. . ,,1" 0 . 6 ll,OL~ FOR RE!lEASE HOLD FOR rJILF:ASE INrt.E!RNATIONJ\L BA.NK FOR . RECOUSTRUCT!QN. AND DJ!,'\r~~T FOR TRE PRESS For Release ~ tfP1"ess Rele~se No. 230 7:30:PP.?4.c.s.T. I Weqnesday , January 10, 1951· Ad~ss by "Eugene ~. Black, President o:f' the , Inte:rnational l3ank for ReQonstruction and Develomnent ;:::::;:Before flle Bankers' Club,of Chtcaao · Ja~~ta~r 10,~ 1951 ~\ In these times any suq_ject\'but dGfense may seem t:dv:Y.al by cc,:npariso;n. The (\ defense of ow.~ oountry anQ. of the :f'ree·world wi;J..l remain the. tQ;[>iC up:pe~ost 1,: our minds and tlla par'amount issue in our l~;ves~ ~Ol" ):.iow lonftl WS cannot tell. 1 Ang., ' \ next ·:tn importance to defense, ! erJ.:p:pose we would put · a fair she.rins of the ·burden". 'l'hat ' means .many ... _ .~ _.. - - --- -- . . - - ~... v:i,goi•cu,~ things:., --~ - . . cam.~~1.gn against infl.at:J.on; h.;lsher taxes; . . ' //.. . . p_rice and wage co~troi; allocat!cns and :re.t:tofu.ns. But we 111ust not· 1et ~te weight \\ of this burden and tlle importance of t~eije issues malre ue lose sight of o~ r~- ·- s:portsiM.iities; ·it should only :place them in a d.ifferent pers:pec't:tve. It 1~ one ,, of these other respons1b1i1t1es about which I wish to speak tonis'ht - the economj,c development of the underdeveloped a:reas of the wo~l.d. On November 10th, shortiy pefore the Korean~ took so grim a·turn, Mr. Gordon Gray's :repo;i.-rt to the P:resjdent on Forel.sri EconoIIJ.ic :Polic!ee ·was p1.ibl,:.iehed. 0 ~his, the first :public doci.unent to gather together the ioosely danslinS thr.eads of American fo:;i;:-e:tsn Eioonomic :policyAP.d weave them into a colle~ent pattern, is a docume:qt ~hich dese~es t\ttent1on. , Amon13 other th;ings ,· the ~eport points ·O\l.t the i1?1Portance of givip6 the un,del:'devel.oped countries~ ~eate~ OJ?portun?tty·tc;, x,:iise ' . their standard of ~1v1ng. It emphasizee the sra.Aual, nat-qte of the dev~iop12Jent pro-- 1,, cee~ .and descr;tbes the obstaclea wh!ch have to be ove;roome to accelerate 1t, And. ,) 0 ', ~ Q ,, 1t ~eachee the conclusion th~t the United States, in ; te own self-triterest, sho'1ld. make addltioi~~l financial and technical ~~s-istanoe ava;llabl,e to the· lesf;J Q.eveloped .;~. · ·•·.·· ,_. . .... ... . .. -. j' countries of the world. The ord,er of macnitude of tlle· annual dollar asaistance r J 'r 0 0 .... 2 ... & 0 fr~ other than private. sou:rces that the re:po~, recOJJm1erids is $500\~million in grants, and $600 to $800 mil.JJon°in l.oans; of the lt)~J!s, llalf' oi" more is e&pected ·~v (,/to be provid~d by th ~ 1 International" Bank:, g \ ·,) r·t would be a nat\lral reaction to ·recomrner.Ld~t1omf of th;ts sort to say tl;.at what 0 0 seemed good on November lOth no longer makee s;~ae on Jan~ary lOth~ So far as the ··, amounts are concerned, there niay well be truth I/in this: ,, •.. But as for',).)the prinoipJ..es invol,ve.d, they we+.'"d, in my judgment, neve;r l40:re alive. " 0 Jl!conomic ··develoJ:l!Il8µt, as a te~~ has beep nn.icb. in fashion ~ecentl.y., But, ~s a - :proc~ss, it is not4j_ng new,. In the last 150 ye~i... s de,:eJ.o:pment has p:roceedeo. very . ff ra:p:J,dly in ce~ain :part·s of the world, in Western E\ttope ,· tri Japan, 1n 11 the oountrlea of the fa:,:- south, 1\r.gentina and Urusuay, Southe;r:-n Af1,•1c·a,, Australia apd Mew. Zealand, · · ~~d, above all, in North Am~~ica. In these countr!ee a hi$h standard of living has • ..... ;,. been achieved and a larae sto:.