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by the White House and the Depart-
ment, and statements and addresses
made by the President and by the
Secretary of Slate and other officers
of the Department, as uell as special
articles on various phases of inter-
national affairs and the functions of
the Department. Information is in-
cluded concerning treaties and in-
ternational agreements to irhich the
United States is or may becoFnc a
party and treaties of general inter-
national interest.

Publications of the Department, as
well as legislative material in the field
of international relations, are listed


MAY 4 1950
The German Problem and Its Solution

by John J. McCloy, U.S. High Commissioner for Germany ^

Our friendships here symbolize tlie links be-
tween our two countries. Those links have been
greatly strenjjthened by the war and the events
since its end. Those events have also demonstrated
our vital concern in Europe. Together with our
European neighbors, we have embarked through
the Marshall Plan and the Atlantic pact on a joint
program to provide for the common defense and
promote the general economic welfare.

In the occupation of Germany, we are engaged
in still another part of this joint task. Tonight,
I want to give you my thoughts on this German
problem and its solution.

When the fighting ended, we had hoped that the
four Allies could work together in healing the deep
wounds of tyranny and war. Instead, each year
the Kremlin has sought to widen the gap between
East and West.

In Germany, the contest has taken dramatic
form. The Soviets have constantly frustrated the
determined efforts of the Western Allies to pre-
serve -i-power unity. The Soviet rulers have ma-
neuvered only to subjugate Germany into vas-

In this drive, the Soviets are again using in
Germany the very methods the Xazis used such a
short time ago — marching youth, mammoth meet-
ings, appeals to militarism and the national front,
violent abuse of opponents, and constant purges.
Despite their solemn pledge to outlaw German
militarism, they are training a German army in
the Eastern zone under the guise of a police force.

The Soviet campaign aims first of all at Berlin.
The course of that campaign has been tortuous.
First, they sacked the city, then they wooed it, next
they sought to starve it. Now, talking of freedom,
they threaten, with the help of their puppet re-
gime, to force Berlin into submission by a new
application of totalitarian methods.

'An .ifldress deliverod before the Pilgrims' Society,
London, Apr. 4, 1950, and released to the press on the
same date.

Berlin — A Democratic Outpost

The Soviet pressure to absorb Berlin and force
us out is strong proof of the challenge of Western
ideals. As an outpost behind the Iron Curtain,
Berlin is a constant reminder to the satellite peo-
ples of the possibility of a different way of life —
a reminder which no amount of propaganda can
erase, a reminder which the Soviets recognize as
a standing threat to their coercive system.

The Communists wull not succeed in taking over
the city of Berlin. The free men and women of
the city will not permit it, and we will not permit
it. The British, the French, and the Americans
are fully determined and fully united. We shall
stay in JBerlin.

Counteracting Soviet pressure is vital, but it
does not solve the German problem. Now, what
is our common policy in Germany ? All of us want
to prevent Germany from again becoming a men-
ace. In seeking to attain this goal, we have been
following two main roads.

Policy in Germany

First, to prohibit institutions and activities dan-
gerous to peace.

Second, to encourage a truly democratic society.

On the first point, in the interest of security, our
fixed policy has been to impose and maintain effec-
tive controls against the revival of a German war
machine. This we intend to do until the evidence
convinces us that progressive forces have strongly
established themselves in the political and eco-
nomic life of Germany. In order to foster the
growth of democratic practices and attitude, the
German people and their elected governments have
been granted substantial powers and responsibili-
ties. But even so, we have retained important
security controls, and, in the event of a real threat,
we can resume all or part of the authority we have

Wisely acbninistered, these various forms of
control can serve as important safeguards of the

April 17, 1950


peace, and there is no gainsaying the fact that
Germany still gives evidence of the need for re-
strictions and controls.

But restraints alone are not enough. Our
greater hope must lie in constructive efforts to
strengthen the progressive forces in German life.
We do not aim to remake Germany in our own
image, but we do seek to encourage Germans of
good will to build a vigorous, democratic state.

