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STATEMENT TO THE SENATE COMMITTEE ON FOREIGN RELATIONS
January 8, 1948
On December 19 the President placed before you the recommendations of the executive branch of the Government for a program of United States assistance to European economic recovery.2
This program will cost our country billions of dollars. It will impose a burden on the American taxpayer. It will require sacrifices today in order that we may enjoy security and peace tomorrow. Should the Congress approve the program for European recovery, as I urgently recommend, we Americans will have made a historic decision of our peacetime history.
A nation in which the voice of its people directs the conduct of its affairs cannot embark on an undertaking of such magnitude and significance for light or purely sentimental reasons. Decisions of this importance are dictated by the highest considerations of national interest. There are none higher, I am sure, than the establishment of enduring peace and the maintenance of true freedom for the individual. In the deliberations of the coming weeks I ask that the European recovery program be judged in these terms and on this basis.
As the Secretary of State and as the initial representative of the executive branch of the Government in the presentation of the program to your committee, I will first outline my convictions as to the extent and manner in which American interests are involved in European recovery.
Without the reestablishment of economic health and vigor in the free countries of Europe, without the restoration of their social and political strength necessarily associated with economic recuperation, the prospect for the American people, and for free people everywhere, to find peace with justice and well-being and security for themselves and their children will be gravely prejudiced.
So long as hunger, poverty, desperation, and resulting chaos threaten the great concentrations of people in western Europe—some 270,000,000—there will steadily develop social unease and political confusion on every side. Left to their own resources there will be, I believe, no escape from economic distress so intense, social discontents so violent, political confusion so widespread, and hopes of the future so shattered that the historic base of western civilization, of which we are by belief and inheritance an integral part, will take on a new form in the image of the tyranny that we fought to destroy in Germany. The vacuum which the war created in western Europe will be filled by the forces of which wars are made. Our national security will be seriously threatened. We shall in effect live in an armed camp, regulated and controlled. But if we furnish effective aid to support the now visible reviving hope of Europe, the prospect should speedily change. The foundation of political vitality is economic recovery. Durable peace requires the restoration of western European vitality.
We have engaged in a great war. We poured out our resources to win that war. We fought it to make real peace possible. Though the war has ended the peace has not commenced. We must not fail to complete that which we commenced.
The peoples of western Europe have demonstrated their will to achieve a genuine recovery by entering into a great cooperative effort. Within the limits of their resources they formally undertake to establish the basis for the peace which we all seek, but they cannot succeed without American assistance. Dollars will not save the world, but the world today cannot be saved without dollars.
The Paris Report of the Committee of European Economic Cooperation was a notable achievement.3 For the first time in modern history representatives of 16 nations collectively disclosed their internal economic conditions and frailties and undertook, subject to stated conditions, to do certain things for the mutual benefit of all. The commitments each made to the other, if faithfully observed, will produce in western Europe a far more integrated economic system than any in previous history.
The report revealed the measure of outside assistance which in their judgment would be necessary to effect a lasting recovery of the participating nations. The executive branch, with help and advice from a great many sources, has developed from this report a program of American aid to Europe which gives substantial promise of achieving the goal of genuine recovery. The program is not one of a series of piecemeal relief measures. I ask that you note this difference, and keep it in mind throughout our explanations. The difference is absolutely vital.
I believe that this measure has received as concentrated study as has ever gone into the preparation of any proposal made to the Congress. The best minds in numerous related fields have worked for months on this vast and complicated subject. In addition, the best economic and political brains of 16 European nations have given us in an amazingly short time their analyses and conclusions.
The problem we face is enormously complex. It affects not only our country and Europe, but almost every other part of the globe.
We wish to present to you in the simplest possible way a full explanation of the executive branch recommendations for aid to Europe. Our presentation will entail the appearance of high officials from the agencies of the Government intimately concerned. Others will give you more detailed information on the many factors to be considered.
I will confine my remarks to the three basic questions involved: First, “Why does Europe need help?” Second, “How much help is needed?” And third, “How should help be given?”
The “why”: Europe is still emerging from the devastation and dislocation of the most destructive war in history. Within its own resources Europe cannot achieve within a reasonable time economic stability. The war more or less destroyed the mechanism whereby Europe supported itself in the past and the initial rebuilding of that mechanism requires outside assistance under existing circumstances.
