840.00R/5–450: Telegram

The Administrator of the Economic Cooperation Administration ( Hoffman ) to the United States Special Representative in Europe (Harriman), at Paris

Torep 3742. For your info at current discussion with State and Defense on the relative priorities of economic recovery and additional defense measures ECA/W has been taking the following position: we believe that the time has now come to define the terms of economic recovery to which we are willing to give absolute priority. Briefly, it should be the degree of recovery which is a necessary condition for security. In these terms, recovery means (1) a high enough standard of living for internal social and political stability (2) a fiscal policy assuring high and stable employment, without inflation and based on an [Page 654] equitable distribution of the tax burden de legibus and de facto (3) a continued emphasis on reduction of costs by: application of technology and essential equipment and by competition for broader markets engendered by freer intraEuropean trade. Actions taken towards these ends are as necessary to security and rearmaments as to economic recovery.

However, where recovery is interpreted to mean massive use of resources for new social programs or large capital investment in projects not necessary to the achievement of increased productivity then recovery must be treated on equal terms with increased rearmament programs and must be weighed in terms of internal security.

Sent Paris Torep 3742 rptd London Ecato 614.