In the wide span of American responsibilities in foreign policy none has been more perplexing than the formulation of a policy toward the new and uncommitted nations running from Casablanca to Djakar- ta. Over the past few years we have begun to appreciate that tested formulae we have applied to events in Western Europe and NATO have only limited application to the broad medley of changes occurring in an uncommitted world. Though we have learned that we must come to terms with the new nationalisms, we have tended to interpret their meanings too much against the backdrop of our own historic experience.
Easy as it is to proclaim a position of "anti-colonialism," many sympathetic observers in the West have not fully realized that some of the new states have set their courses in an environment empty of positive democratic or liberal aim; that their attainment of political independence was but a prologue to the harsh realities of political and economic growth.
We have begun to learn that a purely military response to the tides in the Middle East and Asia is an illusory breakwater. For military pacts and arms shipments are themselves new divisive forces in areas shot through with national rivalries, often without historic boundaries and allegiances. We are beginning to see, too, the special attraction and emotional appeal which the Soviet Union has, in the fluid pattern of events in the uncommitted world, to people full of social resentment and accustomed to authoritarian rule. Communism to them is the alternative, with the glamour of novelty, of breaking fresh ground, and of seeming to offer disciplined, coherent, and irresistible answers to the overwhelming problems of economic management and progress. Indeed, it has been one of Marxism's cruelest ironies that it has gained special force not in advanced industrial societies, but in areas of stagnation, peasant economy, or petrified authoritarianism.
Can the underdeveloped countries achieve economic modernization in freedom? The outlook in many countries is not hopeful. Some of these countries provide barren soil for any real economic progress to take root-they cannot productively absorb investment capital, they do not possess the skills or plans or social outlook which derive genuine benefit from economic assistance, their rapid gains in population seem certain to outpace any attempted increase in living standards. There are, of course, exceptions-and we dare not give any up as lost.
But one country in particular, India, has successfully pointed the way to progressive economic development; it has achieved a steady rate of growth, established the firm beginning of an industrial base, maintained an economy in which the private sector plays a large role, and avoided an excess of governmental regimentation and controls. In India democracy has prevailed in the face of heavy obstacles, the national and per capita incomes have risen despite the continuing rise in population, and education has spread. Two na- tional elections have been held on the basis of universal suffrage. The parliamentary framework is no mirage and is sustained by capable political leadership and a first-rate civil service.
In. 1956 India completed its first Five Year Plan. During that time national income rose by nearly 18 per cent, at least five per cent more than expected. Quite apart from its intrinsic economic achievements, this Plan, with its emphasis on agriculture, helped to generate a mood of national confidence, to divert national energies away from sterile colonial grievances and into the task of national self-development. Moreover, the Plan was favored by good harvests and benign weather. During the period of this Plan (1951-56) the United States aided India with nearly $300 million as well as a wheat loan of $190 million and a share in World Bank loans running to $40 million. Few assistance. contributions we have made have been better used for real economic development.
India's Second Five Year Plan is now in its second year. In contrast to the First Plan it stands in great peril. It may soon collapse. In part this danger is the handmaiden of success-the fact that the Indian economy is expanding, that the government has not imposed a rigid series of controls, that it has permitted a considerable sector of private enterprise. This plan, moreover, is ambitious-two-and-a-half times as large as the first Plan. It is seeking to cross the most difficult threshold of economic growth-the establishment of capital-generative basic industries such as steel. It is trying to double Indian national income in real terms in the next ten or twelve years. It seeks to mobilize India's rich resources in hydro-power, iron ore, manganese, coal. The essential features of the Plan include three steel mills, which absorb the largest fraction of the investment and which would expand crude steel output to 6,000,000 tons; railway and transport improvements costing over $21/a billion; machine moulding shops and a step-up in hydro-electric and coal output, as well as critical but less expansive plans for agriculture and ir- rigatioii, service industries, housing, and education.
Clearly this Plan, which is developing at a time of poor harvests and growing unemployment, and which requires the importation of machinery from abroad, is dependent upon international credit. But this is a time of high prices in foreign capital. The World Bank's interest rate is more than 51/2 per cent. The road. ahead for India's plan seems extremely difficult indeed.
