EFFECT OF INFLATION ON MILITARY PROCUREMENT Senator WILEY. Well, we have been told lately that someone said they thought over the past few months the inflationary cost in military matériel was some $7 billion. Secretary MARSHALL. I made that statement in regard to the inflationary action. I thought your question related to excess profits. Senator WILEY. I am talking about both. Secretary MARSHALL. As to the inflationary reactions, I made the statement that out of some thirty-odd billions, out of the first moneys that had been appropriated last fall, we lost $7 billion on the return on the dollar value of our estimates and that, of course, creates very serious shortages. But the most dangerous part is the threat that it will continue or increase, which would just get us in a vise of difficulties which would jeopardize the entire defense program. Senator WILEY. That was my next thought. What is your recommendation to see to it that that does not occur? Secretary MARSHALL. Well, I testified regarding controls, and there are a great many technical aspects of the matter toward which I am not a competent witness, but I feel that if measures are not taken to control this inflationary development, it will be a terrific blow to our defense program as well as the economy of the country. I am not a competent witness as to how you go about that, because it is a very involved affair, but I think we have all got to make sacrifices in reaching a solution. CONTROLLING INFLATION Senator WILEY. A note was handed me which sets forth what we have all understood, that there was the power last year, last summer, given to the President to control prices and wages, and while you will not lay down any specific pattern that you have in mind, we have got to admit that inflation is due to increased wages and prices, do we not? Secretary MARSHALL. Yes, sir. Senator WILEY. And we are all interested in seeing that the American taxpayer gets 100 cents in return in this military adventure that we are engaged in. I would suggest that every time there is a little increase in wage or material cost under the direction of DiSalle or whoever does it, it seems to provide just an additional opportunity for a great increase in the commodity. I think that the American people have got to be protected on every front. I agree with you that inflation cannot only rob the savers of America, those who have saved in their insurance and in their Government bonds, but it can bust the morale of this Nation. That is what happened in Europe. A good many of the people who built the nation, who were the savers and constructed, were simply taken for a ride. I particularly stress the thought that there is an opportunity in getting procurement to a basis where there is saving; that you don't have people that are buying military matériel on behalf of the Government either directly or indirectly getting sweetened. We see in the papers right along instances and I am not talking about individuals; I am talking about a practice of a break in morale, a break in what we call trustee standards. No one can serve two masters. No public official can serve two masters; yet we are getting into the old Chinese system of "take." I leave that subject knowing that you, sir, with your fine background and your sense of morality and integrity, have a multitude of problems, but I am giving you just one more. IMPORTANCE OF SPAIN Now, General, you were talking about manpower, additional manpower. I don't think you mentioned Spain. Have you any ideas about Spain and the potentialities there of manpower? Secretary MARSHALL. There is a very considerable potentiality there in manpower, in geographical position, and in facilities like airfields, all of which we are very much concerned with. There is also a political situation in Europe which we are faced with. I think that we are making some progress in the matter. Senator WILEY. We recognize also the political situation, and I might say very clearly that we were made cognizant of that. But we also found, without mentioning personalities, that there seemed to be a sense of trying to give way if our own Government sensed the significance of bases-naval and land for planes-in an arrangement between Spain and ourselves. To me that situation is so important. We find that even Frenchmen and Germans are beginning to collaborate in Europe. If this is a world conquest, if we are engaged on the world stage for survival, some of the differences of yesteryears should be, not forgotten, but overlooked in the common interest and the common defense. This question now is a question of your military knowledge. Do you think that airfields in Spain and naval bases in Spain would add to the strength of the common defense? Secretary MARSHALL. The privilege of using fields, the privilege of using harbors, the preparation of those fields to accommodate our planes of the most modern type, would be a very important factor. CONTRIBUTIONS OF OUR ALLIES TO COLLECTIVE DEFENSE Senator WILEY. You have given us, in answer to Senator Connally, the answer that in your opinion the amount arrived at is necessary to carry out the completion, or call it the fruition, of the plan of common defense; in other words, $8,500,000,000. Now, can you tell us the over-all contribution of our allies in Europe over a similar period? Secretary MARSHALL. I cannot give you the exact figures. I can as to the French, because they have publicized them themselves. There will be 10 divisions this summer that they will put into that force and 5 more in the next fiscal year and 5 more in the following year, a total of 20 divisions, with a possibility of some others; and they have made that as a public statement. I am not free to refer to the others, because they have not made them public, and it would be a betrayal of trust if we made such a statement before their government is prepared to announce it