shall be carried out through the United Nations and other international agencies. It will be our policy to participate in programs only where they are initiated and approved by the governments concerned. The initiative and the greater part of the work of planning and carrying forward programs of economic development must come from the underdeveloped areas themselves. We and the international agencies can help but we cannot and should not assume the primary responsibility.

It is intended that the technical-assistance programs in which the United States Government participates without the assistance of other international organizations shall be carried on for the most part by the appropriate agencies of the Government rather than by the State Department. One of the most important aims of the proposed program is to integrate closely and maintain a proper balance among various types of development projects. For example, no gain would be achieved if agricultural production in a certain area were increased, but no transportation facilities were developed in order to take the food to market. It is considered essential for the success of the effort that there be adequate coordination of the development of programs to be undertaken by the United States Government in cooperation with other countries and that these programs be related specifically to those of the international agencies. It is contemplated, therefore, that the President will delegate to the Secretary of State authority for exercising general direction over and coordination of activities on behalf of the United States. As a member of the National Advisory Council, he will work with the Treasury Department and other governmental agencies concerned with the capital-investment aspects of the program and can relate technical-cooperation activities to our efforts to stimulate the flow of capital.

It is anticipated that, in technical cooperation as well as investment, private organizations will play a major role. These organizations, both profit and nonprofit, possess vast stores of knowledge and skill and the ability to teach them to others. Every effort will be put forth to obtain extensive participation by nongovernmental organizations.

Although the bill which is before you makes a general declaration of policy on the part of the United States to promote the development of economically underdeveloped areas of the world, the activities specifically authorized are limited to the technical-cooperation aspects of the program.

And at this point, Mr. Chairman, I should like to point out that, although technically the committee has before it only the technical assistance and general policy of the Point IV program, we wish to take this opportunity to develop the essential aspects of the investment program so that the committee will have before it the full scope of the program.

I shall discuss the investment features, and Mr. Thorp will deal fully with the technical-assistance features of the program.

On the investment side it is important to point out that technical knowledge and skills must be combined with new capital investment if maximum results are to be achieved. Even though savings are relatively low in underdeveloped countries, we anticipate that a large part of the financing of new capital needed will be obtained in those countries themselves. Most developmental projects involve a large

element of local resources and labor which cannot be effectively intro duced from outside. Furthermore, it would not seem wise from the standpoint either of the borrower or of the lender to encourage th formation of too heavy an external debt by these countries. It is hoped that technical assistance can be given where needed to help them channel domestic savings into productive enterprises.

However, a substantial amount of foreign capital also will be needed. Major emphasis in the program is placed upon stimulating an increased flow of private investment to the underdeveloped areas although it is recognized that private capital may not be available fo: certain types of projects such as public utilities, transportation, and communications, and that public loans will therefore be required. To supply such funds, the International Bank is, of course, available for sound loans for developmental purposes. We anticipate that the bank will play an increasingly important role in making loans for develop mental projects for which private capital is not available. In many cases, the establishment of basic public services and facilities through such loans is essential before private enterprises can be established. The Export-Import Bank will also continue to make loans to foreign countries for developmental purposes.

The stimulating of private investment not only opens up potentially large sources of capital beyond that which can be made available through public agencies but also has the advantage that private investors bring with their investment an incentive and know-how for! securing the most effective use of the facilities developed.

Our citizens are likely to invest abroad only when they feel that there is an opportunity for a reasonable return on their investment and that the risks involved are not excessive in comparison with similar investments in this country. The assurances which are needed cannot be obtained through one device alone. Cooperative efforts on the part of capital exporting nations and of the underdeveloped coun tries is needed. We have explored a number of possible methods of approach and have developed several which should be helpful. We propose to familiarize prospective investors with investment oppor tunities in the underdeveloped areas by expanding existing facilities for disseminating information on economic conditions generally and on specific opportunities for investment in those areas. Technical assistance itself, by making available a healthier and better trained force of workers, and helping to establish more effective Government and business practices in underdeveloped areas, opens the way for private investment.

