Foreign Relations of the United States, 1947, The British Commonwealth; Europe, Volume III

Policy Planning Staff Files

Memorandum by the Director of the Policy Planning Staff (Kennan)¹

secret

[Washington,] September 4, 1947.

Report

Situation With Respect to European Recovery Program²

i. paris

The representatives of the 16 European nations assembled at Paris have had the character of their work prescribed for them with considerable rigidity by the background of their meeting and the atmosphere in which it is taking place. By way of reaction to Soviet charges, there has been strong emphasis on national sovereignty (perhaps the only triumph of Molotov’s visit to Paris). None of the delegates is a strong political figure domestically. There is none who could take any extensive liberties with the anxious reservations of the home governments. Finally, in the absence of the Russians the gathering has reverted, with a certain sense of emotional release, to the pattern of old-world courtesy and cordiality in which many of the participants were reared and for which they have instinctively longed throughout the rigors of a post-war diplomacy dominated by the Russian presence. This has practically ruled out any critical examination of the other fellow’s figures—particularly as most of the delegates must have lively doubts as to the entire validity of some of their own, and cannot be eager to enter a name-calling contest between pot and kettle.

It would be wrong to laugh at this gingerly approach or to put it all down to short-sighted timidity in the persons concerned. It reflects serious European realities which must be taken into account. Many of these governments are operating under formidable strains, internal and external. Some of them have internal economic problems with which they are politically too weak to cope. They do not want these problems spot-lighted and made critical issues by the Paris conference. Others, particularly the Scandinavians, are pathologically timorous about the Russians. Finding themselves somewhat unexpectedly in a gathering denounced by Molotov as politically wicked, they have the jumpy uncertainty of one who walks in pleasing but unaccustomed paths of sin. All of them are inhibited, I think, by the consciousness of what seem to them Herculean differences among the great powers over Germany and by the consequent feeling that the necessary center of any real European planning is beyond the effective scope of their activity. This conference reflects, in short, all the weakness, the escapism, the paralysis of a region caught by war in the midst of serious problems of long-term adjustment, and sadly torn by hardship, confusion and outside pressure.

In these circumstances, we must not look to the people in Paris to accomplish the impossible. That they can scale down their preliminary figure they have themselves admitted. That a further scaling down of that figure can be achieved by energetic pressure on the governments from our side, I think likely. That some sort of effort is being made to adjust the report in some measure to the suggestions advanced by Mr. Clayton on August 30 may be expected. As a result of all this, there will be a hopeful—and I think in large measure an honest—attempt to total up the cost of restoring production and of almost achieving “viability” throughout the region, in the light of such improvements of policy as the governments are now prepared to make. Perhaps a gesture or two will be made toward a reduction of the barriers to intra-European trade. A well-meant—and perhaps not entirely ineffective—appeal to the participating governments to put their financial houses in order may well be included.

But glaring deficiencies will remain. No bold or original approach to Europe’s problems will be forthcoming. No startling design will emerge here for the removal of the pitiful dependence of much of this great peninsular area on overseas supplies for which it cannot pay. Worst of all: the report will not fulfill all of the essential requirements listed by Mr. Clayton in his remarks to members of the Executive Committee on August 30. And the total figure of aid required from outside will be considerably higher than it would need to be if it assumed the type of action by the governments, individually and collectively, which we would like to see.

ii. causes of the limitations of the paris conference

Before we attempt to draw conclusions from this state of affairs let us examine more carefully the causes of it. The main causes may be summed up as follows: (1) England, (2) Germany, and (3) general political conditions on the continent.

(1) England.

As late as September 3 the Committee was not intending to include in its report a breakdown by countries of the over-all balance of payments. I understand that the British opposed the inclusion of this item. The reason for this seems obvious: a breakdown would show the great extent to which western European viability, as a whole, is a question of the viability of the combined zones of Germany and even more of Britain itself. I do not have the exact figures; but I am sure it is no exaggeration to say that if these two areas could be eliminated from the calculations, the problem of most of the remainder would not be formidably difficult of solution.