itself. The actual numbers-I was trying to give it to you in percentages. It is much easier to handle it that way. The actual numbers are, in 1952 our allies will have about two million and a half men on active service. We will have, I think, about 340,000 in ground forces and some fifty or sixty thousand in the Air Forces. Senator WILEY. That gives us the manpower. Secretary MARSHALL. I haven't referred to the reserves that they will have on call on M plus 10 days and M-plus 90 days, which go into very large figures. As a matter of fact, the M-plus-90 figure is 5 million. Now, they would not have the most modern equipment and things of that sort, but they would be on call, and that is the rate at which they think they can bring them in. Senator WILEY. Have you the percentage of total income, that is of our allied nations? I think it runs something like $140,000,000,000, doesn't it? Secretary MARSHALL. I would have to look that figure up. Senator WILEY. I think it would be well for the American public to know the percentage of the income that they have Secretary MARSHALL. I think one of the officers following me can probably give you that. Senator WILEY. And the amount they are contributing into this mutual assistance plan. I think ancillary to that, of course, the military dollar that they spend gets a great deal more because they haven't the extreme costs that we have. (The following information was supplied for the record at this point :) Defense expenditures and gross national product Comparative capacity to bear defense cost: Europe and United States [United States fiscal year 1951-52 data] Estimates of total taxation from all levels of government as a percent of GNP: Secretary MARSHALL. Also, their expenditures on manpower are tremendously different from ours. A Turkish soldier gets 23 cents a month; a French soldier gets $1.69 a month; a British soldier gets $26 a month; and our soldier on the lowest echelon gets $70 a month; so it is pretty hard to make a comparison there in money. It is a more effective comparison in men. Senator WILEY. My former question I would restate this way: What amount is each of our North Atlantic Treaty partners contributing to the mutual defense? How do their efforts compare with our own? Secretary MARSHALL. That is really something the ECA can answer better. I have a vague recollection of the amount, but I don't like to state it in the record, because it would probably be wrong. Senator WILEY. Are we contributing any aid to Iran? Secretary MARSHALL. Yes, sir. Senator WILEY. I think that is all. COMPUTATION OF TOTAL AMOUNT Senator GILLETTE. Mr. Chairman, General Marshall, the bill that we have before us contemplates an appropriation of $8 billion. I assume that there will be someone before us in the course of these hearings who will provide us with the breakdown as to how that sum was reached. You didn't reach up in the air and just pick it out of the air. It is a careful computation. Secretary MARSHALL. Yes, sir. I can give you a brief outline of it, particularly as to the military factors. We had to start with the countries themselves in Europe and get their appraisal of what they needed and then consider those figures in discussions with them and in relation to the general program of the build-up of the forces under NATO, and the time schedule in particular. Then those figures were brought back to this country and screened here as to whether we thought they had overextended themselves in their requests and whether they could not meet more of the matériel requirements than they had indicated. It was a very long and tedious process, and it has been carried on in a very exacting manner, but it begins abroad at the individual country and then comes back over here. That is one reason it has taken us quite a time to build up a general program of this nature. All of those facts are slow in assembling and slower in digesting. Senator GILLETTE. It starts with their estimate of what they think they ought to have? Secretary MARSHALL. Under the agreed program. Senator GILLETTE. And that carefully examined over here? Secretary MARSHALL. There is quite an examination over there between our representatives and theirs before it comes here, but the men that have had largely to do with that can testify right before the committee here. TYPES OF AID CONTEMPLATED Senator GILLETTE. In the breakdown into two portions here in your statement of 812 billion, 6.2 billion are for military aid and 2.3, or considerably more than 25 percent, is for economic aid and technical assistance. Secretary MARSHALL. I can give you the breakdown on those figures as to regions if you care for it. Senator GILLETTE. I don't believe that will be necessary. What I have in mind right now, General, is the fact that, out of this need that is presented to us now, more than 25 percent of it is to go to economic aid and technical assistance. I wanted to ask this question: In the preceding paragraph in your statement you made the statement that— We are assisting our allies by providing (a) major items of miltary equipment that they cannot produce in time, (b) support for their own production of military equipment, (c) general economic aid in selected areas to keep nations from becoming impoverished by their defense efforts, and (d) technical assistance to underdeveloped areas. What did you mean by that? Secretary MARSHALL. To build up their economy, building up their production-it may be agricultural; it may be actually industrial-but to try to help them to improve their economy. The actual witnesses on those particular things will follow me, sir. Senator GILLETTE. How do you differentiate, General, between your subhead (c): general economic aid in selected areas to keep nations from becoming impoverished by their defense efforts― and (d) technical assistance to underdeveloped areas How do you draw that line? What is the line? |