It is easy to dismiss India's needs with the assertion that she has launched a grandiose and impossibly large scheme calling for a scale of efforts and cumulative capital infusion wholly beyond her capacity. Yet this is hardly the fact. The investment represented is less than $7 per head per year. Until 1961 it seeks only a total increase in income of five per cent per year, or about 31/2 per cent per capita-by no means an extravagant goal when set beside the parallel effort of totalitarian planning by China. If the plan succeeds, India's rate of investment will still be less than 10 per cent of total national income, compared with nearly 20 per cent in Russia and 15 per cent in prewar Japan. In a country with twice the population of all Western Europe, the scale of financing will only equal Sweden's (with a population of seven million).
India, moreover, has taken stern measures of economic self-discipline. Austerity characterizes the current economic program of the Indian government. Taxes are high,, especially after the recent addition of wealth and expenditure taxes; stiff import controls and licensing have been imposed to ease the drain on India's foreign exchange reserves. Foreign travel has been almost prohibited. Though few persons have an income level that contributes much taxation in a nation whose per capita income' is under $60, persons of measurable income are taxed more heavily than anywhere in the world. In fact, the real question is whether these austerity measures may not have reached the point of becoming self-defeating-drying up too much. private capital, debilitating the private sector by the rigidity of import controls, sapping the incentives on which much of: the Plan was predicated. Unfortunately,, a serious foreign ex- January,.1958 change crisis has forced India to prune its Plan to the core. Her balance of payments gap may be as much as $3 billion over the next three and one-half years. Her foreign reserves have already been almost halved in the past year. Import restrictions on consumer goods have been tightened and some expenditures under the Plan curtailed, extended in time, or cancelled. Railroad stations, office buildings, foreign cultural missions, radio transmitters, and health centers have been the victims of the cutback. But these measures have only closed the gap a little; the heavy expenditures lie in the heart of the Plan-steel, transport, irrigation, machine plants, power.
Can the Indian government cut further into the Plan without deflating all its vital energies? It is quite clear that it cannot; for a genuine program of economic development is a seamless web which cannot be pulled apart and rewoven from cheaper materials. The Indian economy has reached a level of maturity and complexity in which the various elements of the Plan are interwoven-steel and transport and coal and machine tools are part of a single complex and must grow together. Moreover, electric power and education are the muscle for a developmental effort. Without them there will be a husk without the kernel. Further serious cuts in the Plan, in Another Race We Can Lose short, would not "save" money. They would only veil and compound even greater costs in the future-or de.cree the death sentence of the Plan and India's democratic experiment in Asia. There may be some stretchouts which can be made, a few "frills" to be cut and a few postponements which are possible, but they little affect the over-all scale of the Plan or the size of India's loan and aid requirements.
If the Second Five-Year Plan collapses, so may India. If India collapses, so may all of Asia. If all of Asia collapses, so does the security of the United States of America. However sharply one may reject the concept of American ideals impelling us to help others in need, however blind one may be to the dependence of our own economic well-being upon our closing the prosperity gap between ourselves and the "have-not" nations, no thoughtful citizen can fail to see our direct stake in the survival of free government in India. If Indiathe showcase of the democratic "experiment" in Asia, the only real con.tender with Peking for the faith and following of that continent's millions of questioning citizens-should fall prey to internal disorder, agitation, or disillusionment, or if she should join China (with a population of nearly one billion between them) in the Communist camp, the Free World would never be the same.
Though the Indian government has consistently been reluctant to ask for outside help, neither that government or our own can avoid the fact that the Second Five-Year Plan is fully dependent upon outside capital. The Communist world need not supply it-their purposes would be even better suited by the Nehru government's failure. It is the Free World-basically its wealthiest leader, the United States-that holds the key to India's future; and India's future may well be the key to the Free World.
The central issue is not India's neutrality, or the statements of Nehru and Krishna Menon, or India's relations with Pakistan, or the existence of nationalized industries, or competition with or restrictions on American products. We may talk about these and other problems-we may 9 Fitzpatrick in The St. Louis Post-Dispatch assert they require further study or negotiation or delay-but they cannot obscure the central issue: the survival of India, of Asia, of the Free World. No discussion can avoid the harsh facts of India's real needs, of her dependence upon the Second Plan's success, of that Plan's dependence upon American funds, and of our dependence upon a free and independent India.
