The Shifting Soviet View

Foreign Aid and Economic Development: The Shifting Soviet View
Author(s): Robert S. Jaster

Source: International Affairs (Royal Institute of International Affairs 1944-), Vol. 45, No.
3 (Jul., 1969), pp. 452-464
Published by: Oxford University Press on behalf of the Royal Institute of International
Affairs
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FOREIGN AID AND ECONOMIC
DEVELOPMENT
Tim SHIFTING SOVIET VIEW
Robert S. Jaster
FIFTEEN years have passed since the U.S.S.R. launched a trade

and aid offensive in the less-developed areas-its first large-scale
venture in foreign aid to non-Communist countries. With limited
experience in such economies, and with only a small anid dated body of
Soviet literature on the subject of development, the U.S.S.R. organised
a programme under which it has extended $6 thousand million in
economic aid and $2 thousand million in military aid to some thirty-five
countries. In the course of doing this the U.S.S.R., not unlike the
United States, has come to understand something of the bleak realities
of under-development. During the past several years both its aid
programme and its doctrine have been modified to correspond more
closely with these realities.
THE DOCTRINAL BACKGROUND
The roots of Soviet trade and aid policy in the under-developed

countries are embedded in Marxist-Leninist theory, which has claimed
that a basic identity of interests between the Communist countries and
the Third World calls for a special relationship. This special relation-
ship rests on a mutual antipathy to colonialism and neo-colonialism-
a term covering the more sophisticated methods used by foreign capital
to retain control over the economic and financial life of the former
colonies.
Lenin and his successors have viewed these areas as necessary
adjuncts of the advanced Western economies; as territories where, in
Lenin's words, 'imperialist monopolies would struggle for sources of
raw materials, for the export of capital, for spheres of influence, i.e.,
spheres for profitable deals, concessions, etc.' 1 Therefore, to help
weaken the imperialists' influence in formerly dependent territories is
considered a blow at the foundations of imperialism itself.
In 1952 Stalin published his famous thesis on the disintegration of
the single world market and the appearance of the U.S.S.R., China and
Eastern Europe as a 'new, parallel world market', which would
1 Lenin, V., Imperialism, the Highest Stage of Capitalism (New York: International
Publishers. 1939), p. 124.
452
FOREIGN AID AND ECONOMIC DEVELOPMENT 453
'reduce the sphere of exploitation of world resources ' by the major

capitalist countries as Communist countries increasingly would 'dispose
of their own surplus goods '.2 Five years later, at the Twentieth
Congress of the Communist Party of the Soviet Union, Khrushchev
carried this thesis a step further, declaring that the recently liberated
countries struggling for their independence 'need not go begging' to
their former masters, but 'can draw on the achievements of the socialist
world to meet their needs'.' Khrushchev also asserted that the very
existence of the socialist camp forced the colonialists to make
concessions to the less-developed countries.
What are the specific evils of neo-colonialism from which the
emerging nations must be saved? The Soviet argument which, until the
mid-1960s, showed little subtlety and almost no differentiation, ran
along hoary and familiar lines. Imperialist monopolies in search of
super-profits have manoeuvred themselves into control of raw materials,
banking and key branches of industry in the former colonies. Their
interests have been confined largely to such export-centred activity as
agriculture and mining, while the development of industry has been
neglected or intentionally prevented. In alliance with the most reaction-
ary elements in the local power structure, the foreign monopolies have
blocked the introduction of the sweeping social and economic reforms
that are prerequisites for progress toward a modem society.
In their foreign economic relations, the argument continues, the new
nations face a capitalist world market which discriminates against them:
the monopolists conspire to depress raw material prices, especially of
tropical products, while continually raising the prices of manufactured
goods. The worsening terms of trade intensify the under-developed
countries' economic plight by contributing to their ever-growing import
surplus and by reducing their slim foreign exchange holdings.
Even economic aid from the advanced Western countries-charac-
terised as ' so-called aid' in Soviet literature on the subject-only
worsens the new nations' payments position. Credits bear high interest
rates, repayment must be made in hard currencies within a relatively
short period, and generally the credits are not self-liquidating; that is,
they are not invested in basic industry, where the resulting growth in
output would be used toward paying off the indebtedness. Instead, they
are directed into consumer industries and other non-essential production
which are marginal to the process of economic development. Moreover,
aid from the imperialist Powers usually is extended to the private sector,
placing it outside direct state control.4
2 Current Soviet Policies (New York: Praeger. 1953). 3 Ibid., 1957.

