800.51/4–247 Rec’d

Memorandum Prepared in the Department of State


The Financing of Reconstruction and Development Basic Foreign Financial Policies of the United States

The basic objectives and scope of foreign financial policy, which have been adequately discussed elsewhere, contemplate:

The carrying out of a lend-lease policy adequate for the fullest prosecution of the war against the common enemy.
Full participation in relief and rehabilitation measures.
International cooperation in monetary and exchange management through the International Monetary Fund, supplemented by bilateral arrangements with the British and perhaps certain other nations.
Public and private dollar investment in reconstruction and development abroad during the next decade to the extent of $25 to 30 billion.

Such a program coupled with an adequate policy of full employment within the United States, and other elements of an international program of expanding world economic activity and trade can have most satisfactory and useful results. In the absence of relatively stable full employment at home and a sensible commercial policy it may well end in frustration.

The present memorandum will deal only with point 4—public and private dollar investment in reconstruction and development abroad.

reconstruction and development needs 7

[Page 1394]
In Millions of Dollars Totals
Western Europe
United Kingdom 2000–3000
Belgium 200– 400
Netherlands and NEI 1000–1500
Denmark 100– 150
France 1000–2000
Italy 250– 500
Norway 400– 500
— — 4950 – 8050
Eastern and Southeastern Europe
U.S.S.R. 6000–6000
Greece 100– 150
Czechoslovakia 400– 500
Poland ? ?
Yugoslavia 100– 200
— — 6600 – 6850
Europe—Economic Development
 (public and private financing)
2500 – 3500
Africa. Near and Middle East
Public investments 1000–1500
Private investments 300– 500
— — 1300 – 2000
Latin America
Public investments 2000–2350
Private investments 1000–1150
— — 3000 – 3500
Far East
China 3500 – 4500
Other — —
Grand Total 20850–28400

There are attached separate memoranda8 relating to transitional financial aid to Great Britain and credits to the U.S.S.R. included in the above table.

Sources of Required Dollar Funds for Reconstruction and Development

  • Private Foreign Investment—At least $10 billion in 10 years—largely “direct” investment.
  • Export-Import Bank—$5 to 10 billion over 10 years. The $3.5 billion now being requested includes only $1 billion for U.S.S.R. and does not include any amount for U.K.
  • International Bank for Reconstruction and Development—Initially about $9 billion, most of which will be in dollar credits although the financial responsibility is spread over the member governments.
  • Only a small part of this may be expected to be forthcoming during 1946.

Legislation Required

  • Export-Import Bank—Bill in House and Senate to increase lending ability to $3.5 billion.
  • Bretton Woods Institutions—Bill in Senate Committee.
  • Repeal of Johnson Act—In Senate and House Committees.
  1. The table that follows was the same with minor exceptions as one prepared by D. M. Phelps of the Division of Foreign Economic Development, and which was placed in a memorandum of May 11, 1945 that went from Mr. Phelps to Mr. Collado and the Assistant Secretary (Clayton) (840.50 UNRRA/5–1145). The Phelps memorandum, entitled “Preliminary Estimates of Financial Requirements for Reconstruction and Development”, surveyed in considerable detail the reconstruction requirements of war-devastated countries on a world-wide basis. It stated in part:

    “For some months past available data has been assembled on the extent of destruction in countries now liberated, the estimated costs of reconstruction, their foreign assets which may be used to meet requirements from abroad, and the probable deficits in their balances of payments in early post-war years. While these data are in some instances fragmentary and inconclusive it has, nevertheless, been thought advisable on the basis of information now available to make estimates of the possible financial requirements of these countries from the United States, other nations, or the Bretton Woods institutions, if they be established, to meet these deficits. Estimates have also been made of the probable financial needs of these countries recently liberated and of other nations likewise for economic development during the first decade after the end of the war. It should be recognized that all estimates are of necessity highly tentative, but some idea may, nevertheless, be gained as to the possible extent of financial assistance which will be needed by other nations in the early post-war period and of the possibilities for foreign investment, both for reconstruction and economic development.

    [Here follows detailed country by country summary and the original table.]

    “This total figure should be considered as an estimate of financial requirements for reconstruction and economic development during the initial decade after the termination of the war. Although the estimates made for Western European countries are based largely on probable deficits in balances of payments in early post-war years, that is, during the next three to five years, Europe’s estimated financial requirements for the remainder of the first decade are included in the estimate for European economic development, both public and private.

    “… However, the likelihood that investments in the estimated amount will be made must be predicated upon the establishment of the Monetary Fund and the International Bank for Reconstruction and Development; increased funds available to the Export-Import Bank, and the repeal of the Johnson Act and the ‘Johnson Act’ provision in the Export-Import Bank legislation.”

  2. Not printed.