The western European participating countries, with a present population almost twice our own, constitute an interdependent area containing some of the most highly industrialized nations of the world. As a group, they are one of the two major workshops of the world. Production has become more and more specialized, and depends in large part on the processing of raw materials, largely imported from abroad, into finished goods and the furnishing of services to other areas. These goods and services have been sold throughout the world and the proceeds therefrom paid for the necessary imports.
The war smashed the vast and delicate mechanism by which European countries made their living. It was the war which destroyed coal mines and deprived the workshop of sufficient mechanical energy. It was the war which destroyed steel mills and thus cut down the workshop’s material for fabrication. It was the war which destroyed transportation lines and equipment and thus made the ability to move goods and people inadequate. It was the war which destroyed livestock herds, made fertilizers unobtainable and thus reduced soil fertility. It was the war which destroyed merchant fleets and thus cut off accustomed income from carrying the world’s goods. It was the war which destroyed or caused the loss of so much of foreign investments and the income which it has produced. It was the war which bled inventories and working capital out of existence. It was the war which shattered business relationships and markets and the sources of raw materials. The war disrupted the flow of vital raw materials from southeast Asia, thereby breaking the pattern of multi-lateral trade which formerly provided, directly or indirectly, large dollar earnings for western Europe. In the postwar period artificial and forcible reorientation to the Soviet Union of eastern European trade has deprived western Europe of sources of foodstuff and raw material from that area. Here and there the present European situation has been aggravated by unsound or destructive policies pursued in one or another country, but the basic dislocations find their source directly in the war.
The inability of the European workshop to get food and raw materials required to produce the exports necessary to get the purchasing power for food and raw materials is the worst of the many vicious circles that beset the European peoples. Notwithstanding the fact that industrial output, except in western Germany, has almost regained its prewar volume, under the changed conditions this is not nearly enough. The loss of European investments abroad, the destruction of merchant fleets, and the disappearance of other sources of income, together with increases in populations to be sustained, make necessary an increase in production far above prewar levels, even sufficient for a living standard considerably below prewar standards.
This is the essence of the economic problem of Europe. This problem would exist even though it were not complicated by the ideological struggles in Europe between those who want to live as freemen and those small groups who aspire to dominate by the method of police states. The solution would be much easier, of course, if all the nations of Europe were cooperating. But they are not. Far from cooperating, the Soviet Union and the Communist parties have proclaimed their determined opposition to a plan for European economic recovery. Economic distress is to be employed to further political ends.
There are many who accept the picture that I have just drawn but who raise a further question: “Why must the United States carry so great a load in helping Europe?” The answer is simple. The United States is the only country in the world today which has the economic power and productivity to furnish the needed assistance.
I wish now to turn to the other questions which we must answer: These are “how much” aid is required and “how” should that aid be given.
Three principles should determine the amount and timing of our aid. It must be adequate. It must be prompt, it must be effectively applied.
The objective of the European recovery program submitted for your consideration is to achieve lasting economic recovery for western Europe; recovery in the sense that after our aid has terminated, the European countries will be able to maintain themselves by their own efforts on a sound economic basis.
Our assistance, if we determine to embark on this program to aid western Europe, must be adequate to do the job. The initial increment of our aid should be fully sufficient to get the program under way on a broad, sound basis and not in a piecemeal manner. An inadequate program would involve a wastage of our resources with an ineffective result. Either undertake to meet the requirements of the problem or don’t undertake it at all.
I think it must be plain to all that the circumstances which have given birth to this program call for promptness in decision and vigor in putting the project into operation. The sooner this program can get under way the greater its chances of success. Careful consideration and early action are not incompatible.
The interim-aid law which the Congress enacted last December was designed as a stop-gap measure to cover the period until April first of this year. In the meantime it would be possible to consider the long-term recovery measure which we are now discussing. Unless the program can be placed in operation on or soon after April 1, there will undoubtedly be a serious deterioration in some of the basic conditions upon which the whole project is predicated.
It is proposed that the Congress now authorize the program for its full four and one-quarter year duration, although appropriations are being requested only for the first 15 months. Annual decisions on appropriations will afford full opportunity for review and control. But a general authorization now for the longer term will provide a necessary foundation for the continuing effort and cooperation of the European countries in a progressive program of recovery.