Two general lines of action are now contemplated to reduce the risks not ordinarily encountered in a business enterprise at home, although as the result of experience and further study other measures may be devised. As a matter of particular significance, we propose to intensify our efforts to secure treaties with other countries which will give greater confidence to investors. These proposed treaties will seek to secure assurance of nondiscriminatory, reasonable, fair and equitable treatment for our investors, no less favorable than that accorded to the nationals of other countries. Assurances also are sought of reasonable freedom to operate, control, and manage enterprises and of prompt, adequate, and effective compensation in the event of the expropriation of the investor's property. The treaties deal also with

the ability of an investor to withdraw earnings and capital investment. They attempt to limit the conditions under which exchange restrictions may be imposed on such withdrawals.

Although these treaties should do much to encourage investment, they can be only a partial solution of the problem. Some of the risks involved, such as the possible inability of the investor to convert the proceeds of his investment into dollars, stem from difficulties which foreign governments may not be able to control despite their most sincere efforts to do so. It is proposed, therefore, that the ExportImport Bank be authorized to guarantee United States private capital newly invested in productive enterprises abroad against risks peculiar to foreign investment. Hearings have been held before both the Senate and the House Banking and Currency Committees on legislation for this purpose, and the Senate Committee on Banking and Currency has recently reported that particular legislation.

While we understand that an investor must insist on certain assurances before risking his money abroad, at the same time we recognize that the underdeveloped countries on their part have the right to expect that foreign enterprises will be so conducted as to benefit the area whose resources and labor are involved. Foreign investment like domestic investment should be prepared to bear its fair share of local taxes, should provide adequate wages and working conditions for local labor, should not waste local resources-should in short, maintain the same standards of conduct which enlightened business is following here at home.

In conclusion, Mr. Chairman, I should like to say that the President's challenging proposal for helping the masses of people of the world to improve their living conditions has aroused great interest, great enthusiasm, and great hope throughout the world. There al ready is evidence that many people in many countries have been quick to grasp its implications and its potentialities. As the originators of the proposal, we in the United States are being looked to for constructive leadership in carrying it forward. The technical cooperation activities authorized in the bill before you are basic to the orderly and rapid process of economic development. Although the program recommended is modest, it marks the beginning of a movement that can reach far into the future and in time change civilization profoundly for the better. It is not charity. It is an enlightened, businesslike attempt to solve one of the most crucial problems with which our world is confronted.

I urgently recommend your favorable action on the proposed legislation.

Now, Mr. Chairman, with your permission, Mr. Thorp is prepared to carry forward the particular discussion of the technical assistance features which I mentioned earlier in my statement.

STATEMENT OF HON. WILLARD L. THORP, ASSISTANT SECRETARY OF STATE FOR ECONOMIC AFFAIRS

Chairman KEE. Mr. Thorp, we will be glad to hear you.

Mr. THORP. Mr. Chairman and members of the committee, I believe that the committee has received a paper-bound booklet entitled "Point 4." It is a book of some 160 pages and within its covers is an effort to describe what has been done in the past by this Government, the

problems there are in connection with the expansion of the work in th technical assistance field and, in rather considerable detail, the way in which the proposed program would be carried out.

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I should like, if I may take the time of the committee, to present chart form some materials which we think have a very definite bearin on the question of economic development. The members of the con mittee have sets of these charts and if you will look at your own per sonal set I will talk from the larger copy here, and I can assure yo that the copy you have is a photostat copy of the chart from which I will talk.

The first problem is the problem of determining what we mean b underdevelopment. That brings up the difficulty that there are not, think, any exact measurements with respect to many countries.

I should like to say that we are not presenting the material to yo today with the assurance that each figure is an exactly correct figur for each country. It is the best figure which we can obtain, and specific figures for individual countries are given in the document which you have.

