided the bulk of Australia's trade. One half of the

^^Statement by the Australian delegate to the 12th meeting of the Consultative Committee on Economic Develop­ ment in South and Southeast Asia (The Colombo Plan), Tokyo, October-November, l$6o, in Current Notes, November, i960, p. 662. ^^Total trade with the United States -in the mid thir­ ties ran around 10 per cent and that with Europe about the same. Harris, op. cit., p. 57. 304- total exports went to and Imports came from British terri­ tory, including virtually all of the dairy products, eggs, fresh meat, and dried fruit sold abroad. Trade with Asia, with Japan predominating, represented a fairly stable l6 per cent of imports and 15 per cent of exports in the three #-1 decades after Yorld War I. During the l^^O's there was a substantial shift in trade with southern Asia although political instability there was a deterrent. The most notable advance was with India; by 195V55 exports had jumped from tAl million to tA20 million. Trade with Ceylon also increased. There exists, however, some doubt that this will continue, at least in its present agricultural form as both countries advance towards their goals of self sufficiency in food pro- H-2 duction. The most recent figures would seem to confirm this view (see Table 20). Optimism, however, does not mark discussions of Aus- tralian-Asian trade possibilities. There are many barriers to its increase: low Asian purchasing power; fruits and vegetables, typical Australian produce, are priced out of northern markets; domestic underdevelopment makes it

R. F. Holder, "Australia's Trade Relations with the Far East," in Australian Policies Toward Asia (iOimeographed, Melbourne: Australian Institute of International Affairs, 195^), Part VII, pp. 2-3 . lip Current Notes, March, 19^3, pp. 3^3“399* TABLE 21

POSTWAR AUSTRALIAN EXPORTS— PERCENTAGE OF THE. TOTAL

To l94o/4l& 1950/51'’ 1955/56* 1956/57^ 1957/ 58'' 1 9 5 8 /5 9 *

U.K. i 42.64 52.65 5 5 . 2 7 28.55 27.28 51.79 Malaya 5.08 0.81 1.21 0.95 1.4l ■1.65 Singapore - - 1.57 1.44 1.55 1.22

Ceylon 0.61 0.91 1.12 1.08 0 . 7 5 0.75 India 2.15 2.24 1.57 2.92 1.44 1.25 Other Brit. 17.50 8.82 12.55 12.15 15.72 1 5 . 5 9

Total Brit. 65.96 45.46 5 1 . 2 9 46.85 48.15 52.21 Indonesia 2.26 0.55 0.87 0.70 0.50 0.26 Philippines 0.56 0.05 - - — — Japan 5.97 6.27 11.18 14.19 12.66 12.66

Others 2 7 . 4 5 4 7 . 8 9 56.66 58.26 5 8 . 7 1 54.87 100.00 100.00 100.00 100.00 100.00 100.00

^Australia. Yearbook, 1944-1945. op. cit.. p. 551

'’ibid.. 1954. p. 189. '’ibid.. 1959. P . 476. *Ibid.. i960, p. 485.

VN O vn 306 difficult for industry to meet Australian-New Zealand de­ mands and also produce enough for export; the contract sys­ tem, under which British importers guarantee to take a cer­ tain percentage of Australia’s primary produce for a period of several years, leaves little available for export else- where. The advantage of proximity has been lost to Aus­ tralians because of infrequent service between the continent and Asian ports while European exporters can profit from lower freight costs resulting from regular schedules even on longer runs. These are some of the problems facing an. increase in Australia’s trade with southern Asia, Relaxa­ tion of commercial restrictions and prejudices and a real­ istic appraisal of economic relations are held to be essen- tial for an improvement. Imagination and aggressive tailoring of business to fit the market rather than vain reliance on continued Imperial Preference has also been soundly argued even to the point of advocating the country’s

I 4 . 3 The Philippines, for instance, would buy more Austra­ lian meat but cannot get what it desires because of the shortage, E, E. Ward, "Australia's Economic Interest in the Far East," in Implications, op, cit,, pp, 36-37» K. Wilson, "Prospects for Australian-Asian Trade," in Australia's Neighbors, November, 1955> unnumbered, ^^Holder, op. cit,, p. 16, 307

Joining a future Asian trading bloc.^^ The increasing probability that the United Kingdom will join the European Common Market makes the outlook for Imperial Preference grave indeed. With Justification, then, Australian officials speak to Rotarians and others of the potentials of trade that stem from increased demand when the economies of their presently- underdeveloped neighbors are raised, and encourage the Cham- ber of Commerce to seek additional markets in Asia. It is interesting to observe that, because of institutional legislative differences, Australia arouses business interest in foreign aid primarily for reasons of the country's finan­ cial well being while the United States seeks to interest the business world in order to garner political support as well. Government activity in this field will doubtless in­ crease as the necessity to replace traditional markets be­ comes more urgent. Despite these serious national problems,

4-6 R. K. Hefford, "Prospects for Ti’ade with Asian Coun­ tries, " in Australia's Neighbors, June-July, 1^62, unnum­ bered. Casey, April 23, 1959» oP. cit., p. I9G and others. The Minister for Trade, John MeEwen,made a lengthy report on the Common j^Iarket to Parliament May 3» 19&2, in Current Notes, May, 1962, pp. 39“51* lig Cf. the address of the Secretary of the Department of ExternalT^Affairs, A. H. Tange, to the Rotary Club, Sydney, June 22, 195^, in Current Notes, June, 195^» P» ^15* Also comments of R. Rowe, Federal Secretary of Associated Cham­ bers of Commerce, in Australian Weekly Review, February 25, 1959. 30g the economic motive for the improvement of living conditions within the Near North is probably less strong domestically than the humanitarian one in view of the casual concern over business which has marked Australian commerce in general up to this time. Government references to an economic moti­ vation are few and far between: Mr. Spender included it 50 after the humanitarian one for the Colombo Plan and it is naturally stressed in speeches by government officials lec­ turing to business groups. It is, however, far outdis­ tanced in importance by the security objective underlying Australia's foreign aid program, while the question of over­ seas investments and of the need for raw materials enters the picture to no appreciable extent in view of the narrow role of manufacturing in the Australian economy. A discussion of the national security element motiva­ ting the Australian policy of assisting in the economic development of Asia is, in effect, a summation of all that has previously been said. Because of the geographic pro­ pinquity, because of configuration, because of its European, primarily British, heritage, because of its democratic preference, because of its small numbers, and because of its isolation, Australia feels a need to work actively to

^^Hefford, op. cit. 5^June 6, 1950, op. cit., p. 399* 309 maintain itself in its alien world. "Alien" in preference to "hostile", which is often encountered in Australian writings, inasmuch as the premise that the teeming millions to the north covet their barren continent is possibly false. On the other hand, there is a real threat felt for the fu­ ture of Australia from the southward flow of communism out of China.. Currently the menace in Asia is not seaborne, as in the past, hence there seems to be a certain subordination of the ties with Anglo-American naval and military strength in favor of buoying up and making friends with Australia's 51 neighbors. There has been, however, no relaxation of the former ties which are considered to be the country's life­ line. Above all, Australia is obviously anxious to avoid being a second Israel which, although differing in that it is ethnologically a part of the surrounding Semitic world, is in a state of perpetual armed truce with her neighbors.

5^This statement conflicts with the views of Dr. John Burton, one-time Secretary of the Department of External Af­ fairs and author of the controversial book. The Alternative (Sydney: Morgans Publications, 195^)* Dr. Burton stressed Australia's abandonment of principle, successfully followed in the immediate postwar years, for a policy of subservi- ance to what he called irresponsible American anti-communism. He laid the government's policy, which began in 19^3 under the Labor regime, first to fear, which necessitated the military support of the United States; second to the influ­ ence of minority groups, specifically the Roman Catholic Church; and last, to the structure of the political system, particularly to party nominations which enable a minority to dominate the government. He was concerned over the fact that the West did not differentiate between nationalist 310

Australia's effort to make friends rests in part on its general feeling of isolation and the necessity to avoid estranged local relations. Secondly, the friendship policy is- rooted in the de­ sire to strengthen the independence of the new Asian states as an effective means of stopping the inroads of communism. Bolstering their economies is considered, as in the United States, to be an effective means of reducing the unrest on which communism breeds. Being Europeans, the Australians are as firmly anti-communist as the peoples of Western Europe and North America; the government has no halfway, lukewarm attitude towards communism although Labor Party elements, in particular the "wharfies ", have evidenced a much more sympathetic, and at times naive, attitude toward- it. The ruling Liberal Party view has been repeatedly men­ tioned by i^r. Casey during his record term as foreign min- ister,^ and by others in major positions of authority. During parliamentary debates on the various crises in Laos, the observation was often made of still a third aspect of movements and communist expansion, and he favored abandoning support of repressive imperialist or psuedo-democratic re­ gimes which were operating in opposition to popular opinion. c? Of. The geographic and demographic factors previously dlsousseF in this chapter. ^^For a summary, see Casey, Friends, op. cit., chap­ ters $-12. 311

