The Foreign Economic Administrator (Crowley) to the Assistant Secretary of State (Clayton)
Dear Mr. Clayton: Thank you for your reply of January 22 to my letter of January 11, addressed to Mr. Stettinius, in which I raised the question of redefining at this time the supply policy of this Government with respect to Italy. In your reply you state that the determination of what supplies are needed in Italy for military purposes is primarily for the military authorities, and that the State Department is concerned that all reasonable military needs be met.
It is my understanding that the State Department by virtue of its representation on the Combined Civil Affairs Committee, in which this Administration has no voice, has the function there of expressing the views of the civilian agencies of the government with respect to the supplying of civilian needs in Italy during the period when the primary responsibility in supply matters rests with the Combined Chiefs of Staff. For this reason I sought, in my letter to you of January 11, to point out what I believe are grave deficiencies in our supply policy and their possible consequences, in the hope that the then forthcoming directive would be so drawn as to eliminate these defects.
You state in your reply that the directive, as drawn, is considerably broader with respect to civilian supply in that it makes provision for supplies necessary for the restoration of power systems and transportation and communications facilities, and for the production of civilian supplies in Italy which would otherwise have to be imported. The previous policy of the Combined Civil Affairs Committee, while it did not expressly mention these categories of supply in the same way, nevertheless did not expressly exclude them. The question is now, as always, the interpretation of the general policy of the Combined Civil Affairs Committee in the field and in Washington by the various administrative agencies, such as the Allied Commission, the [Page 1241] Allied Force Headquarters, and the U. S. Procurement Committee, which pass on the supply needs and the requisitions from the theater. It was my hope that the wording of the new directive would be sufficiently explicit to indicate to all the organizations concerned that a broader interpretation than that heretofore given was now required. On this question of interpretation you state that the State Department has been assured by the military authorities that they recognize that the prevention of unrest and disorder and the attainment of production for war purposes may now require additional imports in the military program not needed in the beginning. If this attitude is to have an effect on operations it must be transmitted to all the branches of the military organization involved in the supply program.
The concern of this administration with the problem is of long standing and arises from financial and administrative responsibility for some of the supplies being sent there, and from the fact that it has been supplying personnel to the Allied Commission. Information coming to me as a result of these responsibilities indicates that for over a year there has been a failure to give attention to the restoration of certain aspects of industry and agriculture which are essential to the minimum civilian economy of the country. The supply problem as a whole includes many other factors, of course. Italy still needs large quantities of food and other relief goods, and shipping constitutes a major difficulty with respect to these commodities. But the materials most needed for the restoration of the local economy are not large in tonnage, and failure to provide them has not, by and large, been due to shipping limitations, but rather to limitations of policy.
As early as December of 1943, I sent Mr. Adlai Stevenson60 to Italy to report to me on economic conditions there. In his report the policy followed by the military was described as follows:
“Military government has a limited objective—maintenance of civil order in the rear and prevention of disease among the civilian population …61 Military government makes no provision for the importation of supplies for the restoration of agriculture, industry and employment.
“… The net effect of this policy has been to defer the major economic questions for future handling. Failure to bring in necessary rehabilitation goods at this time must necessarily aggravate the Italian economic situation … Bad as the Italian economic situation is now, it may be expected to be worse six months or a year from now, subject only to the moderating effect of reasonably adequate food imports …[Page 1242]
“Economic policy objectives with respect to Italy should be defined progressively, sharply and as far in advance as possible … We suggest that present policy should include not only the military objective of food, fuel and medicine, but also at least a minimum of selective rehabilitation of industry and agriculture to increase self-support in food and essential consumer goods. Every day of delay in tackling this problem aggravates the economic disintegration, increases the burden on our food supply and shipping, and piles up problems for the future.”
Hon. Henry F. Grady, who represented this agency as well as the State Department in the Allied Control Commission, made a similar report on March 29, 1944,62 and in his final report to the Secretary of State dated July 31, 194462 he recommended a reduction of the military control over Italian resources and production, a rapid demilitarization of the Allied Commission and a definition of the policies of relief and rehabilitation.