Now the best measure there is with respect to the economic develop ment is the measure of the ability of the country's population to produce economic goods, and the over-all measure for the country of such production is what is commonly known as national income.

It happened that in 1939 most countries had estimates of national income, and the United Nations, when it came to the problem of allocating the share of the budget to the various countries, studied their development together with the comparable measure of the national income for each country.

So we have as of 1939 figures with respect to the national income of 53 countries, that are given in the document. These can be take as a measure of the ability of the countries to produce under the circumstances as they existed in 1939.

If you will examine those figures you will find, of course, as you would expect, that the countries are in a series of progressions. It happened that as of that time Indonesia was at the bottom and the United States was at the top of the list. For purposes of comparing the various groups, we have arbitrarily taken the position that the clearly underdeveloped countries were those in which the national income per capita was $100 or less in 1939. Then we have set up an intermediate group of countries where the national income ranges from $100 to $200; and then we have set up as the developed coun tries-although I am sure none of them would regard themselves as fully developed those with a national income of more than $200 per capita in 1939.

So for the purpose of comparison in connection with the various indexes of standard of living and well-being we have grouped coun tries in these three groups. In the charts which I will present I will use these categories to indicate the most seriously underdeveloped countries, those which are partially developed, and those which we call, for this purpose, the developed countries.

On these maps it is very clear that the underdeveloped countries form a band in which a very large part of the area comprises the countries south of the United States, Africa, and virtually all of southern Asia.

This area which is marked white on this chart includes two-thirds of the world's population. The world's population is slightly over 2,000,000,000, so that means in the underdeveloped areas there are somewhere between a billion and a quarter and a billion and a half people. In the remaining area, the intermediate group of which I spoke includes one-sixth of the population of the world, and the developed area, the next, the remaining one-sixth.

Now, to show how that works out, the annual national income of the underdeveloped countries-and I said the maximum we admitted there was $100-averages $41 per capita. For the intermediate countries it is $154 and the developed countries $461. In that particular year, 1939, the United States figure was $554.

Those figures are a bit dangerous to use in terms of the present situation. This is a measure of differences as they existed in 1939, and they are in 1939 dollars.

Roughly, to get the present-day dollars you should about double these figures. That is, the price level in the United States has risen. perhaps 75 percent for consumer goods and 115 percent in wholesale prices. We can say roughly that we ought to think of 1939 dollars as perhaps about half the amount or double the value represented in the present-day situation.

Beyond that I think undoubtedly the spread between the developed areas and the underdeveloped areas has increased during the last 10 years. Our American per capita national income at the present time. is over $1,500, not quite three times what it was in 1939 and if prices account for a doubling, you can see that beyond that we have had a very substantial increase in our productivity. I doubt if many other countries have had that same degree of improvement, and we are the most important element in making up the figures for the developed countries.

Now we shall consider various developments which underlie the results of the per capita income. One of the striking comparisons is the difference in the use of energy; energy in the form of coal, oil, and water power, wood, and so forth, and so on. Here you have a very major difference. In the underdeveloped areas the horsepower hours per day per capita are slightly over 1 and the figure in the developed countries is 26 times that. This does not include, I might say, animal energy which is perhaps 3 percent of the total energy that is used in the world; probably a much higher proportion in the backward areas where they use buffaloes and other draft animals extensively. But that could not possibly make any substantial difference. And here we are talking about man supporting himself by energy from sources of power.

Industrial investment per worker shows a similar difference. Let me point out that this is the industrial investment per worker [indicating on chart]. And so, since there is a smaller part of the population engaged in industrial work in the backward areas, the actual amount of industrial investment is a great deal less. But even when they have industry in a backward area that industry operates with only onetenth of the investment that industry would operate with in the more advanced areas.

The economic factors are only part of the picture as to why national income is so low. Another important factor is the capacity