4 This necessarily foreshortened summary is an attempt to set down the main lines of
the Soviet argument as reflected in official publications between 1953 and 1961-62.
Although the arguments were made at somewhat greater length in the original, they
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?
THE ECONOMIC OFFENSIVE
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.
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 creation of industry (in the less-developed countries) will facilitate

social advance; as industry grows, the working class becomes larger,
its unity and solidarity are affirmed. These are conditions which are
necessary for the transformation of the working class into a guiding,.
progressive, revolutionary social force.'0
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
7B. N. Ponomarev: ' Some Problems of the Revolutionary Movement', in World

Marxist Review, Prague, No. 12, 1962.
8 Ibid. Also see Rubinshtein, op. cit., p. 74.
9 See, for example, V. Schetinin: 'Socialist Countries' Aid to Young National States',
Vop. Ek., No. 6, 1960, and M. Lavrichenko: 'Economic Aid of the USSR to Less-
Developed Countries', Kommunist, No. 15, 1959.
10 G. Prokhorov, 'Cooperation between the World Socialist System and the Under-
developed Countries ', in Vop. Ek., No. 11, 1962, available in translation as JPRS
17, 269, January 24, 1963.
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
11 B. Kozintsev, 'International Law Aspects of Soviet Collaboration with Developing

Nations ', in Sovietskoye Gosudarstvo i Pravo (Soviet State and Law), Moscow,
No. 11, 1967, available in translation as JPRS 43,854, January 2, 1968.
12 See for instance V. Rymalov, ' Economic Competition of the Two Systems and Aid
to Less-Developed Countries ', MEMO, No. 12, 1960.
13 Prokhorov, op. cit., p. 66; Schetinin, op. cit., p. 61.
14 Except where otherwise noted, data on economic, technical and military aid are
drawn from U.S. State Department Memorandum RSE-120, August 14, 1968, and
RSB-50, June 17, 1966. Military aid total is also based on the figure of $4-S
thousand million appearing in a New York Times special article of September 5,
1967, citing Washington sources.
15 Soviet Economic Performance: 1966-67, Joint Economic Committee, U.S. Congress,
May 1968, p. 128.
16 Ibid.
to fifteen years.17 Moreover repayment, which usually begins the year

following the final delivery of equipment, is made in export commodities
rather than hard currencies."8
Soviet trade with the under-developed countries almost doubled
between 1960 and 1965, reflecting a rapid increase in Soviet capital
equipment exports and substantially higher Soviet imports of raw
materials, particularly food. Since 1965, however, trade has remained
virtually at a standstill around $1P8 thousand million. Other aspects
of the economic offensive also levelled off in 1964-65. Deliveries of
economic aid have actually declined, due in large part to lagging
progress on major projects in India and perhaps elsewhere.19 The
U.S.S.R. does not seem to have expanded either its technical assistance
or its academic training programme since 1965.
While it is beyond the scope of this article to analyse the recent
slowdown in the growth of the U.S.S.R.'s economic offensive, this
development is nevertheless significant. It indicates that Soviet aid and
trade with the less-developed world are not moving as expected. Indeed,
the earlier projections of a $3-5 thousand million trade turnover with
this group of countries by 1970 20 must make droll reading for Soviet
trade officials today. The relevant inquiry for this article is the nature
of the Soviet response. In what ways have the Russians changed their
views about the role of trade and aid in economic development? How
have such changes been reflected in their foreign aid programme?
THE SOVIET RESPONSE TO REALITY IN THE UNDERDEVELOPED COUNTRIES
The Utilisation of Soviet Investment Aid
One of the first and most persistent problems encountered by the