Britain’s position today is tragic to a point that challenges description. Her problems need no treatment here, except the reiteration that they are deep-seated and grave, and require for their solution all the coolness, the realism, the energy and the unity the British people can muster. In the face of this fact, as a body politic Britain is seriously sick. She is incapable of viewing her own situation realistically and dealing with it effectively.

This view is not confined to outsiders. It is admitted and even volunteered by individual Englishmen who have retained some clarity of vision; and it is coupled with an appeal to us, pitiable in the cost to national pride which it implies, to take responsibility, to find and announce the answer—to treat the British, in short, as a sick people and to tide them over until “they can recover their balance.”

In these circumstances, it can be no great wonder that the largest component of the European recovery problem could not be treated on a basis which would satisfy our “essentials”. The tragedy of the Labor Government lies in the fact that after waiting several decades for a chance to put certain principles into effect, it has finally come into power at precisely the moment when those principles became essentially inapplicable. It is too much to expect the leaders of that movement to recognize that, as an intellectual proposition, and to take the consequences out of their own logical deduction. Only the most dire practical necessity can push them to that point. But when they finally arrive there, they will have lost their justification for undertaking to rule the country; by that time conditions in England will have become quite intolerable; and the present leaders will be forced either to yield or to share governmental power with others. Only then, perhaps, will England be prepared to take all the measures which she ought to take if she were to make a full contribution to European recovery. But by then, unless we have extended some further aid in the meantime, the deterioration may well have been so great that the cost of the problem will be greatly increased.

This deterioration is already progressing by leaps and bounds. It is exerting a cruel pressure on the government. This is probably desirable and necessary; and sensible Englishmen recognize this regretfully. But the usefulness of pressure has definite limits. It is incumbent on us to calculate those limits with the greatest of precision.

Meanwhile, we may hope that the British Government will come a certain distance toward a more realistic program and thus come closer to meeting our “essentials”. But it is too much to hope that it can come all the way within the time allowed. A gap will remain—a gap in which British governmental behavior will be unrealistic, erratic, slap-happy.

It is our problem how to handle that gap. If we choose to hold the British Government fully responsible, as a rational body, and to treat it accordingly, we may have to despair of it—and of European recovery. If we choose to treat it as a sick man, then perhaps, by a judicious admixture of patience and pressure, we can string things out to a better state of affairs.

(2) Germany.

The bizonal administration in Germany answered the questionnaires submitted by the Conference in much the same way, I think, as did the other governments: honestly, against the background of present policies, and conceding to the Conference no authority whatsoever to change those policies. On the contrary, while the Conference was in progress, events continued to occur (failure to agree on the use of Benelux ports; failure to agree on purchase of European fish catch; level of industry talks) which made it evident that the chances of the Conference to influence the degree of integration of German economy into that of western Europe in general would remain meager indeed. It had no choice but to accept unquestioning the figures of the bizonal administration, as it accepted the figures of the other countries.

This is not to say that had things been otherwise—had the bizonal authorities participated in the Conference and shown a readiness to adjust their plans to the requirements of a European recovery program—the Conference would have tackled in a constructive and business-like way the working-out of an integrated program, making full and effective use of German economy. French inhibitions and fear of communist criticism would alone have prevented that. But the isolation of Germany from the effective scope of Conference action created an a priori block to any genuine attempt to get at the ills of the area—through the major international bottlenecks—and relieved the participants of a responsibility they would otherwise have had at least to bear and to face. In this sense, we share perhaps a portion of the responsibility for the failure of the Conference to meet the demands we ourselves imposed.

(3) Political conditions.

The ability of the delegates at Paris to draft a recovery program is no stronger than the ability and readiness of their respective governments to cooperate by measures of internal policy and by the acceptance of new international engagements. These acts require, in varying degrees, resolution, courage, clarity of vision, and ability to enlist popular support. Yet most of these governments are afflicted just at this time with abnormal weaknesses, fears and prejudices. The illness of which the British Government suffers is endemic among all governments in one degree or another. Britain’s is an extreme case. But it is not the only severe case among the sixteen nations represented at Paris. And the work of the Conference cannot logically be stronger than the political and psychological fabric of the war-torn, fear-wracked, confused and maladjusted area which is the object of its labors.

