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International Affairs 1944-)
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FOREIGN AID AND ECONOMIC
DEVELOPMENT
Robert S. Jaster
1 Lenin, V., Imperialism, the Highest Stage of Capitalism (New York: International
Publishers. 1939), p. 124.
452
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FOREIGN AID AND ECONOMIC DEVELOPMENT 453
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454 INTERNATIONAL AFFAIRS
In official Soviet opinion there is but one solution: to cut the bonds
of imperialism. Khrushchev elaborated this view in a speech to the
Twenty-Second CPSU Congress in 1961:
It's time to tear out the roots of imperialism . . . until (the new states)
end their dependence on imperialism, they will continue their role as
" world countryside ".... The interests of a nation call for ... ousting
imperialist monopolies, founding a national industry ... and strengthen-
ing political independence.5
The new states can accomplish this task, Khrushchev said, because of
'the present balance of world forces and the actual feasibility of power-
ful support from the world socialist system'. In other words, the
industrial Western Powers would not risk war to retain their economic
privileges in the ex-colonies, which now could count on the Communist
camp, especially the U.S.S.R., for economic and other support of their
efforts to break away from the imperialist countries.
Soviet ideologists make a sharp distinction between a developing
country's economic ties with the capitalist world, which are bad, and
those with the Communist world, which are good. What unique advan-
tages do the new nations derive from their economic relations with the
U.S.S.R.? And what does the U.S.S.R. stand to gain?
Objectives
The general objective of the U.S.S.R.'s trade and aid activity in the
under-developed areas is stated, in terms of ideology, in a resolution
of the Twenty-Second Party Congress (1961):
The CPSU considers fraternal alliance with the peoples who have
thrown off the colonial or semi-colonial yoke to be a cornerstone of
its international policy. . . . The CPSU regards it as its international
duty to assist the peoples who have set out to win and strengthen their
national independence, all peoples who fight for the complete abolition
of the colonial system.6
Within this broad ideological framework the Soviet trade and aid
were not any more sophisticated, either economically or politically, than the bare-
bones outline given here. (See for example Prokhorov's article in Kommunist of
October 1960, available in translation as Joint Publications Research Service 6684
(Washington, D.C.: Government Printing Office), January 30, 1961. Hereafter
cited as JPRS.) By 1965, Soviet analyses of the development process were showing
more rigour and less dogma, and occasionally offered conflicting interpretations,
as discussed later in this article. Among the earlier expositions, which offer little
variety, the following are typical: S. Viktorov, 'Problems of Southeast Asia's Trade'
in Vneshnaya Torgovlya (Foreign Trade), hereafter cited as V.T., Moscow, No. 4,
1952; L. Fitunin, 'On Economic Aid to Less-Developed Countries', in Voprosy
Ekonomiki (Questions of Economics), hereafter cited as Vop. Ek., No. 11, 1953;
M. Rubinshtein, 'Certain Problems of Less-Developed Countries' Economies', in
Mirovaya Ekonomika i Mezhdunarodnye Otnosheniye (World Economy and Inter-
national Relations), hereafter cited as MEMO, No. 3, 1957.
5 The Road to Communism, Documents of the 22nd Congress of the CPSU (Moscow:
Foreign Languages Publishing House. 1961), pp. 32, 491. 6 Ibid., p. 497.
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FOREIGN AID AND ECONOMIC DEVELOPMENT 455
programme has three main objectives. The first is to help the less-
developed nations to attain political and economic independence of the
industrial West. Soviet economic aid 'helps lay the material foundation
for the genuine (i.e., economic) independence of the ex-colonial peoples',
while Soviet military aid is justified as being given 'to peoples waging
an armed struggle against colonialism '. As purveyors of aid in support
of the new national regimes, the Russians hope that Soviet influence
will supplant that of the West.
The second is to induce the emerging nations to take the 'non-
capitalist'-i.e., socialist-path of economic development. This goal is
to be achieved, partially by example, as Soviet aid 'stimulates interest
in socialism and engenders a desire to use socialist methods in order
to build a thriving economy',' and partially as a result of the opera-
tional guidelines of the aid programme itself. Soviet assistance is
directed toward stimulating the growth of the public sector, to encour-
age national planning, and to build large-scale heavy industry, which
Soviet economists have long considered to be the only firm foundation
for an independent economy.9
The third explicit objective of Soviet aid is to promote the growth
of revolutionary social and political forces in the new states. The
U.S.S.R. has been willing to sacrifice local Communist parties to the
more immediate goal of solidifying its ties with the new national
regimes. Occasionally, however, as in the U.A.R., growing Soviet
economic support to the new regimes has been accompanied by
pressures, which were at least partially successful, to obtain the release
of Communist leaders from local jails. In the longer term it is the
Soviet hope that
The growth potential for Soviet economic ties with the less-developed
countries has been treated as a function of the growth of the Soviet
economy. The weakness of its economy in the early post-war years is
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456 INTERNATIONAL AFFARS
cited as the reason for the U.S.S.R.'s late start in the foreign aid field,'
while the soaring economic growth envisaged under Khrushchev's
Seven-Year Plan (1959-65) led to optimistic projections in the early
1960s of a rapid growth in Soviet trade and aid.'2
While asserting an important role for Soviet trade and aid in the
economic, political and social transformation of under-developed
nations, Soviet analysts nevertheless have consistently acknowledged
its subordination to the role of domestic activity in each recipient
country. This is particularly true of foreign economic aid, which always
has been viewed as a supplement, although a vital one, to internal
saving.13 Moreover trade, not aid, is stated to be the most important
and mutually advantageous type of economic tie between the socialist
and under-developed worlds.
