The Clayton Theorem (or: Did George Marshall Save the US from Economic Collapse?)
Daniel Ford (long essay, fall 2006)
Even if they don’t quote him directly, our textbook authors generally agree with a theorem advanced nearly sixty years ago by Undersecretary of State William Clayton: Europe was about to run out of dollars, a situation that posed a calamitous threat to the US economy. Clayton envisioned ‘markets for our surplus production gone, unemployment, depression, a heavily unbalanced budget on the background of a mountainous war debt. These things must not happen’.
His words appear in Foreign Relations of the United States 1947. Seen in context, they actually constitute an anomalous part of his three-page memo, written as Clayton returned from Europe in May 1947—and that memo, in turn, is an anomalous part of a 284-page collection of State Department papers on the Marshall Plan. In one of those papers, Charles Kindleberger tells us that ‘Mr. Clayton was deeply exercised by what he had seen in Europe. He had the impression that Europe was collapsing.... He was depressed by what he had seen and heard ... and felt strongly that something should be done’. In short, the man was upset, and he was bent on a mission. Do a few sentences, written in heat, deserve the immortality they have been given?
Of our core texts, Crockatt quotes Clayton at length, and indeed admits of no other motivation for the Marshall Plan than the US was staving off a renewal of the Great Depression. Young & Kent grant the aid program a double purpose: to combat communism in Europe, and ‘to ensure that the post-war American economy was not sent into recession’. Best and his co-authors take a similar view: economic aid ‘was not an unselfish act born out of some sense of guilt [sic!]’ but an effort ‘to counter the … rise of European left-wing political parties’ and ‘help stimulate the American domestic economy’. Altruism, the student must conclude, had nothing whatever to do with it.
Gaddis is something of an exception, attributing the Marshall Plan to ‘the desperate economic plight of the West Europeans generally’. Indeed, I venture to say that if he were asked about the Clayton Theorem, he’d find little to commend it, to judge by a reference to the ‘stranger illusions’ of Communist ideology. Early in 1945, Gaddis tells us, Stalin authorized Molotov to accept a reconstruction loan ‘in order to help the United States stave off the economic crisis that Marxist analysis showed must be approaching’. If Stalin was under a strange illusion, what are we to say about Crockatt, Young, Kent, and Best and his colleagues?
Deconstructing Allen Dulles
Turning to books specifically about the European Recovery Program (ERP), Michael Hogan employs a more defensible formulation, explaining that American policy-makers ‘were convinced that a “dynamic economy” required American trade and investment abroad’. However, he provides no documentation beyond the ritual reference to FRUS 1947, and he has virtually nothing else to say about the program’s origins.
Then there’s Allen Dulles, who in 1947 wrote a book to proselytize for the Marshall Plan (it was overtaken by events and wasn’t published until 1993). In his introduction, Michael Wala provides the most egregious example of how the Clayton Theorem has come to dominate academic thinking. American officials, Wala explains, ‘feared that the dwindling dollar reserves of the European nations ... could easily spell unemployment and even a new depression for the United States’. The public-relations campaign in favor of the ERP would therefore stress ‘the humanitarian aspects of the program and the benefits ... for the United States’ domestic economy’, while downplaying its utility for countering Soviet expansion in Europe.
Yet Dulles makes no such argument in the book Wala is introducing—a book written precisely as propaganda for the Marshall Plan. Indeed, Dulles mentions the US economy only once, when he quotes the presidential advisory committee upon which he’d served. The effect is explicitly to contradict his editor: ‘The Committee regards as nonsense the idea ... that we need to export our goods and services as free gifts, to insure our own prosperity. On the contrary, we are convinced that the immediate economic danger to the United States is inflation’.
Instead, Dulles appeals to the better nature of his countrymen: ‘If Western Europe does not receive substantial aid,’ he warns, ‘there will be widespread starvation ... [and] a breakdown in its economy and industrial life. Under these conditions, there is little hope of preserving these countries for what we call western civilization’.
Will Clayton and his theorem
Clayton was a self-made millionaire who turned to public service during the Depression and World War 2. As undersecretary of state for economic affairs, he was ‘regarded both at home and abroad as America’s foremost economic statesman’. Indeed, he was Truman’s first choice to replace James Byrnes as secretary of state. Family obligations obliged him to refuse, or otherwise we’d be discussing the Clayton Plan rather than the Clayton Theorem.
That May 1947 memo wasn’t Clayton’s first mention of the US economy in connection with aid to Europe. Drafting a speech for the president three months earlier, Clayton writes: ‘Last year exports from the United States amounted to ten billion dollars; and imports into the Untied States amounted to only five billion dollars.... It is up to us, if we are going to avoid economic disaster in the years to come, to see to it that the world does have through normal processes plenty of dollars to buy American goods’. However, the notion was dropped from the final draft, and Truman’s speech (at Baylor University on March 2) makes no reference to European aid.
Clayton meanwhile retreated to an Arizona ranch, where he formalized his ideas in a series of one-sentence paragraphs calling for a $5 billion aid program for 1948. ‘The United States must take world leadership and quickly, to avert world disaster’, he writes. But the US will not undertake that leadership unless the voters ‘are shocked into doing so’. The effort must be total, ‘or we’d better stay at home and devote our brains and energies to preparation for the third world war’. His only mention of the US economy is to scoff at the notion that the country could not afford aid, given that it is spending $10 billion a year on defense, its people are enjoying ‘the highest standard of living in their history’, and there’s talk of reducing taxes.
 US Department of State 1972, p. 231 (italics in the original)
 USDS 1972, pp. 201-484 (for a chronology of Clayton’s memo, see Gimbel 1976, pp. 13-14)
 USDS 1972, p. 243
 Crockatt 1996, p. 78; Young & Kent 2004, p. 74; Best et al. 2004, p. 222 (more comically, Reynolds 2000 actually seems to suggest that the Marshall Plan was a cause of the Cold War rather a consequence, p. 111)
 Gaddis 1997, pp. 43, 41
 Hogan 1987, pp. 26, 42
 Dulles 1993, pp. x, xiv
 Dulles 1993, pp. 54, 97
 Sanford 1987, p.3
 Fossedal 1993, p. 3
 Fossedal 1993, pp. 213-4
 Fossedal 1993, pp. 216-9
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