In its history, Germany has produced many
creative figures. But for too long, the world has
suffered from the destructive side of the German
character. In justice to herself and the world,
Germany must display to this and coming genera-
tions the peaceful, creative side of her genius.
This is the great challenge. Only the Germans
can meet it, but we can do much to help them.

In short, our German program seeks to achieve
security by restricting the power to make war
and by encouraging the growth of democracy.
This twofold progi'am is wise and necessary.
Nevertheless, in my judgment, it is only half the
remedy. The other half must be a united Europe
of which Germany must be a part.

Need for a United Europe

The need for a united Europe is made more
urgent by the threat from the East, but it would
still be present even without that threat. The
fact is, we cannot solve the German problem with-
out fitting it into the larger context of a united
Europe. Only within that context do I see the
opportunity to direct the economic, political, and
spiritual forces of Germany into healthy and
peaceful channels.

Time does not permit me to develop in detail
the reasons which lead me to this conclusion. But
I do wish to suggest some of the main considera-
tions. First, let us look for a moment at the
economic facts. These are critical : with only half
the area of prewar Germany, the Federal Repub-
lic has 70 percent of Germany's prewar popula-
tion, including over 9 million refugees from the
East. I hope we shall be successful in our efforts
to unite Germany but even with unity in order
to support that population Germany must rely on
industrial output even more heavily than she did
before the war.

Without the solution of these basic economic
problems, democratic forces may not ba able to
retain power and exercise influence in Germany.
It is essential then to build an economy strong
enough to support its larger population. Yet this
may require an economy strong enough to be a
potential threat to the security of its neighbors.
The dilemma must be solved.

This, I am convinced, can be accomplished only
by assimilating Germany into a broader European
community. Only thus can Germany and Europe
produce the goods and services necessary for a
prosperous and secure future.

These economic factors lead directly to the po-

litical. To insure the freer flow of trade and the
development of European markets will require ef-
fective political machinery. Moreover, centuries
of European conflict demonstrate the need for an
agency adequate to restrain nationalistic forces.
To be specific, after two world wars, Germany's
neighbors today fear the rebuilding of a strong
German economy unless some over-all rule of law
protects them against its use for ruthless aggres-

There is a third aspect of the problem which
may be the most important : the psychological or
spiritual factor. Man seeks loyalties and ideals
to which he can dedicate himself and which will
give meaning to his daily life. In an earlier day,
national states provided sufficient scope for this
need. Today, this is no longer true. Certainly in
Germany many youn^ men and women feel that
their lives are blocked by a dead end. The cause
is not only the physical or economic condition of
their country. The difficulty is rather that no goal
or concept seems to inspire hope or to evoke dedica-
tion. Without such a hope, without a wider hori-
zon, they will become victims of the demagogue.
But, with such a hope, they may create a free

In short, the crucial need is for a genuine Euro-
pean community. The demands of security, of
economic, and of spiritual health, all call for the
same solution. Events press us to this solution
and by "events" I do not mean merely the East-
West split, but the deeper moral, political, and
economic forces that surge in Europe today.

Prompt Action Necessary

Many factors call for prompt action. Today,
the West has the opportunity to unite for its own
defense. Tomorrow may be too late. Today, Ger-
many is still in a formative stage and, I believe,
wants to join in a united Europe. Tomorrow, the
situation in Germany and in other European coun-
tries may have taken a turn which will make action
more difficult. Today, the idea of a European
community has a strong hold on the minds of the
common people throughout the continent. To-
morrow, if steps have not been taken to make this
idea a reality, those hopes may be dashed and sup-
port for the program may be dissipated. Today,
the United States is firmly committed to help Eu-
rope and has shown in many ways its interest in
the development of a European community. To-
morrow, if action has not been taken toward that
goal, tliat interest may be succeeded by a sense
of frustration.

Finally, in the last 10 years, in war and peace,
the leaders and peoples of Europe have been learn-
ing to work together on many joint projects.
These skills and attitudes can form the firm base
for the next step toward a real community.