·e ''of ca:pital built -qp in spite of th~ e1:eat dlssipa-0 tion of assets in wa:r ~ :particularly tp.e tw'o World Wars. where three•g,uE\.~ters of its :population livee, there h~ij e.leo been·(:JOl?le p~ogress. In the :rest of tb,e w?rl~, Millions of :people hav:~, ·~ijSat$~d. in ·the p,:oduction uf connnQd:I. t;tes like tin, :,;-ubber, coffee and oonoa for the world market, wh!tyh, h;.owever riclae 1t ;may h.ave been, ha$ proV1de4 a eource ot income muc~ abov~ thei.r previ.ous level of primitlve subats- tence. Ports, railway~! power ~tat;tons, w}\ole new oomro,imit1.es 1 have beep built, partly to brtns theee oommodit~ea to market, partly to serve the general eoonomtee 0 of these countries. But pl:'csress ha~ really touche4 only a fringe. As the st~dard ot liv:l,.ng of the worlC,. has advanoed, t.the sap betwee,Jl th.e h,:l~ost an~ ;t.oweet llas widened. 1 Th$ bulk of the. people 1n tAe underdevel.o:pe4 eountr-ies a;r-e peaa~nts, :fo:r mo~t of whOJ?J .. ~ horizon is bound,e\'t, by a ~ll, :patoh Or ],and. , this lt1nd, t1s lili:e t1e not, · · · , ~'they do nr;,t even mm, but woi,"li: for anQi;her w:!:t;h poo~Jartd pr;tin,.tive tool$. Ot i:f' Dr .. . .. I) . • . . ., . . • · theJ do own it, they are likely to be so in ~ebt t~at it :ina~ee little diffe~e. 0 - 3 .. G They would, have little incentive to improve the land, even· if +.1:?ey }{;new how o~ had 11 the means; but mostl:r they are illiterate. They· live in small b:ne-room huts., wh'.clt, Often, they Share ,with their few 8111:.malB II Their djet is def:tcient I their St~ip.a poor and they are a :prey td:<'1disease; if medical science has b:rou'ghtr them benefits, 1 they ar two-edged, because":' ever;tl chil~. that is saved:, every old man whoa~ l~f~ is prolong~¢i.., 1@ mother ~outh tq feed. 1 The villages in wh.;I.ch they live are often remote fro~ the few main arte~ies -\ of transportation; . if they-'are on a road, it is !I 'u frequently impassable,;' in the wet season. Storage is rudimentary. Local :ple11t1 in .i/J one d.ist;rict can thus be quite compatible with local famine in another... In manv ._,~ countriEtS the average income is no more, and is often 6onsiderably less, than $100 a year. . . In - inany countries, too, the aver:age life .expectancy is little over 30.· . ~ There is another way in which tl1e 4ifference betw~en the developed ·and the underdeveloped countries can b~ illust~ted. A~ a..~ ex.ample, l willftake one coµn- . , - try, India, the second most populous co1.intry ~n the world. A plan for the develop- ment of Brt tf sh Conanonweal,th countries in South and Soutll-Ea~t Asia was recently· published by .~he C~onwealth CoP1mittee, lt gives·· some interesting ~gqres. On a per capita be.sis, the United ste.tes uses nearly 200 times as m.qch elect~1c power as lnd.:I.a andi 100 times as much atee1; on the same basis, our freisht ca;rs ean.ca;r:ry 50 ' • I) . /"'-°' . " . .. . . . otiIU~ff/as large a load and, if you take an 1,nstrwnent Whicn is less fundamental; but /I,;/• nevei"theles.a almost an eijsent;i.al witl.l us, t:tie telepllone, tlle ratio ta 700, Tbe United States has act~ally somewhat more la~d under cultt~tiQn th~n lndia and, " with only a tenth the mnnber of people woi~~e; on it, pro1~cea f~+ ?JlOre. Nor ie thie surprising when you QOP.Sid.er tha;P c: • W~ have ?,0 times tne·n\l,Iilbe~ of tractors to WOt}c it with end use 65 titnee as JnUCA fert1li-zer •. · Muohlthe e~e stoey, with v~:r"1ation upward, or dOFWl;\rd,, 'Can be re)?eated from one COWltrtJ to another.. ',rher all laclt that ..