Washington’s Missing China Strategy
To Counter Beijing, the Biden Administration Needs to Decide What It Wants
AMERICANS since V-E Day have spent more than $11 billion to aid European recovery. Through UNRRA, the Red Cross and private agencies we have shipped millions of tons of supplies for relief and reconstruction. We loaned $8 billion to Great Britain, France and other European countries to purchase food, raw materials, and equipment for their factories, and to repair their transport systems and their public utilities. The President, the Secretary of Agriculture and other public officials have pointed with pride to these evidences of American foresight and generosity. They, and Congress and the public, seem to have assumed that the job was finished, or soon would be. UNRRA's term expired December 31, 1946, and with it large-scale international relief came to an end. While reconstruction might take somewhat longer, it was hoped that the American loans already made would enable Europeans to finish that task largely by their own efforts. Whatever additional outside help was needed could be supplied by the new International Bank for Reconstruction and Development.
We were much too optimistic. After two years of nominal peace, Europe is still a long way from self-support. England, having exhausted three-quarters of her $4 billion loan, has found it necessary to cut still further her already restricted imports, to reduce her military establishment and to reimpose some wartime controls of production. Everywhere in Europe today inflation, strikes, hunger, bad housing, political unrest and frustrated hopes of better times are still hampering productive effort.
Now, in the fall of 1947, we are faced again with an appeal to help Europe, and on a larger scale than ever before. Millions of intelligent Americans, men and women of good will, are puzzled. Not questioning Europe's continuing need, they want to know what went wrong. Whose fault is it that Europe is not on her feet again? What assurance have we that new loans, or new gifts, will actually revive production and lift standards of living? How will large-scale aid to Europe affect our attempt to maintain stability in the American economy? How will it affect our relations with Russia? Finally, why is this our responsibility?
Seeking for explanations of great social or economic disturbances, men are prone to put the blame on natural phenomena. Certainly in the past two years Acts of God (so-called) have impeded European recovery. Crop failures occurred in critical areas in 1945 and 1946. Excessive cold and unusual snowfall in the winter of 1946-47 followed by floods tied up England's transport system and handicapped production. Disasters such as these not only lowered morale and damaged health but made necessary the diversion of scarce dollars from the purchase of capital equipment to securing immediate necessities. Human frailty, however, rather than Divine Providence must bear the real burden of responsibility for Europe's present plight. Reconstruction was a job which, for the most part, Europeans had to carry through themselves, though there was a broad area on the margin in which American help was indispensable. But owing to lack of foresight and imagination, inability to comprehend the magnitude of the task of restoring the European economy as a going concern, and timidity, our aid was not forthcoming in the amounts nor at the times necessary to meet Europe's needs.
Beginning early in the war, the better informed sections of American opinion showed keen interest in systematic planning for European reconstruction. Eventually, the State Department organized studies of the subject from the point of view of American interest. As the result of this work and that of other agencies, relief, loans and a generous Lend-Lease settlement were all provided. Global economic agencies were created. Each had a bearing on European reconstruction, but when V-E Day arrived there was no comprehensive plan for the use of American resources to restore Europe's economy. And, as things turned out, that goal slipped through the interstices of our other policies and was lost, for the time being at least.
During the war many European countries, and particularly the United Kingdom, had depended heavily on Lend-Lease shipments for the support of their civilian economies. The sudden end of this support on V-J Day—by a Congressional decision taken in April 1945—left them without any adequate substitute. UNRRA's assistance, which went principally to eastern Europe and Asia, was confined to food, clothing and "rehabilitation;" long-term reconstruction projects were excluded. Even so, UNRRA's funds were insufficient to do the job.
The two international financial institutions which had been set up at Bretton Woods were not in a position to help. The International Monetary Fund was designed to aid in meeting temporary deficits in foreign exchange, not to make advances for relief or reconstruction. Its complement, the International Bank for Reconstruction and Development, got a slow start; its first loan was not made until May 1947. At any rate, its total lending capacity was only $8 billion—equivalent to the 1947 United States export balance for nine months, and far from enough to do the whole job. More significant in limiting the Bank's future services in financing European reconstruction is its dependence on the American capital market. That market demands a higher degree of "soundness" than will characterize most European reconstruction loans at present.