At the same time, every thoughtful person must
recognize the tremendous obstacles in the path of
European unity. No friend of Britain, aware of


Department of State Bulletin

her probloiiis, would dare urge any step wliicli
niiglit prejudice Britain's existence or impair her
position as a leader of nations. The United States,
too, will have to do its share. So it is with full
appreciation of the difliculties involved that I say
no pennanent solution of the German problem
seems possible without an effective European

Experience between the two wars and since
teaches us that palliatives will not do. And there
is good reason to believe the problem can be solved.
Tlie courage and energy so magnificently displayed
in the war can be enlisted in the creative task of
building a strong European community. The
European tradition is a heritage which the world
cannot afford to lose. That heritage can best be
preserved by making Europe a vital outlet for the
energies of its young men and women.

This concept of a new Western Europe is our
best hope for peace. It is a threat to no one. Its
very existence will reduce the danger of armed
conflict; its riglitful power will check the ruthless
plans of ambitious men ; and its democratic nature
will preclude any aggressive action on its own

Three hundred 3-ears ago, a member of Brad-
ford's company wrote back to England after the
first harsh winter in Plymouth colony. He was
able to weigh those hardships against tKe spiritual
goal of the Pilgrims. He wrote : "It is not with
us as with other men whom small things can dis-
courage, or small discontentments cause to wish
themselves at home again." We too must measure
our difficulties in the light of our own purposes.
If we carry in our hearts this spirit of the Pil-
grims, we may also count as small the obstacles to
our own high goals.

A Two- Year Record of Recovery

hy Secretary Acheson '

Two j^ears ago the American people, acting
through their Congress and the President, began
a "heroic adventure" with the people of Europe.
The phrase is not mine — it belongs to that valiant
worker for peace. Senator Vandenberg. I know
his heart is with General Marshall, Mr. Hoffman,
his colleagues of the Senate and House, and the
men and women of the Economic Cooperation Ad-
ministration in this celebration of the second an-
niversary of the program to which they have all
made vital contributions.

Looking back, why did we begin this venture?
The war had left the people of Europe nearly
prostrate. It would have been difficult, perhaps
impossible, for them to rise by their own efforts,
and we in i\jnerica knew that a peaceful and hope-
ful future could not be won for us or for them
until Europe once more stood proudly on its own

We did not limit the scope of our offer of

The sufferings and the destruction left by the
war were not confined to any one area. All over
the continent people were longing to rebuild a
useful and orderly existence after the long misery

'An addres.s delivered before officials and represent-
atives of the European Recovery Program in Washington,
D.C., Apr. 3, 1050, and released to the press on the same

and violence of the war. They wanted to restore
their homes and farms and workshops. They
wanted to plan for the futures of themselves and
their families ; they wanted to move toward a more
promising day, toward a world in which peace
might endure.

The Recovery Blueprint

We in America wanted this too. And so Gen-
eral Marshall proposed that all European coim-
tries should participate in a joint recovery
program, to which each would contribute in the
measure of its ability. In this way and with our
aid, we hoped that the weak and war-wracked
organism of Europe could regain strength and

We were rebuffed by a small group of men who
stood to profit from Europe's misery and who
have never viewed the United States with anything
but envy and hostility. More important, the
principle of international cooperation was scorned.
As a result of an arbitrary and selfish attitude on
the pait of some, the program was limited to that
half of Europe where men were at liberty to choose
the path of cooperation.

Within that half of Europe, the recovery plan
has now operated for 2 years under the directioa
of the European countries, working with Mr. Hoff-

Apti\ 17, 1950


man and Mr. Harriman and the splendid team they
have organized and led. This combination has
been unbeatable. This has been the kind of a con-
structive job that arouses the enthusiasm and spirit
and devotion of free men.