•..i _ t, system of pblic 11erv:l.oes on. 'Wh:).ch 11111st be' based i;}Je sreat supe;t's1;l'I.\Otu:re • of a · r; . . 'prosperolls :tnduEJtrial .. or asr19\l,l,tural. ~ society.· .. 4 - . . ' Wliy th:ta d.ispQ.rity should have arisen is di~!)uted. Some on one side would ' . . . ' •, \) ./) . ,, claim superior thrift, inq:u.stry and initiative; some on the other,·that the lees () ·. . . developele,c:i:rE;,fo~ of l~11d tenure, · h~ever diffieult to· aoh:t~ve, ;ts :probably the most impo~tant. The neeC,. for land • Q 0 (/ - 5 - reform is widespread., because the whole basis of develop?lie11t is the land. Its effect on devel.opllle,,nt might be reme.rkable, ,,for, i;f people are :f~ed :f'roin t;he c\eep- rooted conviction that, whateve:r they do, they eam}ot pros:per by their .own effo;i:w-ts, they may show inltiattve in far greater abim,dance than we suspect t4ey- :possess. It ia not without significan~e that land re:f'o1'ltl is one of the main :Planks o±--; COlllllluniat propa(Y.lnda, Unfo~unately the infl,uence of special1.nterests . 0 . in the unde~developed coun- () :::;, tries and ( their re$istance to reforms ii1 the seneral interest are certain\'( as p . . ,·. )l.. s~1·ons as they are in the more developeq.; ~uch vested interests are often very well ent1..enehed. This is anoth~r reason for having a well-Qoncerte,P. plan of action. If pa.rticular m·oups are- to be ransed on tli~lsla.e of the general inte~est, it is nec- e.ssary to show them what the general interest is· and to obtain the )'ri~st $Ul)PO:wt •. • - for it. In all these matte~s the govern:tQ.ents of 1,m.derdeveioped countries require tact- ful but f:!.rm support, :f'or the best course ::ls not al~ys the Jnost ~edi~tely pdpu- it:· lar and po:J_;l.tics may bedevil the whole conduct of d,evelopment, The :Sallk, · in its oper~tions 1 has tr~ed to et~e this k~nd of support. We have consta.ntly urged the und~rdeveloped countries that the;, draw up a scunC. p:rosram of :tnvestl)lent and that they formulate and put into action(the ~conOIU.iC policiee ;necessary fox, its fulfiljlll :niant. We have sent ndssion£1 to a number of these countries, ;tn some cases to in- vestigate ~articiµar sectors of their ~conomiee such as agriculture, in other cases to take an inventory_, so to speak, of the entire country's reaoµrce$ and needs. It is OlU' hope tnat ~he work of t~eae mtssions wtll he~p the countries they have visited to plan thej.l." (\evelop~ent ~:rosr~s effic1e?ltly and to obtaln :for~them -w""ig.e- ',l epread and non-:part~san l)Ubl.ic support,. A progr~ is not, of eom'se, enougl1; it has to be :f'1nancedci with t}le1r· small 0 e· · ' l ~ fltOQ)!;. Of ca;p!tal at1d the:t!' 10'!!' fou a D . ~... few e:,cE\mp:Jies; building n~w l)OWer capacity to overcom.e shortases !Il'rthe 1.ndr~s·tr:ta~l · · r,egion9 around Sao Paulo in Brazil, a;t"Oimd Me~co City ana~nt. a It h~s ae>Jnet1D1ee 'been s-µgseeted. tllat tlli~ :problem el+ould. _be tnet by prov;iclins ,, cap:i,tal 1n.the_fo:r'l1i ot v~ey lof'lB•tei,n low inte;,:est ;rate loanQ. 61.lch lo~ns can, of v - 8 ... 0 • !) course, only be made'· by sove~nts~ :Be.ca°"se such lo~s, in form/ appear to ·pro~ vide ~o~ \.) 