Iran’s intransigent Dr. Mossadegh, having looked suspiciously in the mouth of Mr. Truman’s $24,000,000 gift horse, has decided to accept it. [$24 million in technical aid]

Whether or not Iran would agree to the mild stipulations which accompanied the Point 4 grant for technical assistance has been hanging fire for more than a year. Last December the nationalist Premier rejected the package deal of economic and military aid proffered under the new Mutual Security Act as compromising Iran’s sovereignty.

Iran Short of Revenue

But Dr. Mossadegh’s government is desperately short of money, as a result of the virtual shutdown of the giant Anglo-Iranian Oil Co., which formerly furnished more than a third of the nation’s revenue.

Iran had to get funds from somewhere, and Washington apparently continued to press Point 4 on the Premier, perhaps reasoning that if Mossadegh’s regime falls it might be succeeded by a worse one.

This is quite likely, but the incident is a clear illustration of how far the Point 4 philosophy has departed from President Truman’s original statement of the case.

On June 24, 1949, the President asked Congress for legislation “to authorize an expanded program of technical assistance for such (underdeveloped) areas, and an experimental program for encouraging the outflow of private investment beneficial to their economic development.”

Thus, when it began, Point 4 had two objectives: technical assistance and the encouragement of American capital to go abroad.

What has happened to Part 2 of Point 4?

What About Part 2?

The answer was clearly stated by George A. Sloan, chairman of the U.S. Council of the International Chamber of Commerce, last week at San Francisco’s Commonwealth Club. Said he:

“Many foreign governments have been looking on United States government funds as a substitute for private American capital. There is no alternative in the economic development of a country to a healthy flow of private capital.”

In the first nine months of 1951, according to Commerce Department figures, the net flow of private U.S. long-term capital to foreign investment was cut almost in half. Far from encouraging the outflow of private investment, our government in granting Point 4 and other aid was convincing foreign governments this was a far easier way to get needed American dollars.

And now Washington has gone all the way and shown the world that a regime like that in power in Iran, which unilaterally breaks its contractual obligations to private investors abroad (the stockholders of the Anglo-Iranian Oil Co.) and rejects all adjudication, can get money from the U.S. government to save itself from the consequences.

Contrary to Spirit

How does this square with our public pronouncements that we stand for the sanctity of contracts and international law? The victim in this case was a British oil company, of course, but what will we say when some foreign government decides to take over an American oil company?

Will we bail them out with a Point 4 grant?

The money given Dr. Mossadegh might be justified as a simple bribe to bolster a regime that at least is not avowedly pro-Russian, though its every act has incidentally served the Soviet’s long-range interest in Iran.

But it is far from the original spirit of Point 4.

In the face of such action, is, it any wonder that American capital is reluctant to go abroad?

Mr. Sloan pointed out that U.S. businesses abroad have been carrying on a remarkably successful “technical assistance” program for years before Point 4. This has been incidental to the pursuit of reasonable profit, but it has had far-reaching results. The benefit is mutual—so long as fair treatment prevails and contracts are kept.

What the U.S. government should do, Mr. Sloan argues, is make it plain that American aid grants are merely supplemental and will not be given at all except to foreign regimes which genuinely co-operate with private foreign investors.