Soviet aid programme has been the limited capacity of the recipient
countries to absorb capital.2" Soviet economic literature, however, has
offered almost nothing on this subject, and the very few articles which
have been published treat it only in a perfunctory way.22
Hence the Russians have had to improvise. In a recent article on
the legal aspects of Soviet relations with developing countries, the
author describes how the Soviet government found that
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.
. . . in the process of fulfilling the agreements to give economic and

technical aid to developing nations, some of them had encountered great
difficulties caused by the extreme economic backwardness and limited
financial and technical possibilities.23
The Russians therefore decided, beginning in 1961, that in such cases

they would enter a 'locked agreement', making the U.S.S.R. responsible
'for providing both the equipment and material deliveries, as well as
doing all the work necessary for building the installations '24 As an
example of a 'locked project ', a type of arrangement long known in the
West under the name 'turnkey', the author cites the Soviet-built Assab
oil refinery in Ethiopia.
The Russians have responded in several other ways to the problem
of limited absorptive capacity. In some cases they have provided
commodities for the recipient country to sell locally to raise the
domestic currency costs of a project. Some 5 per cent. of total Soviet
aid has been used for this purpose.25 Since 1965 the U.S.S.R. has
declined to assume new aid obligations until extensive cost and
feasibility surveys have been completed.26
Moreover, the average value of Soviet credits seems to have declined
during the past couple of years, perhaps reflecting greater attention
to the limited absorptive capacities of smaller aid recipients.27 A more
recent innovation suggesting Soviet concern over the effective implemen-
tation of its aid is a Soviet-Algerian agreement of January 1969, under
which the U.S.S.R. will establish on Algerian soil a new Soviet
organisation to undertake irrigation projects.28
The problem of the effective utilisation of aid is one the Russians
share with every other country dispensing development aid. Its persis-
tence in the Soviet programme is indicated by the recent month-long
tour made by Skachkov, chief of the Soviet foreign aid directorate, to
look into the U.S.S.R.'s lagging projects in India.29 Several of the
completed heavy engineering plants are operating far below capacity,
and a number of uncompleted projects require further Soviet technical
co-operation, including assistance in fulfilling production targets and
planning new lines of production. Skachkov is reported to have told the
Indians to pay more attention to quality standards, so as to increase the
export potential; to raise labour productivity through bonus incentives;
and to strive for greater co-ordination among ministries responsible for
public sector projects.
23 Kozintsev, op. cit.

24 Ibid.
26 Ibid.
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.
The Payments Problem
As the Soviet foreign assistance programme expands, and as earlier

projects are completed, the U.S.S.R. is becoming ever more aware of
the balance-of-payments problems of recipient countries. In the early
years of the programme the literature continued to lump these problems
under a single formula. Investments by the industrial West are bad:
direct investments cause a net drain of foreign exchange from the
recipient country, while government credits, most of which are directed
to the private sector, contribute little to growth, yet lead to ever-growing
foreign currency outflows to pay the principal and the exorbitant
interest charged by Western nations. Credits from the socialist camp
are advantageous to the recipient, as they bear low interest charges and
are directed to industrial development projects in the public sector. The
Soviets also make the distinction, sometimes only technically relevant,
between credits repayable in commodities, as provided in most Soviet
agreements, and those requiring repayment in foreign exchange.
Even as late as 1965, an article in the U.S.S.R.'s leading economic
journal viewed the payments problem in a rather limited context: in
view of the developing countries' difficulties in raising the exports
necessary to repay foreign credits, socialist nations' credits should be
used to build enterprises to produce goods which the creditor nations
themselves need.30 A year later an- article in the same professional
journal called attention to the large volume of foreign debt, estimated
at $27-28 thousand million, which the under-developed countries had
accumulated.3' Ignoring the possibility of debt repayment out of the
growth resulting from foreign investment, the author states:
The dependence of the developing countries on foreign sources of

financing has increased so much that it is becoming a heavy burden for
their economies; they are forced to spend an increasingly large part of
their national income to pay off credits, interest, and dividends.
This warning was of more than academic interest to Soviet aid