The United States after V-E Day lent billions to Europe on its own account. Britain's needs were temporarily met after three precious months had been spent in negotiation and seven more in American debate. But the $3.75 billion of new money promised the British in December 1945 had shrunk in purchasing power to $3.15 billion before Congress acted. By June 1947, price increases in the United States had reduced the value of the original sum by almost 40 percent.
Between June 1945 and December 1946, continental European countries got credits, through the Export-Import Bank, Lend-Lease settlements and other means, totalling $3.5 billions, an amount grossly inadequate for their needs. American officials knew the loans were too small, but counted on the International Bank to begin operations in 1946. Our funds, limited in total amount by Congress, were parceled out among many applicants. Their estimates were cut to a minimum, leaving them no elbow room, no margin for unforeseen contingencies such as droughts, storms and floods or the failure of production to come up to expectations. Responsible officials now admit that they underestimated Europe's postwar needs for working capital, as well as its immediate requirements for food and fuel. Beyond that, they failed to recognize how much the disruption of Europe's economic institutions, currency, banking, transport, and of its business organization would impede recovery.
American policies made it hard for the Europeans to make the best use of the money they did get. Rising prices made January's calculations inadequate in June. Controls over production and trade were rapidly removed and foreign buyers had to compete for scarce capital goods with established American industries. Machinery promised for 1948 was no help to Europe in 1946.
Administration officials undoubtedly were trying to be realistic. Congress was in an economy mood, bent on getting rid of wartime taxes, expenditures and controls. "If we asked for more," argued these officials, "we might get nothing. Better to eke out what we have." Congressmen and Senators who were anxious to forget about the war and "take the harness off" the American economy thought they were reflecting American public opinion. Perhaps they were, but it is possible that they underestimated both the intelligence and good will of their constituents. Maybe all that the voters needed was more information about Europe's needs, more education in their responsibility in world affairs. Leadership in these matters was the business of the President and the State Department. But lacking a comprehensive policy, they did not try to impress on the public the size of the reconstruction problem. To have done so would have risked Congressional displeasure. Yet, as Henry Adams wrote, "The Secretary of State exists only to recognize the existence of a world which Congress would rather ignore . . ."
With its eyes on Capitol Hill, the Administration lost the chance to change the climate of opinion, to appeal to the country, and alter the mood of Congress. What was needed was a frank statement of Europe's weakness and danger and an explicit recognition of America's responsibility. Mr. Roosevelt could perhaps have made such a statement in magic phrases which would have rescued the people from war weariness and aroused the great forces of their latent idealism. It would be a great tragedy if his death, like Lincoln's, should prove to have transformed "Reconstruction" from a symbol of hope to one of despair.
Europeans themselves failed to push recovery as fast as they might have. Some governments would not risk telling the people how badly off they were, nor would they impose unpopular economic reforms. The people of Europe were worn out, underfed, perhaps despairing of their chances in the postwar world. In many countries political differences prevented agreement on programs of economic recovery. Nazi occupation had left a legacy of violent antipathy between resistance forces and collaborationists. Russian policies delayed the return of stability and confounded European polities. Over all lay the shadow of growing friction between the United States and the U.S.S.R., hampering recovery and making uncertainty the only certainty.
Secretary Marshall's address at Harvard on June 5 marked a new departure in our reconstruction policy. Delivered in a quiet, academic atmosphere, his careful, restrained language lacked the dramatic note of urgency which pervaded the President's appeal to Congress on March 12 for aid to Greece and Turkey. Both statements dealt with economic as well as political disorder in Europe, but they placed the emphasis differently. Without mentioning Russia, Mr. Truman made it clear that he was asking Congress to implement a policy of checking Soviet expansion by strengthening Greece and Turkey so that they might resist infiltration and aggression. What he failed to make clear was that a considerable proportion of the aid to Greece and practically all of that destined for Turkey was of a military character. Three months later Mr. Marshall did not mention military aid; his program contemplated the economic rehabilitation of distressed countries as a means of removing conditions that promoted political unrest. In March the President had presented to Congress a ready-made plan for aiding Greece and Turkey; so far as we know, those countries had had little if any part in framing it. Now the Secretary of State proposed no plan; he merely suggested that if European states would do some joint planning for reconstruction the United States would see what it could do to help.
