Alternative 2 is to place the responsibility for securing the coordination of foreign and domestic economic policy in the Executive Office of the President.

In support of this alternative it is argued no one agency is in a position to coordinate domestic and foreign economic policy, and that since the resolving of these issues is a basic responsibility in connection with the program of the President, this function should be performed in the Executive Office. Moreover, since solutions in this area depend as much on congressional action as on action in the executive branch of the Government, it is argued that action to achieve greater consistency must to a large degree consist in making recommendations to the Congress. The President is in the best position to view from an over-all standpoint both the domestic and foreign aspects of the Government program, and to make necessary recommendations for remedial legislation.

It is argued against this arrangement, or any other arrangement for coordinating domestic and foreign economic policy, that consistency will be impossible as long as the American people as a whole are relatively disinterested in foreign affairs and concerned primarily with immediate domestic considerations. The attempt to bring about greater consistency will therefore be basically a long-range problem of education.

In the immediate defense emergency period the responsibility for securing coordination of foreign and domestic economic policy lies clearly within the jurisdiction of the Office of Defense Mobilization which, in order to carry out its general responsibilities, must of necessity take a comprehensive view of economic problems from the standpoint of both domestic and foreign availabilities and requirements. From a longer-run viewpoint, the President is staffed by the Council of Economic Advisers, which is responsible for reviewing national economic policies from both their domestic and foreign aspects. An advantage of utilizing this staff lies in the fact that under the legislation which established it there was also set up in the Congress a joint committee which was made responsibile for reviewing the annual report of the Council of Economic Advisers. This Joint Congressional Committee on the Economic Report, it is said, might become an important means of bringing these matters to the attention of the Congress as well as the President. While such an arrangement might not at first be sufficient to overcome many of the conflicts and inconsistencies which have developed in national policy, it would provide a means by which these inconsistencies could be pointed up and their implications examined as a first step toward their ultimate reduction.

FURTHER ANALYSIS AND CONCLUSIONS

The present shortcomings of Government mechanisms in the field of foreign economic affairs have resulted from a combination of the rapid expansion of foreign economic responsibilities, the absence of peacetime administrative precedents, the belief that these programs were temporary, and the assumption that organizational arrangements could therefore be improvised as successive emergencies arose. Recent events and the current world outlook now make it apparent that a more comprehensive organizational solution is required to bolster the economies of friendly nations and to administer effectively the various economic programs necessary to maintain and expand economic strength at home and abroad. Just as military security has called for global-military strategy and a unified approach to military goals, central control of economic measures is required to carry out global economic objectives.

Factors governing a permanent solution

It is clear from the nature of current foreign economic activities that emergency requirements are conditioning the major part of these activities today. With respect to permanent administrative solutions, therefore, the fundamental question is whether the present nature and magnitude of foreign economic responsibilities can be expected to continue over a long period, or whether these conditions are temporary.

In reviewing the present outlook there appears to be no reliable indication of the answer to this question, and no attempt is made, therefore, to arrive at a permanent organizational solution in this report. Some of the factors involved in reaching an effective long-run solution are noted, however, before turning to the immediate problems of the defense emergency situation.

If general war is avoided and there is a general relaxation of international tension within the measurable future, the effect may be to eliminate a large part of present foreign-aid efforts, as well as to reduce greatly the scope of such related problems as the procurement and development of strategic materials abroad and export control. Under these conditions it might be expected that foreign economic responsibilities would call for somewhat greater activity than in the period. prior to the Second World War by reason of the leadership assumed by the United States since that time. Nevertheless, the extent of United States operations would presumably be far less than under the current large-scale assistance programs. On the other hand, a prolonged period of large-scale foreign economic activity might result under either of two other sets of circumstances. First, it may be that preservation of peace will prove possible only by continuing largescale aid in support of military and economic strength in Europe and elsewhere. Second, in the event that it is not possible to avert the

tragedy of general war, responsibilities in the field of foreign economic affairs would be extensive and would be unlikely to cease at the conclusion of such a war.

In view of these unknowns, an answer to the question of what longrun arrangements should be made to achieve the most effective conduct of foreign economic affairs involves two major possibilities: either foreign economic affairs will involve continued extensive activity, or activity in this field will be greatly reduced from current levels within a few years.