The amounts, form, and conditions of the recommended program of American aid to European recovery have been presented in President Truman’s message to the Congress on December 19, 1947. They were further explained in the proposed draft legislation and background material furnished to this committee at that time by the Department of State. Taking as the basis genuine European cooperation—the maximum of self-help and mutual help on the part of the participating European countries—the program aims to provide these countries, until the end of June 1952, with those portions of their essential imports from the Western Hemisphere which they themselves cannot pay for. These essential imports include not only the food, fuel, and other supplies but also equipment and materials to enable them to increase their productive capacity. They must produce and export considerably more goods than they did in prewar times if they are to become self-supporting even at a lower standard of living.
During the first 15 months, exports from the European countries will provide current revenue sufficient to cover almost their entire import needs from sources outside the Western Hemisphere and also about one-third of their requirements from the Western Hemisphere.
It is not proposed that the United States provide aid to the full extent of western Europe’s remaining trade deficit with the Western Hemisphere. Funds from sources other than the United States Treasury are expected to carry part of the load. These will be, principally credits and other forms of assistance from other countries in our hemisphere, loans from the International Bank and private sources, and a further slight reduction in European reserves. It is the final deficit, after all those other means of financing essential imports have been utilized, that it is proposed be covered by American aid.
In each succeeding year of the program, increased production and increased trade from Europe is expected to reduce the amount of assistance needed, until after mid-1952, when it is calculated that the participating countries will have recovered ability to support themselves.
The recommended program of $6,800,000,000 for the first 15 months reflects a searching and comprehensive investigation by the executive branch of European needs and of availabilities in the United States and other supplying countries, taking full account of the findings of the Harriman, Krug, and Nourse committees.4
The program of the $6,800,000,000 for the first 15 months has been computed with precision. I wish to emphasize that this amount does not represent a generous estimate of requirements. It is not an “asking figure” based on anticipated reductions prior to approval. It reflects a rigorous screening of the proposals developed by the CEEC and a realistic appraisal of availabilities. In our judgment, American assistance in this magnitude is required to initiate a program of genuine recovery and to take both Europe and this Nation out of the blind alley of mere continuing relief.
The total estimated cost of the program is now put at somewhere between 15.1 to 17.8 billions. But this will depend on developments each year, the progress made, and unforeseeable variations in the weather as it affects crops. The over-all cost is not capable of precise determination so far in advance.
In developing the program of American assistance, no question has been more closely examined than the ability of the United States to provide assistance in the magnitudes proposed. Both in terms of physical resources and in terms of financial capacity our ability to support such a program seems clear. Representatives of the executive branch more closely familiar than I with the domestic economy will provide further testimony on this issue. But I should like to remind you of the conclusions of the three special committees which explored this matter in detail during the summer and fall.
The proposed program does involve some sacrifice on the part of the American people, but it should be kept in mind that the burden of the program diminishes rapidly after the first 15 months. Considerations of the cost must be related to the momentous objective, on the one hand, and to the probable price of the alternatives. The $6,800,000,000 proposed for the first 15 months is less than a single month’s charge of the war. A world of continuing uneasy half-peace will create demands for constantly mounting expenditures for defense. This program should be viewed as an investment in peace. In those terms, the cost is low.
The third main consideration which, I feel, should be borne in mind in connection with this measure is that relating to conditions or terms upon which American assistance will be extended. It is the obvious duty of this Government to insure insofar as possible that the aid extended should be effectively used to promote recovery and not diverted to other purposes, whatever their nature. This aspect of the program is perhaps the most delicate and difficult and one which will require the exercise of a mature judgment and intelligent understanding of the nature of the problem faced by the European governments and of our particular position of leadership in this matter. We must always have in mind that we are dealing with democratic governments of sovereign nations.
We will be working with a group of nations each with a long and proud history. The peoples of these countries are highly skilled, able, and energetic and justly proud of their cultures. They have ancient traditions of self-reliance and are eager to take the lead in working out their own salvation.
