To the Editor:

In his provocative article, “The Perversion of Foreign Aid” [June], Nick Eberstadt tends to place the blame for the perceived failure of foreign aid on changing policies of the U.S. government. It may be argued, however, that the modifications that have occurred over a twenty-five-year period were a response to changing conditions, over time, in recipient (as well as donor) countries and reflect experience with ongoing programs. . . .

Foreign aid and direct investment, which had contributed to the diversification of the economies of the developing countries, were displaced during the oil crisis in the early 1970’s when recycled petrodollars were offered by the international banking system for a variety of projects—public and private—with minimal review of their viability. Concurrently, foreign aid, bilateral and multilateral, was channeled to the poorest segment of the population, which was not directly affected by flows of external finance. Given these circumstances, it is no surprise that the “basic-human-needs” approach helped to solve emergency problems, but did not pretend to affect underlying structure.

Looking back over twenty-five years in, say, Latin America, we can see that economic development has been quite successful in terms of the overall building of infrastructure, productive capacity, and trade and growth of GNP, although the internal distribution of the increased income has not been even. The debt crisis which surfaced in 1982-83 has inflicted severe setbacks, reducing per-capita GNP to levels of five years earlier. Imports were severely restricted to save foreign exchange with which to pay for service on the foreign debt. Against this backdrop, . . . conventional foreign financial aid . . . can, at best, only alleviate critical situations.

A major dilemma in foreign aid is the constraint on donors’ direct policy involvement in recipient countries, yet in many cases assistance is most urgently required in establishing priorities and in formulating appropriate incentive policies to achieve the desired ends. In the absence of stable and consistent policies in recipient countries, foreign-aid efforts will tend to be fragmentary and localized and will often be swept away by the tide of changing political fortunes. . . . Projects tend to follow traditional lines and often deal with subjects which should by now have been mastered by the recipients. Yet the continuity of personnel and institutions is frequently missing, and successive governments tend to repeat requests for aid previously rendered.

In sum, the process of giving, receiving, and filtering aid through the society is perhaps as relevant as the actual content of the aid package. . . . One should perhaps search for ways to integrate foreign aid into the fabric of a culturally different society rather than experimenting with slogans and approaches to selected segments of the population. As noted by Mr. Eberstadt, “development is primarily the responsibility of the people of the less developed countries . . .,” but that does not preclude foreign aid from providing assistance with regard to the nature and direction of this development.

Marco D. Pollner
Bethesda, Maryland

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Nick Eberstadt writes:

If I read Marco D. Pollner’s letter correctly, we are in agreement that foreign aid can, under the proper circumstances, contribute to material advance and self-sustaining growth in recipient nations. Our disagreements seem to center upon the identification of these proper circumstances.

Mr. Pollner suggests that the financial aid extended by developed countries and multilateral institutions in response to the “debt crisis” of the early 1980’s was an appropriate (albeit insufficient) action. If his conclusion is correct, this is not owing to the strength of the analysis upon which it is based. The so-called “debt crisis” besetting so many nations in recent years was neither an unpredictable nor an unavoidable event. Nor was it principally a result of forces beyond the control of the governments affected by it. What has been labeled a “debt crisis” was in fact a reflection of a somewhat different, but rather straightforward, problem: namely, that the rates of return on the foreign funds many governments borrowed were significantly lower than the rates of interest which they were obliged to pay back on these loans. It would seem to me that such a situation might usefully prompt one to consider the uses to which borrowed funds were put in the newly insolvent nations. I do not see how the inability or unwillingness of certain governments to make good on contracted financial obligations can serve as the base of an argument for increasing the volume or deepening the concessionality of the foreign capital transfers to them.

The “basic-human-needs” programs promoted and underwritten by various foreign-aid agencies can, as Mr. Pollner indicates, be explained in terms of historical factors. But surely he does not believe that every event which can be explained should also be endorsed.

Mr. Pollner avows that the poorest segments of Latin America’s population have been unaffected by “flows of external finance”—an opinion which, while highly questionable, nevertheless continues to maintain a certain currency among some students of contemporary Latin American affairs. Mr. Pollner also indicates that he is interested in the impact of government policies on the prospects for economic advancement of the populations over which those governments preside. Given these two views, I would have expected him to argue for systematic reforms of social and economic policies in Latin American nations, although I did not read an advocacy of such reforms in his letter.

Finally, Mr. Pollner wishes that governments receiving foreign aid would have “stable and consistent” policies. It seems to me very much more important that their policies be economically rational, socially sensible, and politically enlightened. Many of the governments in the modern world whose policies are the most “stable and consistent” embrace agendas which are neither sensible, enlightened, nor particularly economically rational.

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