Lots of variety foods that give variety to a diet are still tightly restricted. They have been able to make this up with more potatoes, more bread, more basic foods, and, as Senator Brewster said, more fish, which is in free supply. If you take some kind of over-all statistical measure, it will show a return to something close to prewar; on the ground, I think one is made more aware of the austerity in all the European countries and what it means.

LONG-RUN INDEPENDENCE OF EUROPE FROM AMERICAN AID IS OUR GOAL

Mr. Chairman, the third reason that I wish to move to and to mention briefly for believing that there is a limit to the resources that the Europeans can themselves devote to the business of rearmament is this: We are planning for the long pull, and by that I mean very concretely that we are planning for a course of events whereby the Europeans in 2, 3, or 4 years will be independent of American aid, certainly of economic aid; will be able both to support their own military establishments, and to maintain themselves as going concerns economically in the world.

Senator SMITH of New Jersey. Did you give us a date for that, when you think they can do that?

Mr. BISSELL. I was careful, Senator Smith, not to give a date. Senator SMITH of New Jersey. I didn't know whether it coincided with 1953, which has been sort of the figure we are aiming at.

Mr. BISSELL. I would say, if I picked a date, I would pick that, sir, and I would be glad to discuss further, in a moment, if you wish, the present situation with which I think we can set a date and the factors. Senator BREWSTER. Is that based on your $100-billion increase and 50-percent increase in the living standard?

Mr. BISSELL. No, Senator Brewster. That goal will take a great deal more than 3 or 4 years to accomplish.

May I say, Senator Brewster, I think it is vitally important for the success of this enterprise that we set up, and that the Europeans hold before themselves, longer-run goals, going beyond this immediate period of military build-up, with some elements of hope for them. Now, I do not mean by that that I believe it is any part of the responsibility of the United States to contribute aid so that the Europeans can double their standard of living or double their production or anything of the sort. I do think, however, and this is the very point that I wish to emphasize, that it is vitally important for us to understand the implications of what we are doing this year for the longer-run prospect. I believe it means concretely these things: First of all, we must not encourage the Europeans to consume their capital. That is, to neglect the maintenance of their plant facilities, their agricultural plant, if I may use the term, and their industrial plant and equipment, during the period of military build-up. In wartime, both in Europe and here, one of the ways the war was, as it were, paid for was by neglecting to make good obsolescence and depreciation. One of the reasons we have had to have a Marshall plan in Europe is because their whole industrial plant was rundown and was used up. We want to avoid exactly that process in these years of military build-up.

I am sure you gentlemen will agree with me that, whether or not you think the Marshall plan has been a success, you do not want to

have us back here asking for another recovery program 3 years from now. It is exactly that contingency that we wish to avoid.

Senator GILLETTE. Mr. Bissell, when you say we are planning for this desired goal, who is "we"?

Mr. BISSELL. In this case I am trying to state what I believe to be the proper United States policy. Specifically, I think that this could be said at this moment, sir, to be the policy of the executive branch. I hope that the legislative branch will agree on the point that it is highly desirable, the point I have been making, that it is highly desirable; that we try so to conduct our affairs and persuade the Europeans to conduct theirs in these next 3 years so that they will be independent of any need of dependence on any aid from us at the earliest possible date.

Senator BREWSTER. Are you at this point going to give that breakdown for France, for instance, as to why, with a 44-percent increase, it still is not practical for them to go farther in producing, or is that all absorbed in this capital item?

Mr. BISSELL. I can give you that in a few moments, Senator Brewster, these figures, or, I think, the relevant figures, country by country. Senator BREWSTER. Whenever you get to them.

