Marshall Plan Days (Routledge Revivals)

Charles P. Kindleberger

• Publisher: Routledge
• Year: 2009
• ISBN:
  9781135229962
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Originally published in 1987 to commemorate the 40th anniversary of the Marshall Plan, this fascinating collection of essays, from an eminent 'insider' to the Marshall Plan, combines economics, politics and history to provide authoritative and personal insights into the creation of one of the greatest foreign aid programmes of the twentieth century.

Any reader interested in the Marshall Plan itself, the inner workings of a major act of US foreign policy, and its many economic, political and historical facets will welcome the reissue of this valuable book from one of America's most distinguished economists.

1
1947 Excerpts from the Cleveland-Moore-Kindleberger Memorandum of 12 June 1947, on a European Recovery Program

written for the Policy Planning Staff, Department of State (unpublished)

Chapter 1 consists of excerpts from a memorandum written in the economic side of the Department of State in May 1947—though dated 12 June 1947, one week after Secretary of State George C. Marshall’s speech at Harvard University because of typing delays—by Harold van B.Cleveland of the Division of Investment and Economic Development, Ben T.Moore of the Division of Commercial Policy, and me, who was in the Division of German and Austrian Economic Affairs. The copy I have been able to get hold of lacks a title-page, and a title. The Introduction states that it was “prepared primarily for the consideration of the Policy Planning Staff, [but] it is hoped that it will evoke general discussion and criticism in the Department.”

As noted in Chapter 10 below, the memorandum was initiated by Cleveland and Moore, and I was asked to contribute only because of the importance of Germany to a European recovery effort. Cleveland and Moore had been working on European recovery in general, as opposed to the problems of separate countries, especially as major contributors to a State-War-Navy Coordinating Committee report sought by the secretaries of the three departments in March 1947. The SWNCC (pronounced Swink) report was dated 21 April, shortly before the Secretary of State and the rest of his delegation, including me, returned from seven weeks in Moscow, trying unsuccessfully, along with the British and French foreign ministers, to negotiate with the Soviet Union over German economic and political problems. The State Department’s Foreign Relations of the United States, 1947 (FRUS), Vol. 3: The British Commonwealth, Europe reproduces a series of documents prepared not only by SWNCC as noted, but also by the Policy Planning Staff headed by George F.Kennan, and by the Undersecretary of State for Economic Affairs, William L.Clayton, all prior to the Harvard speech which is also reproduced. It does not take much literary critical ability to identify the separate paragraphs of that speech that come mainly from the pens of Kennan, on the one hand, and Clayton on the other.

The Cleveland-Moore-Kindleberger memorandum was referred to in FRUS, 1947, Vol. 3, but not printed. I failed to find a copy in my own files or in the National Archives in Washington in a brief foray there, but ultimately obtained one from the Truman Library at Independence, Missouri, after learning from Professor Imanuel Wexler of the University of Connecticut that there was a copy in the papers of Joseph M.Jones, Jr, Box 2.

Since the memorandum lacks a title-page and FRUS in referring to it fails to give it a title, I have had to make up one. Authorship, however, is provided, in the absence of a title-page, by giving the names and departmental designations at the end, on page 86. The non-alphabetical order shows me to be the junior author.

The memorandum is far too long, political, bureaucratically written and redundant to merit reproduction in toto. Before I reread it, I had been mildly irritated with the Historical Office of the State Department for omitting it from the document collection—no longer. Reproduced as Chapter 1 are the table of contents and those passages referring to the economy of Germany that I may have written, though I cannot be sure. The passage on Germany under IV B(2) in the table of contents on politics is the only one I know I wrote, since I retained a copy of the passage. It was, of course, illicit for an economist to write on political questions.

The memorandum has been referred to in a number of books—for example, Jones (1955, p. 243), Beloff (1963, pp. 14–15), Wexler (1983, p. 299)—so that there may be some merit in providing a breathless world some taste of it, if only the passages that I may have written. It helps make the point underlined in Chapter 2 that many minds were working on European recovery programs during the spring of 1947. If only we had not written at such length and/or the typing had been expeditious, we would have had a better claim to immortality by having the paper dated before, rather than after, 5 June 1947.

References

Beloff, Max (1963), The United States and the Unity of Europe (Washington, DC: The Brookings Institution).

Jones, Joseph M. (1955), The Fifiteen Weeks (February 21-June 5, 1947) (New York: Viking Press).

US Department of State, Foreign Relations of the United States, 1947 (FRUS), Vol. 3: The British Commonwealth, Europe (1972) (Washington, DC: US Government Printing Office).

Wexler, Imanuel (1983), The Marshall Plan Revisited: The European Recovery Program in Economic Perspective (Westport, Conn.: Greenwood Press).

