Mr. HOFFMAN. And the billion dollar

Mr. BISSELL. The budget covers the 5.3 billion, but you will find that we are also deducting from that the 1 billion dollars advanced by the RFC.

Mr. CASE. Is that 1 billion dollars advanced by the RFC subtracted from this program, or is it a part of the budget estimates?

Mr. BISSELL. It is in the break-down and is a part of the budget estimates.

I might mention that the 1 billion dollars public debt transaction is not the same billion dollars furnished by the RFC; but in answering the main question, I think I said the whole budget is built up to the total of 5.3 billion dollars, and the deductions are all made in the green-sheet schedules, in arriving at the formal request for appropriation.

Mr. CASE. Then for all intents and purposes, the 1 billion dollars which is deducted as a public-debt transaction is not covered in these estimates, so far as the justifications are concerned?

Mr. BISSELL. Perhaps I did not make myself clear. It is covered, but the total sum justified is the sum of 5.3 billion dollars, and all the subtotals of the items add up to the total of 5.3 billion dollars, so that the whole amount is justified in the budget estimates. The deduction is not made prior to the justification, however, but is from the justification total of 5.3 billion dollars, in arriving at the request which the justification supports.

Mr. CAWLEY. For the reason, Mr. Case, that we will not obtain an appropriation for the debt transaction, the amount of the appropriation will be only 4.3 billion dollars.

Mr. CASE. How is it expected that the 1 billion dollars is to be reimbursed to the RFC fund?

Mr. CAWLEY. Through the Treasury.

Mr. CASE. It is an advance against the appropriation funds; and for all intents and purposes, so far as the Congress is concerned, it is going to have to appropriate the 1 billion dollars.

Mr. CAWLEY. That is not quite correct, if you refer to the public debt transaction.

Mr. CASE. No?

Mr. CAWLEY. The total budget is 5.3 billion dollars, and because of the public debt transaction we are only requesting 4.3 billion dollars, and upon receipt of the 4.3 billion dollars we will repay the RFC.

Mr. CASE. However you may explain the transaction, for the purpose of this committee, so far as I am concerned, you will have to justify what you expect to do with the $1,000,000,000, to give the reasons for the appropriation of the additional amount.

Mr. HOFFMAN. That is right.

Mr. BISSELL. Yes.

Mr. HOFFMAN. We have that cleared up.

Mr. BISSELL, Yes.

EXTENT TO WHICH PRODUCTIVITY WILL BE BUILT UP IN PARTICIPATING

COUNTRIES

Mr. CASE. Mr. Hoffman, you said in your first statement, and you repeated it several times in response to questions, that the basic purpose here is to build up the productivity of these nations. To what level?

Mr. HOFFMAN. I have not changed my view any from the one I reached after working on the Harriman committee several weeks last summer of course, that was during 1947 when we were working.

In 1947 our national income was approximately $200,000,000,000. The national income of the 16 countries, plus Germany, was approximately $100,000,000,000.

We have 145,000,000 people; and there again, they have 275,000,000 people.

And that is the break-down, as they gave it to us from the Paris. Conference. Their studies and estimates in some cases were pretty optimistic, but it looks to me as though in the 4-year period we would be able to build up the productive ability by about one-third. Mr. CASE. By about how much?

Mr. HOFFMAN. About one-third.

Mr. CASE. In your statement you referred to the estimate of the three responsible and independent estimates of probable financial requirements for the program and said this was the lowest, the other two being the Harriman committee and the International Bank.

Mr. HOFFMAN. Yes.

Mr. CASE. Did you give any consideration at all to the estimate made by the House Select Committee on Foreign Aid, so-called Herter committee?

Mr. HOFFMAN. No; I did not. I have read the testimony, but I am not quite as familiar with it so far as the details of the comparison is concerned.

Mr. CASE. You did not mean by that that estimates such as that are not responsible.

Mr. HOFFMAN. Oh, no; not at all.

Mr. CASE. In the New York Times of April 6, 1948, there appeared a story by Michael Hoffman, who reviews what he said was the report of the Economic Commission for Europe, released that date, by the Economic Commission for Europe. Are you familiar with that?

Mr. HOFFMAN. Well, when I got that same article, Mr. Case, I started on a hunt for a copy of that report, and we now have one copy, and we have been reading it just as time permits.