Scope
Since the mid-1950s, when Khrushchev set out to make the U.S.S.R.
a major source of foreign aid to non-Communist countries, the Soviet
Union has extended about $6 thousand million in economic aid to the
less-developed countries,'4 of which roughly $25 thousand million
already has been delivered.'5 Most of the more than $4 thousand
million in military aid is also believed to have been delivered. The
comprehensive Soviet programme has included academic training in the
U.S.S.R. for large numbers of students-more than 10,000 in 1967, and
a roughly equal number of Soviet technicians have been on assignment
in the less-developed countries each year.'6
In accord with the Soviet interest in undertaking major investment
projects of national significance, about 70 per cent. of its deliveries of
economic aid have been made to India, Afghanistan and the U.A.R.,
where the U.S.S.R. has been engaged in such large-scale investment
projects as the Bhilai steel complex in India, transport and power
development in Afghanistan and the Aswan High Dam.
Soviet long-term development credits have been extended on soft
terms: 24-3 per cent. interest, and amortisation over periods of twelve
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FOREIGN AID AND ECONOMIC DEVELOPMENT 457
17 Ibid.
18 Kozintsev, op. cit., p. 12. In some cases, of course, repayment reduces the available
supply of hard-currency earning exports for sale in the industrial West. A very large'
share of Egypt's cotton exports has been diverted to the Communist countries in
repayment of military and economic aid.
19 Soviet Economic Performance: 1966-67, p. 128.
20 L. Zevin, 'Mutual Benefit of Economic Cooperation of Socialist and Developing
Countries', Vop. Ek., No. 2, 1965, available as JPRS translation 30,304, May 28,
1965, p. 37.
21 Soviet Economic Performance: 1966-67.
22 See L. Zevin, 'Mutual Benefits of Economic Cooperation of Socialist and Developing
Countries', Vop. Ek., No. 2, 1965.
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458 INTERNATIONAL AFFAIRS
27 U.S. State Department, Memoranda RSE-120, op. cit., and RSB-80, July 21, 1967,
and RSB-50, June 17, 1966. 28 TASS, Moscow, January 9, 1969.
29 Hindustan Times, New Delhi, December 11, 1968, and December 20, 1968.
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FOREIGN AID AND ECONOMIC DEVELOPMENT 459
30 G. Prokhorov, ' Economic Cooperation between the Socialist Camp and Newly Inde-
pendent Countries', Vop. Ek., No. 11, 1965, available as JPRS translation 34,586,
March 16, 1966.
31 L. Zevin, 'Foreign Economic Problems of the Non-Capitalist Development of
Liberated Countries', Vop. Ek., No. 3, 1966, available as JPRS translation 36,070,
June 20, 1966.
32 Soviet Economic Performance: 1966-67, p. 128.
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460 INTERNATIONAL AFFAIRS
As a case in point they note that India, during its third five-year plan,
spent almost twice as much foreign exchange for imports of industrial
raw materials as it spent on capital goods imports.
The Soviet side of the same payments ledger received a perceptive
analysis in another economic journal, in which the U.S.S.R.'s bilateral
convertible currency settlements with fifteen less-developed countries
were criticised because
... the USSR has an overall adverse trade balance with these countries.
The exchange they earn from exports to the USSR goes partially toward
paying their hard currency obligations to capitalist states, and not for
increased purchases from the USSR.35
With the rest of the developing countries, whose trade with the Russians
is conducted via rouble clearing accounts, the U.S.S.R. has a trade
surplus. In short, where countries have a choice, they tend to use their
proceeds from sales to the U.S.S.R. to buy goods in the industrial West.
The author notes briefly that the Soviet Union's special arrangement
with India to accept payment in local currency is advantageous to the
Indians, because it permits them to maintain an import surplus. His
chief and most interesting observation, however, is that the U.S.S.R.'s
bilateral clearing arrangements with the less-developed countries are
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FOREIGN AID AND ECONOMIC DEVELOPMENT 461
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462 INTERNATIONAL AFFAIRS
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FOREIGN AID AND ECONOMIC DEVELOPMENT 463
CONCLUSIONS
Neither the course of the Soviet economic offensive nor the recent
body of serious development literature in the Soviet Union suggests
45 Zevin, op. cit.; also Butenko, The World Socialist System and Anti-Communism
(Moscow, 1968), available as JPRS translation 46,600, October 4, 1968, p. 233.
46 V. Lavrischev, 'The Soviet Union and the Developing Countries', International
Aflairs, Moscow, No. 1, 1968.
47 B. Baldo, 'From Pre-Capitalist Relations to Socialism' in Kommunist, No. 16, 1968.
48 Fifty Years of the Great October Revolution (in Russian, Moscow, 1967).
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464 INTERNATIONAL AFFAIRS
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