0 ' D a tansiblf;l_quid pro quo wllich can be written down as an asset, it me.y be ea'eier to secure legislative approval for them than for outright srants~ But the I \) O ' ( very fact t~at these loans are ma~e on especially easy te~s and are still called loans sl:\ould make uef eusp1c101,1a. J\.lthouS}l efl,Si,er terms reduc~ the element o~G~r1.ek., " , ~ /I ,,:-, they do ·not come neai, to el+minating it. And sQ1 in the end, althoush some loana _,_, . " 1 ~. .· ··w111 turn O'\,\t well and will be repaid, others will bring. in thei~ trairi., f1~st, . - Q =~~~~evere strain on. the economy of the box-rower and, f;tnaUy_., d,et,aul,t.'d ~ . Wllen this . happens, there is likely to be 111 will, "~tional an4 i~tio~l, on'bC>th sides~ _. 0 U The lende~ wtll resent the default on a loan made in eood fajth. ~~e bo~~ower ·will ~~~ . resent the yeap.s l.6st in abortive strueerit1 than as a J serious financial obligation. The effect ot such defaults 1s to dest~oy credit generally and to atrophy the intesr1ty of all ortho~o~ lending. !n ?UY opinion, wl\ere you have a choice between grants and fuzzy lqan$ of thie kind, it pays in tl;u, long run to make grants. l have desc:ribed. to you. in so.Qlewhat 'OYeraixnpl1fied terms, wha.t tile task (of eco~Qlllic d•velopment means. It will need the whole ~OJ9Y of tAe advanc~d coun- tries to a'~tack :t,t., ·1oans and grants, technical assistence and :private investment. r;;:i_J , (_1 r) A~d these wea~ons niust be u~ed 1~ com.binat1on, not piece-meal, in oi'der to eneux-e that all the ;r~sotU,'Cea of tlle ~rq.evelol:)ed countrj,es are u,ed ~a effeot1vely as') possible. ~eir govei:nmente need encouraa,e.~ent a;:id s~:pJ.io~ it they are to do. thei:r part ot the job, wJiich ie th,e main l)8l:'t 1 with the fi~oss and bolods w~~:ch it wotild ·buy~, The aovernQlent$ of these count~ies Itnow the magnitu~e Qf t~e defense effort~hey are undertakjhg, what can o~ cannot be ~eleased. for otller pu~oses,, (I ' . I sl1all not ·be so ,, rF presumptu.oua as to argue about that./) But I would 1$8.Y tbat when tll.ie has peen dft· c;::J cided, very serious tho\lght s~oitld be given to the ,d;tspo,:1al of' the resid.ue. Our national income :La so :i0irge t;hat, everi a:f'te~ a i:e:ry large defense e;f'fo~·t., the ,, ' ~) ~ 0 (; residue wo\tld still provid~ a tole+able living for civlli~µs. We do not kn.ow the meanihg Of austerity •"' npt yet• 0tim..{J61'8d to this ree1d'18, aIJlOW'].tS Which would make a very. Sl:'eat difference to the ~erq.evelo:ped coim,t,:iee ~ould not uffeet· o-u?··------- stand.ard of living 1n ~ny serious way, althou,gb. they might cut into our indul- • • aences a little. I know that, 1n comparison with 1:;lte out1:1et of Wo~:idw~;r·:t;I, 'there is 1,-ttle '.'.::) slack to be t~Iten up 1:h o~ indusr;t:1:al m.achine. f/J (i~? ~ere 1a, ho1,rever, leeway in \,' 1) ,i t / ' C ., ~ . . asricultlU"~, whe:,;e ou.tpw~ can st:(ll be 1.ncreas~d considerably. An.4, ,dlthoUsh in• dustr.ial equt];iment 1.s n.~e<1red by the wio..erdevelQ:pe~ co'Ulltrles, the~" can use .;f'ood too, :t>ecal.\Se wheat fo:r the workerQ is one of the raw :materta;J.s fox- ~ny ldriq. of 0 co~st:rtiction. Do not :D4stake lQ.Y meanins. •. ! d9 not e~y this or tAat item ¢an read.111 be e~o1--ted in aey pa~tc~a;r. quantity.. All I say is 'that we should. e1ve () serio\le oons1de:ration to the poss1b1l;ty. My huneh is that the~e ,tgb.t be a ver:,; useful ~o~t to spa~. ,> There is orie. tllipg that I wol,lld lite to empha,1ze at this point, If we a:re soins ~o Sl)are tllSrt ''-µ.eeftil" amou~t, we nnu,~t inalte sure th~t it ie, in f~ot, em.. ~ . ·" pl,oyed