We have stated in many ways that American aid will not be used to interfere with the sovereign rights of these nations and their own responsibility to work out their own salvation. I cannot emphasize too much my profound conviction that the aid we furnish must not be tied to conditions which would, in effect, destroy the whole moral justification for our cooperative assistance toward European partnership.
We are dealing with democratic governments. One of the major justifications of asking the American people to make the sacrifice necessary under this program is the vital stake that the United States has in helping to preserve democracy in Europe. As democratic governments they are responsive, like our own, to the peoples of their countries—and we would not have it otherwise. We cannot expect any democratic government to take upon itself obligations or accept conditions which run counter to the basic national sentiment of its people. This program calls for free cooperation among nations mutually respecting one another’s sincerity of purpose in the common endeavor—a cooperation which we hope will long outlive the period of American assistance.
The initial suggestion of June 5 last, the concept of American assistance to Europe, has been based on the premise that European initiative and cooperation are prerequisite to European recovery. Only the Europeans themselves can finally solve their problem.
The participating nations have signified their intention to retain the initiative in promoting their own joint recovery. They have pledged themselves to take effective cooperative measures. They have established ambitious production targets for themselves. They have recognized the need for financial and monetary stability and have agreed to take necessary steps in this direction. They have agreed to establish a continuing organization to make most effective their cooperative work and the application of American assistance. When our program is initiated we may expect that the participating European countries will reaffirm as an organic part of that program their multilateral agreements.
The fulfillment of the mutual pledges of these nations would have profound effects in altering for the better the future economic condition of the European Continent. The Paris Conference itself was one major step, and the participating nations have not waited on American action before taking further steps, many of which required a high order of practical courage. They have moved forward toward a practical working arrangement for the multilateral clearing of trade. France and Italy, whose financial affairs suffered greatly by war and occupation, are taking energetic measures to establish monetary stability—an essential prerequisite to economic recovery. British coal production is being increased more quickly than even the more hopeful forecasts, and there is prospect of the early resumption of exports to the Continent. The customs union among Belgium, the Netherlands, and Luxemburg is now in operation. Negotiations for a Franco-Italian customs union are proceeding.
Our aid will not be given merely by turning money over to the European governments. The European countries will prepare periodic statements of their needs, taking into account the developing programs of mutual aid worked out through the CEEC continuing organization. After review by the specialist economic cooperation officers in each country and by the special United States Ambassador to the continuing CEEC organization, they will be transmitted to the Administrator of the American agency carrying out our program of assistance.
The Administrator, in collaboration with other appropriate agencies of the Government, will determine to what extent the European requirements are justified and to what extent they can safely be met. The Administrator will also decide which specific requirements from among the over-all requirements will be financed by the United States, taking into account the ability of the country concerned to pay for some portion or all of its total needs. For those needs which cannot be paid for in cash, the Administrator will further decide, in consultation with the National Advisory Council, whether aid will be provided in loans—where a sound capacity to repay in the future exists—or in outright grants. When the program has been determined in detail, the Administrator will either advance requisite funds to the participating country concerned to enable the purchase of the approved imports or, more generally, he will reimburse the countries when they have procured and received these import items.
A substantial amount of the essential needs of Europe must come from countries of the Western Hemisphere other than the United States. In some cases the quantities required will not exist in the United States, in others the impact on the American economy will be greatly relieved if commodities can be procured elsewhere. A sizable proportion of the funds appropriated for the European recovery program should therefore be available for the financing of purchases made outside the United States.
The application of American assistance will be in accord with the bilateral agreements to be negotiated with each of the participating countries. The terms of these proposed agreements are outlined fully in the documents submitted to your committee on December 19 last.5
The administration of the program will demand the best talent and the greatest efficiency that our country can muster. The organization bearing the central responsibility must be small and select. It must hold the full and complete confidence of the American people and of the Europeans. It should combine efficient, businesslike administration and operation with the qualities of judgment and discrimination necessary to achieve quick and lasting recovery in Europe at the least long-term cost to the American people and with the least impact on our economy.
The organization must fit into the complex mechanics of our world export picture. American food, steel, and other products are being exported to many areas other than Europe. In many categories American output represents the major source of shortage goods in the world. There is at present workable machinery in the Government for determining total export availabilities in the light of domestic needs and for allocating these items among the many bidders. We propose that this machinery be continued.