CONTINUED CAPITAL INVESTMENT BY EUROPE NEEDED

Mr. BISSELL. If I can just finish this point off very briefly, I believe that it is essential for the Europeans not only to maintain their capital, both their agricultural and industrial plant and equipment, but also to continue the investment of new capital to expand their production base. I believe that is important because we must have not only an increase in production in this immediate year ahead but we must, I think, maintain a steady expansion of European productive capacity. When I have said "we" I would like to correct myself. I would like to modify it to read that I think we should do certain things to make it possible for the Europeans to pursue this course because, obviously, if Europe's production is to expand, and if its productive capacity is to expand, most of that has got to be done by them. The relevance of this point to the need for economic aid is that if the Europeans are to expand their production next year, and if they are to continue to plow back some of their resources into a continued expansion of their productive base, then that sets a limit to the resources that they can put into exports, earning their own way in the world; it sets a limit to the resources they can put directly into rearmament. That, substantially, is the third reason that I wish to set before the committee to explain how we arrived at these figures that are before you and why it is that we believe the Europeans cannot expand their exports and cannot themselves carry a larger share than that already planned and proposed of the immediate-term defense plan.

Senator LODGE. You have given us how you arrived at the figures as to how the European effort is concerned. I haven't heard you say how you arrived at the figures insofar as our part is concerned. Have you? You haven't given that.

Mr. BISSELL. Senator Lodge, I haven't given you specific figures. May I put your question this way

Senator LODGE. Let me say this: I don't want to ask any questions until you finish your statement. I understood the chairman to say we weren't going to.

Mr. BISSELL. May I, nevertheless-it is important to clarify that point right at this point in my testimony.

SUMMARY OF REASONS WHY EUROPE NEEDS AID

The three considerations that I have mentioned, the limits on the European ability to control inflation, the limits on the extent to which it is in our interest to see their standard of living reduced, the limits on the extent to which it is in our interest to see them divert resources away from capital investment and expansion of their economy-those three considerations in each country set a limit on the extent to which the Europeans can build up their exports and, therefore, their foreignexchange earnings. They determine, in part, and have a bearing on, the extent to which the Europeans must expand their imports, and in that way they serve largely to determine the amount of economic assistance that we believe is necessary if rearmament is to go forward in Europe.

ECONOMIC RECOVERY AID AND ECONOMIC AID FOR MILITARY PURPOSES

There is only one other point I wish to make, sir, in concluding these remarks. I said at the beginning that a significant part of the total of $1,675,000,000 proposed for economic aid, of course, does not have this same, this direct, connection with rearmament that I have been discussing. There is, in other words, some unfinished Marshall plan, or recovery, business in these figures. We have been asked a number of times, "Well, how much of this figure is for recovery purposes and how much of this figure is directly related to rearmament?", and I want to give you the clearest answer I can to that. I have to give the warning that it is not a perfectly simple question to answer.

The first part of the answer I want to give is this: It is our belief that if the new fiscal year were the fourth year of the Marshall plan, in a much more peaceful world; if specifically there were prosperity generally throughout the world, as there is today; if the Europeans did not have to increase their level of military expenditures above that of the fiscal year just ended, that they would need some six-hundred-and-seventy-odd million dollars of economic aid to finish out the fourth year of the Marshall plan.

Having said that, I have to say that I am not sure that that is an accurate answer in terms of a figure to the question I just posed, how much of our total of $1,675,000,000 can be said to be for recovery, because, for instance, in the figure of $670,000,000 I have just quoted to you as the sum that would be needed for the Marshall plan in the absence of additional rearmament, there is a figure of $50,000,000 for France.

You might pick that figure up and say, "Of the total of $290,000,000 that is proposed in the program before you for France, $50,000,000 is for purely peacetime recovery, and the other $240,000,000 for rearmament." That statement would involve an important misconception, because naturally it is not possible, or I think in the United States interest in these countries, for them to go ahead with all of the activities that we associate with recovery, and then pile reamament on top of that. If we were having the fourth year of the Marshall plan we would hope for a much greater increase in the standard of living

in these countries than will be possible in the year ahead, and for no cut-backs in the standard of living. We would hope that their peacetime capital investment could be on a larger scale and would not have to be cut back, which it will have to be, and is being, under the present conditions of rearmament. We would hope that a large part of the increase in their production, their total output of goods and services, could go into export, and that is the reason why they would be able, in the absence of rearmament, to more nearly earn their way in the world.