Perhaps because of its lack of drama, the Secretary's address got little immediate notice in the American press, but abroad Mr. Bevin and M. Bidault welcomed it as marking a momentous shift in American foreign policy. The United States, it seemed, had abandoned its fairy godmother attitude. It had put the initial responsibility for planning on Europe but promised "friendly aid" in drafting an economic program for Europe. "Any government," Mr. Marshall promised, "willing to assist in the task of recovery will find full coöperation on the part of the United States." Thus, Russian participation was invited. But the invitation was coupled with the warning that the United States would not help any government which manœuvred to block recovery and "to perpetuate human misery in order to profit from it politically or otherwise . . ."
Europeans noted appreciatively that the Secretary reversed the principle (laid down by his predecessor when UNRRA ended) of dealing with each suppliant separately. He, in fact, made it a condition of American aid that the new European program should be a "joint one, agreed to by a number, if not all European nations." Repeatedly, as when he spoke of "the entire fabric of the European economy" and "the rehabilitation of the economic structure of Europe," he showed that he was planning to shift American policy in that area from a national to a regional basis. Further, he was thinking not of stemming an immediate crisis, nor of aid "on a piecemeal basis as various crises developed." He had in mind a long-range program.
The shift in emphasis of American policy between March and June was perhaps related to the responses which Mr. Truman's blunt declaration evoked on both sides of the Atlantic. Debates in Congress and in committee hearings revealed doubt and hesitation, and not merely in the minds of isolationists and tax-conscious members. Many citizens who believed their country should meet its postwar responsibilities were worried. They disliked the idea of giving hundreds of millions to what seemed a corrupt and autocratic government in Greece, and they had little faith in Turkish adherence to western democracy. Besides, they questioned whether it was practicable for the United States to stem in this fashion the advance of Communist power.
Avowed Communists, whether in New York, London, Paris or Rome, followed the line laid down in Moscow denouncing the new policy as crass imperialism and as new evidence of capitalist "aggression." Conservative opinion, of course, applauded the President for his firm line. But liberal newspapers in Sweden and Italy were disturbed by the tone of the President's message; and in France, Léon Blum, though not criticizing the proposal of help in itself, liked "neither the President's line of argument nor his choice of words." Sharing neither Mr. Churchill's exuberant satisfaction nor the unqualified disapproval of London's Daily Worker, middle-class liberal opinion in England was worried at the prospect that England in an atomic war might have to bear the first brunt of Russian attack. "The most prevalent fear aroused in Britain by the Truman program," wrote an American newspaper correspondent,[i] "probably is that the United States is tending toward individual rather than collective action in international affairs."
The "Marshall Plan" (as it is universally called) got a very different response. It gave new hope to many Europeans who had been uneasy about the Truman declaration. "Everybody was struck by the economic and nonpolitical character of the plan," wrote Léon Blum. "Its only political influence would be indirect—through its very benefits, inasmuch as the misery or well-being of a people is a political factor of prime importance." [ii] This type of American loan would not be "a para-military operation." A few suspicions lingered. Would political conditions be attached to American aid? Why had the United States "by-passed" the U.N.? Publicists warned that Mr. Marshall had made no commitments; only Congress could do that. The confused Communists talked around the question until Molotov left the Paris meeting; then they knew where they stood and prophesied Europe's enslavement to the dollar.
Disregarding the critical minority, the governments of western Europe quickly got down to work. After the fruitless session with the Russians, they held what Mr. Bevin happily called "the quickest conference I have ever presided over" and began detailed work on a program to present to the United States.
While Europe was preparing its plans, the United States began to study what it would have to do to carry out the program sketched by the Secretary of State. At the time of writing, before the Paris proposals are published, the cost of the Marshall Plan cannot be accurately estimated, but it is not too hard to form some idea of its order of magnitude. Before he left the State Department, Benjamin Cohen suggested that Europe might need $5 billion or $6 billion a year for three or four years to meet its "rudimentary rehabilitation needs." A subcommittee of the House Committee on Foreign Affairs estimated that Europe will need about $10 billion in new money over the three-year period 1947-49. John H. Williams, testifying before the Joint Congressional Committee on the Economic Report, thought $4 billion a year all that was contemplated in foreign aid. Conservative industrial and banking circles looking at the rate of recovery of some European countries, and emphasizing the size of gold and dollar balances, prefer to talk in smaller terms, say $2 billion to $3 billion a year.