The organization must be granted flexibility in its operations. In my judgment this is the most vital single factor in effective administration. Without flexibility the organization will be unable to take advantage of favorable developments, to meet adverse emergencies, or to cushion the impact of the program on the domestic economy.
It has been suggested in some quarters that the administering agency should be established in the form of a Government corporation. It is claimed that a corporation can be vested with broader powers and flexibility than an independent executive agency. I do not believe that this is necessarily so.
The legislation establishing an agency can clothe it with any or all of the beneficial attributes of a Government corporation. On the other hand an executive agency under the responsible direction of one man, and fitted into the existing machinery of Government, will be better able to meet the requirements of the situation than a corporation directed by a board. This task of administration clearly calls for administration by a single responsible individual.
Finally, the operation of the program must be related to the foreign policy of the Nation. The importance of the recovery program in our foreign affairs needs no argument. To carry out this relationship effectively will require cooperation and teamwork, but I know of no other way by which the complexities of modern world affairs can be met. It should, I think, be constantly kept in mind that this great project, which would be difficult enough in a normal international political climate, must be carried to success against the avowed determination of the Soviet Union and the Communist Party to oppose and sabotage it at every turn. There has been comment that the proposed organization, the Economic Cooperation Administration, would be completely under the thumb of the Department of State. This is not so, should not be so, and need not be so. I have personally interested myself to see that it will not be so. The activities of this Administration will touch on many aspects of our internal American affairs and on our economy. In the multitude of activities of this nature the Department of State should have no direction.
But the activities of the ECA will be directly related to the affairs of the European nations, political as well as economic, and will also affect the affairs of other nations throughout the world. In this field, the constitutional responsibility of the President is paramount. Whether or not he chooses to ignore or eliminate the Secretary of State in the conduct of foreign relations is a Presidential decision. I think that in our effort to restore the stability of the governments of western Europe it would be unfortunate to create an entirely new agency of foreign policy for this Government. There cannot be two Secretaries of State. I do not wish to interfere in the proper operations of the ECA. The organizational structure we have proposed provides a means for giving appropriate direction and control in matters of foreign policy to the Administrator of the ECA with least interference in the businesslike conduct of his task. In this connection he must coordinate his affairs with the legal responsibilities charged to the Secretaries of Commerce and Agriculture.
The man who accepts the challenge of the great task of administering the European recovery program must be a man of great breadth, ability, and stature. I have no qualms but that with such a man, and the able aides he will choose, I and my staff can form a smoothly working team for handling the complicated problems in foreign relationships which will arise in the course of the programs. In my judgment, the organizational proposals which have been put forward represent a sound and practical arrangement of functions and a framework for successful administration.
What are the prospects of success of such a program for the economic recovery of a continent? It would be absurd to deny the existence of obstacles and risks. Weather and the extent of world crops are unpredictable. The possible extent of political sabotage and the effectiveness with which its true intentions are unmasked and thus made susceptible to control cannot be fully foreseen. All we can say is this program does provide the means for success and if we maintain the will for success I believe that success will be achieved.
To be quite clear, this unprecedented endeavor of the New World to help the Old is neither sure nor easy. It is a calculated risk. But there can be no doubts as to the alternatives. The way of life that we have known is literally in balance.
Our country is now faced with a momentous decision. If we decide that the United States is unable or unwilling effectively to assist in the reconstruction of western Europe, we must accept the consequences of its collapse into the dictatorship of police states.
I said a moment ago that this program does provide the means for success, and if we maintain the will for success, I believe that success will be achieved.
I think it is of the greatest importance in considering this program that the people, as well as the Congress, thoroughly understand the critical situation. We have heard the comment several times that we won a victory, but we still have not won a peace. It goes much further than that. In some portions of the world there is more fighting now than there was during the war. You are aware of that. There is political instability. There are efforts to almost change the face of Europe, contrary to the interests of mankind in advancing civilization, certainly as we understand and desire it. The whole situation is critical in the extreme.
We happen to be, very fortunately for ourselves, the strongest nation in the world today, certainly economically, and I think in most other respects. There will be requirements in this program for certain sacrifices. But I feel that when you measure those sacrifices against what we are fighting for you will get a very much better idea of the necessities of the case.