Table of Contents [of Memorandum]

Page*

I Introduction

II Summary

(part)†

III Objectives and Premises of a United States Program for Europe

A Premises and Long-Run Objectives

B Short-run Objectives

IV The Program

A Introduction

B Political Goals and Leadership

(1) France and Italy

(2) Germany

C Raising the Mass Living Standard of Europe

(1) The European Recovery Plan

(a) The Economic Case for a European Recovery Plan

(b) Outline of the European Recovery Program

(i) Production and consumption goals

(ii) Measures to achieve the production objectives

(c) Eastern Europe and the Recovery Plan

(2) Economic Recovery in Germany

(a) Original Premises of United States Policy in Germany

(b) The Shifit in Premises

(c) Agreements Embodying Policy

(d) Current Economic Conditions in Germany and Europe

(e) Basic United States Policy towards Economic Recovery in Germany

(f) German Recovery in relation to European Recovery

(3) Financing Europe's Dollar Deficit

(4) Domestic Economic Policy in France and Italy

* Numbers refer to original pagination in the Memorandum.

† Portions reproduced below.

II Summary

(3) United States Economic Policy in Germany [pp. 13 ff. of original memorandum] United States economic policy in Western Germany will be of critical importance to the success or failure of the European Recovery Plan. Unfortunately our economic policy in Germany to date has neither been consistent nor has it taken adequately into account the functional relationship of Western Germany to the European economy. As regards its consistency, United States German policy originally was based upon a severely restricted premise under which the Germans were to be economically disarmed and left to their own devices for recovery. The economic disarmament aspect of this policy fitted into the broader objective of reaching agreement with the USSR in Germany where Soviet policy was harshly restrictive. Following failure to achieve agreement with the USSR on the basis of a restricted Germany, an attempt has been made to coax the Soviet Union into economic collaboration through the promotion of economic recovery. With respect to the relationship of Germany to Europe, there has been a shifit from the original aim of restricting German economic activities whatever the cost to the rest of Europe toward that of creating a self-supporting bizonal area in three years (to relieve the United States taxpayer), again, whatever the cost to Europe.

At the moment United States economic policy in Germany is in a state of flux. As interpreted by the American authorities in charge of the occupation, the primary tasks are to create a self-supporting economy, achieve agreement with the USSR, and to promote free enterprise at the expense of socialism. In Washington, on the other hand, importance is attached to creating a self-supporting economy and to reaching agreement with the Soviet Union, but emphasis is additionally placed upon promoting German recovery in the context of a European-wide recovery. The attempt to impose American economic institutions on Germany is not regarded as fruitful. The task of obtaining agreement between United States government policy as laid down in Washington and as practised in Germany is a major precondition for success in producing recovery in Germany.

The current economic situation in Germany is characterized by low levels of production, almost complete lack of control of distribution, and administrative machinery inadequate to the accomplishment of United States aims in the planning of production and foreign trade. Production of coal in the Ruhr, which had recovered from 185,000 tons a day to 238,000 tons a day in March 1947, has again been set back by a crisis in flood. This flood crisis took effect first in the Ruhr despite agreement in principle that the miners’ rations should be isolated from the effects of flood shortage. Production of flood was held back by low production of fertilizer which can be increased only with increased amounts of coal. Programming of exports, except of a few commodities such as coal, lumber, hops, etc., has been put on a private enterprise basis with the result that resources cannot be directed into productive channels necessary for Europe.

Primary requirements of the present situation in Germany are programs (1) to increase the production of coal and flood; (2) to allocate coal and flood internally in Germany in the most effective fashion; and (3) for production of exports which will take into account to the maximum extent possible the recovery needs of the European economy within the framework of the European Recovery Plan. In the pursuit of all these objectives, adequate administrative machinery, whether German or Allied, is needed to prevent individual businessmen, workers and farmers from refusing to produce or from di verting production into wasteful channels.

sufficient financing must be available to provide Germany with the maximum amount of flood which can be obtained in world markets up to the 2,600 calories provided for in Allied planning. The present normal consumer’s ration of 1,550 calories per day, which has not been met, is inadequate. The short-run ration goal of 1,800 calories for the normal consumer, which cannot be met during the present crop year, is the immediate aim. Other financing of German imports should be restricted to the necessary raw materials to produce exports and the minimum consumers incentive goods necessary particularly for miners and farmers. It is not considered desirable to import goods for general consumers in Germany or for capital investment until clear needs which cannot be met from German resources have been revealed. Finally, adequate financing via the ECE clearing agency mentioned above of European purchases of German goods should be made available to remove the present obstacle of the dollar requirement in the way of German exports to Europe.

IV The Program

B Political Goals and Leadership

(2) Germany [pp. 35 ff. of original memorandum]

The problem of setting political goals and stimulating effective non-communist leadership in Germany is broadly analogous to that in France and Italy. It is, however, complicated by two major factors: first, that there is no German government; and second, that there have already developed certain mutually contradictory patterns of American and British behavior in Western Germany in relation to local political developments. A third factor which in some respects complicates the problem but in others makes it easier of solution is the fact that Eastern Germany is occupied by Soviet forces which furnish both competition and contrast to Anglo-American performance in Western Germany.