Australian security. If that small country went communist (not, as above, because of internal dissatisfaction but through armed aggression and subversion), Thailand would be severely threatened, Malaya would be greatly endangered, and the road to Australia would be wide open. In support of this belief, Canberra was not slow in following the Uni­ ted States' lead in bolstering the Thais during the 1962 crisis. But whether the real concern should be over an Asian invasion of Australia or over the onrush of commu­ nism via the adjacent island chain is fairly immaterial. Fear there is, and the method of calming this fear becomes important. Consistent with their belief that Asian hordes are ready to swarm into their empty spaces were the arguments presented by political leaders during the discussion on immigration policy in the late 19^0 'a. At that time the ^0-year old Immigration Restriction Act, more commonly re­ ferred to as the White Australia policy, had been revealed by High Court examination to have certain weaknesses which the government was attempting to remedy through the passage of amending legislation. As a public relations gesture to counter minority opinion, Prime Minister John Chifley de­ nounced to the radio public the "false idea" that the troubles of Asia could be cured or even improved by 312

5^ emigration to Australia. The traditional line against Aslan immigrants had been an economic one: their lower liv­ ing standards permitted them to work for wages inconsistent with the Australian scale and this, it was felt, would lead to social disturbances. On this issue both major parties were in agreement.It was held, in public discussion and during debate on the new bill, that even if all the Asians came that the country could take, it would be an insignifi­ cant help to their homelands. Asian immigration would only create new problems within Australia, the argument ran, by placing one race in subordination to another and such situ­ ations in other countries had led to shocking, horrifying conditions which should not be encouraged in Australia. In an outburst of eloquence, A.A. Caldwell, Labor Minister for Immigration, stated the Australian claim to the continent thus : This land is our land, to own and to develop. Our claim . . . rests not on conquest nor on feelings

^^John B. Chifley, May 29, 19^9, In Current Notes, May, 19^9, pp. 6k6-6hj. 1952 the Minister for Immigration, H. E. Holt, in reiterating the perennial Liberal position said that "the policy of restriction was not based on any notion of racial superiority, but on a frank and realistic recognition that there are important differences of race, culture, and eco­ nomic standards which make successful assimilation unlikely and . '. . would lead to [disturbing] racial problems." Quo­ ted in his statement of July 7, 195^, Iri Current Notes, July, 1954, p. 467. ------313

of hostility to any people. It is based on the great work of our fathers, our grandfathers and great grandfathers— the men who explored our great continent, tilled its land, built its cities, and developed its industries. The only way for present-day Australians to pass on their "proud heritage" was by preserving the homogeneity of the race. The Job for the Asiatics lay at home and should be solved there. Australians could help them to irfiprove their living conditions through technical training.Indeed the government held that it was the task of the western democ­ racies to demonstrate that "liberty, democracy, and freedom mean something more than Just freedom to starve." 57 In light of the above it would seem that one of the prime inspirations for Australian economic help overseas was to improve conditions in Asia in order not to encourage emigration. More comfortable living conditions, more food, more clothing, more security at home would possibly keep potential trouble from Australian shores. As for the double-pronged communist menace, the Aus­ tralians, while holding that the military protection of the 53 ANZUS Pact and of the Southeast Asia Collective Defense

^ Second Reading speech in the House of Representatives, June 9, 19^9> in Current Notes, June, 19^9» P« 7^95 In part he repeated Mr. Chifley’s arguments May 29, 19^9 , op.cit., pp. 646-6^7* 57lbid. eg - The Security Treaty between Australia, New Zealand, and the United States sighed at San Francisco, September 1, 1951, in conjunction with the Japanese peace treaty. 31^ Treaty are part of a positive policy to discourage aggres­

sion and to stop the outbreak of war, maintain that these arrangements’'do hot represent the sum of their policy. In

1955; Mr, Casey wrote that

. . . the most serious error we could commit would be to believe that the vital problems of Asia can be solved by military means alone, and to neglect the psychological and economic aspects of the prob­ lem .... In addition to offering military protec­ tion In time of need, we need to win and retain the confidence of the free countries of Asia by showing them that our only object Is to help them to strengthen their economies In a way which will en­ able them to reinforce their political Independence and deal with the pressing social problems of their peoples.59

During the Labor administration, which ended late In

19^9; there was no definite commitment to help Improve liv­

ing standards overseas except through the United Nations, support of which was the dominant theme of that regime. Mr.

Evatt made the Labor policy of friendly relations with near­ by states contingent upon their developing Independent poli­

tical Institutions and making Internal efforts at self-lm- 6o provement. His successor, on the other hand, set forth

as Liberal Party policy, the demonstration of friendliness

by actions, by sympathetic understanding, and by readiness

to help the new Aslan states help themselves. To a country

In Australia's geographic position, such a policy was

KO ^^Oasey, Friends, op. cit.. pp. 92-93.

GOjune 21, 19^9, op. cit.. p. 761. 315

calculated to have desirable benefitsthe geographic factor was never separated from discussions on Australian foreign policy. The Liberal Party has remained In power throughout the Intervening period and lias consistently followed this same path. As one element In Its attempt to win the confidence of the free Aslan states, particularly adjacent ones, Can­ berra has steadily Increased Australia's representation In Asia, In i960. In addition to ambassadorial and trade com­ mission representation In Japan, six of Australia's sixteen ambassadors abroad were assigned to Southeast Asia while High Commissioners served Malaya and the three large South Aslan countries, all members of the British Commonwealth of Nations. Laotian affairs alone were handled by a minis­ ter; Trade Commissioners operated In eight of the states of southern Asla.^^' Educational assistance for young Aslans has been a longtime policy of the government. It began In January, 19^6, with the announcement of three ■LA5,000 scholarships. This Independent offering was first amalgamated with the UNESCO and later with the Colombo Plan programs; In April, 1962, the government welcomed Its ^GOOth assisted Aslan

^^P. C. Spender, statement to the House of Representa­ tives, November 22, 1950, In Current Notes, November, 1950, p. 200. 62 Australia, Yearbook, 19oO. op. cit., pp. II54— 1157* 316

student. Several thousand other young people have inde­ pendently sought their higher education in Australian uni- 63 versities; still others are working on correspondence courses particularly in the field of technical schooling. It was hoped that the educational program would stimulate friendships, and that the students would return home with a better understanding of the differing ways of life in « 64 Asian and Western cultures. As part of a program to foster relations between such visiting students and the assorted delegations which also traveled through Australia, a Meet Your Neighbor Campaign'^' was initiated in 1953 to enable such foreigners to contact everyday citizens in their homes and thus promote a deeper 65 contact between peoples. In an attempt to improve Aus­ tralian understanding of Asia, the government encouraged private traveling in the north, the study of Asian civi­ lization, more cultural exchanges, and the development of

63 In January, 196I, there were approximately 9000 foreign students in the country.. R. G-. Menzies, statement on the 9th Annual Colombo Plan report, January 11, 196l,in Current Notes, January-February, I961, p. 61. C. Spender, statement of December 20, 1950, in Current Notes, December, 1950, p. 6S7 . Cf. also R. G. Casey, address to the New South Wales branch. Economic So­ ciety of Australia and New Zealand January 22, 195^> In Current Notes, January, 1954, p. 24. 65 Current Notes, April, 1953^ P* 242. 317

Friendship Societies.Even greater emphasis on Asian studies with added attention to the economic-social features of Southeast Asian society was advocated by an Australian lecturer from the University of Malaya whose experience had 67 shown the value of personal knowledge and appreciation. The main feature of Australia's friendship program, however, has been the Colombo Plan. Its initiation of this project is generally recognised; it was proposed by the Australian delegate at a Commonwealth Foreign Ministers' session in Ceylon in January, 1950* The three attending South Asian prime ministers, D. S. Senanayake of Ceylon in particular, stressed the greater importance to them of the economic problems facing their recently established states than the political issues felt by the West to be para- ■ 6g mount. Mr. Spender subsequently suggested mutually 6 Q planned economic development within the Commonwealth.

^^For example, R. G-. Casey, address, Wesley Church, Melbourne, January 22, 1956, in Current Notes, January, 1956, pp. 29-30. ^"^Gamba, op. cit., pp. 32-33. 6?! The Times (London), January 10, 1950. ^^The Colombo Plan for Cooperative Economic Develop­ ment in South and Southeast Asia, Report of the Common­ wealth Consultative Committee (London; Ë.M.S.O., l9^0), Cmd. SOSO, See also the annual reports of the Committee. 313

Throughout parliamentary debate on the plan in Can­ berra, frequent mention was made by botli political parties

of their mutual respect for the need of the Asian states and for the potential benefits that improved standards would bring to the world economic scene in general and to

Australian trade over a longer term. It was duly recog­ nized by all speakers, however, that Australia herself was not able financially to contribute a great deal inasmuch as

the country was at an intermediary stage of development be­

tween the Asian states and Western ones. Mention was there­ fore made of scholarships, technical assistance, and token aid as means by which the country could demonstrate its 70 goodwill. The matter of its public image in Asia was of direct concern to both government and press. From the be­ ginning to June 30, i960, Australia's contribution under

the Plan amounted to tA33«l6 million out of a total of

&A3,300 million. That portion of their contribution of which Australians are most proud is technical training, in­ corporated in the scholarship program previously mentioned, and the provision of experts and advisers of which over 4-09 71 had served overseas through i960.