officials. At about that time scheduled annual repayments on earlier
Soviet credits were starting to reach significant levels. It is estimated
that the developing countries' scheduled repayments to the U.S.S.R. for
economic aid alone amounted to $145 million in 1966 and $175 million
in 1967.32 The repayments burden seems to be particularly severe
for a relatively small number of major aid recipients, as shown by the
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.
Soviets' agreement in 1965 or 1966 to relieve the U.A.R. and Indonesia

from certain debt-service obligations.33
In 1968 Soviet scholarship finally came to grips with the critical
questions of less-developed countries' payments. Two Soviet economists
published a serious treatise on the advantages of economic diversifica-
tion for a developing country in which they explored the question of
import substitutes.34 In an extension of Nurkse's 'balanced growth'
approach, the authors argue that
in order that production to replace imports be profitable, it usually is

necessary to establish a full range of enterprises. Otherwise, with a
shortage of local raw materials, foreign currency expenditures may rise
instead of falling.
The authors go on to argue that,

As a result of ignoring the principle of comprehensive development,
which has resulted in a weak linking of individual industrial projects,
in many countries of the third world expenditures on imports of raw
materials, semi-finished goods, and other inputs for industrial production
are increasing without let-up.
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
33 U.S. State Department, Memoranda RSE-120 and RSB-80.

34 R. Andreasyan and A. Elyanov, 'The Developing Countries: Economic Diversifica-
tion and the Strategy of Industrial Development', in MEMO, No. 1, 1968, available
as JPRS translation 44,997, April 10, 1968.
35 V. Savelyev, 'Foreign Exchange Relations Between Developing and Socialist Coun-
tries', in Ekonomicheskiye Nauki (Economic Sciences), Moscow, No. 1, 1968,
available as JPRS translation 44,997, April 10, 1968.
inhibiting the growth of trade, and should be replaced with systems of

multilateral settlements between the socialist camp and individual
regional groupings of developing countries, such as an Arab currency
bloc.
A Positive Role for Western Aid ?

Recently the Russians have adopted a less disparaging attitude
toward the role of Western aid in the less-developed countries. The
new attitude may reflect the growing conviction among Soviet specialists
that economic development is a long, difficult and uncertain process in
which advanced nations, both Communist and non-Communist, will
have an important contribution to make.
In 1966 a Soviet economist suggested that a developing country,
once it had expanded the domestic market on the basis of the state
sector and had raised the level of domestic saving and investment,
should accept Western credits; for under such conditions foreign capital-
ists would have to make concessions and 'to assist, despite their nature,
in the development of the economy'.36 This is considered to be
particularly true since the Communist states now offer the new countries
an alternative source of capital. Another economist, agreeing that the
opportunities for imperialist exploitation have diminished, suggested
that 'some benefit may accrue to the new states from foreign (i.e., non-
Communist) investment in production', so long as foreign capital is
excluded from enterprises serving primarily the domestic market, where
control of raw materials by foreign firms would allow them to exert
influence over the national economy.37
In a recent issue of the U.S.S.R.'s leading financial journal it was
acknowledged that, even if a less-developed country chooses to follow
the capitalist, rather than the socialist, path of economic development,
'this apparently does not absolutely rule out the solving of one or
another problem'; it only fails to guarantee overall social and economic
progress in a short time.38 Even GATT, which the Soviet Union has
long criticised as a tool of the imperialists, was recently credited with
lowering duties on manufactures exported by the new nations,39 and
another economist has urged the developing countries to draw heavily
on the advanced industrial countries to raise the level of science and
technology.40
36 Zevin, op. cit.

