Foreign Relations of the United States, 1949, National Security Affairs, Foreign Economic Policy, Volume I

Policy Planning Staff Files

Minutes of the 148th Meeting of the Policy Planning Staff, Tuesday, October 11, 1949, 11 a. m. to 1 p. m., Department of State¹

October 11, 1949, 11 a.m. to 1 p.m.

top secret

Present:	George Kennan	Dorothy Fosdick
	Paul Nitze	Robert Hooker
	Ware Adams	Robert Joyce
	Lampton Berry	Carlton Savage
	George Butler	Harry Schwartz
	John Davies	Robert Tufts

• Lucius D. Battle, S/S
• Carlisle H. Humelsine, S/S
• Richard M. Scammon, R
• Walter Schwinn, P
• Robert D. Murphy, GA
• The Secretary

Mr. Kennan started the discussion with a general description of what he considers the major issues facing the U.S. today:

The situation is high-lighted by the differences between the East and the West—at least to the extent that you can start a consideration of the situation with this factor. It is the most serious of all individual factors, although it is not the sum total of our difficulties.

In general, both sides have somewhat over-extended lines and are attempting to consolidate their positions. The best evidence available to us indicates that the Russians are not planning to start a war but that they are, on the contrary, too preoccupied with Tito and the Far East. As for the U.S. the question can be phrased: Are we holding our own? In attempting to arrive at an answer there are several major aspects of the general problem, which can be arbitrarily divided as follows:

1. British adjustment to the economic realities which confront her, the necessity for which has not been materially changed by devaluation.² As regards “a Policy” to guide the U.S. in facing and handling this problem, it is perhaps more logical to speak of a series of devices by which we will have to handle the continuous repercussions which can be expected during the period of adjustment. One of the most important devices is the continuing group which we must set up with the British as a piece of long-term machinery through which to work out mutual problems and to study the advisability of closer association.

2. The question of the type of association which the Western World should and/or can form. This involves the related problems of European Union and the closer association of the U.S., U.K., and Canada. The Policy Planning Staff is presently attempting to refine PPS/55³ as a general guide for this group of problems.

3. The problems that arise in connection with Germany and Japan as occupied countries. The pattern of these problems was largely set by the manner in which the war was concluded and by the fact that we are committed to handle these problems in cooperation with our allies. Things are not going too well in either of these countries, the gravest future danger probably being that inherent in a rise of ugly German nationalism. The Secretary at this point said that he believed that the French would have to take the leadership in the solution of this problem and that the rate of progress of any solution would depend upon the speed with which the French were willing to proceed. He said that he had made this point to Mr. Schuman⁴ when he was in Washington at the time they were discussing the dismantling of German industry.⁵ The Secretary pointed out that it was obvious that sooner or later we were going to have to stop dismantling. He raised the question of whether it were not better to do it before German pressures increased any further. Mr. Kennan added that in his view if the French could not face up to this problem today when Germany is divided, occupied, and weak, it can hardly expect to do so later when the Germans have recovered. He felt that any idea of lining up everyone against the Germans was basically a poor one as it would simply mean that the Russians would more easily be able to take advantage of the situation.

4. Mr. Kennan expressed his opinion that in the Far East the problem is not one primarily of Russians but of the basic relations of Americans with Asiatics. He quoted the historian, Bemis, who went so far as to call the open-door the “great aberration”.⁶ He considered personally that a hands-off policy is probably better than the kind of meddling in which we have indulged to date.

5. The whole relationship between military and political policies in the light of the announcement that the Russians possess the atom bomb.⁷ In this general connection, Mr. Kennan said that he had drafted an article which, if properly cleared throughout the Government, might with the Secretary’s approval be published by Reader’s Digest.⁸ Mr. Nitze suggested that Mr. Kennan’s outline which had been arranged on a geographic basis could also be profitably examined on a functional arrangement, i.e., problems examined from the military, economic and political points of view.

The Secretary said that we need our own analysis of what is happening and where we are heading, an analysis made independently of economists. Mr. Nitze pointed out that economists in general are leery of making projections into the future, as they felt it was a very difficult field in which to predict the future and that their professional reputations were at stake. The Secretary said that one of the best men he knew of who might undertake a study of the kind he had in mind was Kyriakos Varvaressos, who is presently connected with the International Bank and was once Greek Minister of Finance. The Secretary said that Mr. Varvaressos published two studies of the ECA, one before passage and one after, which in retrospect were the best he had seen on the subject. The Secretary stated that we must consider what present societies are capable of doing given the nature of their organization. He suggested that what is needed is a thorough study of the history of the last 35 or 40 years. During that time we have been holding a concept that if something “abnormal” happened, it was a temporary thing and that we would shortly return to “normality”; whereas, in actuality, during that entire period the realities of the situation confronting us forced us to do nothing but “abnormal” things. In the Secretary’s view, the prevailing interpretation of this concept is to the effect that we must end this 35 or 40 year program of abnormality by 1952. The Secretary suggested that unless we face up to what we want, decide on how to get it, and take the necessary action, the whole structure of the Western World could fall apart in 1952.

