700.5/7–1950
Memorandum of Conversation, by the Secretary of State
Mr. Clayton1 called at his request. He said that the problem before us was how the free world could arm itself in order to get sufficient strength within sufficient time to defeat the menace of communist aggression. The essential part of this problem was to accomplish this result without the United States going broke. If that occurred, we should have lost the struggle. I agreed that this was the problem.
Mr. Clayton stated that in his opinion the only way in which this could be done was through federal union of the democracies. He particularly spoke of the importance of bringing Australia and New Zealand into such a federal union. I asked how this would affect the immediate military and financial program since the basic task was for all the democracies to devote a much greater percentage than at present of their national income to military purposes and since mutual aid is already a principle in this effort. Mr. Clayton said that if western Europe was overrun there might be the possibility of the British Fleet’s surrendering to the Communists, whereas under the federal union this would not occur.
Mr. Clayton went on to say that his principal point was not a military one but an economic one. He thought that it was not possible to get the necessary economic strength unless all financial and trade barriers were removed and that, under the present small national divisions in Europe, economic strength was not possible. He said that the President had an opportunity to become one of the greatest men in history if he would pick up this idea and move forward with it quickly. He urged me to withdraw the State Department’s opposition to the resolution now pending before the Thomas Subcommittee so that the matter could be acted upon by the Congress and the public response in the United States could be obtained. He thought that if we took the initiative in this matter, the people of the democracy would override the administration and insist on the formation of the federal union. I told Mr. Clayton that I would give the most careful consideration to what he said, as I always did to his views.
In leaving, Mr. Clayton said that in his opinion between 20 and 30 percent of our national income should be devoted to increasing our military strength and that anyone who opposed such a program would meet with intense opposition throughout the country. I said that the Department was and had been keenly aware of the urgent necessity for the most speedy and substantial increases in the amount devoted to the defense purposes.
- William L. Clayton, Assistant (Under) Secretary of State for Economic Affairs, 1946–1947; previously Assistant Secretary for Economic Affairs.↩