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SPEECH TO THE PITTSBURGH CHAMBER OF COMMERCE
January 15, 1948
During the past week I have appeared before Congressional committees of the Senate and the House to discuss the European Recovery Program recently recommended by the President. Other officials of the Executive Branch are now testifying before the same committees as to the details of the Program. It has been widely publicized and discussed. Its purpose and principal features are now well known. Therefore, I am reluctant to add another statement to the mass of material on the subject. But this issue is of such great national importance that I feel justified in referring tonight to some aspects that may be of especial interest to the leaders in business.
Businessmen quite naturally are concerned about the possible effects on their own position—about how this program will affect the supply of raw materials, prices, sales, profits and the conditions of doing business. Measures affecting the national economic interest in the long run will influence the private affairs of all of us. In considering the effect of this particular measure upon our individual or collective lives and fortunes, it seems logical first to appraise the present position of the United States in world affairs.
In order to put current events in proper perspective, it is necessary to go back at least to the Council of Foreign Ministers at Moscow last spring. We met there, as you know, to consider peace treaties for Germany and Austria. That effort to reach agreement failed utterly because the Soviet Union insisted upon conditions which the three western powers could not in good conscience accept. The reasons for the Soviet attitude have now become clearer and were well defined at the recent London Conference, where resort to similar obstructive tactics and propaganda appeals led again to failure.
Our experience at Moscow was productive in one sense at least. It necessitated a complete re-appraisement of the situation in Europe which was steadily deteriorating, and brought us to the important conclusion that we faced the choice of quitting Europe altogether or of completing the task of European recovery. We had no intention of quitting.
Once the basic decision was taken, the United States put into effect certain measures susceptible of immediate application. These concerned Germany, where we have major responsibilities as an occupying power. It was apparent that there was no immediate prospect of a German peace treaty nor any likelihood that the Soviet Union would cooperate in establishing a balanced economy for all of Germany as provided in the Potsdam Agreement. Therefore, we had to take what steps we could to enable the Germans to pull their own weight in Europe and at an early date to terminate reliance upon Britain and the United States for the essentials of existence now lacking in western Germany.
The British and American zones were then being integrated economically in the interest of efficiency and economy. This process was accelerated. In addition, the two governments decided upon an appreciable increase in the level of industry. This is a rather technical matter which is not readily understood. It should be remembered that the Potsdam Agreement called for the economic integration of all four zones of Germany. To enable Germany to be self-supporting, a stipulated portion of the German industrial capacity, factories, machinery, etc., was to be retained in Germany. Industrial capacity in excess of this requirement was to be destroyed or distributed among the Allied nations as reparations.
But the refusal of the Soviets to cooperate in establishing a unified economy for Germany invalidated the level of industry and reparation calculations made at Potsdam. It soon became apparent that the plants and equipment originally selected for retention in the western zones could not—with that area sealed off from the Soviet zone—produce enough to support the increased population of the bizonal area. This left the people in the bizonal area heavily dependent on Britain and the United States, especially for foodstuffs. The only feasible solution was to increase the industrial capacity to be retained in western Germany at the expense of reparations. This was done.
Incidentally, these measures which we have undertaken together with the British for the revival of economic life in our two zones have all been on the basis of a continuing invitation to the other occupying powers to join us in these necessary and constructive steps.
Such measures as these, which we could undertake singlehandedly or in cooperation with other governments, yielded some results. But they did not get to the heart of the problem—which was, the general economic recovery of western Europe, which, after a promising start, had plainly begun to falter. It became unmistakably clear that if Europe was to recover, rather than suffer a perhaps fatal relapse, vigorous action would be required. The United States was the only nation in the position of economic power and leadership to take the initiative in the matter. The alternatives to such action were so repugnant that for our own self-interest, if for no other reason, we could make only one choice.
These then were the considerations that led to the suggestion of last June 5. It was stated that a continuation of the procedure of intermittent relief measures was no longer possible. It was also stated that recovery must depend primarily on their own exertions. The suggestion was made that if they would take the initiative and unite in developing a sound and workable cooperative program to restore their economic system to a self-supporting status, we should do whatever we were able to do, consistent with our own capacities and needs.