In the opinion of the writers, Mr. Cohen's estimate is most likely to prove correct; it will probably cost upward of $5 billion a year, at least for the first year or two, to place Europe on its feet economically. It may be that not all of this sum will be charged to the Marshall Plan. Supplies for Germany may continue to be carried under a different head, as may the $332 million already appropriated for relief and the $400 million appropriated for loans to Greece and Turkey. The International Bank is likely to supply funds for some projects included in the Plan. Should Europe's industry revive under the initial stimulus, exports to the United States might mount, so that the need for additional dollars may decrease. But if on the other hand European recovery still languishes, or American prices keep rising, the total cost of the plan may well exceed initial estimates.
Five billion dollars is a lot of money, more than the whole capital of the Export-Import Bank, more than the British loan, which was supposed to last three years at least, more than the American contribution to the International Bank or to the Fund. On the other hand, it is only 2.5 percent of our national product for 1946. That is less than three-fifths of what Americans spent on alcoholic beverages last year; it about equals our expenditure on tobacco, sports and movies. At the height of the war we spent more than $5 billion every three weeks. Five billion is a lot of money from some points of view, but very little if it saves a continent.
The governments meeting at Paris know that their dollar demands must be kept within reason. The President's advisory committees and federal experts will subject the European plan to close scrutiny before any program is presented to Congress. The pressure will be strong to keep down the total, to compress the pill to a size Congress will swallow. Certainly every reasonable economy is justified. But optimism is not justified. The implied assumption of 1945 and 1946 that every request can safely be cut will just as surely lead to trouble again. We should have learned by now that Europe needs a margin for contingencies, that every country needs working capital, that none can safely strip itself entirely of gold and dollar balances. Realism must take full account of Europe's needs as well as Congress' willingness to give.
To estimate Europe's needs correctly is the first task. Equally essential is the second—actually to fill these needs. Not dollars, but the delivery of adequate quantities of the right goods, in the right places, at the right time, is the essence of effective aid to Europe. Most of the goods we have shipped to Europe since V-E Day have been for immediate consumption. Only a small part has been in the form of machinery, locomotives, farm equipment, steel and other capital goods which Europe needs if it is to produce enough to pay its way in the world.
During the last half of 1946, the United Kingdom spent only 5 percent of its dollars for machinery. "Those who say the loan should have been spent on such items as steel, mining and manufacturing machinery entirely overlook the supply conditions in the United States, where these things are almost unobtainable," Herbert Morrison told the House of Commons. Yet production of these goods in the United States is now at a high level. During the latter half of 1946 we produced 80 percent more iron and steel than in 1935-39, and more than two-and-one-half times as much machinery. But because of our high level of business activity the bulk of these products is being used domestically. Moreover, what is exported goes not only to Europe but to many other parts of the world, especially Latin America.
To make the Marshall Plan succeed, the United States will have to see to it that more capital goods go to Europe. "The success of our foreign policy rests in our ability to carry out the things that we say we are going to do," Dean Acheson told a House committee. "To embark upon programs without the capacity to carry them out effectively and on time is to court disaster." Congress passed the bill which Mr. Acheson was advocating. Among other things it extended the President's wartime power to control exports and, in effect, to divert production from domestic to foreign markets when such action is "of high public importance and essential to the successful carrying out of the foreign policy of the United States." The preamble of the act expresses Congress' desire to get rid of controls, and when signing the bill, President Truman promised to use them "sparingly and dispense with them as soon as conditions permit." Even so, all the evidence indicates that the President should use these powers more than he did in the past two years, when decontrol was the order of the day.
