Q: The Marshall Plan. ... When originally announced it wasn't really a plan at all?
A: That is quite accurately the situation. There wasn't a Marshall Plan at the time of, of Marshall's speech. He talked about a plan, but it was a chimera. I was quite annoyed about the whole thing. It seemed to me absolutely ridiculous to be talking about a plan when nobody had the foggiest idea about who would do what, with what and to whom in order to get anything organised, and I think I was, yes I, I was the fellow that must do the work if the work was to be done, and it irritated me beyond belief that Marshall would talk about a plan when there wasn't any. And Chip Bohlen was, you know, interpreter to the President whenever he negotiated with the Russians, and Chip was close friend of mine, and Chip was kind of bewildered by the situation, but he didn't know exactly what Stalin's speech meant, and he was going off to Moscow, as a matter of fact - no, he was going off to an Ambassadorial post as I remember, he was going to be Ambassador to Paris, to the Fre, and he wasleaving the next day to go to Paris to pick up his duties there, but his mind was on something else so he wouldn't talk to me about this. I couldn't find anybody much to talk to about this, except for Forrestal. So I talked to Forrestal, Forrestal and I had been business partners (cough) in the years before the war, and very close friends. And Forrestal said, "I couldn't agree with you more, Paul, but you know, I can't swing the US government 'cos the State Department doesn't think this way at all. You've got to go and see your friend Acheson..." - have I been through this before?
Q: ... You say the Marshall plan didn't exist when it was announced, it was just an idea. So how did you actually go about coming up with a plan that would mean something, and was Marshall surprised, for example, when Bevin said, 'Yes, we want it, give it to us quickly.'? What happened after the commencement address, what was next?
A: I guess prior to that time we'd written NSC 68, and NSC 68 was a basic review of US policy and strategy, starting from ground zero and many things had happened during the preceding year which really had fundamentally changed the correlation of forces. One was that the Soviets had tested a nuclear (b/g cough) device and it was clear that they were going to have a nuclear weapon..
Q: The background to NSC 68.
A: In the winter of '69 -
A: '49, we were - I was very much worried and so were some of my fellow workers by the fact that in the preceding year a number of adverse things had happened. One (cough) was the fact that the Russians had tested a nuclear device and therefore it was only a matter of time before our nuclear monopoly, on which we had been and were depending for our security, was going to be not a monopoly but a duopoly - and maybe more, over time. And beyond that the scientists said that they had figured out a way in which you could make a thermonuclear weapon, and that was going to be at least a thousand times as powerful as the then known nuclear weapons - and that the Russians were working on - we knew the Russians were working on that kind of thing, and were probably ahead of us in their work on a thermonuclear device, and it turned out later that they were ahead of us: they tested a thermonuclear device before we did. And then the situation in the Far East had deteriorated. The Chinese Communists had - defeated the Chinese Nationalists and Chiang Kai-shek had retreated to Formosa. And what with the other disasters, there were a whole series of disasters, but that's enough for, to make the world seem - different.
Q: NSC 68 really changed the whole way of looking at things...Were you aware at the time of how drastically it might reshape US/Soviet policy, the whole budget requirement, were you aware of just how enormous this undertaking was that you were about to propose?
A: Well I had - done some calculations as to what I thought would be necessary in the way of actions to support the policy outlined in NSC 68, and had come to a rough estimate that those actions would cost us $40 billion per annum in addition to what we were then spending on defence. And I talked to Dean Acheson about it, and told him that my estimate that this was going to require actions that would cost us 40 billion dollars a year. And he said, "Well, Paul for goodness sakes forget about that. No deal with that forty million. I've heard you and I may find it convenient sometime to let the President know about that, but nobody else should know about that. It'll discourage everybody too much. Get the policy settled first, and then one can look into what the action requirements are and what those will cost." He said, "I have it in mind, I will see to it that the President understands it, but you forget about it, don't tell anybody else what your estimate is." So I didn't.
Q: Back a little, the Marshall Plan. You were involved in working out where some of the money should be spent, and the whole idea there should be a cut off. ... Could you tell me you approach to some of the economics of the Marshall Plan, when it finally became a plan?
A: Well the real hero of the Marshall Plan (cough) was William Clayton, who was the Under Secretary of State for Economic Affairs, and Will Clayton went off the Europe to see whether the situation in Europe was as serious as some of us had been saying it was, and really did require immediate action. And he came back thoroughly persuaded that serious action was required. He thought that the first thing we ought to do was to see to it that Europeans did their part, and that they should agree to a customs union and remove all trade barriers amongst the various European countries, and have an economic bloc and co-operate with each other, rather than just competing with each other. And secondly he thought that the plan shouldn't be simply an aid programme, but one ought see to it that this assistance was paid for, all the, you know, all the gasoline or wheat or whatever, when it was paid for by those who used it and consumed it and that all the proceeds from those sales should go into a special account called the -....
Q: Doesn't matter, 'be in a special account', that's okay...
A: ... be in a special account which could only be used on projects which it was clear would be, not only pay for themselves but would add significantly to the productivity of the European area. Counterpart Funds they were called. It was really the ideas of Will Clayton that ended up by being the heart of the Marshall Plan and the secret to its success, 'cos it was a very complex instrument really. But it was so designed that it guarded against what otherwise might have been the risks - and real risk was that everybody would have spent the money and it all would have gone into foreign bank accounts and people would have siphoned it off and there wouldn't have been any lasting benefit to Europe. But to have all the Counterpart Funds put into a special pot which couldn't be used except under extraordinary conditions, this was the key to why it really turned out, to why it turned out to be a great success. In connection with the work in those days, I'd tried to do some mathematical computations of what the requirements would be out over a five year period of time and with the first Hollerith machines, which later became IBM computers, were then available, and I requisitioned those Hollerith machines to help me with the arithmetic involved, and did a computation as to how much money could be usefully absorbed by the European nations over the next five years. And lo and behold, it was enormous! - because the way the thing was programmed -the one criterion: what could Europe usefully absorb? And so having done that computation it's perfectly clear you had to add another parameter to this problem, and that was to say it has to, the programme has to end up with decreasing requirements for funds; and then if you arbitrarily say that over the - each year it's going to, less if going to be available than the first year, and it goes down till zero is required in the fifth year, then that's the way it'll turn out. And that's what we did, and that's the way it turned out. We designed the outcome, and then worked out the programme to produce the outcome that we wanted.
Q: How effective do you think the Plan was in shaping up the parties in the Cold War? Do you see it very firmly as part and parcel of the Cold War?
A: Well I saw it primarily as being a set of measures designed to restore economic health to Europe, and that that was a very important thing for Europe. It was going to go down the drain internally, at least it was my view. The Communists were strong in Italy, and strong in France and strong in Germany. I thought it was going to down, politically go down the drain unless we could - get into position some effective economic measures which would restore the, improve the economic health of that part of the world.
end of CR 10027