Free market: thread binding Reagan's foreign aid plans

President Reagan asks the Soviet Union, "Who's feeding whom?" and pointedly carries the message of free enterprise to the 22-nation summit meeting on developing nations at Cancun, Mexico, next week.

In a preview of this message, which he gave Oct. 15 in a speech at the World Affairs Council at Philadelphia, Mr. Reagan argued for free markets and private initiative and specifically taunted Soviet Russia for its dependence on American grain exports. Developing nations, he argued, like individual citizens at home, should put increasing emphasis on economic freedom and less reliance on governments.

Promising to continue aid to developing countries, Reagan nevertheless declared that "it's time to speak out with candor" and charged that there is " a propaganda campaign" that would "have the world believe capitalist US is the cause of world hunger and poverty." As a matter of fact, he continued, America "provides more food assistance to developing nationsthan all other nations combined."

This was the basis for the President's unusual attack on the Communist industrial system. The Soviets won't attend the conference at Cancun, he said. Why not? "They simply wash their hands of any responsibility, insisting all the economic problems of the world result from capitalism, and all the solutions lie with socialism."

In sharp sarcasm directed not at a rival superpower's military might but its ideology, Reagan used the taunt "Who's feeding whom?," ridiculed the Soviets' centralized authority as against free enterprise and added, "It's a question of freedom vs. compulsion, of what works vs. what doesn't work, of sense vs. nonsense."

The question of US foreign aid was raised at the World Bank conference here last month and will come up again at Cancun. Reagan repeatedly has warned the poor countries that they must rely more heavily on private loans and their own efforts.

US Treasury Secretary Donald T. Regan said recently that the International Development Association, an affiliate of the World Bank, must face "the political realities," in apparent reference to its lack of popularity in Congress. US contributions may be cut back from $12 billion over the next three years to half that, it is believed here.

Reagan's speech at Philadelphia defended the US from the charge of being "stingy." US trade barriers, he said, "are among the lowest in the world." The US has helped the World Bank and International Monetary Fund with aid. It has been a market for the exports of poor countries. "Government and private enterprise complement each other," he declared, adding that "development depends on economic freedom." Last year, he said, developing countries outside OPEC (the Organization of Petroleum Exporting Countries) earned $63 billion, or twice the total amount of so-called development assistance.

Reagan appears to be bringing to foreign affairs the same social-economic philosophy applied at home to budget and tax programs. He favors free enterprise rather than government aid and greater reliance on private initiative and the profit motive. He said the United States will aid developing countries by reviving full prosperity at home. Every 1 percent reduction in US interest rates due to lowered inflation, he said, "improves the balance of payments of developing countries by $1 billion."

To aid developing countries he said the US will:

* Put its own house in order.

* Guide assistance toward development of self-sustaining productive activities, particularly food and energy.

* Make clear at Cancun that it is ready to open markets and liberalize trade.

* Improve the climate for private capital flows.

Reagan's Philadelphia speech was not a broad discussion of foreign affairs, as at one time scheduled. Instead he took up individual matters one by one, expressing his views of the arms buildup, support of Israel, Egypt, and plans to strengthen NATO nuclear defense and elsewhere.