Nation: More Harm than Good

Among the professionals of world finance, the U.S.’s Robert L. Garner, 67, talks from a background of 14 years in international economic development, first as vice president of the World Bank, then as president of the International Finance Corp. Last week, about to retire from IFC, Mississippi-born Bob Garner spoke in Vienna at the annual meeting of the World Bank and International Monetary Fund (see BUSINESS). Out of his experience, he delivered himself of some of the most sense-making ideas so far about the problems of giving foreign aid—and of receiving it. Excerpts:

“We need to keep in mind two significant developments in the postwar world. First, the spreading realization that no nation can today walk alone; second, that for the first time those countries which have achieved a more abundant life have accepted responsibility to assist their poorer neighbors to improve their economic lot. Thus the less developed countries have the unique opportunity to draw on the fruits of centuries of experience, organization and technology in economic progress.

“But I am troubled by the extent to which there is growing up the insidious consequences of too great reliance on foreign aid. There are too many instances where the obvious attitude is that the chief responsibility of a government is to secure the maximum help from abroad, with lesser responsibility to mobilize its own resources. Over the postwar period immense sums have been made available to the developing areas. However, to most of the recipient countries, the amounts are never sufficient. They never can be, because money alone accomplishes nothing. It is only a tool. The effective spending of large funds requires experience, competence, honesty and organization. Lacking any of these factors, large injections of capital into developing countries can cause more harm than good.

“Economic development or lack of it is primarily due to differences in people—in their attitudes, customs, traditions, and the consequent differences in their political, social and religious institutions. Much effort and the sacrifice of some of the accustomed ways are the inevitable price of advancement. Too many wish for the best of both worlds. It won’t work. Only frustration and failure can result from seeking the fruits without being willing to pay the price of admission to modern economic society.

“Out of my experience, I have arrived at a few simple requirements for any country to make its way up the economic ladder:

> “A reasonable degree of consistent law and order—government which can govern. Without a degree of continuity in political life, consistent economic growth is not possible.

> “Reasonably honest and effective public administration. There is no denying that in many countries graft and corruption in public office lay a heavy tribute on resources which should go into development.

> “I can seldom refrain from commenting on the importance of financial stability. There are many prominent supporters of inflation who claim that it is a necessary adjunct of growth. But I have taken a close look at inflation in quite a few countries. I have seen it upset governments, take the bread out of the mouths of workers, the old, the helpless, undermine the operations of business. So I continue to class it as a dangerous fever, which gives the patient a temporary spurt but quickly saps his strength.

> “A sensible plan of balance among agriculture, industry, transport, power, communications, with such provision for housing, education and medical services as resources permit.

> “Revolutions are likely to come unless those who have the wealth and power are prepared to cooperate in working out means whereby productivity can be increased and its benefits more widely distributed. So I put high on the list of public policy positive efforts to see that the benefits of growth be spread widely among more and more people—through jobs, ownership, opportunity. Obviously, there is need for governments to provide the basic facilities and services. To do this in adequate measures will strain their human and financial resources. It seems sensible, therefore, to give the greatest scope to private initiative and capital in all fields which are not necessarily in the public sector.”