Spender, June 6, 1950» op. cit.

7^"The Colombo Plan; Ten Years of Cooperation," in Current Notes, June, 196I, p. I5. 3:9

Despite its limited capacity to give, Australian con­

tributions to Asian improvement have been considerable. As in the case of the United States, the objectives were a mixture of humanitarian, economic, and political ones, albeit on a more limited scale, with national security un­ derlying them all. Never does the delicate geograhic posi­ tion of this English-speaking continent fade from the thoughts of Australian policy makers. Their main goal is

to build friendships among Asian peoples, both to assure

Australia’s position in an alien environment and to strengthen these new states against communist inroads, domestic or foreign— this objective coincides with Ameri­ can aims. In the fields of technical cooperation and edu­ cational assistance, Australia has scored favorably indeed because she has neither the international power nor the physical resources to permit her to assume the neo-imperi­ alist role so feared by the new states in regard to the old colonial powers. Her efforts, then, to bridge the gap between Asia and the West, particularly the United States, by building confidence through Colombo Plan councils and through her own close relations with students and techni­ cians are of great value to the western democracies. CHAPTER VII

A COMPARISON OF OBJECTIVES

What has the foregoing examination of the three major aid programs operating in sourthern Asia revealed? How ex­ tensive were the several programs? What categories of ob­ jectives can be identified? What correlation or conflicts, present or future, can be found within the three offerings?

What comparisons can be made from the evidence that has been reviewed? Ifhat are the future prospects for this as­ sistance?

The extent of the tripartite aid considered here has varied considerably. The United States' share in the eco­ nomic development of southern Asia was, in money terms, far and above that of any other donor and covered projects in all fields: agriculture, power, transport, health, edu­ cation, and commerce. The assistance came in varying forma, in loans or grants Involving acquisition of consumer goods and industrial materials; in "military support" freeing lo­ cal resources of domestic responsibilities for use for mili­ tary purposes; and long-range technical assistance. In the period from 1951 through 196O, American contributions to southern Asian development amounted to $7 »372*1 million.^

^Consultative Committee, Ninth Annual Report (Tokyo, i960), p. 216. 320 321

This amount dwarfs the Japanese and Australian contribu­ tions in the proportions roughly of to l6 to 1 . These figures show a narrower spread than the relative propor­ tions of the current national incomes of the three coun­ tries, which are roughly 163 to 13 to 1. This disparity probably results from the necessity of these states to di­ vert funds from foreign assistance for internal development.

This difference in aid contributions does not, how­ ever, reduce in actual value the efforts of either Austra­ lia or Japan. The need for development is so vast that 2 every contribution is a welcome help. The emphasis in

Australian and Japanese efforts, too, has varied. Japan's cumulative budgetary appropriations for technical assistance by the end of the 1960-1961 fiscal year amounted to

$2,909,250 and capital assistance disbursements or alloca­ tions to $21,397,500.^ These figures represent only a mi­ nor part of the overall Japanese contribution to southern

Asian development if we include the long governmental em­ phasis on and stimulation of private "economic cooperation", and, more particularly, the developmental impact of repara­ tions. By means of the latter Japan has contributed to the capital development of Burma, the Philippines, Indonesia, and Vietnam by building several large power and conservation p See Chapter II, note Jih, 3 "The Colombo Plan; Ten Years of Cooperation," op.cit., p. 13* 322 dams and by Installing complete industrial plants. Between

1950 and 1961, $4-32.2 million was expended for reparations purposes; this was nearly twenty times the amount of direct 4. aid. A large proportion of Japanese developmental help or "economic cooperation", whether through developing coal in do a or the Tamanagan iron deposits of î-Ialaya, or improv­ ing cotton production in Pakistan, or developing cottage industries in India, created employment where none existed before or increased the financial returns of agricultural­ ists. Thus whether Japanese developmental aid of this na­ ture was public or private, it was in all probability, the most directly beneficial of any of the non-educational, non-health measures undertaken in the area.

Total Australian contributions, which amounted to

$82.8 million through i960, were spent for the provision of experts($3,037,300) and equipment ($3,307,500); for train­ ing awards in Australia, considered the "main feature" of the program ($10,575,000); and for capital aid ($64,125, 5 000). The largest part of Australia's capital contribu­ tions has been Australian-made equipment or commodity gifts to raise counterpart funds for some specific purpose. The aid spent went into irrigation, electric and thermal power

^JSY. 1961. op. cit.. pp. 4-22-4-23.

5"The Colombo Plan: Ten Years of Cooperation," op. cit., p. 13. TABLE 22

AUSTRALIAN^ JAPANESE, AND UNITED STATES ASSISTANCE TO SOUTHERN ASIA

Country 1954-1960 United States, 1951-1960% Australia®’ Japan®^ FiSP P.L. Ex-Im. Other Total TOTAL Grants Grants Loans DLF ICA 480 Bank

Burma 2.5 55.2 42.6 95.8 98.1 Cambodia 1.8 - 195.5 2.5 - - 195.8 197.6 Indonesia 7.0 176.9 * 11.6 88.7 155.4 165-5 - 417.2 601.1 Laos 0.6 - 252.5 0.8 - - 255.1 255.7 Malaya 2.8 20.0 1-.5 -- 21.5 24.5 Other Malaya 0.9 - 0.9 - - 0.9 1.8 Philippines 1.0 50.0 224.0 59.6 115.4 204.0 655.0 654.0 Thailand 1.7 0.1 22.5 216.2 5.0 16.5 - 260.0 261.8 Vietnam 2.4 29.2 1505.5 68.9 - - l4oi.6 1404.0 20.5 177.0 155.5 2511.4 515.0 295.2 204.0 5258.9 5456.4 Ceylon 5.9 0.2 7.7 15.6 45.7 - 69.0 75.1 India 17.1 0.1 0.5 566.5 421.2 1 4 5 9 165.5 189.7 2556.6 2574.5 Nepal 0.2 - 19.1 57 - - 22.8 25.0 Pakistan 17.0 205.8 591.9 466.0 7.5 67.4 1556.4 1555.4 Total 40.2 0.5 0.5 577.8 1047.8 19295 172.8 257.1 5984.8 4025.8 Misc. 1.1 0.5 - 154.4 - - 154.4 155.8

GRAND TOTAL 61.8 177.6 0.5 711.1 5495.622445 468.0 461.1 7578.1 7618.0

VjJ ro VjJ TABLE 22 (Continued)

^Extracted from UIT, Statistical Yearbooks for 1950» I960 , 196I, eg. cit.. Tables 1$4, 155, 156 respectively. Australia made no loans. The $176.9 grant by Japan to Indonesia was a cancellation of postwar import obligations as part of Japan's reparations settlement.

^The Colombo Plan for Economic Development of South and Southeast Asia, Ninth Annual Report (Tokyo, i960), p. 216. Includes the Mutual Security Program's Development Loan Fund and Interna­ tional Cooperation Administration operations; Public Law 460; Export-Import Bank activities; Sind “other covering the obligations for Philippine Rehabilitation, 1951 wheat loan to India, and 1955 grain loan to Pakistan. Miscellany covers $87 million for the Asian Economic Development Fund and the balance for regional malaria control. UB figures do not include $82$.9 million aid to the Associated States of Indochina largely used for support of the French Expeditionary Corps and Associated States Forces.

VO M VO p 324

projects, municipal services, transport, communications,

and broadcasting: all basic contributions to the economic

structure of the underdeveloped Asian recipients. The

train in g program, however, holds the major in te re st of the

Australians, It is seen not only as a long range, funda­

mental contribution to economic development but also, in

view of Australia's limited resources, as the best possible means of stimulating friendship and contacts between Austra­

lia n s and the peoples of southern Asia.

Before proceeding with a comparison of the objectives

of these three donors for giving aid, the peculiar charac­

teristics of the Colombo Plan, under whose auspices this assistance is first discussed, merit a brief explanation

inasmuch as the machinery of consideration may affect the

substance of subsequent decisions. Contrary to popular be­ lief, this is not a fund but a forum for developmental dis­ cussions, or, as it is properly called a consultative committee. Its main contribution to development seems to have been the creation of a spirit of cooperation among the

Asian members and between them and those advanced states of- fering advice or funds for assistance. The round table

One outstanding feature that developed along with the Plan has been the intra-regional training which has oc­ curred as one new state sent technical experts to assist a fellow underdeveloped country with a specific problem, Burma, Indonesia, the Philippines, Ceylon, India, and Pakis­ tan have all provided experts, training facilities, or funds to other countries in the area. Not only was this useful to 325

discussions of mutual problems, of complications, of solu­

tions, of advanced nations' advice, have seemed to build a feeling of equality and intimacy between donor and reci­ pient. The Colombo Plan is merely a clearing house of ideas, but, because of its quasi-multilateral approach, it has served to dull some of the Asian objections to bilateral aid programs despite the fact that the financing of propo­ sals is entirely by direct negotiation between two states.

