E CONOMIC AID, as a means of injecting from outside a dynamism into impoverished or lethargic societies and economies, has become one of the major instruments of foreign policy over the last twelve years. Millions of dollars have been expended by the United States alone. Yet there have been few attempts at an objective evaluation of what is being attempted through aid, or to determine what aid can and cannot accomplish, and what reactions (both in recipient and donor) it produces. Aid has been tacitly accepted as an automatically self-adjusting process whose problems can be ironed out by the same remedies which suffice within Europe or America. Partly because the aid administrators and technicians have not asked themselves searching questions about where they are going and who is going with them, most programs have fallen short of their objectives, and today many aspects of foreign aid are viewed with distinct cynicism both by donors and recipients. The present article attempts to examine some of the conditions under which aid operates. It is written by one who has no formal qualifications other than an association of eighteen years with Asia, and one who believes that aid is vital, not only as an economic instrument but also as a contribution to international understanding, but that faulty aid programs backfire disastrously, promoting nothing but international frustration and ill will. First, it is useful to recall how recent is the whole concept of aid as a contribution to international betterment, with no expectation of repayment or reparation to the donor. Apart from isolated incidents (such as the diversion of the American and British shares of the Boxer indemnity toward education for Chinese), international fiscal relations before World War II were conducted strictly by commercial rules. During the nineteenth century the railroads of the five continents were largely financed and built by British companies-to the world's advantage. But payment was required for this service, not only from the wealthy United States, but also from India, China, and Africa in their poverty. Any other arrangement would have been regarded by laisser-faire economists and bankers as hopelessly unsound. When one country was politically dependent on another there was no recognition of an obligation on the part of the metropolitan power to assist its dependency, even when a rich nation ruled an impoverished people, as in the