I would like to close by saying that this is a complex program. It is a difficult program. And you know, far better than I do, the political difficulties involved in this program. But there is no doubt whatever in my mind that if we decide to do this thing we can do it successfully, and there is no doubt in my mind that the whole world hangs in the balance, as to what it is to be, in connection with what we are endeavoring to put forward here. Thank you.
US Congress, Senate, Committee on Foreign Relations, European Recovery Program: Hearings . . . , 80th Cong, 2d sess. (Washington: GPO, 1948), pp. 1–10.
1. Secretary Marshall was the first of over ninety witnesses the thirteen-man Senate Committee on Foreign Relations would hear over the next month. He began his testimony shortly after 10:00 a.m. in what developed into one of the most comprehensive public hearings undertaken heretofore on a foreign policy question. (The Private Papers of Senator Vandenberg, ed. Arthur H. Vandenberg Jr. [Boston: Houghton Mifflin Co., 1952], p. 384.)
2. The president’s lengthy message to Congress (published as “A Program for United States Aid to European Recovery,” Department of State Bulletin 17 [December 28, 1947]: 1233–43) began by noting that since the war ended the United States had provided grants and loans totaling over $15 billion for various international relief projects. Now, the president stated, “We must decide whether or not we will complete the job of helping the free nations of Europe to recover from the devastation of the war. Our decision will determine in large part the future of the people of that continent.” Truman requested $6.8 billion for the first fifteen months of the program (April 1, 1948–June 30, 1949) and an additional total of $10.2 billion divided into annual appropriations over the subsequent three years (July 1, 1949–June 30, 1952) for a total of $17 billion. “If we provide only half-hearted and half-way help, our efforts will be dissipated and the chances for political and economic stability in Europe are likely to be lost.” (Ibid., pp. 1233, 1237–38.)
3. The Department of State published the report in September and October 1947. In his letter dated September 24, 1947, transmitting the report to the president, Marshall stated: “The report is divided into two volumes. The first of these consists of a general statement of the problems of European economic recovery, the plans of the European countries concerned to meet these problems and the assistance which these countries believe to be necessary from the United States and other non European countries and agencies to restore their economic position. It also contains summary statements of the position and prospects of the participating countries and western Germany in food and agriculture, energy sources, iron and steel, transport, timber, and manpower as well as in their balances of international payments and their internal financial situation. These summary statements are drawn from the reports of Technical Subcommittees of the Conference, which are published in full in volume two.” (Committee of European Economic Co-Operation, vol. 1, General Report; vol. 2, Technical Reports, Department of State Publications 2930 and 2952 [Washington: Division of Publications, Office of Public Affairs, 1947].) Marshall’s letter is located in 1: iii. Volume 1 is 144 pages and Volume 2 is 562 pages.
4. For the Krug, Nourse, and Harriman reports, see note 2, Marshall Statement to a Joint Meeting of the Senate Foreign Relations and House Foreign Affairs Committees, November 10, 1947, p. 255.
5. The draft “Economic Cooperation Act” stated that to ensure that the European recipients used the aid effectively, they would sign bilateral agreements with the United States reaffirming the pledges given at the Paris CEEC meetings to the other participating countries and pledging in addition to “increase production, restore monetary stability, reduce barriers to trade, and make efficient use of resources including the supplies furnished under the aid program. The United States would also have a veto over the expenditure of local currency obtained by the European governments in selling to their own people the goods supplied by the United States [called counterpart funds]. . . . [T]hese funds would have to be placed in a special account in each country to be held or used only for purposes agreed upon by that country and the United States.” (See John C. Campbell et al., The United States in World Affairs, 1947–1948 [New York and London: Published for the Council on Foreign Relations by Harper & Brothers, 1948], p. 484.)
Recommended Citation: The Papers of George Catlett Marshall, ed. Larry I. Bland, Mark A. Stoler, Sharon Ritenour Stevens and Daniel D. Holt (Lexington, Va.: The George C. Marshall Foundation, 2013- ). Electronic version based on The Papers of George Catlett Marshall, vol. 6, “The Whole World Hangs in the Balance,” January 8, 1947-September 30, 1949 (Baltimore and London: The Johns Hopkins University Press, 2013), pp. 309-320.
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