As needs become known following discussion of anticipated recipient deficits at each annual meeting, donor countries allocate funds under their own grant or loan budgets. Thus, in the complicated American assistance program, no separate entry appears for Colombo Plan expenditures: General Mu­ tual Security funds spent within the southern Asian area become Colombo Plan monies as do Development Loan Fund,

Public Law 4S0, and other commitments. It is not anticipa­ ted that the free world's Aid Consortium, formed in 196I, will basically alter the need for consultations under the 7 Colombo Plan; the forum serves a useful function.' However, the recipient, but it was good, psychologically, for the poor state donor. The trend was first noted in the Fifth Annual Report (Wellington, 1957)* Toward the end of 1953, this intra-regional exchange had increased from 11 to 20 per cent of the total training awards. Department of State Bulletin, December 1, 195&, P*

^The United Nations' Economic Commission for Asia and the Far East is also a regional body covering this area but it is larger (including East Asia and Afghanistan) and 326 the Consortium will constitute a wider base from which funds can be drawn for use in the area, and it will replace many of the bilateral negotiations leading to the supply of funds or grants, thus tending to modify the realization of a do­ nor's objectives. In broad and general categories, the aims of tripar­ tite aid have been humanitarian, economic, and political. The latter, by nature, is subject to considerable subdivi­ sion which, in the case of the United States, could include military objectives in certain recipient countries. None of the motivations discussed herein conflicts seriously with any other. There is presently a political irritant between Japan and the United States over a ban which interferes with Japanese trade with communist areas and there is a potential trade antagonism between Australia and Japan in the region, but neither is severe and either could conceivably be modi­ fied by changed conditions. Both the United States and Australia have definable humanitarian aims and the fact that Japan has an official assistance program at all emphasizes one quasi-humanitarian feature of development, namely the vague, intangible feel­ ing that there is a degree of obligation on the part of the industrialized states to improve the lot of the poor is subject to political diatribes by communist members. At one meeting in Rangoon, the Burmese chairman requested a com­ munist delegate to stop propagandizing and to be constructive. 327

ones. Until very recently, however, little mention has been made in Japan of the need to improve conditions in the poor g states. Australia, it has already been noted, is too small a power to worry the anti-colonial Asian states in regard to possible political advantages it might be seeking. In con­ sequence Australian assistance retains, probably, the purest of the humanitarian features v;hich have prompted mass pub­ lic aid anywhere. But practical limits on governmental hu- manitarianism have obviously appeared. In the United States it was found that humanitarianisrn, which exists obviously and freely in private circles, is limited by three major factors: differences between private and public standards in the disposition of funds raised by taxation; changing circumstances within recipient countries, as, for example, American coolness toward India following the latter*s sei­ zure of Goa and its warmth toward New Delhi following the 1962 communist invasion; and the unwillingness of the gov­ ernment to continue aid which is apparently "wasted" or Q diverted from its intended purpose. While official lip- service is rendered both to the recognition that the

^See Chapter VI. q ^The most famous example of this was the curtailment of UI'IRRA after World War II when it became apparent that this program, per cent of which was financed by the Uni­ ted States, was being politically manipulated in Eastern Europe. Southern Asia has before it the examples of aid for Laos which, in 195S in particular, the United States 322 underdeveloped peoples need to receive aid and to the de­ sire of the American people to improve upon the miserable living conditions of the poorer nations, great care is taken in selecting the projects which receive official approval inasmuch as the total task is beyond any one state’s avail­ able resources. This selectivity is obviously based on political considerations, either on behalf of American in­ terests, or the direct interest of the recipient whose sup­ port would already have been considered to be in the Ameri­ can interest. The speed with which famine relief was granted to America’s ally, Pakistan, as compared to neu­ tralist India is a case in point. Vague platitudes, such as a desire to help improve living standards or a recognition that help should be forth­ coming to raise people from misery, are repeatedly encoun­ tered in official considerations of American assistance programs. When written into public law these are the basis for claiming that any assistance (even for dams, agricul­ ture, or industry) which raises living levels and benefits people is an expression of humanitarian motivations. In less generous and more specific terms, however, these motives cut off pending internal measures which would stop its di­ version from popular to elite projects. Aid in this latter instance was humanitarian only in the sense that any assis­ tance may benefit the people by raising living standards. 329 directly yield few concrete results and they may be hard to pinpoint. Malaria eradication Is one— In southern Asia this was accomplished through UN activity coupled with a grant of $4-7.4- million from the United States. This par­ ticular humanitarian accomplishment promoted local economic

Improvements through the Increased health and efficiency of the people of the area treated and the attendant rise In their economic output. Attempts to rationalize such a pro­ ject as being Inspired by selfish Interest In protecting the American public from malaria seem rather remote from reality; the project was conducted In places like the high­ lands of Thailand where probably not more than one hundred

Americans had ever been before.

In the realm of economic motivation, the tripartite powers have all subscribed to the concept that development will raise a poor state's living standards and that this will redound to the donor's advantage Inasmuch as trade between advanced states has proven to be larger than be­ tween an Industrialized power and a poor one. ^ Whether or not there Is a fallacy In this argument, It Is one of

^^See Chapter IV, note 69. 330 those assumptions to which many adhere. This theory envia- 11 ages far greater development than has presently occurred.

Australia's economic objective is deeper and more im­ mediate than that of the United States whose interest in southern Asian trade is more potential than operational.

American businessmen are only slowly being awakened to the scope of Asian needs. The Australians, on the other hand, having for decades relied on imperial preference and empire trade, are presently faced with a probable loss of advan­ tage if Britain enters the European Common Market. In con­ sequence, they are actively seeking to expand their commerce

Japanese industrialists have been able to realise immediately from their investments in raw material production in southern Asia. They needed the supplies and deliberately set out to increase their availability within close geographic limits and within a settlement area which was advantageous to Japan, Australia has also been able to profit immediately from trade with southern Asia despite the fact that both areas deal in primary products. It was really because of rising Asian living standards, unappre- ciable as they were, that the new states could indulge in some of the luxury purchases, by old Asian standards, which the primary imports from Australia represented. Undoubt­ edly some additional trade has also developed for the United States over this short period. Certain American capital goods have been supplied for southern Asian development which would probably have been purchased from less expen­ sive sources had the developing country acquired its goods in a competitive market rather than through material grants. Laws demanding on-shore procurement and the transport of aid goods in American ships have likewise stimulated their respective industries while sales of surplus farm goods, often with detrimental effects on our. foreign relations in the region, have served to relieve an embarrassing domestic surplus. However, all of these advantages are subsidized and would disappear under conditions of competition with other suppliers. 331 with southern Asia. There is already a noticeable shift in emphasis in the articles exported; even fifteen years ago primary goods were being challenged by the expansion in 12 chemicals and drugs, metals and machinery. One great problem in connection with an increase in Australia's ex­ ports to southern Asia is the unsuitability of her normal primary products for that tropical market. Wool, the main export, has little value there, textiles are being locally produced now, and dried and fresh fruit have proven to be priced out of the Asian market. Meat and wheat would seem to be the traditional products with the best possible expec­ tation of expansion,

Japan's major objective for developing southern Asia has been almost exclusively economic. Denied access to the mainland by circumstances beyond her control, Japan looks to southern Asia as the nearest source of the raw materials which she needs in order to keep her tremendous industrial plant in operation. Thus acquiring these products has been the primary concern of business and government. Since

Japan already had a surplus of sterling and has consistently sold more to southern Asia than she purchased there, active development of export markets was unnecessary except for the recognition that Japan had to maintain her exports in order

^^Trade with Malaya in these two categories increased four-fold in the decade after 1937/193^ while similar trade with India-Pakistan increased five times. See Current Notes. March, 19^9, PP* 391-397" These categories are still ex- pending. Australia, Yearbook, I960, Qp. cit., p. 1223. 332

to have the funds for Importing necessities. By deliber­ ately curtailing production of those items which would con­ flict with infant industries abroad, Japan was ready to supply advanced consumer items and needed capital goods in competition with the West. Thus she may compete with American firms with similar objectives but two factors some­ what reduce this possibility: traditionally foreign trade has not loomed large as a percentage of the Gross National Product in the United States and Americans have not, up to now, sought business in the same urgent fashion as the Japanese. Moreover, American goods are generally priced too high to appeal to local purchasers who prefer European or Japanese products and servicing technicians. The main potential conflict in the economic field, therefore, would seem to be between Australia and Japan, The great lead that Japan will have in the area by the time Australian enterprise really begins to reach outside Australian-New Zealand borders will serve to protect Japanese markets from Australian encroachments. Wise planning would go a long way toward removing the possibility of developing competing Australian-Japanese industries, but little hope exists for 11 international cooperation of this nature. "

^^Furthermore, relations between the two remain rather cool because of persistent Australian wartime memories. 333

