Charles P. Kindleberger on the Economic Background

The following document was written by economist Charles P. Kindleberger, who was working for the Department of State (Acting Director, Office of Economic Security Policy), in preparing the Truman administration’s presentation to the Congress of the enabling legislation for the Marshall Plan (Economic Cooperation Act of 1948). The original is in the State Department records (Record Group 59 [Central Decimal File 840.50 Recovery/7-2248]) at the U.S. National Archives and Records Administration, College Park, Maryland. For other documents by Kindleberger, see his Marshall Plan Days (Boston: Allen & Unwin, 1987). In the document below, material in brackets has been added by the editor (Larry Bland).  The memorandum is published in the Foreign Relations of the United States 1947. The British Commonwealth; Europe, Volume III, 241-247.

Memorandum for the Files
Origins of the Marshall plan:

July 22, 1948

The collection of gossip and rumors presented below is not vouched for in any way. It is set forth only because time is fleeting, memories fade, and the stuff of history is fragile. Even at this date, thirteen months later, I am unable to sort out what I know of my direct knowledge and what I have been told.

It is well known that the topic of European reconstruction was widely discussed during the winter of 1946-47. The Council on Foreign Relations had its entire winter program devoted to this topic. I talked twice on it: once in January on coal; and a second time in May on Germany.

Walter Lip[p]man, without claiming credit for the origin of the Marshall plan, has told me that he wrote a series of columns (not the one on the cold war) setting forth the necessity for a plan for European reconstruction. This I do not recall and didn’t when he told me.

In early 1946, Walt Rostow [Assistant Chief, Division of German and Austrian Economic Affairs, 1945-46] had a revelation that the unity of Germany could not be achieved without the unity of Europe, and that the unity of Europe could best be approached crabwise through technical cooperation in economic matters, rather than bluntly in diplomatic negotiation. This suggestion was given to Secretary [of State James F.] Byrnes for free examination through the kindly offices of Mr. [Dean G.] Acheson. Joe and Stewart Alsop wrote a column on the subject in April 1946, referring to what was in the Secretary’s briefcase. In any event, the Secretary didn’t buy. That summer, however, the US representation on the Devastated Areas Subcommission of the Commission on Employment of the Economic and Social Council of the United Nations bought the idea from Rostow and Kindleberger (who was by that time a member of the firm) and peddled it first to Mr. [Isador] Lubin [US representative] on the [UN] Commission on Employment, to the Poles and to others. This was the origin of ECE, of which causa proxima was Mr. Molotov’s decision, made in the corridors of the Waldorf [Hotel, New York City] after a midnight debate between the Poles (winners) and the Jugs [Jugoslavs] (losers.)

The ECE thought was inextricably wound up in a European recovery plan. ECOSOC in February 1947 wrote terms of reference for ECE (it thought it did; actually Miriam Camp[s] wrote the terms of reference and ECOSOC [UN Economic and Social Council] initialled them). These contained reference to planned recovery programs.
I have had a hard time seeing how the Acheson speech at Delta [Council], Mississippi [May 8, 1947], was the midwife to the Marshall plan. Acheson made five points ?] including primarily the usual ones about multilateralism which the Department has stated so frequently that it is inclined to believe them. One point, however, referred to using United States assistance in future where it would do the most good in recovery in some planned way. This was hardly revolutionary, since there was no specific suggestion of a recovery program, and since there was no suggestion as to who should draw one up. And the point was only one of five.

In my book, Scotty Reston [James B. Reston, reporter, New York Times] gets a great deal of the credit for initiating the Marshall plan. As I reconstruct the plot, Reston would have lunch with Acheson. Mr. Acheson, as many of his warmest admirers are prepared to concede, converses with a broad brush. Reston would get him started on European recovery, and Mr. Acheson would allude to plans under consideration. The following day invariably Reston would have a first-page story in the NY Times referring to big planning going on in the State Department. This would give Mr. [George F.] Kennan, who had just been appointed to the newly created planning staff in February, the jim-jams. If there was public talk of all this planning in the Department, and the planning staff had received so much publicity, maybe this was where the effort should be applied. As I say, I have no way of knowing what was going on in Mr. Kennan’s mind. I do recall, however, learning that Kennan had been having lunch with Reston (this may have been later though). Perhaps Reston was acting as liaison man within the Department.

