reporting its findings and recommendations on the escalating crisis of people in Cambodia, the Study Mission stated:

"To summarize the refugee situation—the prognosis is dismal. Neither our Government nor the Cambodian Government have any organized refugee program. Adequate housing, sanitation, and medical service are either nonexistent or in short supply. Increasing numbers of refugees are being generated by an accelerated level of military activity and intensified American bombing. The repression on both sides is increasing with the Government losing its precarious control and relying more and more on American intervention. And in the midst of this are a million refugees, half of them children. They are receiving virtually no assistance and face malnutrition, serious food shortages and, in some areas, the real specter of starvation." But nothing really illustrates the situation more than the truly shameful neglect by our government of the tremendous humanitarian needs among the youngest war victims-including some 25,000 American-fathered children in South Vietnam. Our neglect of these children, and the tens of thousands of orphans, and millions of other children disadvantaged by battle-especially in South Vietnam― is a national disgrace. It's only remedy is immediate and positive action by the Administration on numerous recommendations-which are apparently still under review at the White House, the Department of State, and the Agency for International Development. It defies understanding as to what it takes to move the Administration and Saigon on facilitating adoptions overseas and up-grading child welfare in South Vietnam.

Certainly, it is not for any lack of compassion or support among the Congress or the American people. And neither is it for any lack of money, which we freely spend on the bombing of Cambodia-nor is it for any lack of reasonable suggestions as to how we should answer the children's cries for help. But there is a logjam in the Administration which needs to be broken. And I appeal, again, as I did in a letter on May 22, for the President's help in breaking this log-jam-and in meeting the tremendous humanitarian needs among the children of South Vietnam and Indochina.

The list of shortcomings in the Administration's proposal on Indochina continues. Given the new opportunities for change, one of the most glaring omissions relates to international cooperation in helping to heal the wounds of war. Except for a general reference to the future possibility of multi-lateral approaches, the Administration's proposal is silent.

Clearly, the thinking of a wartime bureaucracy, preoccupied with how to maximize American influence and presence, still dominates our policy and programs in Indochina-even under today's new conditions. And offers of international assistance-even for humanitarian purposes-are all but ignored. In past weeks, the Study Mission of the Refugee Subcommittee visited a number of capitols, and held lengthy discussions with officials of various governments and international organizations. And I can report today that the Study Mission returned greatly encouraged over the possibilities for an international humanitarian alliance.

The record is clear that a number of governments are prepared to support and contribute to humanitarian programs under international auspices. In fact a number of governments have already earmarked funds for this purpose. The record is clear that the United Nations stands ready to help. The record is clear that UNICEF is prepared to move at a moments notice. The record is clear that the Indochina operations group of the International Red Cross-and many voluntary agencies-are prepared to upgrade and expand their efforts. But the record is also clear that not much word of encouragement or support-let alone any initiative-have come from our government-or from its counterparts in Saigon, Vientiane, or Phmon Penh. And so we are needlessly locked into the tired patterns and policies of the past.

FUNDING FOR INDOCHINA

As I suggested earlier, the amendment I am introducing today reduces the President's request for assistance to South Vietnam, Laos, and Cambodia-from some $630,000,000 to $390,000,000. Pending our development of a new national assistance policy toward Indochina, and a more stable political and military situation throughout the area, this $390,000,000 is a generous amount, I feel, to meet our initial humanitarian responsibilities following the ceasefire agreements—and to provide some basic transition support to the governments involved. If we apply the tests of humanitarian and basic support objectives to our proposed assistance,

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a great deal can, and must, be cut back or eliminated from the President's pending request.

The President's request for $630,900,000 is allocated as follows:

South Vietnam.

Laos

Cambodia

Regional Development Program__

International Support Costs--

Millions

$475

55

75

9

16.9

My amendment authorization of $390,000,000 could be allocated along these lines:

Again, applying the tests of humanitarian and basic support objectives to the Administration's allocation for South Vietnam, I strongly feel that a number of projects recommended by the Administration should be totally eliminated, and others drastically reduced. Because they encourage and continue our direct involvement in South Vietnam, public safety programs, disguised under new labels, must be eliminated. The projects labeled Trade Union Development, Logistics General Support, Support of Local Government, Development Planning, Public Assistance and Public Works General Support, Vietnamese Engineering and Construction Corps, Support of Rural Development, and some others should also be eliminated.