Overseas investments and the acquisition of raw ma­ terials have not figured heavily in Australia's economic motivation for foreign aid in view of the country's limi­ ted economy, but these features do intrude in the Japanese- American programs. Japanese industrialists are actively engaged in investing in foreign concerns. Technical co­ operation through the extension of patents and of know-how by private firms in joint foreign companies has been a ma­ jor aspect of Japanese "economic cooperation". Both Japanese and American investments in southern Asia expan­ ded rapidly as political conditions were stabilized. Japan's resource needs were, however, primarily responsi­ ble for its rapid penetration of southern Asia. Indeed, around the necessity for gaining ordinary but, to Japan, absolutely essential industrial materials such as iron ore and coal was centered the entire Japanese developmental program. On the other hand, the United States, fairly well endowed with more of the common minerals, was unconcerned until the Paley Report turned public attention to scarce materials of which Southeast Asia had a goodly share. The scarcity factor was of no particular concern to the Japan­ ese, to whom virtually all materials are scarce, although, of course, they needed these items along with others. Acquisition of strategic materials by the free world continues a matter of concern to the United States, but this is a political problem rather than an economic one as many of these items are exclusively Asian, their sale is a requi­ site of local government activity, the V.^est is the major customer, and the only possibility of the unavailability of the commodities is through the loss of the area to communism, which would be a severe blow to the Western powers. The mu­ tual compatibility, at least at present, of the economic ob­ jectives for aid giving by these three donors thus becomes apparent. Aims are similar, none are in striking conflict with the others and what one power does serves to benefit not only the region but the donor-recipient group as a whole by stimulating world-wide economic activity. In the field of political motivations, Australia and the United States share the limelight— it was not until 1961, when Japan contributed to the international Aid Con­ sortium, that the glimmerings of a political objective could be found behind its aid policies. The partial aim of this free world group was to limit the supporting assistance which India would have to seek for its Third Five Year Plan from the communist world. Japan's decision to join could have been a back-handed way of expressing anti-communist feeling. More probably the political motivation for her participation in the Consortium was the international recog­ nition of her industrial status and of her dominant Asian economic ranlc. 335

The Australian political objectives do not in an;; way conflict with the very limited Japanese concepts or with the broader ones of the United States. If successful, they would serve to benefit the western world by providing an­ other bridge between Orient and Occident. Australia's objectives are two-fold, first to make her­ self at home in the alien world she had previously ignored, and, second, to promote the stability of the states within that region because she feared the spread of communism either by subversion based on poverty or by military ag­ gression. Her sponsorship of the Colombo Plan, her friendly contacts through education programs, her technical assis­ tance to southern Asia thus tend to build up the person to person contacts and friendships she wants and serves to de­ velop the skills and techniques so badly needed by the underdeveloped states. Education and training thus loom large in Australian aid and will, in the long run, serve to strengthen recipients against the spread of communism which Australia and the United States are both anxious to contain, American political objectives are unlimited; they em­ brace the Cold War as well as the security of the United States. They include denying southern Asia to communism, strengthening internal conditions within the area to avoid the proliferation of regional unrest, and promoting freedom and democracy. The far-reaching political motives of the 336

United States, In comparison to the limited ones of the Australians and the negligible ones of the Japanese, neatly encompass the political desires of these other states. The national security of the United States and of the free world has been served by the fact that no part of the area in question has yet fallen to communism despite the present nebulous political condition in Laos, Maintaining the pre­ sent international line-up serves both Australia and Japan. The former's immediate security is strengthened thereby and thus her second political objective of foreign aid is made effective. As for Japan, she has already discovered, at least in relation to China if not in the case of the U.S.S.R. with whom her trade is expanding, that a communist country is difficult to trade with. Should southern Asia, or any part thereof, follow the Sino-Soviet path, all Japanese in­ vestments and most of her export markets would be lost while sources of raw materials might be severely endangered. Thus Japan, too, would benefit from the containment of communism although this has never been a strong domestic talking-point for aid programming; it was almost exclusively mentioned by Japanese spokesmen overseas, particularly by ambassadors to American audiences expected to favor this argument for aid over all others. One possible conflicting interest among the tripartite donors lies in the American interpretation of national 337 security to include an embargo on the shipment of strategic goods to communist countries. • In her relations with Japan, and with Japan alone, mainland China has attempted politi­ cal blackmail by linking goods desired by Japanese customers to the purchase of items on this prohibited list. It was an effective means of creating ill-feeling between the Uni­ ted States and Japan. This Chinese political maneuver has restricted Japanese trade with the continent, but support for the embargo has been maintained partially out of respect for the American market which might otherwise have been alienated. Strengthening the southern Asian states internally and promoting freedom and democracy within the area can be con­ sidered as part and parcel of the overall motive to block the spread of communism, or cah'stand-alone as American ob­ jectives. Considered independently, promoting internal se­ curity can be an end in itself, designed to reduce world tensions and trouble-spots: Kashmir, in dispute between In­ dia and Pakistan; the still sensitive Thai-Cambodia border disagreement despite its settlement by the World Court; and the West Irian-Indonesian problem which threatened to in­ volve the United Nations are all cases in point. The de­ velopment of mutual respect between states in the area and the creation of the strength to suppress internal rebel­ lions will contribute to the domestic tranquility of the 3)8

southern Aslan countries and so benefit commerce and facili­

tate development and the effective absorption of aid. On

the theory that stability is rooted in economic progress,

any contribution to development— humanitarian, military,

commercial, or developmental, so long as it is effectively

absorbed— can help stabilize a nation. Thus no conflict

exists between this internal security motive of the United

States and the Japanese or Australian interests; indeed

it would supplement the objectives of both these states.

Similarly the promotion of freedom and democracy is an en­

couragement to Australian aims in the area and even to those of Japan, but for the specific purpose of facilitating com­ merce and only indirectly for democratic reasons. Japanese economic desires, as previously indicated, are predicated on a free economy only possible in a free society. To this extent, then, Japan would be interested in the promotion of freedom and democracy as well as internal security.

This comparison of the motives of the United States,

Japan, and Australia for contributing to the development of southern Asia has revealed a vast difference in contribu­ tions, a diversity of emphasis, a common underlying assump­ tion in favor of maintaining free institutions, and only minor areas of conflict or potential conflict between the interests of the three powers involved. The wisdom of the underlying assumptions and the degree to which the tripartite objectives have been realized both lie outside the scope of this study. Stability seems to mark the out­ look for continued tripartite assistance to southern Asia.

No changes have occurred recently to affect the basic mo­ tivations of any of the donor states; neither are any in prospect. In consequence, the continued interest of the three major powers in the economic problems of their Asian friends can be expected. Inasmuch as American resources as well as American objectives in the area reach far be­ yond those of her partners, it can also be expected that the United States will continue to play the leading donor role in southern Asia. APPENDIX

3^0 APPENDIX A

SOUTHERN ASIA: POPULATION, AREA, NATIONAL INCOME

I960 National Country estimated, Area Income population* (sq. mi.)“ I960®

Burma 21,527* 261,789 4,920 m. kyats Cambodia 4,952 88,780® l4,689^m. riels Indonesia 95,189* 755,865 205 b. rupiah West Irian 755 151,000 - Timor 502 7,550 - Laos 1 ,850* 91,000 — Malaya 6,909s 50,690 4,252^m. MS Singapore 1,687*»S 224 - Brunei 34e 2,226 — North Borneo 454s 29,500 - Sarawak 745G 50,000 - Philippines 27,792 114,850 10,492 m. pesos Thailand 26,2582 200,148 50,271 m. baht Vietnajn 14,100 65,000 -

Ceylon 9,896 25,552 5,656 m. rup. India 440,516® 1 ,221,880 128^b. rup. Port. India 650. 1,557 - Nepal 9,407* 54,000 - Pakistan 94,601^ 564,757 22,606 m. rup.

Japan 94,052*"S 142,688 11,451 b. yen

thousands. Extracted from UIT, Demographic Yearbook. 1961. op. cit., Table 1.

^Extracted from The World Almanac. 1962 (New York, 1962).

'Extracted from UN, Statistical Yearbook. 1961. op. cit.. Table 165.

1961 figures extracted from UN, Monthly Bulletin of Statistics. June 1962, op. cit., Table 1.

'Estimate. ■1959. 'Figures considered reliable.

3^1 APPENDIX B

BILATERAL, MULTILATERAL, AND COI^MIJNIST AID TO SOUTHERN ASIA

Bilateral. Aid® Multilateral Aid Communist Bloc Aid Country Grants Loans Grants Loans Eastern Europe^ China®

Burma 10.8 — 10.8 12.5 42.0 4.2 Cambodia 8.4 - 2.8 -- 22.4 Indonesia 4.1 -28.4 12.9 - 595.0 56.2 West Irian 128.6 - 7.1 0.5 - - - Laos $.9 - 1.4 --- Malaya 48.9 0.9 1.8 2.7 -- Other Malaya 15.9 0.9 1.6 - - - Philippines 0.5 - 7.5 15.1 - - Thailand 0.1 - 7.0 52.0 - - Vietnam 10.9 - 2.0 -- - Total 217.0 -55.7 47.9 60.1 455.0 82.8 Ceylon 22.2 1.5 4.2 l4.0 66.0 26.5 India l4l.l 211.9 51.5 585.2 1079.5 - Nepal 10.4 - 220 - 55.5 52.6 Pakistan 99.5 18.0 11.6 74.4 -- Total 275.0 251.4 49.5 475.6 1178.8 59.1 Misc. 91.6 55.9 50.4 GRAND TOTAL 581.6 251.6 147.6 555.7 I6I5.8 141.9

VjJ 4=- ro APPENDIX B (continued)

95^-1960. Extracted from UN, Statistical Yearbook for 195Ô» I960 , I96I, op. cit.. Tables 1^ , 155, 1$6 respectively. Bilateral aid excludes Australian, Japanese, American, eind communist assistance. It is basically Colombo Plan help from Canada, New Zealand, and the Unitedlïingdom. Only the follow­ ing grants, or loans as noted, came from other sources. Burma $9»2 million from India; Cambodia $8.1 million (France); Indonesia ($100,000 (India) and a repayment of $22.1 million on a Netherlands* loan; West Irian, all from the Netherlands; Laos $$.6 million (France); Vietnam §10 million (France); Ceylon §100,000 (India); India §4.6 million (Norway) and a §44.0 million loan from West Germai^; Nepal §9*9 million (India); Pakistan $^0,000 (Sweden). The Miscellaneous figure under Grants includes §50.5 mil­ lion from France to French Indochina. Multilateral aid comes from UI\' agencies.