The same act extends the President's power over certain imports and over domestic rail transportation. Other legislation permits the Maritime Commission to operate vessels, thus guarding against a shipping shortage. Perhaps additional controls will be needed to make sure that enough American goods of the right sort reach Europe. Or, what is equally important in the case of some products such as sugar, copper, fats and oils, that the well-heeled American buyer does not outbid his needier European competitor in overseas markets, thus drawing into the United States goods that are more urgently needed in Europe. Sharing scarce goods will not be easy and will often be unpopular. Americans watching the ships going out of New York harbor may identify their cargoes with the food they cannot find in their own groceries and butcher stores. Pennsylvania and West Virginia mine operators may complain to their Congressmen that the machinery they need is going to Europe to be installed in Wales, Belgium or the Ruhr.
Will such complaints be justified? Will the new aid to Europe actually deprive Americans of goods they need? The United States is now producing at record peacetime levels—steel 95 percent more than prewar, machinery 175 percent, trucks and cars 90 percent, coal and oil 150 percent. Last year we produced 13 percent more meat than before the war, and our 1947 wheat crop is estimated at 20 percent above 1946's record harvest.
But we are consuming more, too. "The American people now have available for their own use a larger quantity of goods and services than ever before," the President said in his midyear economic report. Although our population has grown, per capita consumption of meat in 1946 was 15 percent higher than in 1939, canned vegetables 52 percent, fresh vegetables 14 percent, canned fruit 36 percent, and eggs 22 percent. Although there was a slight decline in our consumption of wheat, dairy products, fresh fruits and edible fats and oils, the average American diet was maintained at a level substantially above prewar. According to the President, "The consumption of major food products by American consumers has clearly not been jeopardized, although the aid rendered to those stricken by the war has, of course, entailed some sacrifice."
Clearly, the American people have not suffered from their record peacetime exports. In 1946 exports of goods and services equalled about 8 percent of our national product; in the first half of this year slightly over 9 percent. In the roaring twenties it was 7 percent. Then we called it prosperity; now some of us are worrying about scarcity.
Perhaps we should worry, for the Marshall Plan is not devoid of risk. Prices are rising, demand outruns supply and inflationary pressures are strong. Many fear that large-scale aid to Europe will blow the top off the American boiler. Perhaps it will—but not if the Government proposes the right measures and Americans support them. Undoubtedly, our heavy exports against credit are a source of danger, but the chief faults in our economy lie at home. To make the Marshall Plan work, it is not necessary to increase total American exports, but to keep goods moving to Europe in large quantities after existing credits run out. Even if exports to Europe were to increase, that might well be at the expense of other areas which last year got almost 60 percent of the total.
Though it may not expand our exports, the Marshall Plan, if it is to succeed, must change their composition. Otherwise we shall merely continue the export pattern of the last two years, supplying Europe with immediate needs but not with the makings of reconstruction. At first, to be sure, sizable shipments of food and coal will continue. The need for them is urgent; Europe still cannot meet it. But along with these goods there should go, and in increasing quantity, machinery, steel, tools, fertilizers and other production goods. By prewar standards, we are now exporting substantial quantities of these goods, but prewar is not the real test. Aid to Europe is not normal trade, in the course of which we provision a going concern. The job is to rebuild what was destroyed, to make up for six years of depreciation and hard wear, to modernize Europe's industries -- and all to enable that area to pay its own way.
Under present conditions of full employment it seems that we can supply more capital goods to Europe only by using less ourselves. Before next spring, some economists believe, domestic demand will have slackened sufficiently to permit increased exports without interfering with home needs. So much the better if it turns out that way; the job will be easier, and the Marshall Plan will provide some insurance against a recession starting from a slump in capital goods, a key sector of our economy. But even if total domestic demand for capital goods eases, domestic buyers in some lines, perhaps many, will still be competing with the aid to Europe program. In these lines government intervention may be needed to make the Marshall Plan succeed. Fortunately, rationing capital goods is easier than rationing consumers' goods; there are fewer buyers, production tends to be concentrated, demand can more easily be deferred. It remains to be seen whether the powers the Administration now has will be sufficient to keep adequate exports moving to Europe.