Drastic cuts should be made in several projects-especially in the $25,000,000 project for Saigon's National Economic Development Fund, the $8,000,000 My Thuan Bridge Project, and the more than $17,000,000 allocation for USAID Technical Support. Additionally, the Administration's allocation of some $275,000,000 for the Commercial Import Program, should be reduced by at least $125,000,000.

Applying the same tests to the Administration's allocation for Laos, again, I strongly feel that the public safety program must be eliminated, and a number of other projects reduced-especially those labeled Development of Lao National Roads, Development of Rural Economy, Air Technical Support, Mekong Vientiane Dike, and General Technical Support. Additionally, the Administration's allocation of some $18,200,000 for the multi-lateral stabilization fund, should probably be reduced by several million dollars.

The situation in Cambodia is dismal at best-with a truly desparate crisis of people and little territory under the control of the Phnom Penh government. But just as we should stop the bombing in support of this government, so should we also reduce the flow of our dollars which fuels its corruption. Clearly our immediate responsibilities are the tremendous humanitarian needs of refugees and war victims-and the urgent need for persistent efforts in behalf of a ceasefire agreement.

I have outlined briefly what I feel are some of the principal issues facing our country regarding future assistance to Indochina. And a great deal more will be said by all of us in the coming weeks and months.

The countries of Indochina are in a period of transition, which is clearly not reflected in the President's assistance request for FY 1974. And in the absence of any new directions and initiatives from our national leadership, it is incumbent upon the Congress that it develop a responsible alternative.

I feel that the guidelines and authorization in the amendment I am introducing today, are a reasonable and generous beginning—and hopefully they will be given full consideration by the appropriate committees of the Senate.

STATEMENT OF JAMES P. GRANT,1 PRESIDENT, OVERSEAS DEVELOPMENT COUNCIL

Mr. Chairman and Members of the Committee: I appreciate the invitation to submit a statement to this Committee on S. 2026. In my opinion the proposals introduced in the Senate on June 20 by Senator Humphrey for himself and Sen

1 The views expressed in this statement are those of the individual, and do not necessarily represent those of the Overseas Development Council, or others of its Directors, officers, or staff.

ator Aiken, and in the House on May 30 by a bipartisan majority of the House Foreign Affairs Committee, are among the most far-reaching and important of any broadly supported Congressional initiative in the development field since the launching of the Marshall Plan 25 years ago. The changes it proposes should significantly increase the effectiveness of U.S. assistance in helping to address the most difficult developmental problems of the low-income countries, expand substantially the export of American goods and services of a developmental character to the over one billion people in the lowest-income countries, and increase noticeably the contribution made by our trade, monetary, aid, and other policies to the development of the poor countries. I will address separately each of the four major proposals in the bill.

MUTUAL DEVELOPMENT AND COOPERATION

Changing the title of the legislation to the Mutual Development and Cooperation Act and the name of the administering agency to the Mutual Development and Cooperation Agency would make them reflect more accurately the true nature of the relationship now emerging between the United States and the developing countries. As detailed in the Overseas Development Council's recent publication The United States and the Developing World: Agenda for Action (February 1973), international politics and power relationships are changing, which security concerns giving way to economic issues among nations. This change will require the United States and other rich nations to pay greater attention to the needs and desires of many developing countries than ever before-for reasons of morality, self-interest, and the development of effective international institutions, which we in the United States in particular require.

Development can be a mutually beneficial process both for the low-income countries in need of outside resources and for the outside countries supplying those resources. This is increasingly true as the world grows more interdependent and as all countries rely more on international cooperative efforts to solve their problems and to achieve their national goals. For example, improving the U.S. balance of payments and increasing domestic employment are two goals that depend on reform of the international trade and monetary systems; in both instances, cooperation by developing countries will improve the prospects for success. The ability, and willingness, of developing countries to cooperate in these areas is likely to be greater if they are making progress toward achieving their national development goals and we are assisting in the process. Similarly, our growing need for relatively assured access to their raw materials frequently requires both improvements in their infrastructure to permit physical access and their continued economic and social progress to maintain their political viability. "Mutual Development and Cooperation" may be a headline writer's nightmare, but it is a good shorthand way of describing a relationship in which the United States perceives a direct self-interest in the success of the development efforts of the low-income countries. It is also a more suitable characterization of a style of administering development assistance which looks to the developing country to take the lead in setting its own goals and planning development activities.