Mr. CASE. In this story he states:

The industrial output in Europe, excluding Germany and Russia, had recovered nearly to prewar levels by the end of 1946 and in the third quarter of 1947 was 99 percent of that of 1938, according to a mammoth report on European recovery released today by the Economic Commission for Europe.

He further states:

This is the most complete and thorough study of the European economy ever made. It contains the facts and analyses that Congress wanted before acting on ERP but could not get because they did not exist.

And he states further:

The report concludes, as all other reports on world economic problems, that the United States must very greatly increase its imports from Europe or there's no hope at all of reestablishing a balance in the world's economy.

Now when you talk about increasing the productivity of Europe, and when this writer says this is the most complete and thorough study of European economy ever made, and when he states that the industrial output in Europe, excluding Germany and Russia in the third quarter of 1947 was 99 percent of that in 1938, that is the year immediately proceeding the war, I think the people of the United

States will want to know to what level you want to build in terms of the prewar standards.

Mr. HOFFMAN. I think you are quite right. I have not read this report with reference to population, but the population in Europe since 1938 has increased almost 10,000,000; there are 10,000,000 more people today than they had. That may have been referred to, I do not know.

Mr. CASE. While you say there are 10,000,000 more people, this article also says, as one of the main conclusions, the third observation made, is that the total commodities available for home use in Europe as a whole, that is, as a whole after excluding Germany, had reached 96 percent of the prewar level on a per capita basis by 1947. That would take into account the increased population. Mr. HOFFMAN. Yes.

Mr. CASE. And it further states that Belgium, Czechoslovakia, Ireland, Norway, Poland, and Sweden actually had more goods per capita than in 1938; and of course, Belgium, Ireland, Norway, and Sweden are among the 16 participating nations.

Mr. HOFFMAN. Well, I cannot answer that, Mr. Case; I have not read the report and therefore have no comment on it.

Mr. CASE. The reason I brought that up is it seems to me that is rather basic, because in your statement, and in response to repeated questions you said that the main purpose was to build up the productivity of these nations, quoting from your formal statement:

We know precisely what we want to accomplish, namely, increased production in all of the nations covered by this aid program.

Mr. HOFFMAN. Mr. Case, I have with me Mr. Calvin Hoover, and I think he has had a chance to go more fully into that report. Would you wish him to comment on the question?

Mr. CASE. I understand this report was prepared by the Economic Commission for Europe and made to the United Nations.

Mr. HOFFMAN. That is my understanding. Would you like to hear Mr. Hoover?

Mr. CASE. I think we would like to hear his statement on this matter.

Mr. HOOVER. Mr. Chairman, my attention has just been called to a communication from Mr. Myrdal, executive secretary of the Economic Commission for Europe, which I think perhaps I should read and then I will be glad to answer any questions I can concerning the program.

This is a letter to the editor of the New York Times and reads:

My attention has been directed to the article published in the New York Times on April 12 by Michael Hoffman, commenting on certain findings of the survey of the economic situation and the prospects of European relief by the secretariat of the Economic Commission for Europe.

I note this article states that the analysis of the European trade and the survey points the way to saving of two or three billion dollars in the ERP. This inference is, of course, entirely that of Mr. Hoffman and does not in any way represent conclusions of the Secretariat's survey, although this must be evident from a reading of the relevant parts of the survey, I felt it necessary to make this statement, as an erroneous impression may be gained by the fact that Mr. Hoffman has noted from the ECE Survey in the context of his own inference.

Now, if you would be good enough to put to me the previous question that you have asked I would be glad to try to answer them, Mr. Case.

Mr. CASE. Well, first of all, it was previously stated that you seek to build up the productivity of the 16 nations. My question was: To what level are we to build them up?

Mr. HOOVER. First, I should say that we would have to try to build them up to the level so they will be able to pay, through their exports, for imports they get. But that is not conclusive, again, obviously, because if the standard of living in Europe was allowed to keep on rising them obviously we might not be able to attain that goal. So that I should say that it is the decided responsibility of the ECA to keep track of the standard of living in Europe and see that it is not allowed to rise at a rate that will make it much more difficult to increase the ratio between the exports and imports.