It is too late to return the American economy to its position on V-E Day. Proper use of controls then in force would have speeded European recovery. Instead, we dismantled them. That mood still prevails. Rationing, it is said, is politically impossible; certainly its restoration would be very difficult administratively. Price-fixing at new levels, though possibly easier, might not be more popular. Perhaps we can safely do without either. The full panoply of wartime regulation of our economy will almost certainly not be needed to carry out the Marshall Plan. There may be shortages of some consumers' goods, at least in the first years of the plan. Though the size of this year's wheat crop certainly makes flour rationing unnecessary, it may turn out that we shall need to restrict the feeding of wheat to animals, which high corn and meat prices encourage.
Americans, thinking about the Marshall Plan, are worried about inflation and scarcity. Tass, the Soviet news agency, looks at it another way. The United States can help Europe, but ". . . the U.S.A. . . . is also interested in making use of its credit possibilities for expanding its external markets, especially in view of the approaching crisis."[iii] This view, that the United States needs the Marshall Plan to forestall a depression, has found a certain currency in Europe. Certainly a sharp drop in our exports would shock the American economy. Whether it would set off a depression depends on many things. We are in a boom and, to paraphrase the old saying, "if you say boom, you must say bust." Depressions usually follow wars—but how soon? Many economists think we shall have only a short recession that pricks some of the bubbles in our disturbed economy, bringing down prices and setting free a great pent-up demand that will sustain production at a high level for some time to come.
If a depression should be not far off, the Marshall Plan may avert it; but to assume that this is why we are undertaking new aid to Europe jumps many steps in logic. We could dispose of our surplus agricultural products by a domestic relief plan. The domestic market is far from saturated with most commodities. Moreover, if a depression should come, it might be easier, politically, to make large appropriations for roads, dams and public buildings than to spend the same amount of money on the Marshall Plan. Subsidized housing would create a tremendous market for the construction industry, one of the staples of our economy, and domestic spending of this sort would create more jobs than subsidizing exports. No, the Marshall Plan has other aims than to avoid a domestic slump.
Europe will not be rebuilt in a year, or in four, the term set in the Paris discussions. But even four years' aid calls for continuity in the new American policy, and there is no way to guarantee it. One Congress cannot commit another to vote funds; each is free to undo the work of its predecessors. Already the Truman Administration has lost control of Congress; we may have a new Administration before the Plan has been in effect even a single year. One might, with ingenuity, devise a scheme for setting up and financing the whole Plan at one stroke, but there would be next to no chance that such a scheme would be politically acceptable. There will be no getting away from the need to go periodically to Congress for funds and, in all probability, for ancillary legislation as well. That was true of Lend-Lease; it can hardly be less true of a peacetime lending program.
There are means, however, for making it more rather than less likely that the year after next the United States will carry out the program on which this year's actions are based. Bipartisan agreement is, of course, essential to getting European aid adopted in Congress and will be needed if the program is to be kept out of the election campaign. A declaration of intent by Congress, personal commitments by party leaders, reports to Congress on what is being done under the Plan, all these will help.
Such measures should be reënforced by public education and efforts to stimulate public interest. The State Department has undertaken successful campaigns of public education on certain postwar measures: the Bretton Woods institutions, the United Nations and the British loan. But the Department never made Americans understand the real size of the reconstruction job in Europe and what it required from the United States. Lack of a clear policy, rather than inadequate public relations, was responsible. The Government never took on the whole job; sometimes it seemed almost to refuse to recognize it. The State Department's Office of Public Affairs is always skirting a precipice since it may not spend money to influence Congressional action. It has trouble getting policy-makers to leave out qualifications when presenting diplomatic and technical matters to the voters. Each year the Office runs a Congressional gantlet in the hearings on its budget; and particularly in an election year it must take care not to be accused of playing politics. If it can find the means to get past these difficulties, and will take the risks involved, it may play a useful rôle in creating a better popular understanding of this new development in our foreign policy.