The necessity of creating German administrative organs in the bizonal area without a German government increases the difficulty of developing political effective leadership in Germany in two respects. On the one hand, the occupying forces encounter difficulty in securing the cooperation of German leadership because of the reluctance of local leaders to serve foreign powers. On the other, the responsibility for creating adequate administrative machinery is laid squarely at the door of military government and cannot be shifited to the German people.

Disparate development in political structures in the British and American zones is an equally important obstacle to development of effective non-communist leadership. In the American zone, military government has, partly through ineptness, directed its appeal to the conservative and separatist sentiments in Southern Germany. It has offered Germany the typically American slogans of free enterprise, small-scale business, frequent elections, etc. which are to a considerable extent irrelevant to the immediate needs of the population, and has exhibited hesitancy and fear if not outright opposition to trade unions, public ownership, anti-fascist popular fronts, and similar socialist-type symbols and policies. It has transferred responsibility for government to Germans in large doses—perhaps at a faster rate than the Germans have been able to take it on. And it has not always accompanied this responsibility with the grant of commensurate executive powers. Despite directives from Washington instructing the Office of Military Government to refrain from interfering in German political matters, the background of personnel at all levels of the occupation in Germany has been such that interference has taken place after the transfer of responsibility and has supported the more conservative elements in the community.

In the British Zone, on the other hand, military government has openly interfered in German politics. This interference has, however, been contradictory in character. British policy statements have supported socialism in Germany with Germans in control; at the same time the zone of occupation has been unofficially used to protect British investments and to find an inordinate number of jobs for British civil servants, thus withholding responsibility from the Germans. The differences in British and American policy in the separate zones have recently been strikingly revealed in negotiations required to constitute the bizonal administration.

The fact of Soviet occupation of Eastern Germany has made competition among the occupying powers for the flavor of the German population more acute in economic matters such as employment, standard of living and flood rations. Other competition is revealed in intellectual and cultural fields where Soviet policies in Germany are even more striking than those of the American and British. The Soviet Union has sought a “friendly” government in Eastern Germany (i.e., a government subject to control). At the same time it has been anxious to obtain maximum reparations from Germany, in capital equipment and in current production. Had it not been for Soviet unlimited demands for reparation, our comparative success in keeping German thought in Germany oriented toward Western Europe would have been far less.

The development of an adequate indigenous political basis for resistance to communism in Germany requires, as in France and Italy, two major types of action. First, much improved economic performance in the bizonal area is necessary. Second, some coherence of German moderate non-communist leadership in the western zones must be developed. Even more obviously, perhaps, than in Western Europe, these two requirements are organically related in the same fashion as the chicken and the egg; it is impossible to tell which must be done first.

Economic recovery in Germany, which is discussed more fully in subsection C (2) below, is both a necessity for the development of political leadership and a prerequisite to it. As in Italy, adequate administrative machinery needed to achieve effective distribution of coal and flood, which is in turn needed to stimulate production, cannot be established without a broad basis of political support from among the moderate parties. Effective cooperation of responsible German leaders cannot be obtained unless the latter see hope ahead for a continued improvement in the economic situation which warrants them in cooperating with the occupying forces for the benefit of the electorate to which they must appeal.

At the political level, the core of the present difficulty in developing effective non-communist leadership in the bizonal area lies in the fact that the British and American military governments appear to be more concerned with maneuvering for position between left of center (the British socialists) and right of center (the American Christians) than they are with developing a common ground from which all moderate parties can take a firm stand against the extremes of Nazi and Communist thought. Internecine warfare among the middle groups tends to polarize political thought in Germany rather than to develop cohesive central leadership which will draw support away from the extremes.

In the political sphere, the solution to the twin problems of economic recovery and the provision of German leadership lies in a compromise between British support for the SPD and American support for the CDU separatists. Excessive concern by the US for decentralization in economic matters, for free enterprise, abolition of controls, etc. must give way to a real attempt to find a genuine middle ground. The present attempt to build a top-heavy structure providing checks and balance as between the Socialists and Christian Separatists will, if carried to completion, defeat the entire program. The development of centripetal political forces in Germany to replace the present centrifugal forces is the primary task of British-American policy in Germany and one which is not now being met.

It is not clear that Germany is ready to respond to an appeal which goes beyond this level and asks her to take a role in the reconstruction and economic recovery of Europe as a whole. The depths of self-pity in Germany are still being plumbed. The Germans are still too intimately concerned with their own sufferings and are unaware of the existence of comparable economic problems elsewhere. Moreover, such slogans as the “integration of Western Germany into Western Europe” are interpreted by the Germans in their current mood as the granting of license to France, Belgium and Switzerland to use German resources for their own benefit without corresponding benefits to Germany.

The temptation lies in the other direction to appeal to German nationalism. The Soviet Union has already embarked on this course of propaganda by supporting at Moscow strong central government and opposing dismemberment of Germany in the West. The United States has attempted to compete as a champion of German nationalistic sentiment in calling for the revision of the German boundary with Poland.

If our European program is to take a Europe-wide approach to European economic and politica...