3 N. Syomin, 'Non-Equivalent Exchange: A Neo-Colonialist Tool', in International
Aflairs, Moscow, No. 1, 1968.
38 Yu. Osipov, 'Financial Problems of Mobilizing Domestic Resources', Finansy SSSR
(Finances of the U.S.S.R.), No. 9, 1968.
39 V. Pavlov, 'Industrial Exports from the Developing Countries', in MEMO, No. 7,
1967.
40 V. Gromeka, 'New Technology, Old Plunder', in Ekonomicheskaya Gazetta (Econo-
mic Gazette), Moscow, No. 45, 1968.
In sum, the new nations critically need assistance from advanced

industrial countries; and, although aid from the socialist camp is more
advantageous to the recipients in every way, they should nevertheless
seek and use help from non-Communist industrial countries, so long as
they can do this without endangering their own progress toward
economic independence.
A More Realistic Attitude toward Development Prospects

Since 1966, public discussion in the U.S.S.R. on the developing
countries has variously indicated attitudes of scepticism, uncertainty,
resignation and impatience toward the growth prospects of the new
nations, under any conditions. Thus, last September a Soviet economist
warned that
transferring to a non-capitalist path does not mean an immediate result
will be obtained. Building an independent economy is a difficult task,
demanding vast expenditure of human and material resources.41
Another economist wrote in similar vein about prospects for changing

the emerging nations' production and export structures, which 'will
require years of intensive and painstaking work through mobilisation
of internal savings, increasing exports, enlarging foreign aid receipts',
etc.42
The long-standing Soviet cliche that aid to the state sector leads to
future growth of 'progressive' groups in the new countries has also
been challenged. Citing recent data on India, a Soviet economist shows
that the growth of the public sector has in fact stimulated an expansion
of private enterprise.43
The futility of dispersing aid resources widely among the less-
developed countries is discussed at some length in the April 1969 issue
of the U.S.S.R. Academy of Sciences journal of international econo-
mics.44 The author of a major review article notes that developing
countries make up almost 90 per cent. of the nations of the world, and
their number is growing faster than the number of socialist states.
In a remarkable passage, which suggests that foreign aid is still a subject
of political controversy in the Soviet Union, he warns that,
if one were to follow the advice of certain ' ultra leftists ', and distribute
a large part of the national incomes of the socialist countries as free aid
to the bulk of the young states, then obviously the socialist nations
would artificially slow down their own economic growth, without
achieving any perceptible impact on the many recipient countries.
41 Osipov, op. cit.

42 Pavlov, op. cit.
3 F. Traitskaya, 'State Capitalism in Less-Developed Countries' in Ekonomicheskye
Nauki, No. 4, 1968.
44 E. Konovalov, 'Problems of Mutually Profitable Collaboration' in MEMO, No. 4,
1969.
The author then emphasises the need to concentrate economic

assistance where it will be most effective, and cites the ideal example
of a single powerful economic complex developing along socialist lines.
.Other recent Soviet literature on development has turned toward under-
developed lands along Russia's borders as particularly promising areas
for future economic collaboration. Iran and Afghanistan-which have
been among the top three recipients of heavy Soviet industrial credits in
the past couple of years-are cited as countries where joint development
of 'borderland economic complexes' offers bright prospects for future
trade and technical co-operation.45
Other Soviet observers, showing impatience with the small progress
achieved so far by the developing nations, argue simply that things are
going badly and will improve only when these countries adopt the
non-capitalist path.46 Probably the most significant of several arguments
along this line is that which appeared in Kommunist, the official journal
of the CPSU Central Committee, last November.47 Addressing himself
to the Mongolian development experience, the author lists Soviet
assistance and the existence of a revolutionary political party as two
essential factors in Mongolia's development from feudalism to socialism.
He explicitly extends his argument to cover backward areas today:
Mongolian experience shows that economic and cultural backwardness
in a country, no matter how great, cannot block the path to socialism,
(and) . .. that national liberation of peoples can be accomplished only
in close alliance and fraternal solidarity between the national liberation
movement and the international Communist movement, when the less-
developed country is guaranteed state aid and support from socialist
nations.
The point of the article seems to be that countries wishing to develop

must choose the non-capitalist path, and only then can they be assured
of comprehensive aid from the Communist countries. This suggestion
was first made by Brezhnev a year earlier in a speech to the Supreme
Soviet.48 He said, 'the scale and concrete forms' of Soviet relations
with the new states would depend on the general direction of a particu-
lar country's policies; ' the most intimate ties have been established
with countries which have taken the socialist path of development'.
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).
that any really fundamental change has occurred in Soviet doctrine or