The Marshall Plan, like the aid to Europe that preceded it, is not, of course, purely altruistic. The Plan will demand a lot from Americans in goods, effort, intelligence and good will. What do we get in return? If the Plan succeeds and the European economy is rebuilt, we shall be amply repaid, for the United States has a vital interest in Europe. Twice in our lifetime we have been involved in wars that began in Europe. The danger of another world war would grow if Europe were left to deteriorate. Unwillingness or failure of the United States to help would inevitably turn many western Europeans, in desperation, cynicism, or with slight hope, toward Russia. That would mean a loss for the United States in the worldwide political contest. Europe, which accounted for half the world's trade before the war, is, moreover, an essential part of the kind of world economy we are trying to rebuild. Humanitarian instinct, again, calls on us to aid; to deny that instinct would damage our own natures. Finally, western Europe is, with notable exceptions, an area of freedom and democracy. It would not long remain so if its economy crumbled; Americans as well as Europeans would be the losers. We suffer when part of what we stand for is lost to the world. American independence was proclaimed on the basis of ideals that pertained to all men. A refusal to aid Europe would mean abandoning these ideals and would undermine our democracy.
Since Europe's economic and political recovery is our goal, we must be careful not to attach conditions to American aid that might frustrate our purpose. This will not be easy; we have many legitimate interests in Europe, and many prejudices.
The original conditions of the Marshall Plan—that the Europeans get together on a reconstruction plan, and that they provide the greatest possible amount of self-help—were sound, and it was no disservice to the Europeans to impose them. As Anthony Eden said, referring to Britain's position, "If the Marshall offer should become a pretext . . . for refusing to face the facts, and for shirking the necessary hard decisions, then in the long run . . . the additional breathing space it gives us may prove to be more a loss than a blessing." But more difficult problems lie ahead. The United States will have to work closely with European governments in carrying out the plan. Our views of how reconstruction can best be achieved must be taken into account, but we must not substitute our judgment for the judgment of Europeans simply because we are giving aid. The United States has in fact a veto power over European reconstruction—a dangerous weapon that may recoil on us.
Common problems will have to be settled by agreement. Distinctions between "economic" and "political" conditions will offer no guide for policy, only for hypocrisy. As Dean Acheson said when the British loan was being discussed, "Between self-respecting people political concessions are not to be bought for money." We are dealing, in western Europe, with independent, self-respecting people, and part of our purpose in helping Europe rebuild is to keep them that way. American diplomats will have to refrain from reaching for the lever that cuts off reconstruction aid every time they get into a dispute with a foreign government.
The treatment of Germany, nationalization of European industries and trade with countries in the Russian orbit illustrate the problems which will arise. The trails of many European shortages lead to the doors of German factories and mines now producing half, or less than half, of what they did before the war. New orders issued to General Clay make it clear that the United States has reversed its past policy and plans increased industrial output in western Germany. Clearly this is necessary to carry out the Marshall Plan. But Germany's neighbors, particularly France, are worried lest the new policy mean that Germany will receive preferred treatment or even that safeguards against renewed German aggression will be dropped. No solution of the German question will make the maximum contribution to European recovery unless it takes satisfactory account of these fears on the part of Germany's neighbors, as well as seeing to it that the revival of German industry benefits Europe in general and not Germany alone.
Further difficulties arise because the "German question" concerns eastern as well as western Europe and the United States. The November conference in London may decide whether there is to be a split Germany, one part playing a crucial rôle in the Marshall Plan, the other a lesser rôle in the Molotov Plan, or whether there is to be a single Germany, serving as a kind of passageway between east and west.
It is argued with increasing frequency that a condition of American aid to Europe should be a suspension of programs of nationalization of industry. Nationalization, it is said, impedes recovery while free enterprise would promote it, but in this argument (which is found more often in financial pages than in Washington dispatches) there is usually a strong flavor of American distaste for Socialism. Here we have a potential source of great trouble. Americans said easily during the war that the old Europe was dead and a new one would arise, but now we act as if this were not true. Socialists are in power in many western European countries, and in all they exert strong influence; other non-Marxist groups have become more socialistic than they used to be. So it appears that unless we are willing to help Socialists we cannot help western Europe, and we cannot help Socialists and ask them to stop being Socialists for the time being. We can ask, within limits, that they do not divert into socialization the energies that should be going into reconstruction. But Americans must recognize that the political changes which have taken place in Europe must somehow find expression, sometimes in acts of more symbolical than material significance. Also, an American government should not find it too hard to understand that foreign democratic governments sometimes have to do things simply to satisfy their electorates.
