REPORT ON ECA TUESDAY, FEBRUARY 7, 1950 UNITED STATES SENATE, Washington, D.C. The committee met, pursuant to notice, in the committee hearing room, U.S. Capitol, at 10:30 a.m., Senator Tom Connally (chairman of the committee) presiding. Present: Senator Connally (chairman), George, Thomas of Utah, Tydings, Green, McMahon, Fulbright, Smith of New Jersey, and Lodge. Also present: Messrs. C. Tyler Wood, Assistant to the Deputy Administrator, ECA; William C. Foster, ECA; and Horace H. Smith, congressional liaison officer (Senate), Department of State. The CHAIRMAN. Senators, we have with us this morning Mr. Hoffman, who expressed a willingness to come before the committee and give us an outline on ECA, the authorization and subsequent appropriation. He has his troubles and his difficulties. We are glad to have you, Mr. Hoffman. He just returned a short time ago from Europe, fresh from the boulevards. Senator LODGE. Have we a bill before us now? The CHAIRMAN. I do not think it has been introduced. Senator LODGE. There will be a bill, I presume? The CHAIRMAN. We will have to have a bill. Senator LODGE. And Mr. Hoffman will be available for questioning on that bill? Mr. HOFFMAN. Yes. The CHAIRMAN. This is principally about his trip more than it is about his authorization. He will have to come back on the authorization. STATEMENT OF HON. PAUL G. HOFFMAN, ADMINISTRATOR, ECONOMIC COOPERATION ADMINISTRATION Mr. HOFFMAN. Mr. Chairman, what I thought I would like to do this morning, if I may, is first of all to report to you on the present situation and, second, ask your counsel, your advice. After you get the picture as accurately as I can give it to you as to what this situation is that we are facing, and as I go along, I will make it as brief as I can. The CHAIRMAN. You will submit to questioning? Mr. HOFFMAN. Oh, definitely. I appreciate the opportunity to come here and appreciate the opportunity to consult with you. As I say, I am very glad to lay some of these problems in your laps as well as our own. They are resting somewhat uneasily at the moment. INTERIM REPORT OF THE OEEC First of all I would like to tell you that we have just gotten the interim report of the OEEC, which is the Organization for European Economic Cooperation. The CHAIRMAN. That is composed of every country that gets money, and it has a representative on it of each country? Mr. HOFFMAN. Yes, sir, and that committee has just published this report, which will be released tomorrow morning. I do not presume you will have an opportunity to read it. It is a report that tells a very dramatic story of what has been accomplished. I want to just point out one or two things that have happened. The CHAIRMAN. Who is the head of it? Mr. HOFFMAN. The head of it at the present moment is Robert Marjolin, called the Secretary General of that committee. It is committee with a staff and they have headquarters in Paris and have done, I think, a very remarkable job on the whole. Senator LODGE. Wasn't Mr. Spaak proposed to be the head of this? Mr. HOFFMAN. May I come to that a little later, Senator, if it is agreeable? A PRODUCTION MIRACLE Here is one table in which you have your bottom figures that tell the whole story of what has been accomplished in Europe, and which I think honestly can be classified as a production miracle. I do not think any language short of that describes adequately what has been accomplished by the Europeans, with our aid, in the building back of production. In 1938 the output of goods and services in Western Europe was $155 billion. In 1947 it had fallen down to $138 billion, two years after the end of the war. Today it is $164 billion. It is above the figure that it was at in 1938. POPULATION INCREASES We must qualify that by the circumstance that there are about 20 million more people there, so that on a per capita basis this, of course, is not as much of an advance as it is considered just on sheer quantity alone. Senator GREEN. May I ask a question there? Do you believe that population increases more rapidly during war, or less rapidly? Mr. HOFFMAN. My observation is that it increases very rapidly immediately after a war. Senator GREEN. I mean a as result of war. Mr. HOFFMAN. I just do not know. Senator GREEN. Never mind. Senator LODGE. What is the reason for the 20 million increase? The CHAIRMAN. The soldiers coming back home. Senator SMITII of New Jersey. There must be large shifts of population. Mr. HOFFMAN. Refugees count for a good many million of that 20 million in Western Europe. Senator GREEN. Would there be a corresponding decrease where they came from? Mr. HOFFMAN. Oh, yes. There has been a great shift of population from Eastern to Western Germany. Senator GREEN. That does not prove that there has been a decrease in Eastern Germany. CONSUMER GOODS Mr. HOFFMAN. I could not prove it. I just say there are several million less people in Eastern Germany than there would be if they had not moved to Western Germany. I think another very significant figure in this very short table is this: We have taken the position, with the full consent of the European nations themselves, that so far as the consumer goods are concerned, consumption of those goods should be held to the 1938 level, that it was not the job of the United States of America to go in there and put its billions behind a recovery that took them far, consumerwise, beyond the level of living prevailing in 1938. This is the total figure. I have the per capita. But the total would be reduced down to the point where their standard of living is still below what it was in 1938, although out of the $161 billion of output of goods and services in 1949, $115 billion went for food, clothing, and similar items, as against $114 billion in 1938; on a per capita basis somewhat less per capita than prevailed in 1938. Senator SMITH of New Jersey. The overall figure is about the same? Mr. HOFFMAN. About the same; 115 in one case and 114 in the other. CONTROLLING INFLATION, PRESERVING DEMOCRACY I could go through this report in detail and point out that when it comes to production or when it comes to control of inflation in Western Europe, the progress, as I say, in production has been something short of a miracle, good progress when it comes to controlling inflation, because 2 years ago it looked as though the flames of inflation would be spreading and might not be stopped. Also, I point out what I think is very significant, and that is that there have been no situations in which the governments have not remained as democratic as they were or became more