Therefore the figure-I have picked a country at random-of $290,000,000 for France isn't $50,000,000 worth of recovery plus $240,000,000 of aid for rearmament. It is the figure that you come out with after allowing for all of the cut-backs that we believe to be in the United States' interest in civilian activities in that country, and for the maximum military effort we believe they can make, which will be probably in terms of the percentage of their national income out of the largest military effort in Europe.

Nevertheless, I think the figure I have given you does provide the best estimate that we can give of the funds we would be requesting from you gentlemen if we did not have rearmament in Europe.

ECONOMIC AID FOR RECOVERY AND FOR REARMAMENT IN SPECIFIC COUNTRIES

I would like to mention one or two more of the comparisons by individual countries, because I think they further elucidate the question. We are asking in the program before you for $145,000,000 for Austria. I believe we would ask for exactly the same if there were no rearmament. In the Austrian case, therefore, you can call this program purely and wholly a continuation of the Marshall plan.

In the case of Trieste the figure is $4,000,000, and again the whole amount, I think, would be needed even in the absence of rearmament, unless and until the absorption of Trieste into the Italian economy is possible.

To take a third case, Iceland, the figure is $8,000,000. Again the whole amount can be said to be for pure recovery purposes. Those are small countries, but there are three countries where the answer to the question I raised is perfectly clear. What we are asking for is pretty nearly a pure continuation of the Marshall plan, and we do not want in any way to give any other impression.

Take two other cases.

Senator BREWSTER. You mean they are not going to do anything on rearmament?

Mr. BISSELL. Virtually nothing. They are, of course, affected by what is happening in the rest of the world, but it cannot honestly be said that the request for aid in any way reflects the burden of rearmament on those countries.

Now, in several other cases that is true to a significant extent. We are proposing $250,000,000 for Greece. Our rough guess is we would ask for $175,000,000 for Greece if there were no heavy military burden on the Greek economy. In other words, there would still be a need for a sizable recovery program in Greece for this fiscal year, and I think going some time beyond this fiscal year.

In Germany the figures are $175,000,000 in the program before you, and we think we probably would be asking for $100,000,000 for Ger

many if we did not have a rearmament effort to allow for. There the situation is a little more complicated. Rearmament in Germany means an added load of about a billion dollars of expenses to the German Government. It also, however, means sizable expenditures of dollars by the United States military establishment in Germany. Those dollars, of course, improve the German dollar position, and greatly reduce the need for economic assistance. So that if both those influences were removed, the billion dollars of added cost to the German budget and the sizable contribution, the spending of dollars by our Government in Germany, Germany on balance would be better off, but there is still unfinished recovery business to be done.

Mr. Chairman, I think perhaps the most useful thing would be to put into the record a very simple table comparing the figures, by countries, of economic support that are proposed in this program; what we believe those figures would be in the absence of any greater rearmament effort than that in the year just ended. I would like the committee to understand that I am sorry to have taken so long on this. As I repeat, we are not for one moment proposing that what the Europeans ought to do, and what we ought to help them to do, and in part pay for them doing, is to add rearmament wholly on top of what we mean by recovery, nor do I want to give the impression at all that all the unfinished recovery business is here being smuggled in under the coat of support for rearmament.

I think the distinction is one we want to make just as clear to you as we can, and if I can go into it in any further detail, I will be very glad to.

Senator SMITH of New Jersey. Your figure is approximately $600,000,000 out of this total?

Mr. BISSELL. To be exact, it is $672,000,000.

Senator SMITH of New Jersey. Then of this $1,600,000,000 that we have, $1,000,000,000 is going into the military?

Mr. BISSELL. Substantially that is correct, Senator Smith.

Mr. Chairman, could I just say one more thing, to mention some of the statistical information we can supply for you.