^1956-1961. U.S., Department of State, The Sino-Soviet Economic Offensive in the Less Developed Countries (Washington: U.S. Government Printing Office, I958), p. 50. For figures after February 1958» cf. New York Times reports on pacts signed. One such estimated that actual U.S.S.R. bloc aid has run around one-fourth of the §2.5 billion promised* Ibid., March 20, I96I, p. 28.

°19 5 5 " ! 960. C. Garrett, "China as a Foreign Aid Donor," in Far Eastern Economic Review (Hong Kong), January I96I.

VjJ BIBLIOGRAPHY

3 # BIBLIOGRAPHY

Source Material

Australia. Bureau of Census and Statistics. Official Year­ book of the Commonwealth, 191S, 1923. Melbourne; Gov­ ernment Printer, I9ÏS - .

Official Yearbook of the Commonwealth, 1932, 19»54-, 1955. 1957. 1959. I960. Canberra; Gov- ernment Printer, 1932 - . Good for then, recent, and current economic-social developments but disappointing in that there are no extensive tables covering changes over a long period of time. Usually information is some two years old.

______. Department of External Affairs. Current Notes on International Affairs, 19^3-19^2. y Monthly; of inestimable value for official statements and Parliamentary speeches on foreign affairs. Appen­ ded will be found texts of miscellaneous treaties and international agreements following no set pattern.

Burma. Ministry of Information. The Pyidawtha Conference, Resolutions and Speeches. Rangoon, 1952.

Cambodia. Ministry of Planning. Premier Plan Quinquennal,. 1960-196^ . Pnom Penh, i960. _ .

Consultative Committee. The Colombo Plan for Cooperative Economic Development in South and Southeast Asia. Lon- don: H.M.3.O., 1950. Omd. dodo.

______. Annual Reports. 1952 - . S’ontains an excellent running picture of development and planning within southern Asia. Particularly en­ couraging for its view of intra-regional cooperation.

Dennett, Raymond and Turner, Robert K., eds. Documents on American Foreign Relations. 19^7. 19^9. 195Ù. Prince- ton; Princeton University Press, 1939 ~ • Included a topic on foreign assistance up to 1951) after that date of little use for this subject.

Indonesia. State Planning Bureau. Report on the Execution of the Five Year 1956-1960 Development Plan. Djakarta, Ï9EI: 345 3^6

Japan, Office of the Prime Minister. Japan Statistical Yearbook, 195^. 1958. I960, 1961. Tokyo, 195^ '- . A very detailed and comprehensive guide to official Japanese data. In Japanese and English.

Laos. Ministry of Planning. Plan de Development Economique et Social. Luang Prabang, 1959•

Malaya. Second Five Year Plan of Development. Kuala Lum~ pur, ' 196T.

New Long-Range Plan of Japan, 1961-1970. Tokyo: The Japan

Tn§es;‘'Tt^'V'1^6i. ' ------

Supreme Commander Allied Powers. A Report on Japanese Raw Materials. Tokyo: Hosokawa Printing Company, 19^3.

United Nations. Department of Economic Affairs. Economic Development in Selected Countries. Lake Success, New fork, 19^7. A very early survey on the matter of development. Provides data for comparison.

Economic Commission for Asia and the Far East-. Economic Survey of Asia and the Far East, 1955, I960, l9'61'.""BiHgkôk7 I95r"".' — An essential source. Pinpoints the economic prob­ lems, policies, and progress of the area.

. Food and Agriculture Organization. Credit Prob­ lems of Small Farmers in Asia and the Far East. Bang­ kok, 1957. A unique presentation of a key factor in the situa­ tion under review.

______. Production Yearbook, I960. Rome, 1961.

______. Second World Food Survey. Rome, 1952.

. State of Food and Agriculture, 195^, 1959. Rome,

All the FAO production publications above represent specialised studies embracing information from many official quarters.

. Statistical Office. Demographic Yearbook, i960 , 196I . New York, i960 - . Mirrors the changing structure of social conditions in the area under survey. Monthly Bulletin of Statistics. I962.

Statistical Yearbook, 1955, 195&, I960, I96I. ----- York, l$gS - .------' ' Both the monthly and annual UN Yearbooks summarize vast quantities of data gleaned from official sources not directly available to the research scholar. Natu­ rally the value In each case rests on the validity of the source, but In any event the figures are the best now obtainable.

IJ. S. Congress, House of Representatives. Committee on Appropriations. Hearings on the Mutual Security Ap­ propriations for 195b . S^th dong., 1st Sess., 1955.

. Committee on Foreign Affairs. Hearings on the Act for International Development. Bist Cong., 2nd Sess., 1950.

. Hearings on the Mutual Security Act Extension. 82nd Cong., 2nd Sess., 1952.

. Hearings on the Mutual Security Act of 1955» 84-th Cong., 1st Sess., 1955*

______. Hearings on U. S. Foreign Policy for a Postwar Recovery ï^rogrânü 20th Cong.7 2nd Sess,, 194-8.

______. Joint Hearings on the Mutual Security Act of ' 1951. 82nd Cong., 1st Sess., I95I*

__ . Senate. Committee on Foreign Relations. Hear- Ings on the Act for International Development. 8lst Cong., 2nd Sess., 1950*

. Hearings on the Mutual Security Act of 1951» 22nd Cong., 1st Sess., 195I. Both House and Senate Hearings on Important legis­ lation bring out many statements of value In a survey of opinions.

. Special Committee to Study the Foreign Aid Pro­ gram, The Military Assistance Program of the United States. Washington: Government Printing Office, 1957* Although considering the military aspect of assis­ tance, this was a useful study of a problem closely re­ lated to foreign economic aid.

Department of Commerce. Basic Data on the Econ­ omy of Cambodia. World Trade Information Service, part 1, No. 61-65. 3^2

. Department of State, Department of Defense, In­ ternational Cooperation Administration. The Mutual Security Pro&ram, Fiscal Year, 195&, 1?59~ 19SÔ. Wash­ ington: Government Printing Office, 195S - , Presents presidential opinions on the meaning of foreign economic assistance.

Development Loan Fund Report for 1959. Washing­ ton: Government Printing Office, 1959» A summary of the operating experiences and commit­ ments of this aid agency from its inception.

, Economic Cooperation Administration. Fourth Re­ port to Congress (January-April, 19^9 ).

. Ninth Report to Congress (April-July, 1950)*

______. International Cooperation Administration. Oper- ations Report. Washington: Government Printing Office,

International Development Advisory Board. Part­ ners in Progress. Washington: Government Printing ürfi-c'è7"i95i"— The Rockefeller Report, one of several surveys of this period; this laid the basis for subsequent admin­ istrative decisions affecting economic assistance.

__ . President. Report by the Economic Survey Mission IÔ the Philippines. Washington: Government Printing Office',' I9B0: ---- The Bell Report. Laid the basis of the American as­ sistance program in the Philippines.

Report on Foreign Economic Policies. Washington: G^overnment Printing Office, 1930. The Gray Report.

Report of the Materials Policy Commission: Re- s our ces for 'Freedom. 5 vols". Washington: Government Printing Office, 1952. The Paley Report.

United States. Statutes at Large, ig4^-196l. A standard reference work generally available through­ out the world. 3^9

Books

Altken, Thomas, Jr. A Foreign Policy for American Business. New York: Harper and. Brothers, 1962. Summary presents a code of conduct for overseas firms in an effort to show their role in advancing the demo­ cratic capitalist ideal.

Allen, George C. Japan's Economic Recovery. London: Ox­ ford University Press, 1$58.

Barr, Stringfellow. Let's Join the Human Race. Chicago: University of Chicago Press, 1950. One of a series of emotional accounts.marking the early fifties, of the need for assisting in the develop­ ment of the poorer states.

Bingham, Jonathan, Shirt-Sleeve Diplomacy: Point IV in Action. New YorF: The John Day Company, 195^* Considers complications and practical difficulties attending the introduction of this major post-war American program in retarded areas.

Black, Eugene. The Diplomacy of Economic Development. Cam­ bridge : Harvard University Press, 196O.