The Secretary [Marshall] got back from Moscow in April about the 25th I recall. The Truman doctrine was making heavy weather of it, both on Capitol Hill and in the country as a whole. Its negative, retaliatory, counter-punching features were disliked. Its implications for economic and ultimately military warfare were regretted. I had the strong impression from a chance conversation with Willard Thorp [Assistant Secretary of State for Economic Affairs] before I left for Moscow on February 20th (about), that the department was in a panic as to what to do in Greece. Slapping together an anti-Russian policy to take over the British policing role there, was too much for the country to swallow. It gagged. The Secretary, whose attention to the Truman message of March 11 must have been cursory at best, was obviously going to try something else. The Truman doctrine was no great shakes. Negotiation in the CFM [Council of Foreign Ministers] was no way to get peace fast. He was receptive to new ideas.

Then Mr. [William L.] Clayton [Under Secretary of State for Economic Affairs] came home from Geneva. I do not remember when he did return, but it was either April or May. It was common knowledge in the Department that Mr. Clayton was deeply exercised by what he had seen in Europe. He had the impression that Europe was collapsing rapidly. His interest lay in production?]and he was deeply impressed by the prospective failure of the French wheat crop?]and in organized markets. He was depressed by what he had seen and heard of black markets, hoarding, etc. He was worked up about the state of the economy of Europe and felt strongly that something should be done.
About this time, partly I guess in response to the Reston articles, van Cleveland [H. Van B. Cleveland, Acting Assistant Chief, Division of Investment and Economic Development] and Ben Moore [Assistant Chief, Division of Commercial Policy] started to write a long memo on a European recovery program. I was asked to contribute a couple of chapters on Germany, which I did. Cleveland and I had some difficulty getting together on the German passages. He felt that what I had written did not fit into his broader scheme, and I would not accept what he rewrote of my material as bearing any resemblance to the economic problems of Germany or their solution. This memo was finished sometime before the end of May, as I recall. It took a long time to duplicate in mimeograph. This was finally done and it appeared after the Harvard speech with a date of June 12, 1947. [See Kindleberger, Marshall Plan Days, pp. 1-24.]

During April or May, Ty Wood [C. Tyler Wood, Special Assistant to the Assistant Secretary of State for Economic Affairs] organized the Thursday luncheons in the Assistant Secretary’s office for office directors. The purpose of these was to discuss wider problems of a sort a little too vague to warrant holding meetings for. Ed Martin [Edwin M. Martin, Chief, Division of Japanese and Korean Economic Affairs] tells me that the Thursday meeting began to discuss the European recovery problem during May. It had, of course, heard from Mr. Clayton. It was, moreover, aware that Cleveland and Moore were writing the piece on a recovery program. Some of the May discussion turned on how to organize the shop to deal with the problem of European recovery.

Bill Malenbaum [Chief, Division of International and Functional Intelligence, Office of Intelligence Research] tells me that on June 3 or 4th, but in any event just before the Harvard speech, Mr. Wm. A. Eddy, Special Assistant to the Secretary for Intelligence, told him that the Secretary had called a meeting at the assistant-secretary level to discuss the proposed speech and that there had been a fundamental difference of opinion between Clayton and Kennan as to how to go about the European recovery program. This difference, of course, turned narrowly on how to write the speech. But it may be useful to turn first to the drafting of the speech.

On no good authority, and I have forgotten what, I have understood for some time that the speech is a merger of paragraphs from separate memos on the problem of European recovery written by Mr. Clayton and Mr. Kennan. The part laying out the analysis of what is wrong in Europe seems to be very much the product of Mr. Clayton’s mind. The emphasis on trade and exchange is striking. The rest, and particularly the final paragraphs, are supposed to be the product of Mr. Kennan’s pen.

The question which apparently divided Messrs. Clayton and Kennan was that of whether the initiative should be left to Europe. Mr. Clayton, as I later learned from him, was strongly opposed to a program of the UNRRA type, where the United States put up most of the funds and had only one vote in 17 on its distribution. He was accordingly opposed to reducing the role of the United States to that of supplying the assistance. It seems to me probable that his opposition to a European plan for US assistance sprang from this background of view. Mr. Kennan, on the other hand, presumably had in mind the political desirability of leaving the initiative to Europe. The clash between these views, of course, was ultimately resolved through the device of the multilateral and bilateral agreements, with Europe operating the program under a series of mutual pledges, but each country being responsible for its performance under the program to the US if it received assistance.

Bill Malenbaum also reports that Walter Salant, who had the task for the Council of Economic Advisers of estimating the net foreign balance of the United States for a period ahead, asked him just before the speech what his views were on whether there would be a foreign aid program. Salant said that he had canvassed the Department of State and that there was no unanimity of view as to what was about to transpire, but that on balance he thought the majority view was that there would be no program of assistance.