Mr. CASE. Of course, what you are proposing here today is to use the money of the taxpayers of the United States to build up this productivity, and in some cases, apparently, you propose to build it up to higher than the prewar level, that is, the level of 1938.

Mr. HOOVER. I should very greatly doubt whether that could be done.

Mr. CASE. Well, this report says it was nearly to the prewar level by the end of 1946, and in the third quarter of 1947 it was 99 percent of the level of 1938, excluding Germany and Russia.

Mr. HOOVER. Yes. In the first place; taking it by stages, if you take the production and the level at which it is presently, in a good many countries it has very nearly attained the level of 1938, and in the case of Sweden and a few other countries it has actually surpassed that; but they will need to produce very much more than they were producing in 1938 if they are able to pay for their imports, because of the circumstances they have lost a very considerable portion of their assets abroad from which in the past they paid for a good deal of what they used.

Mr. CASE. You mean by "assets abroad" that a great deal of their foreign exchange was paid for by income from foreign investments? Mr. HOOVER. That is precisely right.

Mr. CASE. As an illustration, for instance, the recent liquidation of Argentine investments by England?

Mr. HOOVER. Yes, sir.

Mr. CASE. In other words, we now seek to provide some way to provide the income for England that she formerly received from her investments in Argentina?

Mr. HOOVER. That is to say we hope to provide the means by which they could earn, through production and exports, what they formerly obtained.

Mr. CASE. And if it does earn that, then it could buy the materials for the exports it contemplates selling?

Mr. HOOVER. Yes, sir.

Mr. CASE. Where are those exports to be sold?

Mr. HOOVER. They would have to be sold, obviously, in other parts of the world; we will say in Latin America, in the Eastern Hemisphere, and in the United States. And I do not see how we can get away from choosing that either the rest of the world will have to buy enough so that these countries can sell enough to be on an irdependent basisMr. CASE. You include the United States?

Mr. HOOVER. Yes, sir.

Mr. CASE. In other words, we would use the United States taxpayers' dollars to build up the productivity of those countries so that they can export more to sell to us so that they can balance their trade. Where do we balance ours?

Mr. HOOVER. Well, I should think in that process ours would be balanced. As it is now

Mr. CASE. Balanced by the money we appropriate so that they can build up productivity to get a favorable balance of trade to balance their economy?

Mr. HOOVER. What I was thinking of is this: we have been exporting an immense export surplus. It is just another way of representing the fact we are caring for these people.

Mr. CASE. Where and how will the United States Treasury balance its export of dollars?

Mr. HOOVER. I should suppose that would come to an end at the end of this period that is contemplated. I certainly hope it would, and I would by no means favor any processs

Mr. CASE. Why is not the direct answer to my question that the Treasury will balance its export of dollars by levying more taxes? Mr. HOOVER. As long as that goes on, I would say that is precisely what would be done.

POSSIBILITY OF EXPORTS OF PARTICIPATING

COUNTRIES REACHING

RUSSIAN SATELLITE COUNTRIES

Mr. CASE. Is it contemplated that some of those exports will be sold to the so-called satellite countries or eastern European countries? Mr. HOOVER. Our exports?

Mr. CASE. The exports of those 16 nations.

Mr. HOOVER. Yes, sir; I suppose so.

Mr. CASE. And thereby help to balance the economy of the satellite countries, the countries who were invited to participate and then declined?

Mr. HOOVER. I suppose it would at the same time help the economy of those countries.

Mr. CASE. That is all, Mr. Chairman.

Mr. KEEFE. I would like just to pursue that line of inquiry Mr. Case has indulged in for just a moment, to satisfy myself.

Congress has indicated clearly in the passage of this legislation and other legislation a clamping down by the media of export controls and direct legislation and prohibiting the export from this country to the satellite nations.

Mr. HOOVER. Yes, sir.

Mr. KEEFE. And to Communist Russia.

Mr. HOOVER. Yes, sir.

Mr. KEEFE. In response to an overwhelming demand of the American people and the Congress of the United States.

Mr. HOOVER. Yes, sir.

Mr. KEEFE. Now, if I understood correctly your answer to that question Mr. Case asked-and correct me if I am in error-what we propose to do under this program is to take the American tax dollar, buy raw materials and finished products, ship those raw materials and finished products as gifts to the participating nations who are the recipients of the gifts and they, in turn, to fabricate those materials

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