Bock, Edwin A. Fifty Years of Technical Assistance. Chi­ cago: Public Administration Clearing House, 195^*

Brimmell, J. H. Communism in Southeast Asia: a Political Analysis. London: Oxford University Press, 1959»

Brown, William Adams, Jr., and Opie, Redvers. American Foreign Assistance. Washington: Brookings Institu- t ï o n , T . W . ------Butwell, Richard. Southeast Asia Today— and Tomorrow. New York: Frederick A. Praeger, 1961.

Casey, R. G. The Conduct of Australia's Foreign Policy. Melbourne: Australian Institute of International Af- fairs, 1952.

______. Friends and Neighbors. East Lansing: The Michi­ gan State College Press, 1955* Essentially a pronouncement by the Foreign Minister aimed at impressing upon the Australian public the fact that their country constituted an Asian power with all attendant implications. 350

Cluniea Ross, Ian, ed. 'Australia and the Far East, Sydney: Angus and Robertson, Ltd., 153b. "

Cohen, Benjamin J. Japan's Postwar Eponomy. Bloomington: Indiana University Press, I95S.

Curti, Merle and Birr, Kendall. Prelude to Point Four. Madison: University of Wisconsin Press, 1$5^* A detailed history of a century of foreign assistance prior to Point IV.

Dean, Vera M., et al. The Non-Western World. Ithaca: Cor­ nell University Press, 19^3. A widely-read semi-popular discussion of the impact of recent world events upon major underdeveloped areas.

Emerson, Rupert. From. Empire to Nation. Cambridge: Har­ vard University Press, i960 '. Surveying the common features of the political evo­ lutionary process marking our own time.

Farley, Miriam S. The Problem of Japanese %rade Expansion in the Postwar Situation. New York: Institute of Pa­ cific Relations, 19^0 .

Ginsburg, Norton S. Japanese Prewar Trade in the Oriental Triangle. Chicago: University of Chicago, i"epartment of Geography Research Paper No. 6, 19^9*

Hancock, W. Keith. Wealth of Colonies. Cambridge: Cam­ bridge University Press, I95O.

Harris, H. L. Australia's National Interests and National Policy. Melbourne : Melbourne University &ress, Ï93S.

Harrison, Brian, Southeast Asia. London: Macmillan and Company, 195^*

Hatta, Mohammad. Past and Future. Ithaca: Cornell Uni­ versity Press'] i960 .

Higgins, Benjamin. Economic Development: Principles, Problems and Policies. New York: W. W. Nortonand Company, I959 . An economist's attempt to evolve a theory of build­ ing up economically backward lands.

Indonesia's Economic Stability and Development. New YorF: Institute of Pacific Relations, 1957» 351

Hoffman, Paul G. One Hundred Countries; One and a Quar­ ter Billion People'". Washington; Albert D. and Mary Lasker foundation, 196O.

Hoselitz, B. F., ed. The Progress of Underdeveloped Areas. Chicago: University of Chicago tress, 1952. Jenkins, Shirley. ' America's Economic Policy Toward the Philippines. Stanford: Stanford University Press, 1 9 3 ? : ------

Kapranov, I. U. S. S. R. Technical Assistance to I.reign Countries! Washington: U. S. Joint Publications Research Service, 196I.

Katayama, Kenji. Japan's Role in Asiatic Trade. Tokyo: Japanese Council, Institute of Pacific Relations, 1950.

Mack, Robert T. Raising the World's Standard of Living. New York: The Citadel Press, 1953*

Mead, Margaret, ed. Cultural Patterns and Technological Change. Paris: UNfeSCO, 1953* Considers the economic and social shocks attendant upon a retarded area coming into touch with contem­ porary western life.

Minobe, Ryokichi. Japan's Foreign Trade. Tokyo: Ministry of Foreign Affairs, 1957*

Hyrdal, Gunnar. Rich Lands and Poor. New York: Harper and Brothers, 1957* A discussion of economic developmental theory marked by an unusually sensitive awareness of significant non­ economic factors.

McLaughlin, Kathleen. New Life in Old Lands. New York: Dodd, Mead and Company, 193^. A discussion of basic problems arising when "prog­ ress" strikes underdeveloped territories.

Nurkse, Ragnar. Problems of Capital Formation in Under- developed Countries. Oxford: Basil Blackwell and Mott, 1953.

Okasaki, Ayanori. Histoire du Japan: l'Economie et la Population. Paris : Presses Universitaires de France, ---- 352

______. Japan*3 Population Problems. Tokyo: Ministry of Foreign Affairs, 1957*

Okita, Saburo. The Rehabilitation of the Japanese Economy and Asia, 'l^okyo: Ministry of Foreign Affairs, 195^*

Shepherd, Jack. Australia’s Interests and Policies in the Far East. New York: Institute of Pacific Relations, 1939. Silcock,T. H. The Commonwealth Economy in Southeast Asia. London; Cambridge University Press, 1959.

Soedjatmoko. Economic Development as a Cultural Problem. Ithaca: Cornell University Press, l^^S.

Staley, Eugene. The Future of Underdeveloped Countries. 2nd ed. revised. New York: Harper and Brothers,1961, A standard work in the field.

Taeuber, Irene B. The Population of Japan. Princeton: Princeton University ÜPress, 195S.

Trager, Frank, Building a Welfare State in Burma. New York: Institute of Pacific Relations, 195S.

, ed. Marxism in Southeast Asia: a Study of Four Countries. Stanford: Stanford University Press, -

Tsuru, Shigeto. Business Cycles in Postwar Japan. Tokyo: Science Council of Japan, 1953•

Essays on Japanese Economy. Tokyo: Kinokuniya, T95S.

U. N. Educational Scientific and Cultural Organization. They Can’t Afford to Wait. Paris, 1952.

______. Food and Agriculture Organization. Man and Hun­ ger. Rome, 1961.

U. S. International Cooperation Administration. Technical Cooperation. Washington: Government Printing Office,

Utley, Freda. Japan’s Feet of Clay. New York: W. W. Nor­ ton and Company, 1937- 353

Ward, Barbara. India and the West. London: Hamish Hamil­ ton, 1961.

Wilson, Harold. War on World Poverty. London: Victor Gollancz, 1953 •

Winslow, C, E. A. The Cost of Sickness and the Prloe of Health. Geneval World Health Organization, I99 I.

Wolf, Charles, Jr. Foreign Aid: Theory and Practice in Southern Asia. Princeton: Princeton University Press,

An economist's analysis of aid to southern Asia with emphasis on Intercountry and Intercommodlty assistance.

Zlnkln, Maurice. Asia and the World. New York: Institute of Pacific Relations, 1953*

Newspapers and Articles

A considerable number of periodicals In several coun­ tries have contained articles of real value for our purpose. Newspapers, too, through editorial comment and coverage or lack thereof, Indicate much about a country. The leading ones have been grouped below. A continuing picture Is best obtained from The New York Times. Time Is notable for Its breadth of outlook and freshness of approach. These latter two are particularly useful during periods of local censor­ ship. ïhe Oriental Economist Is a basic tool of utmost value Including as It does contemporary statistics, arti­ cles, comments, and notes on Japanese economic affairs of the past generation.

Acheson, Dean. "What Is Point IV?" Department of State Bulletin (February 4-, 1952), 155-159»

Allen. Luther A. "The Issue Is Freedom," The Nation (March 17, I962), 233-236.

The Bangkok Post (Bangkok, Thailand). 1955“19^2.

Barrows, Leland. "U. S. Vietnamese Cooperation Since 1955, II Department of State Bulletin (May 11, 1959), 67^-60 1.

Bayne, M. M. "Economic Aid to Aslan Countries," Australia's Neighbors (May-June, 1961), unnumbered.

Brzezlnskl, Zbigniew. "The Politics of Underdevelopment," World Politics (October, 195&), 55-75* The Burman (Rangoon, Burma), 1955-1959. The Ceylon Dally News (Colombo, Ceylon), 1956-I962. Coates, T. H. “Social Education in India," Auatralia's Neighbors (February, 1956), unnumbered. "The Colombo Plan: Ten Years of Cooperation," Current Notes (June, 1961), 5-I6. The Commoner (Katmandu, Nepal). I957-1960. Cumpston, I. M, "The Australian-Japanese Dispute of the Nineteen Thirties," The Australian Quarterly (June, 1957), 45-55. Davis, S. R. and Hughes, 0. A. "The Literature of Austra­ lian Government and Politics," The Australian Journal of Politics and History (August, 195S), 125-1^9. Dawn (Karachi, Pakistan). 1955-1961. Dean, Vera Micheles. "Spotlight on India," Foreign Policy Bulletin (August 1, 1957), 175-177. Deccan Herald (Bengalore, India). 1955-19^1. Dulles, John Foster. "The First 90 Days," Department of State Bulletin (April 27, 1955), 605-653: "Foreign Aid in the Philippines ," Progress 1955 (Manila: The Manila Times. 1955), 9O-II5. Fraser, Stewart. "Some Aspects of Japanese Foreign Rela­ tions," Australia's Neighbors (June, 1959), unnumbered. Furnivall, John S. "Burma Past and Present," Far Eastern Survey (February 25, 1955), 25-27. Gamba, Charles. "Some Thoughts on Australian-Asian Under­ standing, " The Australian Quarterly (September, 1953). 24-35. Gleason, Alan H. "Japan's Export Market Problem," The Oriental Economist (hereafter referred to as Or. Ec.) (June, 1958), 515-513. Halpern, Joel M. "Observations on the Structure of the Lao Elite," Asian Survey (July, I961), 25-5 2 . 355

Hefford, R. K, "Prospects for Australlan-Aslan Trade," Australia's Neighbors (November, 1955)» unnumbered.