us~f,ully. l;n these tuies., i.st ot,~:U., tllere !f.f ?).O e~cl.lee for waste. We, . cannot aff'o:rd to ~~e mitt~ ~Ef a, se$t'LU!'e, wll:1.eb wtll do no reAl sood to the i-ec1p- 1ents. In othe~ wo:r<\e 1.we Pltlit be S'1re tAt\t ~~ins we JDa}fe ~vatlable is <\evo~ed to well conQe:lved l)roq,'1c·tfve ;projecte and tM.t thepe projects are also we~ --. '() - 10 •" 0 0 And if wen can afford someth:!.llS, why should we take the trQti.ble and,, bear the <:;,_··-· ' (? \i additional sacriflcen ., To this, I t~ink there is a S:f.ll1Ple answe:r-, 0 • () We ~e bound ~o C) • ,, r}\ . . ., do 1~, because it is in our own self-interest, b_e~a~sa tt is th~ only action// c~m~ ' l sietent with the basic p:rinciples wllioll tlle Waste~ Wo~l(\ is st;rivins to niaintain. • ,,- t: • Of CQ~ee, there will be th;se wh~ will cl"Y "Operatio11 ~a.th<;>le" and wiU ask how j) p . many divisions we are gqing to get out of it. To this I wou:}.d say "that. we }Q~Y ,set 0 i~ifO divisions.0 But if we ao not.bing, we ]llay see an eve~ greater'mul.t+tude of divi- ,, 0°~'. C sions.agi'4Lmst us and important aourcescof ~!W mate;t-i&le cut off. Cert~in1Y the lesson~ of recent years hav~ emphasized the truth that aggreesive Co:rrxm~em bre~ds on pove~y, misery and ho:peleasnes*3. A :relatively emali expend.itU):'e now to ~1se standa:rds of living i1r tlle leas developed count1ties and to offe'1: th.e llope of'.' a !) better futur.e to tllet~ ]eople~ may save ~a lll\1.Ch sreater sacritic~ later' on •. 0 (l Tiiere is arfo~her answer, too, ,,~nd that is that a~si~tance to,: develo:pmen,P to /) ~ ~;;/ 0 backward areas is the.only action ccms:t,stent w~tb the basic p:r;tnc1ples which the •.. :f' Western World. is at~vins to ma,inta:t.~. We speak with ;p:r;de of the vast induat;-1,a~ machine that the Amerlcah l)eopl.e have created and the h~sh stan~ ot ltvins w·e enjoy. Bu~ tt ie not, in the matn, the Ame~ican peo:Ple liv:t,ns to~y ~ho ci-eated our l)roS:P~rity. It was our fat~~re a?l4 forefathe~e, They left us an inheritance u ~ ~~ and we ar~ in a very real E;Jense the tru.stees of thi.e ipheritance •., ~ stewarnditions whic~ to us s~ec barely conceivable? . _ ,. S~qµld we me:teJ..y Qf'fer these p~o1le, who ot~n ac~:f.eve a 4:1gn4ty 111 lite wllich we . • ', lll18h1; en~;, a se1'1!10n on 1;be bei:lefi1;s c:>f ii.em®racy d ~ ~ :free ent.e;t'.P,:1,ae 11® O'\WBelves 0 0 0 - 11 - • 0 as !ts pruie e:x:ample? To the~, democracy and free elections a:re meaninB].ees; govern- " " inent is the local. tax-c~lJ.ector,. And the concept of free enterpr1,se is equally un1ntelligibl.e unless,it means givins them a decent plot of free unencUlllbered land, ' :-;.-:~) \' sufficient tools and working capital to work it, ~nstru.ction in how to improve it and creel.it a'b a reasonable ,~' ~.:f:e,..rto ~.,....__/_,,.::- take advantage of that· 1nstru.otion. And. to get them tl\t~, we have to put as much physical effort and moral force to work ae we can. ·-.:c::.• ~1s'llty-eight yea.rs ego, at another time of c1•isia, Ab~--ahrun Li.ncoL."1 said: "The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high With cdifficul·liJ;; and we must rise with the occasion. As our case is new, so we must think anew ap,:l act anew. We must disenthraJJ. ourselves,. and th.en we • .~l shall eave o~ cou.ntr.;lr.1'. Today not ,the Union, but the f:ree wo~ld is at stf;ike. If we do not rise with tlle jPOcasion, we ~all fall with it, an(\ we shall :f'all very hara.. (\ . \ \ \\