Production Mirrors Success

Great progress has been made in Western Eu-
rope. Over-all industrial production in 1949 was
15 percent above the 1938 level. Coal production
was 434 million metric tons in 1949 — in 1948 it was
398 million tons. Steel output in 1949 was 46
million metric tons — one-sixth more than in 1948.
The production of bread grains has risen by more
than half in the period from 1947 to 1949.

And these gains will continue, for the farmers
and workers have more and better tools and ma-
chines. In 1949 the average factory worker piro-
duced 25 pei'cent more than he did in 1947.

It would be incomplete if I spoke of European
recovery as though it mattered only to that one
continent. Western Europe is one of the world's
great workshops and one of the world's great mar-
kets. The recovery which has been made there
has extended its influence to many other coun-
tries — to the countries of South America, to Af-
rica, and to Southern Asia. It is gi'eatly to the
interest of all of us to have Western Europe strong
and healthy.

This illustrates what has been accomplished
through the Marshall Plan. This is the exciting
record of recovery. These statistics are alive with

Triumph of Cooperation

The progress that has been made is a triumph
of man's ingenuity, of man's will, of man's con-
fidence in the power of free institutions. It is not
a triumph for any one nation, or for any one class,
but a triumph of cooperation.

We are proud of our contribution. We have
supplied a great deal of assistance to this coopera-
tive effort. But our contribution has been only
the "something extra"' that was needed. It has
added the vital margin to the efforts and resources
of the people of Europe themselves.

When the European Eecovery Program began,
the Communists filled the air with dire predictions
that the European countries could not cooperate
in this way without its ending in their domination
by the United States. The experience of the Euro-
pean Recovery Program has shown how dishonest
and insubstantial this propaganda was. No coun-
try has lost anything but poverty; no country has
gained domination, but all have gained in self-
respect and have won a new confidence and a
strengthened independence. Meanwhile, the peo-
ples of Eastern Europe and China have learned
that there is indeed a part of the world where the
harvest of collaboration is a bitter fruit.

Looking to the Future

Now, as we look forward, what facts do we
want to call to mind?

First of all, we must remind ourselves that the
real test of stamina is how we do in the long middle
stretch of the race. Here is where staying power
has to come in to take over the initial enthusiasm.
Eighteen countries are cooperating in the most
exciting thing that is happening in the world.

Second, the recovery of production — which was
the first great object of the program — was diffi-
cult and arduous, but it was easier in many ways
than the recovery of trade — the second great ob-
ject of the program. To restore satisfactory levels
of trade, the European countries have to overcome
maladjustments arising from the economic effects
of two great wars and difficulties stemming from
political and economic conditions deeply rooted in
their history.

The revival of production was mainly a national
problem, which required a great national effort
and some outside assistance. The recovery of
trade, however, is largely an international prob-
lem, requiring a high degi-ee of cooperative give
and take and difficult, even painful, adjustments.
We are aware that it is difficult for the goverimients
of the participating countries, faced with large
needs and inadequate reserves, to risk in practice
what their own self-interest commends.

We also recognize that trade is a two-way street,
for us as well as for them, and that we bear a large
responsibility for achieving a satisfactory balanc-
ing of our trade with Europe and the world. We
are vigorously' addressing ourselves to this prob-
lem, which is of vital interest to our farmers and
workers and businessmen. Together with the par-
ticipating countries, we have to lay solid founda-
tions during the coming period for the future.
We are going to have to continue to cooperate in
many ways, to draw more closely together, to co-
oi'dinate our economic policies, if we are to build a
system that works.

Finally, we must remind ourselves that the
answer to the forces opjjosing recovery is the same
which we — the United States and the participat-
ing countries — gave in 1947, namely, to proceed
confidently, seriously, deliberately to the construc-
tive work at hand. Peace is what men make it and
the only way to win it is to plug away at it.

The European Recovery Program lights a path
to a future to which men can look M'ith confi-
dence for peace and order in a system based on free-
dom and justice. We in America continue to
regret that the bright hope of progress along this
path must be confined to half of Europe. We re-
gret that it has not yet ]n-oved possible for all the
peoples of Europe, to shake off the shackles of
bitterness and violence and to join hands in the cre-
ation of a better world. We regret, but we do not
despair, for the fear of a few will yet succumb
to the hope and the strength and the determination
of the many.