The response was instantaneous. In the countries where freedom of opinion and action still prevailed, the idea quickly caught hold and served as a strong stimulus to morale as well as a spur to action in a material way. It focused attention on the necessity of treating economic recovery as a continental and cooperative matter, rather than a problem confined to the narrow purview of each nation.
The response of the Soviet Union and the states under its domination was revealing. Their reaction was immediate, sharp and defensive. Our proposal to Europe contained no geographical or ideological qualifications of any kind. Any government sincerely desirous of entering into a combined effort to promote the rehabilitation of Europe was free to participate. It was made clear, however, that we would not aid—in fact, we would vigorously oppose—any nation or group which sought to delay or impede recovery.
This was the suggestion: the nations of Europe were left to their own choice—in so far as they were free to do so. Sixteen countries, led by Britain and France, rallied together at Paris to work out a joint program to which each pledged itself to contribute what it could. The Soviet Union, though invited to serve as a co-sponsor of the conference, spurned this invitation and refused to participate. Moreover, the Soviet Government evidently directed the eastern European countries subject to its influence or control to refrain from attending, even after some of these had indicated a desire to participate and one had actually accepted. Subsequently, a high Soviet official, a member of the ruling Polit-Bureau, made a public statement that it would be the policy of his government to oppose and attempt to defeat the European recovery program by every possible means. That statement has been confirmed by the actions of the Communist parties in several European countries, notably France and Italy.
The sixteen western nations set up the Committee of European Economic Cooperation and proceeded to draft a program for achieving recovery to a self-sustaining basis in a four-year period. Far from interfering with the sovereign rights of the countries involved, as hostile propagandists have alleged, the United States refrained throughout the summer from any suggestion or advice to the European representatives at Paris, despite the fact that repeated and urgent appeals for such counsel were made. We were determined that the initiative in this phase of the procedure should be confined entirely to the European countries involved. Only at the conclusion, and then at the insistence of the participants, did we express our views on some aspects of the preliminary draft of the Paris program as they might relate to the prospect of American support or aid.
After the Paris program was submitted to our government, it was given an intensive and critical examination. No peacetime project in government history has received more careful attention and study from a large number of highly qualified individuals both in and out of Government. Numerous modifications were made in the Paris program, as the result of studies made by various groups from the Executive Branch and by the Krug, Nourse and Harriman committees. As a result, the measure recommended to the Congress represents the combined judgment of a large number of the nation’s best talent. It is the plan, we believe, best adapted to serve the interests both of the United States and the European countries we wish to help.
There may be flaws of omission or phrasing and no doubt the proposal will be improved in some particulars in the light of Congressional hearings and debate, but the principal features, have been shaped with utmost care, to meet many vital considerations affecting the national interest. Radical alteration of the basic structure would, I fear, jeopardize the prospect that the measure will successfully accomplish the purpose for which it is designed. There is a general determination to secure the most efficient administration of this program that is humanly possible, taking into full account the unavoidable factors of governmental legal requirements and diplomatic relationships.
The proposal is now under close scrutiny in Congress and the resulting publicity should keep the nation well informed as to the issues. This is especially desirable because we are dealing with a matter which may largely determine the course of history,—certainly the character of western civilization,—in our time and for many years to come.
The American people frequently hear assertions that events have thrust our nation into a position of world leadership which imposes on us unprecedented responsibilities. There is truth in these assertions. The practical question is: Shall we acknowledge and accept the obligations and exactions of leadership and, if so, in what manner shall we exert that leadership?
I dare say no group is more determined to assert its leadership in vigorous and decisive fashion than the business element. Your traditions and instincts, your business experience, tell you that to be a leader you must act like one. But, of course, the great problem of the leader is the responsibility for what follows as the result of his decisions and actions. If we agree that the United States has become a world leader and in view of the critical state of the world perforce must assert its leadership, then we must examine all aspects of the problem.
Our contribution to the European Recovery Program will cost the businessmen of America money—it will cost all Americans money. But on this occasion I refer to the situation of the businessman of America, the great and small industrialist—what are his reluctances in the matter of the foreign aid program?
Expenditures of the magnitude required to set in motion a constructive rehabilitation program in Europe—that is, a cure and not a palliative—will be an evident factor in the matter of federal taxes. The appropriations necessary to carry out this program effectively, particularly in the initial fifteen-month period, must be considered in connection with tax rates.