Now there is none of these three main difficulties which will not yield to well placed effort over a long period of time. And for that reason the long-term chances for European recovery should not be underrated in the light of present impediments. But, on the other hand, there is none of these three factors which can be corrected within the brief period of grace which still remains before European conditions deteriorate beyond the saving-power of present concepts.

iii. how has europe responded to the harvard speech?

The suggestions contained in the Harvard speech were predicated on the underlying thought that unless Europe could make a real effort on her own behalf, she would not be able to make any effective use of foreign assistance. The Secretary’s observations had the effect of putting that question to the test.

Today we are in a position to gauge the answer. The answer is that Europe is only partially capable of making on her own behalf and within the time which circumstances will allow the effort which the Harvard speech envisaged—the remainder of the effort she would like to make, and probably will make in large part, given time and opportunity. But she cannot make it now.

Meanwhile the economic situation of two of the leading countries, namely England and France, is deteriorating with terrifying rapidity. If nothing is done for them within two to three months, they both face genuine hunger by winter, and other complications of unpredictable dimensions, with unforeseeable effects in other areas of the world.

iv. where do we go from here?

(a) First: as to the treatment of the report of the Paris Conference. Here we have the following alternatives:

1. We can let things take their course, receive a report which will not really be satisfactory, review it and reject it in due course, making no further effort to aid.

2. We can make efforts to have the report presented in such a way as to avoid any impression of finality; let it come to us on the understanding that it will be used only as a basis of further discussion; try to whittle it down as much as possible by negotiation; then give it final consideration in the Executive Branch of our Government and decide unilaterally what we finally wish to present to Congress. This would mean that we would listen to all that the Europeans had to say, but in the end we would not ask them, we would just tell them what they would get.

This last is what some of the more far-sighted of the Europeans hope we will do. They recognize that their report will inevitably be padded. They know that they themselves cannot pare it as it should be pared. As one of them said to me: “You people go ahead and cut it down. We will squawk over every cut. Never mind that. Most of your cuts will be justified, and we will squawk anyway. If any of your cuts are really unjustified, we will set up such a genuine and unmistakable howl that you will know you have made a mistake and you can then correct it.” I know of nothing that better illustrates Europe’s pathetic weakness, and Europe’s consciousness of that weakness, than this remark.

Unquestionably, if we are prepared to recognize that Europe should be aided in spite of herself and if we wish a general aid program put in hand promptly this fall, then this second alternative is the one we should adopt.

(b) Secondly, as to the question of timing.

1. We can try to get an aid program through the next regular session of Congress, leaving ourselves plenty of time to thrash it out, giving Europe no other aid in the meantime, and hoping that it will not come apart at the seams before the aid becomes effective.

2. We can hold a special session of Congress before Christmas and try to jam through it a general aid program, the final dimensions of which would probably have to be determined unilaterally by ourselves as discussed under IV(a)2. Here again we would have to bet on Europe’s holding out until the program could be effective.

3. We can attempt to evolve and implement voluntarily and without solicitation from the Europeans, an immediate or early emergency aid program to be administered by ourselves, along the lines of “Food and Fuel for Europe” or some such slogan, leaving the general program to be dealt with expeditiously but in due course.

My own appraisal of the urgency of Europe’s plight leads me to reject alternative No. 1 as giving us no plausible guaranty against a catastrophic deterioration of the world situation.

The choice is between No. 2 and No. 3, and there is much to be said for and against each of them.

On balance I favor No. 3. To evolve a really sound approach to Europe’s problems is going to take time. The problems are so grave, so complex, so far-reaching, so critical for the future of our people and the world at large, that they should be dealt with in most orderly and considered manner. This cannot be done if we have the consciousness that people are starving while we deliberate. It cannot be done if the general atmosphere is one of panic and collapse. A short-term aid program would buy us time in which to deal deliberately and carefully with the long-term program. It could be publicly justified on this basis. Put in hand spontaneously by us, without request from Europe, it should do much to offset the vicious propaganda current in Europe as to the motives of our policies toward Europe. It need not constitute a violation of the principle of “no more piece-meal aid”, because it could easily be so arranged that it would eventually either be absorbed into any general aid program which Congress might approve or terminate at once if Congress turned such a project down completely.

v. the basic problem

The main consideration which inclines me to this last alternative is the impression which I am carrying back from Europe with me of the immense seriousness and complexity of the basic problem with which we are dealing. I am not sure that we have come anywhere near to finding the real answers within the scope of our present thinking. At last Saturday’s meeting of Mr. Clayton with representatives of the Executive Committee, Sir Oliver Franks stubbornly insisted that he and his colleagues would not be honest, in the light of the data they had before them, if they did not show a small continued deficit at the end of the four-year period. Some of the members of our official family saw in this a violation of the principles on which the Europeans had been asked to approach this matter, and thus a cause for indignation. I could not share this feeling. What Franks was saying was simply that he and his colleagues were not sure that the area in question could really be made “viable” within the four-year period which they had selected for a program of aid. They felt that they were in honesty bound to face this fact.

I think this doubt legitimate. It arises primarily from the component doubts concerning the full efficacy of the present approach as a solution of the problems of England and Germany. In neither of these cases am I sure that we have faced the facts. The replies which were submitted by the bizonal area to the questionnaire sent in by the Paris Conference showed a future German economic development based on several optimistic assumptions. A key assumption, for example, was that the output of steel could be brought within four years to a figure of ten million tons per annum. Another was that adequate export markets would exist and that the terms of trade would develop in Germany’s favor. Nevertheless, this reply, too, did not show complete hope of “viability” at the end of the four-year period.

In the case of England, the situation is similar. On the same sort of optimistic assumptions, people in Paris can see Britain at the end of the aid program almost self-sufficient, not quite. If these assumptions should prove to be unsubstantial, the gap would be greater.

But in the case of Britain things are complicated by the process of internal adjustment which is now wracking the British people and Government. We have seen that only the pressure of painful necessity can force a development in the right direction. But we have also seen that if the pressure of necessity gets too great, the result can be a breaking instead of a yielding—a catastrophe instead of an adjustment. For us to attempt to calculate with precision, on a day-by-day basis, the exact position of this point-with-no-return and to utilize the pressure of our foreign aid program to keep the British just close enough to this point without letting them go beyond it, seems to me to demand of us an operating flexibility which we do not enjoy, and therefore to involve tremendous political risks. I am afraid that in this case the whole process of adaptation which the British people must undergo will become fouled up with inevitable psychological by-products of a protracted relationship with us an [as] an object of charity.

And again, I see no guarantee of success. With many of England’s traditional sources of income lost I think there is for her no satisfactory economic future, in the long run, which does not include (1) a long-term spontaneous flow of private capital from this country to England, and (2) a considerable freedom of labor and population to emigrate from areas in Britain where their presence is no longer economically justified to other continents, particularly our own. In other words, the problem of England’s long-term economic future is one of flexible and fluid adaptation to the economies of this country and Canada.

I do not believe that this process can be successfully brought about by inter-governmental negotiations across the barriers which now divide these countries as independent and sovereign nations. For this reason I am more and more inclined to the feeling that there is no satisfactory solution for England’s long-term problems, from the United States standpoint, than some closer form of association between England, Canada, and our own country: something which would involve a sharing of certain of the powers of sovereignty among the three countries. There is no necessity that a move in this direction should take the form of any sudden or abrupt act. It can well be planned as a gradual process, to be completed through a five or ten year program. But whatever it is, it should be threshed out and determined in this immediate period that lies before us, as part of the long-term problem of European recovery. And this, again, requires time for study, time for the preparation of public opinion, and time for careful and highly complicated negotiation.

vi. summary

In short, the long-term problem before us seems to me to be a deeper, more far-reaching, and more complex one than any of us have realized. We cannot deal successfully with a program of this nature on the spur of the moment or under the abnormal pressure which would be caused by a further deterioration of conditions in Europe.

For this reason, we must undertake at once an interim aid program with which to buy time. If we do this, then both problems—the short-term one and the long-term one—may still be solved. If we do not do it, we shall solve neither the one nor the other.

1. Marginal notation: “Kennan Report on Paris Trip”.
2. Initialed “G.C.M.”