REDIRECTION OF BILATERAL DEVELOPMENT ASSISTANCE

S. 2026 takes an important and constructive step in increasing and sharpening the focus of the now much diminished bilateral assistance program on acute problem areas, and in emphasing especially the importance of assisting developing countries in programs and projects which will benefit the poorest majority of the people in these countries and which will enable them to participate more effectively in the development process.

The circumstances surrounding bilateral development assistance have changed dramatically in the 12 years since the Foreign Assistance Act was enacted into law in 1961, embodying many of the forward-looking concepts emanating from the work of this Committee in that and prior years. In the early 1960s, not only was bilateral development aid larger both in absolute amounts and in purchasing power, but it also was a much larger proportion of the total foreign exchange available to low-income countries. Now, however, the developing countries (excluding major oil exporters) have more than doubled their earnings from exports of goods and services, to over $50 billion annually in 1972. At the same time the private investment and aid flows from other developed countries have increased from approximately $4 billion to over $11 billion, and multilateral financial institutions have assumed a much greater role in transferring resources. Thus the diminished amount now available for bilateral development aid-some $1 bil

lion-plays a much smaller role both in transferring resources generally and in financing major capital projects.

Over the same 10 years, the global development effort has had remarkable success in increasing the rate of growth in national product. During the 1960s, the developing countries averaged a 5.5 per cent increase in GNP-a rate of growth unequalled by the rich countries at a comparable stage of their development. A number of developing countries have experienced very substantial economic growth, attaining GNP growth rates of 10 per cent a year or even higher. Some low-income agricultural societies have been transformed into industrializing economies in amazingly short periods, and others are following suit. Exports of manufactured goods have shown dynamism; for the developing countries as a whole, they have been increasing rapidly and now account for 23 per cent of their total world exports.

Yet unemployment levels in many developing countries are still increasing, some even exceeding those of our own Great Depression; the income gap between the poorest half of the population and those well-off is actually widening; the bottom two-thirds of the population still have no meaningful access to health facilities; a majority of the rural population is illiterate; and urban settlements are mushrooming because of massive rural migration. In many areas, these problems become less manageable every day because population growth continues unrestrained. Finally, if the debt burden that has built up in a number of major, very low-income countries continues to accumulate, it will become insupportable. This situation has led some people to throw up their hands in despair, others to argue that aid is only "making the rich richer," and still others to state that development is aggravating global environmental and population problems.

These are the real issues which must be met in seeking to answer the question: "Where next with development assistance?" The global community now knows from the experience of the 1960s how to achieve increases in national product when it has the will to devote international and national resources to the task. However, to continue to measure development by GNP increases alone is to forget that, after all, the goal is human progress. Development must now be seen as encompassing the minimum human needs of man for food, health and education, and for a job which can give him both the means to acquire these basic needs as well as the psychological sense of participating usefully in the world around him. Last February in New Delhi, a wise and perceptive Thai set forth the aspirations of Asian man as seen through the life cycle from the womb to the grave. His "Ode of a Developing Country Man" (Annex A) is a most expressive description of the meaning of development. We need to develop ways of achieving this broadened concept of development as successfully as did the global community in accelerating growth in output over the past 10 years.

Fortunately, experience in a number of poor countries during the past 10 years offers some encouraging evidence that an effective combination of domestic as well as international policies can simultaneously create new jobs, increase access to health and educational services, improve nutrition, reduce income disparities, and check population growth. The possibility is best illustrated in East Asia, by countries with very different political and economic systems: namely, the experience of post-1960 China on one side of the ideological barrier, and the experience of South Korea, Taiwan, and the city-states of Hong Kong and Singapore on the other.