There are subtle distinctions among the inconveniences and sacrifices that may be expected to result. Waiting for delivery of a new model car while continuing to drive an old one is an inconvenience. Paying higher taxes than we would wish entails definite sacrifice, as does doing without some scarce goods or articles until there are enough to go around.
These are some of the realities to be faced in our daily private lives. These are some of the exactions of leadership. But each of the comprehensive analyses of the problem yet made, and there have been a number, resulted in the same general conclusion that the United States can successfully carry out the proposed program.
The fact is that the largest part of the job of assisting Europe, as measured by the rate of exports from this country, is behind us. The volume of commodities planned for shipment from the United States during the first fifteen months of the program is less than the volume of our exports during the past fifteen months. Moreover the program contemplates a steadily decreasing volume of exports in succeeding years.
The goods and services to be financed with American dollars actually will constitute but a small proportion of Europe’s total requirements—perhaps on the order of five per cent. Our aids will be marginal, but that margin is absolutely necessary to enable the European economy to gain sufficient momentum to make real progress towards a pay-as-you-go basis. It is, in effect, the proverbial nail for lack of which the battle of European recovery may be lost.
The fatal deterioration and collapse of Europe economically and therefore politically would result in consequences of a most serious nature for this country. The situation we then would face would necessarily impose on us such burdens in the way of taxes, discomforts, sacrifices and impairments of the rights and privileges we now enjoy as to make those that now confront us seem trivial by comparison.
In the field of foreign trade, for example, this government is pressing for international agreements to remove or minimize arbitrary restraints on business between nations and to eliminate harmful discriminations. Many of the restrictive practices we oppose appear in the system known as state trading, where the foreign commerce of a country is conducted by the government as the sole or dominant buyer and seller. We recognize that many of the present state-imposed restraints are defense mechanisms, resorted to as a result of abnormal conditions caused by the war, and susceptible of correction when stability is assured.
The long-term significance of state control of foreign trade, however, is a matter for serious concern. Thus, business has a special stake in European recovery by virtue of what this recovery may mean for the practices and atmosphere of world trade. There is no doubt that if the countries of Europe should be forced to meet their present problems without further assistance from this country, the result could only be a radical increase in the restrictions and controls in force throughout that area affecting international trade and investment. And more important, perhaps, than the actual restrictions themselves would be the deterioration in the atmosphere in which international business would have to be conducted. If the businessmen of this country are again to enjoy the former facilities for residing, traveling, and doing business among the European peoples, then it is essential that the Europeans retain their confidence in this country and in the soundness of liberal institutions in general. It is idle to think that a Europe left to its own efforts in these serious problems of recovery would remain open to American business in the same way that we have known it in the past.
I have been talking about Europe, but the situation is even more serious than that. Europe was at the heart of a great world trading and financial organization. Her failure to recover would have disastrous effects in many other areas. The economies of Latin America and Canada, for example, are organized on the basis of having markets in Europe. If Europe fails to recover, and she certainly cannot do so without our aid, the repercussions will be felt throughout the entire world.
The cumulative loss of foreign markets and sources of supply would unquestionably have a depressing influence on our domestic economy and would drive us to increased measures of government control.
By contrast with these possibilities, the cost and temporary adjustments required by the European Recovery Program appear reasonable, as I think they are. I have attempted only to present an estimate of the stakes the businessmen of America have at issue in this matter.
We are all stockholders in the same company—the United States of America. The paramount question before us, I think, can be stated in business terms. We are required to make a decision as to which is the wiser course: Whether to make a capital investment in European recovery involving a sum that though large is well within our means, with a good prospect of realizing long-term gains; or whether to spend our abundant capital for the satisfaction of our immediate wants, in the hope that the day of reckoning can be indefinitely deferred.
I am not a businessman, but I have some knowledge out of my experience of what has been required in the past to preserve certain of our national assets in security, peace and freedom. I consider the prudent course in this situation is prompt and effective action to assure solvency and stability in Europe. I think that is our role as a leader in a distressed world. I think we must judge ourselves in our present security and abundance in comparison with distressed people, sick and suffering but already inspired by a great hope that the new world will help redeem the old.
GCMRL/G. C. Marshall Papers (Secretary of State, Speeches)
1. Marshall spoke to the chamber’s annual banquet at 9:30 p.m. in the Hotel William Penn.
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. 328-334.