The Hindu (Madras, India). 1955*1962.

Indonesian Observer (Djakarta, Indonesia). 1959*1961.

Kuznets, Simon. "International Aspects of Economic Growth, " Bulletin of the International ------House of Japan (April,

Kyber Mall (Peshawar, Pakistan). 1955*1961.

"Land Policies In Asia," Current History, -(November, 1953).

The Leader (Allahabad, India). 1955*1961.

"Malaya; Second Five Year Plan," Current Notes (June, 196I), 31-38. The Malay Mall (Kuala Lumpur, Malaya). 1955*1961.

Manila Dally Bulletin (Manila, Philippines). 1955*1961.

Mason, Edward S. "Competitive Coexistence and Economic De­ velopment In Asia," International Stability and Prog­ ress; United 5tates^Tnterests and Instruments (The American Assembly, l997)> 59*97* Hereafter International Stability.

Minobe. Ryokichi, "The Real Scale of Foreign Trade," Or, Ec. (May, 1956), 235*237. Morgenthau, Hans. "A Political Theory of Foreign Aid," The American Political Science Review (June, 1962), 30I-309.

Nation (Rangoon, Burma). 1955*1960.

The New Times of Burma (Rangoon, Burma). 1955*1959.

The New York Times. 1950-1962.

Oganescoff, Igor. "Living It Up In Laos," The Nall Street Journal (Pacific Coast edition, April 97 195S), 1.

The Oriental Economist (Tokyo, Japan). 1950-1962.

Pakistan Times (Lahore, Pakistan). 1956-I962. J5ê

Pfanner,- David E. and Ingersoll, Jasper, "Theravada Buddhism and Village Economie Behavior," The Journal of Asian Studies (play, I962), 34-1-361.

" Philippine Reconstruction and Rehabilitation," Progress 1955 (Manila: The Manila Times, 1955)^ 72-S9 .

"Postwar Transitions of National Life, " Or. Ec. (January, i960), 13-17.

Price, C. A. "The Effects of Postwar Immigration," The Australian Quarterly (December, 1957), 2É-4-0.

Reday, Joseph Z. "The Philippines, a New Free Economy," Or. Ec. (April, I962), 200-203.

Reinhardt, G. Frederick. "The United States Role in the Eco­ nomic Development of the Colombo Plan Area," Department of State Bulletin (November 11, 1957)f 755-75^.

"Rise of a New Middle Class," Or. Ec. (February, i960), 66-69.

Romulo, Carlos P. "The•Philippines Since Independence," Current History (March, 1961), 139~1^6.

Roseman, Alvin, "An American Aid Mission Director’s View of Technical Cooperation," Partnership for Progress: In­ ternational Technical Cooperation (American Academy of Political and Social Science, May, 1959), 2-o.

Rostow, VJ. U. "The Stages of Economic Growth," The Economic Journal (March, 1956), 25-^6 .

Schelling, Thomas. "American Aid and Economic Development: Some Critical Issues, " International Stability, 121-I69.

Sihanouk, Norodom, Prince. "Cambodia Neutral: the Dictate of Necessity," Foreign Affairs (July, 195S), 5S2-566.

Singer, H. N. "Obstacles to Economic Development," Social Research (Spring, 1953)> 19-31'

Smith, Roger M. "Cambodia’s Neutrality and the Laotian Crisis," Asian Survey (July, 196I), 17-24.

The Statesman (Calcutta and Delhi, India). 1955-1962.

The Straits Times (Singapore). 1956-I962. 357

Takagaki, Katsujiro. "Mission of Trade Firms," Or. Ec. (February, 1955), 77~7^- Time. I95O-I962. The Times (Manila, Philippines). 1955-1952. The Times of India (Bombay, India). 1955-1950. Times of Indonesia (Djakarta, Indonesia). 1955-1950. The Times of Vietnam (Saigon, Vietnam). I955-I961. Truman, Harry S. "American Peace Policy," Department of State Bulletin (June 20, 19^-8), SO^-SOFT Tsuru, Shigeto, "Internal Industrial and Business Trends,"./ Japan Since Recovery of Independence (American Aeat- dèmy of Political and Social Science, November, 1955), S5-94. Van der Kroef, Justus M. "The Philippines, Indonesia and United States Aid," Current History (August, 1957), go-SB. ______. "Social Structure and Economic Development in Indonesia, " in Social Research (Winter, 1955), 39^-^-S-l^* Wilson, R. K. "Prospects for Australian-Asian Trade," Aus­ tralia's Neighbors (November, 1955), unnumbered. Wurfel, David. "Foreign Aid and Social Reform in Political Development: a Philippine Case Study," The American Political Science Review (June, 1959;, ^55-^iS2. Yoshida, Shigeru. Speech to National Press Club, Washington, November S, 1954, Vital Speeches of the Day (December 1, 195^), 579-BSO.

Unpublished Materials Borrie, W. D. "Australia's Population Policy and Its Rela­ tion to Demographic Problems in Asia," Implications for Australia of Recent Developments in the Far East. Syd­ ney : Australian Institute of International Affairs, 1950), 1-6. (Mimeographed.) Hereafter Implications. Burma. Washington Embassy. Religion as a Factor of Cul­ tural Difference. Washington, 1958. (Mimeographed.) 35^

Cambodia News (Washington), undated volumes I-IV (1961).

Carnell, F. G. Political Ideas and Ideologies In South and Southeast Asia. Leicester, England: Political Studies Association of Great Britain, 1961. (Mimeographed.)

Holder, R. F. "Australia's Trade Relations with the Far East," Australian Policies Toward Asia. Melbourne: Australian Institute of International Affairs, 195^» VII, 1-1 6. (Mimeographed.)

Macapagal, Diosdado. Address on the State of the Nation to the Fifth Congress of the Republic of the Philippines, Manila, January 22, 1962. Washington: Embassy of the Philippines, 1962. (Mimeographed.)

Inaugural Address, December 30, 196I. Washington; Embassy of the Philippines, 196I. (Mimeographed.)

Nong Kimny. "Neutrality in the Sixties, " New York: Cam­ bodian Mission to the United Nations, 1961. (Mimeo­ graphed. )

Official Files of Radio Addresses, Radio Australia (Sydney), 1943-1955.

Sihanouk, Norodom, Prince. Speech, Kent State University, October 3, i960 . Cambodian News, III, No. 7*

Speech to the United Nations General Assembly, September 29, I96O. New York: Cambodian Mission to the United Nations, i960 . (Mimeographed.)

Ward, E. E. "Australia's Economic Interest in the Far East," Implications, 36-46. AUTOBIOGRAPHY

I, Janet Evans Ragatz, was born in Dayton, Ohio, Octo­ ber 19, 192^. I received my secondary school education in the public schools of Columbus, Ohio, but graduated from Berkeley Hall High School in Beverly Hills, California. My undergraduate training was at Tlie George Washington Uni­ versity from which I received a Bachelor of Arts degree, with distinction, in 19^6. In my senior year I served as an assistant in history, received the Ernie Pyle Award for my work as editor of The Hatchet, the campus newspaper, and, upon graduation, received the John Henry Cowles prize as "leading woman graduate of the School of Government". My Master of Arts degree was granted by the same university in 19^7 » I am a member of Phi Beta Kappa, Mortar Board, Pi Gamm.a Mu, and Pi Sigma Alpha. From 19^4- to 19^6 I carried on research for the spe­ cial assistant to President Sergio Osmena of the Philippine Government-in-Exile in Washington and served, from 19^6 to 19^9, as an analyst with the Central Intelligence Agency. In 1953» I entered The Ohio State University. My class work and general examinations were completed in 195^ fol­ lowing a year as a Fulbright scholar at the Australian National University in Canberra. I was a teaching assis­ tant in Political Science at Ohio State during three

359 360

quarters and am presently teaching a survey course at the Marlon Branch, During the Japanese academic year 1959"*196o, while pursuing- language study at the Tokyo Japanese Language School, I taught American civilization at Gakushuln Tandal and Ochanomlzu University, Before returning home, I took an extended trip through Southeast Asia to gather disserta­ tion materials. In 1950 I compiled A Bibliography of Articles. Descrip­ tive. Historical and Scientific, on Colonies and Other De­ pendent Territories, Appearing In American Geographical and Kindred Journals, 1935-1950 (Washington: Educational Re­ search Bureau, I93I). This was followed hy a short social history, Canberra, A,C,T, (Melbourne: Hawthorn Press, 1936) and a ^0-page report. The Ohio State University*s Position. Relative to Midwestern Afro-Aslan Programs, for presenta­ tion to the Ohio State Graduate School In I96I. Last year I wrote A Study Guide : History of the Middle East, pub­ lished by Knopf for the Armed Forces Institute In November,

1962.