Contrary to a common assumption of the 1950s and 1960s, the development record of these countries indicates that policies that enhance social equity need not deter overall economic growth-and that many such policies can even speed it up. Thus, in the smaller East Asian countries just mentioned, growth rates over the past decade have averaged an impressive 10 per cent annually. But in addition, the income, health, and education of the bottom half of the population has improved greatly, the disparity between the income controlled by the upper and bottom 20 per cent of the population has been reduced, birth rates have dropped sharply, and the dependence of these countries on foreign aid has either ended, or, as in South Korea, has been greatly reduced. Annex B illustrates graphically how much more beneficial national development has been to the poorest majority in these countries as contrasted with the more traditional development examples of Mexico, the Philippines, and Brazil. All of the “high performance" countries have found a way to increase the ability of the average worker to participate effectively in the development process, thereby helping both the individual and his society.

This has required not only favoring use of plentiful labor over scarce capitalintensive equipment, but also providing the incentives and mechanisms to encourage savings, establishing or supporting institutions to give small farmers and entrepreneurs ready access to capital and technology, and ensuring the availability of rudimentary but meaningful educational and health services for virtually all. Through such policies, these countries have made social justice a major ally of growth. The acceleration of growth through full employment should not surprise us, as it not only means that more people have a stake in society, but that national output is increased by putting idle labor resources to work, and that scarce capital and foreign exchange are used more efficiently. Elsewhere, countries as different as Israel, Ceylon, and Yugoslavia have dealt effectively with some of the problems discussed here.1

There also is important new evidence that in an increasing number of poor countries, birth rates have dropped sharply despite relatively low per capita income, and despite the lack or relative newness of family planning programs. The common factor in these countries of Latin America and Asia is that the majority of the population has shared in the economic and social benefits of significant national progress to a far greater degree than in most poor countriesor in most Western countries during their comparable period of development (see Annex C). This evidence demonstrates that appropriate policies for making health, education, and jobs more broadly available to lower income groups in poor countries contribute significantly toward the motivation for smaller families that is the perrequisite of a major reduction in birth rates. It is becoming increasingly clear that if the developing countries are to escape the threat posed by rapid population growth within an acceptable time frame, more families must acquire the motivation to limit births, as well as being provided with improved means to do so.

In the 1970s, development planners need to give far more attention than heretofore to the effect of alternative development strategies on birth rates. Equally important, the population crisis must be dealt with in the broader context of the development crisis-with more emphasis on the possible ways of treating the basic "disease" of poverty, thereby creating the needed motivation for smaller families. Combining policies that give special attention to improving the wellbeing of the poor majority of the population and policies that provide large-scale, well-executed family planning programs should make it possible to stabilize population in developing countries much faster than reliance on either approach alone.2

It is no accident that most of the non-socialist "development successes" have taken place in societies with broad access to varying combinations of trade, investment, and aid. Nor is it an accident that the major innovations introduced through development cooperation have resulted primarily from U.S. assistance programs-private and public-which explicitly concentrated on particular functional areas. These innovations include the programs such as comprehensive rural development in Korea and, in particular, Taiwan; the "Green Revolution": the extraordinary spread of public health measures as exemplified by malaria eradication; and the acceptance of the need for large-scale family planning programs.

The bilateral development aid requested by the Administration and supported by the proposed bill is a relative drop in the bucket when contrasted with the total needs of the developing countries (excluding major oil exporters) for more than $70 billion of foreign exchange. However, if bilateral assistance is looked at as a weapon to be targeted primarily on the critical specific problems of development (and particularly on helping the poor majority to participate more effectively in the development process), this amount can be of great significance. President Nixon in his May 3 report on the State of the World, and A.I.D. in its Congressional Presentation have both recognized the need for such a greater focus. The proposed restatement of policy, authorization of funds by problem sectors, and removal of fixed requirements for loans and grants will ensure that this shift takes place more rapidly and more extensively than otherwise might be the case.

1 Possibly the best general discussion of these new policies is in Development Reconsidered, by Edgar Owens and Robert Shaw, D. C. Heath (1972). An excellent summary is contained in the Edgar Owens statement entitled "The New Look in Development: Investing in People is the Best Economics," submitted to the House Foreign Affairs Committee on June 12 during its consideration of H.R. 8258, the House version of this bill.

2 See "Smaller Families Through Social and Economic Progress," by William Rich, Monograph No. 7, Overseas Development Council (1973).