It is not as though the Indian, government has warned: "Help us or we shall go to Moscow." They have 'attempted no such intimidation. But they know and we know what the alternatives are to economic and political stability in Asia-and what happened in the Indian state of Kerala, where well-educated but despairing citizens freely elected a Communist government.
The necessity for American action is so apparent that the real question now, I would hope, is not whether we respond but how. There is some indication that the Administration is unwilling to take the matter directly to Congress, but may prefer instead to piece together an aid program from existing laws, much as they did in the case of Poland last spring. Would this be enough?
At the present time the United States is furnishing India about $70 million in hard currency assistance, most of it on a loan basis. About $60 million is for economic development purposes-such as machinery and steel plates-and the remainder in technical assistance. In addition, India will receive about $360 million worth of surplus agricultural commodities-largely wheat and riceover a three-year period, with a sub- stantial portion of the local currencies resulting from the sale of these commodities also loaned back to India for economic development purposes. Although the total is thus already a larger level of assistance than we were providing under the first Plan, it falls far short of her requirements, even after the assistance likely to come from other nations and the World Bank.
There are, of course, avenues of increased assistance under present legislation which the Administration is exploring:
First, the law on agricultural surpluses may be capitalized by another half billion or more dollars, with some of this going to India-but there are many other claimants, including close allies such as Greece and Turkey.
Second, the Export-Import Bank might reshape its policies so as to include India. But its current requirements for early repayment and for the purchase of American goods make it of little help to India's program-and a half a billion of its current credit has already been committed to Great Britain.
Third, India might receive a larger loan from the new I.C.A. International Development Fund. But the Congress capitalized this Fund at o~ ly $300 million; and even if a sharp n increase were voted at this coming season, it also must serve many "customers" without committing an exaggeratedly large precentage of its funds to any one country.
Perhaps these laws could all be used; perhaps we could adapt the proposals for increasing India's credit SPECIAL STUDENT RATES for Classroom Use A Detroit teacher writes: "The Progressive is more valuable reading for my students than any textbook." The Progressive is available to students and teachers at the low rate of only 50c per student per semester when ten or more copies are sent in a bundle to one address. Adult study groups may also take advantage of this special school rate. School Departmnt The Progressive Madison, Wisconsin 10 suggested by Senator John Sherman Cooper, our able former ambassador to New Delhi, who urged that we sell an additional $160 million of agricultural surpluses against rupees, and convert the $190 million wheat loans of 1951 to a rupee basis. But these steps do not seem to me to come to terms with India's real needs over the full span of the second Plan. That effort requires something more than merely small injections of adrenalin.
Too often in the past our aid to India has been marked by reluctance, vacillation, and excessive red tape. It seems to me that, rather than relying year by year on a series of expedients, holding the Indians in perpetual suspense, and giving aid short of the minimum required, the time has come to meet the problem head-on with special legislation, to act generously according to our ability in full recognition that the success of the Indian development scheme is in our own best interest.
Because of the shortage of time, it may be necessary in the coming year to pass an emergency-type program for India to last until there has been a full assessment of needs-as Congress did in the Fall of 1957 for the start of the Marshall Plan. But it would be no service to ourselves or to India to hope that a final solution can be found by squeezing small items from all existing laws and hoping that they can do the job with a little belt-tightening in India. If our actions are to have the maximum economic and psychological impact, it is essential that we meet this challenge boldly and with courage.
This is not to say that the $600 million loan figure informally suggested to our government by Indian Finance Minister Krishnamachari represents a magic number as either a floor or a ceiling. Our stake in the Plan is vital enough for us to make certain that we grant neither too little nor too much. The Indian planners themselves seem uncertain about their "built-in deficit," about what further cuts or postponements are plausible, or what their real needs will be for dollar loan support through 1961. The serious plight of the Plan is obvious in India's talks with American, British, and German The PROGRESSIVE leaders-but the exact nature of its needs need to be spelled out more fully.