A newspaper man?]I forget which one?]gave me a long story on how the speech happened to be delivered at Harvard which may be worth setting down, despite the fact that I cannot vouch for one word of it. First, however, I cannot help recalling a bit of dialogue which took place in the central corridor, fifth floor, New State Department Building, in about the second week of July between Philander P. Claxton [Special Assistant to the Assistant Secretary of State for Occupied Areas] and me.

Claxton: Where have you been? I haven’t seen you around lately.
Kindleberger: I am not working on German matters any more. I have moved over and now work on the European recovery program.
Claxton: Oh, that’s the program which developed out of the Secretary’s speech at Princeton.
Kindleberger: Phil, where did you go to college?
Claxton: Princeton, why?
Kindleberger: That’s what I thought.

According to the newsman’s unsubstantiated story, the Secretary agreed with Messrs. Kennan and Clayton that there should be a speech and that it should read about as it eventually did. He then wondered where it might be given. Pat Carter [Marshall S. Carter, Special Assistant to the Secretary of State i.e., Gen. Marshall’s right-hand man] looked up and found that the Secretary had no speaking engagements until June 17, 1947, which all agreed was too far distant in the future in the nature of the existing European crisis.

At that point, the Secretary is said to have remembered that Harvard University had awarded him a degree during the war. He had refused it. Normally, he wrote letters to universities which offered him degrees during the war, saying that he was unable to accept because he felt that the soldiers overseas might misunderstand his position if he were to accept an honorary degree, leaving his desk for the purpose, when they couldn’t get away. This type of letter could not be written to Harvard, however, since Admiral King [Ernest J. King, Chief of Naval Operations, 1942-45] and General Arnold [Henry H. Arnold, Chief of the Army Air Forces, 1938-46] had both been awarded degrees and had accepted. Accordingly, the Secretary merely wrote and refused it.

It had rarely if ever occurred before that Harvard had been refused an offer of an honorary degree, and the University was both surprised and puzzled. Suspecting, however, that the Secretary had some hidden motive for refusing, it wrote back to him saying that it would award the degree, which the Secretary could claim at any time when it suited his convenience.

All this the Secretary recalled. Accordingly, he got in touch with Harvard and said he wanted his degree. This again is reported to have surprised Harvard, which already had a speaker and whose commencement, only a few days away, was practically complete as to arrangements. But Harvard gracefully acquiesced. And the historic speech was given at Harvard. Ed Mason [Edward S. Mason, consultant, Office of International Trade Policy] says that he doesn’t believe this story because, as he puts it, Harvard does not alter its arrangements even for the Secretary of State.

Joe Harsch of CBS and the Christian Science Monitor has printed this story as to why the Marshall plan should be called the Miall plan. Leonard Miall is the BBC correspondent in Washington and incidentally a neighbor, car-pool mate and friend of mine. I recall very well that the evening of June 4, as we were driving home, he complained that he had just finished writing out a script for the next day’s noon broadcast on plans for United States economic aid to Europe, when on his way home he had stopped by the newsroom of the Department and picked up a copy of the Harvard speech. This required him to tear up his script and start again. (It seems to me noteworthy in retrospect that aid to Europe was such a widespread thought in Washington that Miall would have written several scripts on the subject, starting out with the Acheson Delta speech. He was fairly close to Acheson, with whom, along with a group of British journalists, he had lunched once or twice.)

Miall handed me the text of the Marshall speech in the back of the car. I hastily read it as the car moved along and suggested that this was big news and that he would most certainly have to do a new script. I recall that Miall was irritated as well by the fact that there was no firm release date on the Marshall speech, release being the indeterminate hour the speech would begin at Harvard. This was a usual annoyance for him, however, in booking circuits in London.

Harsch’s story runs to the effect that Philip Jordan, the information officer of the British Embassy asked Mr. Balfour, then the Chargé, whether he should cable the Foreign Office the text of the Secretary’s speech. Balfour is reported to have said no?]just another commencement speech.

The rest of the British and foreign press were all off running down some other story which they featured in their cables?]United States note to some country like Hungary?]if I recall correctly. Only Malcom Muggridge of the Daily Telegraph and Leonard Miall of BBC gave it a big play (Harsch omits mention of Muggridge, but Miall insists he should share the credit). And so the Marshall plan was communicated to Mr. Bevin by the BBC (and possibly the Daily Telegraph) since the Foreign Office-Embassy, London Times and other avenues of communication were uninterested in it.

I have many times been asked whether the Department did not advise US missions abroad and/or foreign missions here of the importance which it attached to the speech. As far as I have gathered, without putting any effort into it, the answer is no. Asked why not, I have had no answer.

These random jottings are perhaps not worth recording. I record them just the same to help light the lamp of memory for my old age, waiting for me around the corner.

C. P. Kindleberger