Department of State Bulletin

The Future of Foreign Trade

by Willard L. Thorp, Assistant Secretary for Economic Affairs '

Any similarity between foreign trade before the
war and during the postwar period is hirgely
coincidental. At the end of the war, many for-
eign countries found themselves with new import
requirements. For example, Europe had to im-
port from us many millions of tons of coal, and
France and Germany imported wheat by the ship-
load. We even sent rice to Japan. Sources of
supplj' also were shifted ; for example, rubber was
no longer an exclusive product of the tropics but
could be manufactured in the United States in
synthetic foiun, and huge oil reserves have been
discovered and developed in the Middle East.

The ability to make payment for imports by
the various countries also changed tremendously.
The United States greatly increased its capacity
to produce and its position as a creditor nation
while European countries found themselves with
drastically reduced foreign investments, increased
foreign obligations, and reduced productive ca-
pacity. Such important factors in international
economics as tourism and shipping faced the nec-
essity of reconstruction from the war's devasta-

There is another important change from the pre-
war picture. Because of the pressing demand for
imported goods and their limited ability to pay
for them, many countries continued their war con-
trols or established new ones over foreign trade
and foreign exchange. Import and export licenses
became as familiar as bills of lading. In fact, the
over-all pattern of controls was much more exten-
sive than prewar. Even those countries which
emerged from the war in strong financial condi-
tion, such as Sweden, Brazil, Mexico, and Canada,
saw their reserves dwindle under the pressure of
the demand for imported goods until they had to
join the list of countries where import restrictions
were necessary.

' Made liofnre the Sopii'ty of the Plasties Industry at
Chicago, III., on Mar. 30, 1050, and released to the press on
the same date.

Effects of a Continuing Financial Assistance

Among all these changed circumstances, the
most important postwar element has been the con-
tinuing extraordinary financial assistance ex-
tended to other countries by the United States. It
was this which made possible the tremendous vol-
ume of American exports so needed for postwar
relief and recovery. In 1947, the United States
shipped abroad l-i.4 billion dollars of commodities,
an all-time peacetime record. In that year, the
gap between our merchandise exports and our
merchandise imports was 8.7 billion dollars, made
up largely by American assistance plus the liquida-
tion of certain assets which still remained in the
possession of foreign countries. In 1948, our ex-
ports dropped by about 2 billion dollars, imports
increased, and the merchandise gap dropped to
slightly over 5.4 billion dollars. In 1949, both
exports and imports fell by about half a billion,
and the merchandise dollar gap was cut to slightly
below 5.3 billion dollars. As compared with 1947,
American commodity exports in 1949 were down
2.5 billion dollars, and commodity imports had
increased by slightly less than 1.0 billion dollars.

Developments in the Trade Pattern

These annual figures for 1949 do not clearly
disclose the more recent developments in the trade
pattern. The decline in 1949 took place in the last
half of the year, particularly in the record of ex-
ports. Although no single nuMith is a reliable
indicator in foreign trade matters, our exports in
January 1950 were the lowest since October 1946.
Imports in January, on the other hand, have been
exceeded in only 4 months since the end of the war.

The actual movement of goods, recorded in the
import and export statistics, is always the result
of influences at work months before, when plans
were made and orders placed. At least three nega-
tive factors were at work in early 1949 which
affected trade in the latter part of the year. First

Apr]] 17, 1950


was our own business recession, which, being
largely an inventory adjustment, involved the
postponement of purchases abroad as well as at
home. Second was the rapid weakening of the
British financial position which led to their pro-
gi-am to cut sterling-area dollar purchases by 25
percent and to the devaluation of the pound
sterling, followed rapidly by many other cur-
rencies. Third was the recognition by several
Latin American countries that they had overdrawn
on their commercial credit and had to curtail im-
ports until they could reduce their heavy backlog

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