policies, as outlined in the first part of this article, on the role of
foreign economic relations to economic development. The primacy of in-
ternal savings and investment, the vital but supplementary role of foreign
aid, the generally evil intent and growth-retarding effects of Western
capital, and the manifold advantages of close ties with the Communist
countries continue to be the core of the Soviet position.
Recent evidence suggests, however, a certain erosion of the old
orthodoxy; a more pragmatic, open-minded inquiry into the problems
of development as they really exist, rather than as remote Communist
ideologues would have them be. The notion that industrial Western aid,
trade and technology are both necessary and good for an independent
developing country is new. The explicit recognition of the limitations
on Soviet capabilities to hasten the development process is also new,
as is the U.S.S.R.'s evident resignation to a long, difficult and uncertain
course of development, even under the most favourable assumptions;
indeed, it shows a more mature appreciation of the enormity of the
development task than was evident even as recently as the regime of
Khrushchev, who spoke of economic and social transformation occurring
'within one generation'.
These shifts undoubtedly reflect the Soviet response to its sudden
and intimate involvement in areas and societies which previously were
a subject only of passing attention and of doctrinal platitudes. Before
the early 1960s Soviet study of these areas was largely concentrated in
one institute, that for Oriental Studies. Economic development was
treated as something which occurred when a standard set of pre-requisite
conditions was met.
As Soviet foreign aid personnel have come face to face with reality
in the under-developed countries, and as Soviet scholars have begun to
inquire seriously into these areas, several significant things have
emerged: a greater awareness of individual countries' needs and
problems; a diversity of views on how to go about solving them; and
some modification of previous official attitudes toward under-
development. There seems little reason to think this trend will not
continue.
Robert S. Jaster is an economic development specialist at present

working as an analyst with the United States Government. In
addition to brief visits to some under-developed countries,
Mr. Jaster took part in an ECE group assigned to study the growth
potential of East-West trade.

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The Shifting Soviet View

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Foreign Aid and Economic Development: The Shifting Soviet View

Author(s): Robert S. Jaster

Tim SHIFTING SOVIET VIEW

FIFTEEN years have passed since the U.S.S.R. launched a trade

THE DOCTRINAL BACKGROUND

The roots of Soviet trade and aid policy in the under-developed

'reduce the sphere of exploitation of world resources ' by the major

2 Current Soviet Policies (New York: Praeger. 1953). 3 Ibid., 1957.

THE ECONOMIC OFFENSIVE

The creation of industry (in the less-developed countries) will facilitate

7B. N. Ponomarev: ' Some Problems of the Revolutionary Movement', in World

11 B. Kozintsev, 'International Law Aspects of Soviet Collaboration with Developing

to fifteen years.17 Moreover repayment, which usually begins the year

THE SOVIET RESPONSE TO REALITY IN THE UNDERDEVELOPED COUNTRIES

The Utilisation of Soviet Investment Aid

One of the first and most persistent problems encountered by the

. . . in the process of fulfilling the agreements to give economic and

The Russians therefore decided, beginning in 1961, that in such cases

23 Kozintsev, op. cit.

The Payments Problem

As the Soviet foreign assistance programme expands, and as earlier

The dependence of the developing countries on foreign sources of

This warning was of more than academic interest to Soviet aid

Soviets' agreement in 1965 or 1966 to relieve the U.A.R. and Indonesia

in order that production to replace imports be profitable, it usually is

The authors go on to argue that,

33 U.S. State Department, Memoranda RSE-120 and RSB-80.

inhibiting the growth of trade, and should be replaced with systems of

A Positive Role for Western Aid ?

36 Zevin, op. cit.

In sum, the new nations critically need assistance from advanced

A More Realistic Attitude toward Development Prospects

Another economist wrote in similar vein about prospects for changing

41 Osipov, op. cit.

The author then emphasises the need to concentrate economic

The point of the article seems to be that countries wishing to develop

that any really fundamental change has occurred in Soviet doctrine or

Robert S. Jaster is an economic development specialist at present

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