(7 of 9)
2) The U.S. is running into the red in its international transactions, with the result that U.S. gold reserves are shrinking as gold flows overseas to balance the nation's accounts. If the gold outflow continues for even a few years, it could endanger the value of the dollar, with shaking results for the entire world.
The policy implications of these two propositions run in opposite directions: Proposition No. 1 suggests that the U.S. should give more help to the underdeveloped countries. Proposition No. 2 suggests that the U.S. cannot afford to give more, perhaps ought to give less. To resolve this clash of directions is the challenge of U.S. foreign economic policy, and the task that Robert Anderson has set for himself.
The Big Change. Besides the inherent difficulties of the task, Anderson has to contend with a widespread failure, at home and abroad, to grasp how radically the world economic picture has changed over the years since World War II. Back in the late 1940s, the U.S. was the principal source of the world's manufactured goods, exported far more than it imported. Result: even with U.S. tourists spending millions abroad, U.S. troops stationed around the world, U.S. Marshall Plan dollars pouring into Western Europe to rebuild shattered economies, and Point Four aid flowing to underdeveloped countries, the U.S. ran up a surplus in its overall international accounts. Gold trickled into the U.S. Treasury from abroad.
By the mid-1950s, Western Europe and Japan, their economies rebuilt with U.S. help, were briskly competing with the U.S. in foreign markets, even in the U.S. home market. By last year the U.S.'s international transactions were drastically out of balance: the U.S. ran $3.4 billion in the red in its overall international payments. Gold flowed overseas so briskly that the U.S. gold reserve shrank by $2.3 billion, a thumping 10%.
"Buy West German." Anderson was aware of the trend when he took office in 1957. In characteristic fashion he quietly set about shifting foreign-aid policies that had been backed by the full prestige of the Truman and Eisenhower Administrations. There were no dramatic sessions; at every opportunity he simply called attention to the problem. Last spring he began inviting Administration leaders to conferences and lectures. At first the State Department was horrified at the prospect of revising foreign-aid policy (and some of its staffers still are), but Anderson found a sympathetic listener in Under Secretary (for Economic Affairs) C. Douglas Dillon, longtime international banker both on Wall Street and in Government and a firm believer in the imperatives of a sound world economic policy. Gradually the President's statements on foreign aid began to soften. By last September, Anderson could bluntly tell the World Bank and International Monetary Fund meeting in Washington: "There must be a reorientation of the policies of the earlier postwar period."
Essentially there are two pillars to Anderson's policy, aid and trade: