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

851.51/9–1047

Memorandum by Mr. Ridgway B. Knight of the American Embassy in France¹

secret

[Paris,] September 10, 1947.

Memorandum of Conversation Between Mr. Robert Schuman² and Messrs. Wolverton, Macy, Keogh, and Monroney³

Mr. Schuman, after welcoming the committee, stated that in addition to answering with complete frankness any question which the committee members might care to ask, he would see that complete data and written answers would be supplied on any subject that might be of particular interest to his visitors.

Mr. Wolverton thanked Mr. Schuman for his welcome and indicated the committee’s hope that it might be of assistance in helping France in solving the present difficult situation. He reminded the Minister of Finance of American democratic institutions, of the necessity of Congressional approval of any Presidential policy, and also of the fact that in their turn the various Congressmen were answerable to their constituents. With a view to any possible assistance to France, certain major French factors were of particular importance to American public opinion. After consenting to heavy financial sacrifices, the United States had balanced its budget, and the average American would not view with favor aiding a foreign country which had not stabilized its currency and achieved a sane budgetary balance.

Mr. Schuman answered that since he became Finance Minister fourteen months ago, his primary objective has been the balancing of the French budget. He said that considerable efforts had been made and material results obtained, adding that had it not been for the increases in wages and prices, such an equilibrium in France’s public finances would have already been attained. As it was, it appears that France’s normal budget is “within a few billion francs of being balanced”. He then reminded the committee that France had been invaded three times within the span of a single life, and insisted on the vastness of France’s losses between 1940 and 1945: destructions, systematic exploitation and pillaging by the Germans, and the less spectacular but important losses due to the fact that French equipment of all kinds could not be maintained properly during those six years. While it was the French Government’s policy to achieve a balance of the normal budget, the reconstruction of France, representing capital expenditures, had to be covered by an extraordinary budget. He indicated that such reconstruction budgets would have to cover total capital expenditures of about ten thousand billion francs over the course of the reconstruction period which he mentioned as twelve to fifteen years.

Mr. Schuman went on to declare that while France had made great efforts within the last two years and rebuilt her railroad and road system and her industries so that they were now approaching French pre-war level, the French economy had now reached a point where it was “in neutral” and could not proceed without outside assistance.

Mr. Macy referred to past American aid and said that it was essential that any new assistance not constitute “just another palliative” but lead to a real and constructive solution of the problem. Mr. Schuman expressed his full accord as well as the French Government’s agreement with this position.

Mr. Monroney, after commenting favorably on certain results of France’s reconstruction efforts which he had been able to witness personally, drew attention to the vital necessity of France’s exerting herself to help herself in order to make possible any American assistance. As an example, he raised the wheat problem and the necessity for France to put back under cultivation the same acreage which was planted before the war. Also referring to wheat, he drew attention to the great difficulties of convincing American farmers not to feed wheat to livestock—in view of the short corn crop—if these same farmers could not be assured that this practice had been done away with in France. Mr. Schuman answered that the French Government was fully alive to these problems, that premiums had been offered in the past year to farmers who sowed wheat, but that it had not been possible to accomplish much in this field in view of the low tax receipts from peasant sources. He added that more effective measures—both inducements and penalties—would be added but that, of course, they belonged within the province of his colleague, the Minister of Agriculture. As to the problem of feeding wheat to animals, it was stated that severe penalties had been enacted, but as farm property was over-divided in France (three million farms), measures of control and enforcement were exceedingly difficult.

Answering a question as to the French citizen’s willingness to tighten his financial belt and accept heavier taxes, Mr. Schuman said that it had been decided yesterday morning to form a committee of several Ministers in order to reduce Government expenses as much as possible and see to it that these decisions were implemented. Furthermore, Mr. Schuman declared that the entire fiscal policy and tax structure as well as methods of financial administration were under review, and that a bill of complete reform would be introduced into the French legislature in November, doubtless pass before the end of the year, and come into force on January 1, 1948. Mr. Schuman said that in France it was not a question of raising tax rates, which were already so high as to discourage initiative. On the contrary income tax rates had to be revised downward to take into account the devaluation of the franc since 1940 and the [ten-fold]⁴ increase in living expenses. However, French tax receipts must and will be increased. At present there are vast sectors of French economic life which pay little in the way of taxes: farms, black market operators, the liberal professions, small shopkeepers who are able to dodge taxes. Mr. Schuman said that the French Government’s principal objective in the financial field was to plug these holes by simplifying the fiscal set-up dating back to the days of Napoleon and which since then has “grown like Topsy” to a complicated and unrelated whole, impossible to enforce.

Answering a question as to the possibility of efficiently administering France’s large colonial Empire and thus obtaining assistance for the mother country, Mr. Schuman briefly answered that this was the intent and hope of the French Government.

Mr. MacChesney⁵ expressed his pleasure at being once again back on French soil and working on the solution of France’s problems. He also drew the Minister’s attention to the necessity of France’s doing the maximum to help herself in order to convince American public opinion that France should be aided.

Again, while thanking the members of the committee for their interest in France, Mr. Schuman placed his services at their disposal to supply any additional information in writing which they might desire.

Ridgway B. Knight

1. Transmitted to the Department as enclosure 1 to despatch 9585, September 10, from Paris.
2. French Minister of Finance.
3. Members of the Sub-Committee for France and the Benelux Countries, Select Committee on Foreign Aid, House of Representatives, United States Congress.
4. Brackets appear in the source text.
5. Brunson MacChesney, consultant to the Select Committee on Foreign Aid, House of Representatives.