democratice than they were in 1947. Senator GREEN. You mean there are no cases in which they have become more democratic, or less democratic? Mr. HOFFMAN. Less democratic. In other words, I still remember so vividly the statement made to me when I first landed in Paris by friends of mine, who told me that if we were going to be realistic in our program for Western Europe we must accept the fact that countries such as Greece, Italy, and France would have to temporarily become strong governments, which means dictatorships, and that, of course, was not the U.S. Government's policy to have that happen. So far as our activities were concerned, they were directed toward keeping in power the democratic governments. Whatever you might say about the strength of the French Government, the French Government is a democratic government. It is a middle-of-the-road government. The Italian Government is distinctly a middle-of-the-road government. And in Greece they are having new elections, but there is no possibility of there being a dictatorship in Greece. Greece is generally a democratic country. That is the situation on the production front and what has happened so far as inflation is concerned. CAPITAL GOODS Senator SMITH of New Jersey. Can I draw this conclusion from your figures, that your consumer goods consumption is about the same, therefore your figure overall is in durable goods? Mr. HOFFMAN. What has happened is that they have put an extraordinary percentage of their total income into tools-roads, machine tools, buildings. They really have kept their belts tight and put their increased production where it should go. Senator SMITH of New Jersey. They have really increased capital in the large sense? Mr. HOFFMAN. Oh, yes. Senator SMITH of New Jersey. That is the important thing. Mr. HOFFMAN. That is the important thing. That is a good story, SO far. THE DOLLAR GAP REMAINS Now, when you come to two other problems with which they must deal and we must help, if we can, I cannot report any such progress. On the matter of dollar earnings, the gap closed from a top of about $5,500 million in 1947 to about $3,500 million in 1948 and in 1949 it stayed at $3,500 million. I mean, they did not increase their dollar earnings in 1949 over 1948. It started out quite well at the beginning of the year, and then you had this British crisis come up and you had a lull during which all this discussion of devaluation occurred, and the net is that it is about the same. I think we can say that there is evidence that that situation is improving. I want to make this statement, that I think there is today, as against a year ago, an awareness on the part of practically all these key countries that that problem can be met only by drastic measures, emergency in nature. We are not going to get the dollar gap closed by 1952 except by perfectly extraordinary efforts on their part. What it nets down to is this: They are now shipping us about a billion dollars' worth of goods and they have got to increase their shipments of goods to us by at least a billion dollars, of all kinds, before the end of 1952 in order to close this gap, and then they have to build up the invisibles, their tourism and their earnings from shipping and other earnings of that kind that they can build up, and that, plus investment, gives you, as you can see, a possibility of getting that problem into manageable proportions by June 30, 1952, if they succeed in really getting underway with their programs and if we are willing to take their goods. I mean that is the second part of it. Senator SMITH of New Jersey. Did the invisibles improve in 1949 over 1948? Mr. HOFFMAN. I can give you the figures, if you want them, later. Senator SMITH of New Jersey. No; I am just curious whether they show signs of improvement. INCREASING TRADE WITH THE UNITED STATES Mr. HOFFMAN. Oh, yes; invisibles went up. As I say, the goods themselves, no; exports of goods, no; but the invisibles did go up slightly. That is underway. We have set up an organization in Paris and an organization in this country, and we are giving all the help we know how to give, pricipally in the form of technical assistance on marketing which we are making available to the European countries. We are also, working with both governments and private groups, trying to persuade them that this market is worth trying to crack. The first problem, and the problem that lasted over a year, was to get them really to a point where they would make the effort, because they said, "What's the use of trying? Every time we build a market in the United States somebody comes along and finds a new regulation or new tariff and put us out." Senator LODGE. What categories of imports have you been interested in, particularly? Mr. HOFFMAN. I can give you a complete list, item by item. I think the most practical list we developed was this: We had a group headed by Wayne Taylor, who went to Europe and made a study of all of the export possibilities to the United States. We have that in the form of a very complete report, and I would rather give you the report than try and give it to you out of memory. As a matter of fact, we have a report from the Retail Dry Goods Association in which they listed both the quantities of goods, the kinds of goods, and the approximate prices that they were willing to pay for those goods. That also is in the hands of Europeans. As I say, we have Ralph Strauss now going to Paris, formerly vice president of Macy's, and he will have counselors in all of the larger missions. The effort is going ahead, and all I can tell you is that if they put forth their effort and we do not get stopped on this side, I think there is a chance to close that dollar gap, and I hope that we can persuade them to do it. The CHAIRMAN. Has not France enjoyed a tremendous tourist business? Mr. HOFFMAN. Oh, yes. That is the most painless way of closing it, but you can do only so much of it. The CHAIRMAN. I know, but it does whatever it does. GIVING IS NOT A HEALTHY SITUATION Mr. HOFFMAN. Next year that will come close to $300 million. For this year, this year we are in, that is. That is a great deal of money, and it is, as I say, painless, but America has to accept one idea: we either have to let the Europeans earn the dollars that they must have in order to pay their own way, or we are never going to have a healthy situtation, because it is not healthy to give people money. Our present relationship with Europe is not healthy. Senator THOMAS of Utah. I know why I am pretty healthy, because nobody has ever given me a cent. |