Mr. Kennan felt that the Western World need not necessarily collapse simply because we stopped financing it but that perhaps the main strain might be felt in this country unless we can decide how we can swallow our own surpluses. Mr. Nitze said that we may not have to spend $5 billion a year abroad but we probably will have to spend something.

Mr. Kennan then gave a brief outline of Mr. Hooker’s study of JCS papers⁹ from which he said that you could draw two general conclusions: On the one hand, there seemed to be an acceptance throughout the Government of the infallibility of the Joint Chiefs of Staff, and, on the other hand, it was obvious that the Joint Chiefs drew their conclusions from the maximum capabilities of the enemy which they based on the improbable to a greater degree than on the probable course of events. He stated his belief that there is no clear-cut Government concept of what our objectives would be if we got into a war with Russia. His own view is that neither total annihilation nor complete surrender of the enemy is possible and, therefore, that limited rather than total warfare should be our objective.

Mr. Kennan also mentioned the concept of retaliation by atomic bombing in the light of the knowledge that the Russians now have the atomic bomb and suggested that it may now be impossible for us to retaliate with the atomic bomb against a Russian attack with orthodox weapons. Mr. Nitze pointed out that this fact might make conventional armaments and their possession by the Western European nations, as well as by ourselves, all the more important; that it might be necessary, therefore, to lower rather than to raise civilian standards of living in order to produce arms as against consumer goods; and that this in turn might call for a different propaganda approach than the one we were presently using. For instance, the European countries might be able to produce enough armaments if they devoted 20% rather than 5% of their national economy to it. The Secretary said, however, that we must examine these problems from the point of view of what peoples and governments will do rather than what they can do.

The Secretary said that it was his feeling that we should look first at the general implications of the Russian possession of the atomic bomb and then proceed to the examination of the problem of international control of atomic energy. Mr. Nitze pointed out that any effective civilian defense in this country against atomic warfare might affect the determination of the enemy to use the bomb. The Secretary made the point that to agree with the Russians not to use atomic bombs in warfare was to deprive yourself of the effect on the enemy of the fear of retaliation by atomic bombing against orthodox aggression.

Mr. Kennan pointed out that the only decision to date on this subject is that the President will determine whether or not to use it;¹⁰ but, in the meantime, it was his opinion that the Military have been basing all their plans on the use of the bomb, thus making it difficult if not impossible to do anything else when the time comes to make a decision. He also added that he and the others in the Department who were supposed to be Russian experts were against atomic bombing of Russian cities. They feel that the most probable result would be to stiffen the courage and will to resist of the Russian people. From this he went on to say that if we decided it would be unfeasible to use the atomic bomb in the first instance there might be some advantage in then agreeing with the Russians that neither of us would use it at all.

The Secretary pointed out that by the middle of January at the latest we will need a great deal more light on many of these problems than we have at present. For example, if for a variety of reasons we wish to agree with the Russians not to use the bomb such a decision would make rather awkward a request of Congress for additional appropriations to make more bombs which we weren’t going to use;¹¹ by January more military assistance funds will be required; ECA will be up before Congress again and the Secretary believes that it is going to be much more difficult to put through than before.

Mr. Nitze said he felt it important that in our planning for the future we not assume that 1952 is an automatic cut-off date for foreign assistance, even though we shall probably have to maintain the contrary publicly because of the necessary effect on European countries.

The Secretary said that we would have to set Christmas as a target date for coming up with the answers to all of these problems and that he planned to spend two afternoons or mornings a week with the Planning Staff in working them out.

1. These minutes were prepared by Harry H. Schwartz of the Policy Planning Staff.
2. For documentation on U.S. interest in the British financial crisis, see vol. iv, pp. 781 ff.
3. PPS/55, July 7, 1949, a study of the U.S. position with respect to European Union, is not printed; for documentation on that subject, see vol. iv, pp. 1 ff. and pp. 367 ff.
4. Robert Schuman, French Foreign Minister.
5. For documentation on German reparations and the dismantling of German industry, see vol. iii, pp. 546 ff.
6. Chapter XXVI of A Diplomatic History of the United States (New York: Henry Holt and Company, 1936) by Samuel Flagg Bemis is titled “The Great Aberration.” That chapter discussed the Spanish-American War and its aftermath. Chapter XXVII, “The Open Door and the Far East (1899–1914)” is also critical of American policy.
7. For documentation concerning President Truman’s announcement on September 23 that an atomic explosion had occurred in the Soviet Union, see pp. 1 ff. and pp. 419 ff.
8. An article by Kennan titled “Is War with Russia Inevitable?” appeared in the Department of State Bulletin, February 20, 1950, p. 267, and also in the March 1950, issue of Reader’s Digest.
9. Reference is to an analysis of material originating with the Joint Chiefs of Staff for the years 1948 and 1949 in the files of the Policy Planning Staff, prepared by Robert Hooker of the Policy Planning Staff and submitted to Kennan on September 21. The study is not printed.
10. Reference is to document NSC 30, “U.S. Policy on Atomic Warfare”, approved by the National Security Council on September 16, 1948; for text, see Foreign Relations, 1948, vol. i, Part 2, p. 624.
11. For documentation on the question of expanding the U.S. atomic weapons production program, see pp. 419 ff.