The parallel here with the problems of European recovery just ten years ago is striking. Like that of postwar Europe, the Indian economy has reached the crucial and precarious point of success or failure', with much the same political dangers. Secretary George C. Marshall in 1947 urged the European countries to make a reckoning of their primary requirements. After such a review and a candid presentation, of needs, it was possible for Congress to commit itself to the Marshall program of European recovery. Today, if we are to become effective contributors to India's economic survival and health, it is essential that India present us with a searching and wholly realistic accounting of its plans and needs.
As long as her precise requirements are shrouded in uncertainty, we are likely to continue purely stop-gap and patchwork remedies which will satisfy neither India nor potential lenders. It is far better if a frank exchange exists between both countries, both in terms of generating support and securing a level of aid which rests on more than false expectations or cloudy hopes. There exists in the United States a large reservoir of good will towards India and a genuine concern that its economic growth be unimpaired. But a fund of good will becomes a source of support only if there is assurance that India herself knows her destination and goals and is aware of the means necessary to reach them. It would be an important step forward. if the United States would begin at once to undertake the kind of bipartisan surveys which were made in Europe in 1947-48, both through Congressional committees and executive study groups.
It is not suggested, of course, that the U.S. Treasury be the sole source of support to sustain the Indian Plan. On the contrary, the occasion provides a splendid opportunity for the kind of real multilateral assistance and joint effort many of us have long urged. It is likely that Germany will make a significant contribution, that Canada and Great Britain and the Colombo Plan countries can January, 1958 0 The Down-to-Earth Missile Race make modest ones, and that in the improved climate of relations even Japan may be a contributory state in textile machinery. Moreover, the International Bank has already made loans for railroad development and to the Tata Steel Company, and will probably make more beyond the $360 million already committed.
The Soviet Union, too, may well be a contributor-and some will say that American aid is thus futile or misguided. The Soviet Union has, to be sure, loaned India much of the money to build the Bhelai steel mill on a 12-year 21/2 per cent loan and has recently negotiated another $126 million loan at low interest. But here seems to be an extraordinary opportunity to match systems with the Soviet Union on favorable terms, to show our true concern for economic development, and to push India well ahead in its competition with the Chinese economy (which is also on its Second Plan phase and experiencing serious trouble, especially in the agricultural sector).
Finally, some help can be expected from private investment, which has already entered India in some quantity and will continue to do so on an expanded basis. But private investment cannot cover the gap. There is little question that dollar for dollar private investment is both the most durable and most resilient form of assistance; and varied foreign concerns and banks have made investments in India. (Krupps of Germany is building a steel mill; the World Bank has repeatedly shown confidence in the private sector of the Indian economy.) But it is equally true that we are in a period of investment capital starvation, with an overabundance of capital outlets and a depletion of available sources. Th United States channeled over $4 billion into private foreign investment last year, but less than 10 per cent of this was venture capital in underdeveloped states. Well over three-quarters is attributable to investment in Canada, in Latin America, and Middle East oil.
There is no visible political glory for either party in coming to the aid of India, particularly at this time of high taxes and pressing defense needs. The task of "selling" such a program to the American people is far more difficult than that of a decade agofor we were more familiar with the people and problems of Europe, our ties were closer, their economies were more directly aligned with our own and held out more certain promise of success. But the need and the danger are as great now as thenIndia today represents as great a hope and challenge to the future of liberal democracy as Western Europe did in 1947-and our people are still, I am confident, equal to the effort.
I realize that it is difficult to give resonance to such words and proposals in the mood which has governed our approach to foreign aid and economic policy in the past sessions of Congress. But this mood has in part been induced by the persistent counsel of caution, by the lack of vision and purposefulness with which we have approached the problems of the underdeveloped world. If we are to break the aimless drift and deadlocks in policy, if we are to regain the initiative in world affairs, if we are to rouse the decent emotions of Americans, it is time again that we seek projects with the power of stirring and rallying our hopes and energies.
In the Indian loan appeal the United States can both demonstrate our creative magnanimity and serve well our national interest in Asia.
John F. Kennedy is a United States Senator from Massachusetts