Should there be industries whose nationalization would clearly impede recovery, the United States would certainly be justified in questioning the wisdom of such a step—though hardly in shutting off aid in order to prevent it. But we must bear in mind that the pragmatic arguments used to justify free enterprise in the United States do not always apply in Europe. European capitalism was seriously decrepit before the war; it leaned heavily on the staffs of cartelism and government aid. Moreover, many of the owning, financing and managerial groups of Europe are now tarred with the brush of collaboration. Our traditional American attitude seems to offer us the best guide: the pros and cons of nationalization are primarily something to be argued out by the people of the country concerned, and the United States will intervene only to secure proper compensation of American interests affected. Each case ought to be decided on its merits, and not by a blanket formula. Unfortunately, Americans are as likely to be "ideological" on these questions as are Socialists!
A good part of Europe is not participating in the Marshall program. The eastern countries that have chosen to stay out (also Spain, which was not invited) will, of course, receive no American aid. But trade will go on between these countries and the west, and that will give rise to perplexing problems. Will western European countries, or some of them, become ports of entry through which American exports will reach these other countries? Or will western European countries export to the east their own domestically-produced goods of the same sort that they are importing from the United States? There will be cases in which such trade may be justified; Polish coal, Finnish pulp, Soviet timber, Czechoslovakian manufactures, Jugoslav ores and Danubian foodstuffs will all be of value to western Europe. Some kind of politico-economic calculus will have to be applied to each transaction or agreement. By means of this continuing east and west trade something of the old economic interdependence of Europe may be maintained, though separate planning for the east and west will almost certainly tend toward divergence.
Secretary Marshall invited all Europe to plan for recovery. Mr. Molotov and the leaders of countries in the Russian orbit declined. But Britain and France maintain that the way is still open for eastern participation. "Our objective of the economic unity of Europe remains," said Under-Secretary for Foreign Affairs Mayhew in Parliament. "No doors have been slammed. . . . We regard, as we have always regarded, the proper and healthy development of Europe to lie in close and cordial relations between east and west." André Philip at a meeting of the Economic Commission for Europe said: "We shall do nothing to deepen the ditch that now exists in Europe." The great magnet for the east will still be the chance for American aid; the success of the Marshall Plan will increase its pull.
By the Marshall Plan we can help the Europeans be what they want to be, independent and democratic peoples. That also is what we want them to be. The Marshall Plan, then, is politics as well as economics.
American strength against European Communism will not be demonstrated in the political conditions which we might attach to our economic aid but in our success in carrying the reconstruction plan through to success. Neither the French nor the Italian Communists can afford to be against food, clothing, and jobs; they cannot keep their mass support on the basis of any such program. But by exploiting the difficulties and inequities that are bound to accompany reconstruction they might sabotage recovery. At their present strength, these Parties could probably block our program in France and Italy; but proper American tactics can force them to choose between opposing recovery and retaining their popular support. We must take care that in adapting the Marshall Plan to American politics we do not destroy the plan in Europe.
The Administration will, of course, have trouble in getting Congress to vote money for aid to Europe. The votes will come more easily if they can be painted as votes against Communism. The temptation to use blatant anti-Russian arguments will be strong, and Congress may attempt to attach anti-Communist conditions to the aid. Nothing would be more likely to strengthen the Communist Parties in France and Italy than such an attempt to dictate internal European politics.
A second world war, it was predicted, would destroy civilization. When that prediction proved false, our relief at escaping complete catastrophe was so great that we failed to recognize how close had been our escape, to see how much had been destroyed and, in particular, how badly the structure of European life had been weakened. We gave aid and made loans, but without an over-all view of Europe's needs. In our haste to resume our prewar way of life we were loath to burden ourselves greatly with Europe's troubles. Now after two years those troubles still persist. They trouble us as well as Europe. Secretary Marshall has given us and Europe a second chance to solve them. Since the Russians have abstained, his plan will deal in the first instance with the needs and resources of western Europe. But since it cannot artificially isolate 16 countries from the surroundings in which their economies have developed and with which they are interdependent, it will affect the fate of eastern Europe and Germany as well.
[i] Jack Tait in The Christian Science Monitor, March 21, 1947.
[ii] "The Soviets Say No," The Nation, July 19, 1947.
[iii] Dispatch broadcast from Moscow, The New York Times, June 30, 1947.