General William O’Dwyer, who succeeded Mr. Henry F. Grady as Vice President of the Allied Control Commission and represented the FEA and the Department of State there, found the situation so serious that on September 8, 1944 he reported directly to the President recommending immediate increase in the allocation of shipping so as to carry to Italy larger amounts of food and other supplies. He also stated:
“… Next in importance to an increased food supply will be a partial restoration of power.
“Without adequate food supply and partial restoration of manufacturing the result may well be rioting, bloodshed and anarchy. Without these two basic aids the Italian people and the government will be in a desperate plight … A relatively slight change in present policies may help to correct this situation.”
As a consequence the President on September 8, 1944 sent the Secretary of War a memorandum directing the War Department to “take immediate action to make available the additional essential civilian supplies and shipping necessary to remedy this condition.” With a similar memorandum the President invited me to “cooperate to the fullest extent possible with the Secretary of War in meeting the objectives stated in the memorandum to him.”
On September 13, 1944 the Theater Commander63 in a cable to the Combined Chiefs of Staff pointed out the restrictions imposed on the civilian supply program by existing policies, and called for a new directive adapted to the current situation. His cable, paraphrased, reads in part:
“Supplies have been imported and distributed to the civilian population in order to minimize disease and prevent unrest, and efforts [Page 1243] toward economic rehabilitation have had the primary, if not the exclusive, purpose of utilizing Italy’s resources for the war effort and producing in Italy goods which would otherwise have had to be imported.
“In the light of the changed operational situation the limited directives which have governed seem no longer to be adequate … Moreover, if the two governments continue at this stage to consider only what is required in the interest of the war effort, they may lose the opportunity of ensuring one of their own long term interests, i.e., the establishment of a reasonably prosperous and contented Italy after the war.”
The cable then goes on to give certain examples of the difficulties arising under the limited policy:
“Notwithstanding this fact the standard of military necessity still obtains and in the provision of supply is being strictly adhered to. For example, a clothing program was submitted in June (Lac airgram 32) based on the estimated essential needs of the population this winter, but also having regard to the anti-inflationary effects of an increased supply of consumer goods. I am now asked, however, (Cal 738) to certify that this clothing is the minimum requirement to prevent disease and unrest which would prejudice military operations. As another example, not of great importance in itself but indicating the type of question which is now arising, in response to a requisition of paper essential for proper keeping of Italian tax records, it is asked (Cal 566) whether the paper is necessary ‘To control and manage the civil population’.”
This last extract most clearly indicates the need for a thorough understanding, at every administrative level, of the interpretation to be put upon the policy laid down by the Combined Chiefs of Staff. It also suggests to me that the State Department cannot safely remain indifferent to the application of this policy in day-to-day operations. The final authority for supply remains, during this period, in the military, but the consequences of military administration affect the civilian economy and our long-range interests with respect to Italy.
I would therefore like to suggest that the new directive should be accompanied on the U.S. side by a modification of the hitherto exclusive control exercised by the military over its implementation. The civilian agencies have up to now played a minor role ill policy decision and administration with respect to economic and supply problems both here and in the field. This situation should be changed, and the FEA, along with other civilian agencies, should be given official representation on, and a vote in all the committees where economic decisions on Italy are made.
Unless something of this sort is done neither this administration nor the State Department will be adequately informed of supply operations for Italy, nor will they be assured that the objectives of the civilian agencies, during the military period, are being met.[Page 1244]
For the financing of these civilian supplies appropriated funds, supplemented by the dollars made available, or to be made available to the Italian government, seem adequate for the time being. FEA will shortly submit proposals for further financing on which we hope to have your support.
I should like to add that unless a change makes itself felt immediately all reports indicate that conditions in Italy will be driven to the verge of political and social chaos, particularly if the northern areas are added to the territory under Allied control. I am sure that such consequences are not desired by this government, which has in its public utterances given every indication of a desire to provide a peaceful and democratic solution of Italian affairs.
I have confined my remarks to the supply phases of our economic policy toward Italy. With respect to the political and financial sections of the new directive, as you know, I concurred in the memorandum filed by the U.S. members of the Combined Civil Affairs Committee on January 22.64 Matters described in that memorandum seem to be of the utmost importance. However, the immediate problem in Italy is one of supply and it is only through an improvement of the supply program that immediate effects can be achieved.