Foreign Relations of the United States, 1955–1957, Western Europe and Canada, Volume XXVII

140. Memorandum of a Conversation, White House, Washington, October 23, 1957¹

Washington, October 23, 1957

PARTICIPANTS

• President Eisenhower
• Signor Giovanni Malagodi, Secretary of the Italian Liberal Party²
• Signor Manlio Brosio, Italian Ambassador to the United States
• Brig. General A.J. Goodpaster

Mr. Malagodi opened the discussion by saying he had been attending the International Industrial Development Conference in San Francisco, and was most grateful for the opportunity to meet with the President on his way back from San Francisco. He said he had known Mr. Henry Luce and Ambassador Luce well in Rome, and had had many excellent discussions with them there.

The President asked how things looked generally in Italy. He said he had been hearing good reports of developments there. Mr. Malagodi said that economic development had been making good progress in Italy, and that internal bitterness had abated to a considerable extent over the past several years. He told the President he would speak from the point of view of the Secretary General of the Liberal Party—one devoted to free enterprise, support of the alliance with the West, and deep faith in Western civilization. He said, however, that there continue in Italy a number of problems which cause him deep concern. He is worried over the international situation. He is concerned with the problem of “building Europe” and the necessity of moving by slow but well thought out steps. Communism within Italy remains a matter of concern. He is deeply worried over the possibility of recession within the United States, since the United States economy has such a critical impact upon the whole economy of the Western world. While he agrees strongly with the hard money efforts of the United States, he realizes that a recession which could be absorbed by the United States without undue impact could have the gravest repercussions throughout the free world. What he would like to see would be a stop to inflation, but with GNP continuing to rise say one or two percent a year. If there were any recession, and consequent effects in Europe, the Communists would make great efforts to exploit this situation. He was sure that all of Europe is hoping that our reciprocal trade program will be continued. As regards Europe, he hopes that it will be possible to go forward with the development of the common market, and to extend freer trade to the United Kingdom and Scandinavian areas. But much depends upon U.S. reciprocal trade efforts.

The President asked concerning unemployment in Italy, and Mr. Malagodi indicated that improvement is being made. He recalled that the Italian problem is more a matter of underemployment—of people not profitably employed on farms—than true unemployment. In the last two years a dent has been made in this problem; about 100,000 per year have been absorbed over and above the natural increase in the labor force. If this process could continue for five years, the problem would be well on the way to solution. He recalled that elections will be held in the spring, and said this is why he is so concerned with economic matters. He felt that it is essential to keep the Communists and associated Socialists isolated. The de Gasperi policy of economic progress, but with no “leaning toward” the leftist groups, was the sound one. His party holds the view that leaning toward the leftists is a mistake, and this is why they broke with the coalition.

The President, in commenting on the general problem, said he is doubtful of the philosophy of leaning toward the left because it is hard to stop a trend if a move to the left once begins. The President asked why the parties woo the left, and Mr. Malagodi recalled that nearly ten million Italians vote for the leftist group. There is a natural urge to try to attract votes from this group. The President spoke of the tendency that such actions have to encourage people to lean more heavily on central government and said we have the same problem here. He explained how hard it is to reverse the trend. Governors do not want to impose the taxes which would enable activities to be handled at a State level, and people in government, including Congressmen, try to build up federal activity in the localities as a means of influence. Mr. Malagodi said he is trying to do the same thing in Italy, but it is hard to do this with a very small party, and with ten million votes for the leftist philosophy. The President recalled that the Communists had at one time received more than 40% of the total Italian votes. Mr. Malagodi said that this proportion is down from the peak, which occurred in 1946. He added that although the Hungarian affair had had a heavy adverse impact on Communist intellectuals, the fact that the uprising had been crushed and that the Russians had been ruthless had had a great effect on Communist voters, many of whom tended to admire the use of force and violence. He said that the Sputnik reinforces this attitude toward the Russians.³

The President spoke with regard to the prospects of the United States’economy. There had been something in the way of a jolt from cutbacks in Defense production. Also, we have had several years of expansion and savings had been absorbed, with money working at top speed, and funds are tight. We have some unemployment, although it is low, and there has been some rise in the cost of living, although recently this seems to have practically levelled off. All in all, there are signs of a sideways movement in our economy for at least a short period. In his opinion, we must expect this from time to time in an economy as dynamic as ours. It could only be prevented through imposition of controls, and this means loss of freedoms. He did not expect any decline in gross national production but it may stay relatively even for a period. He added that there is some possibility that the Federal Reserve might ease money conditions if the situation develops along these lines. He referred to an estimate from an outstanding financier he had spoken to last night who expected 1958 to be as good a year as 1957, and as the larger part of 1956, but without as rapid a rise as in 1955.

On the other hand, the President recognized that some things are not as favorable in the economic picture as in 1953. Europe is not booming as at that time. Also there is uneasiness and uncertainty over Sputnik and related activities. Many things are favorable, however. In particular, buying power is high.

The President stressed how hard it is to maintain and advance the policy of freer trade. He has special difficulties in some very small productive sectors involving production forces of perhaps 500, perhaps 2000. Sometimes he must make concessions on these items in order to advance the overall program. He is hoping to get the program extended for five years, and would like to get it extended for ten. Mr. Malagodi said he realized that the American economy could stand moderate fluctuations quite easily. In Europe the repercussions of even such fluctuations might be severe.

He went on to say that Europeans are thinking they must strengthen their “shield” of conventional and local forces for defense, in order to give a higher degree of confidence. This may involve added expenses, and will add to their burdens. He was referring to the time when the Strategic Air Command and Russian missile strength may neutralize each other.

The President said he thought this was very much of an oversimplification. He recalled the theory when he went to Europe in 1951 was that the United States would put its forces there while Europe built up its own. Unfortunately, our forces have been held there— often in countries such as Germany where the gold reserves are already high and the need for the benefits from expenditures of our troops are not so great as elsewhere. He recognized that they had not yet built up their full forces, but felt that Adenauer is doing all in his power to do this.

The President ended the discussion with a statement as to the great possibilities open to Europe if it could come together in greater unity, with each helping the other and benefiting thereby.

Photographs were taken and the meeting ended with cordial expressions from the President and from Mr. Malagodi and Ambassador Brosio.⁴

1. Source: Department of State, Presidential Memoranda of Conversation: Lot 66 D 204. Confidential. Drafted by Goodpaster.
2. Malagodi was in Washington, October 21–25, after attending a conference in San Francisco.
3. On October 4, the Soviet Union launched the world’s first artificial Earth satellite, “Sputnik I.”
4. Malagodi also met with Under Secretary of State Herter on October 24. According to the memorandum of conversation, the meeting dealt with a wide range of topics, but centered on Italian concerns about the world economy, the policies of the Soviet Union, and the Middle East. (Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199, Italy)