Military vs. Economic Aid

April 4, 1949

The purpose of the Atlantic Pact is twofold. It is to strengthen the democracies of Europe to maintain their integrity and independence. And it is to give the clearest possible warning to Stalin of the consequences of any threat on his part to that integrity and independence. The Atlantic Pact is not merely the strongest single measure to assure the world’s peace today; it is perhaps our only hope of peace.

The pact can achieve its purpose only if its pledges are unmistakable. For the clearer we make these pledges, the less likely we are ever to be called upon to meet them. The weaker and more ambiguous the pledges, the more liable we are to tempt the Kremlin to gamble on our indecision. In short, a weak and ambiguous commitment on our part would actually be more dangerous than a firm and unequivocal one.

The Senate, therefore, should not only ratify the pact promptly, so that the masters of Russia will not be tempted to exploit any interval of indecision, but whatever uncertainties are left by the language of the pact itself should be removed by the declarations of senators, by interpretations of the pact by the President and the State Department, and even (though this is constitutionally supererogatory) by a strong resolution of endorsement on the part of the House.

These political steps will clear the way for reconsideration of the economic phases of our foreign policy. The strange assumption has grown up in this country that the extent of our “international cooperation” is something to be measured primarily by the number of dollars we are willing to give away. It is taken for granted that our participation in the Atlantic Pact must necessarily cost us at least a couple of billions more on top of the $5,580,000,000 already asked for continuance of the ERP. If it were really necessary for us to contribute a couple of billions to help rearm Europe, these funds could easily be taken out of this $5,580,000,000 for “recovery.”

Not only is there no need for us to pay for European rearmament, however, but with our participation in the Atlantic Pact the last excuse for the continuance of the ERP in its present form has disappeared. The economic arguments for the ERP, as I have tried to point out in previous articles (e.g., Newsweek, Feb. 28) are hopelessly confused. Now the political raison d’être of the Marshall Plan has disappeared. For politically the Atlantic Pact does directly what the Marshall Plan did only symbolically.

The European democracies have in fact the resources to rearm themselves. And if they lack determination to do this, any monetary contribution we make to their rearmament will be worse than futile. For there is no way in which we can insure that either the money or the equipment we contribute will actually result in a net increase of European armament by that amount.

It will do no good, in other words, to earmark our contributions to make sure that they are used for rearmament. Suppose, for example, that Ruritania decides that it is essential to provide x millions of dollars for defense. It will spend this amount by taking it out of other potential expenditures, whether we make any contribution or not. But if American instead of Ruritanian taxpayers contribute this x million dollars, there is no assurance that Ruritania will spend our x million dollars in addition to the amount of money it would have spent for defense anyway.

It is far more probable that our contribution would simply release Ruritanian resources for spending in other directions. Ruritania, freed from necessity for military spending, has just that much more available for bigger social security schemes, bigger food subsidies, bigger nationalization deficits, or whatnot.

This simple economic principle of substitution has been ignored in all the proposals for American rearmament of Europe as well as in the “special accounts” and similar futile efforts of the ECA to check the use in Europe of our specific ERP dollars.