Three alternatives with respect to a permanent organizational solution for the conduct of foreign economic affairs appear deserving of consideration in relation to the possibilities just noted: (1) focus responsibility in the Department of State by consolidating major economic programs and activities in that Department; (2) continue a separate foreign economic agency by expanding the Economic Cooperation Administration and making it a permanent executive Department of Foreign Economic Affairs; or (3) establish a Department of Foreign Affairs within which economic activities would be brought together in a department of foreign economic affairs, which would be one of several subordinate administrative departments. The basic choice presented by these alternatives is between separating the administration of foreign economic affairs from the general foreign affairs agency, or alternatively including these activities in the Department of State or a new Department of Foreign Affairs.

A choice between these alternatives is important because until it can be made, the existence of a foreign economic agency such as the Economic Cooperation Administration, with limited scope and nonpermanent status, will probably mean continuing unsettled jurisdiction and resulting administrative difficulties. There will always be a running battle for jurisdiction as long as the Department of State maintains a detailed interest in the same aspects of foreign economic affairs in which a separate agency is concentrating at the same time.

Factors suggesting a Cabinet Department.—Establishment of a Department of Foreign Economic Affairs to provide specialized attention in this field would assume that extensive foreign economic programs of some sort will be continued on a relatively permanent basis. Otherwise the activity would not be sufficiently important in the Government as a whole to warrant the status of an executive department. On this assumption, the departmental arrangement would provide for the type of public leadership in this field that can be provided only by a member of the Cabinet or someone who is recognized as having substantially the same status. Such leadership involves the ability to speak with authority as the head of a major department of Government on the basis of specialized knowledge such as the President cannot be expected to have.

Such an organizational arrangement might clarify in some respects the role of the Secretary of State by permitting him to concentrate on the more general aspects of his present task and also on those aspects of it that are not shared with the other departments of Government. The Secretary might also be relieved to some extent of administrative burdens, and more importantly, of personal burdens in presenting economic programs and appropriation requests to Congress and in leading public discussion of foreign economic activities.

Since it is the function of the Secretary of State to advise the President and to provide leadership under him in the development and execution of the foreign policy of the United States, the Secretary is inevitably cast in the role of the generalist in the field of foreign affairs. He can seldom afford to attach himself to any specialized interest, since he must be in a position to appreciate the claims of all. There may be question, accordingly, as to whether he should seek to be a specialist in foreign economic affairs, although that appears to be a part of his present duties.

The problem of the Department of State.-But the concentration of specialized economic activities in a separate Department of Foreign Economic Affairs as a means of relieving the Secretary of State would have adverse effects on the Department of State. A general foreign affairs agency divorced from the particular activities involved in the economic aspects of foreign affairs would have difficulty in carrying out its responsibilities effectively. The removal of economic work from the diplomatic service would also lessen the opportunity of bringing a more realistic note into the training and experience of many foreign service officers.

An alternative possibility as a permanent administrative solution would be the transfer to the Department of State of all foreign economic activities that could readily be separated from the domestic and military agencies of the Government. This arrangement, however, also gives rise to serious misgivings. If it were assumed that the foreign economic programs were large, the question would be whether large-scale economic activities could be given proper attention by a department submerged in so many major problems. But more impressive is the question of whether, regardless of the magnitude of economic activities, specialized economic affairs could be handled. satisfactorily in a department which often seems to be dominated in its action bureaus by personnel who have come up through the Foreign Service during a period when conditions were quite different from those prevailing at present.

Incorporation of foreign economic activities into an agency having general foreign affairs responsibilities has much to commend it from a general administrative point of view. Despite the contention that so-called political affairs are the principal concern of the Depart

ment of State, in reality the economic aspects of foreign affairs must be given major attention in any consideration of the political relations between states. To withdraw from the Department of State the economic policy activities which it now has and to join them with existing economic programs in a new agency would in effect create a second and possibly more potent foreign affairs agency. It is for this reason that the attempt to remedy the weaknesses of the Department of State in the field of foreign economic affairs by withdrawing responsibility from it is open to most serious question.

The basic organizational dilemma.-Although several factors point to a solution outside the Department of State, such a solution fails to recognize that economic affairs are an integral part of foreign affairs. One possible solution to this dilemma of choosing between the Department of State and a permanent independent agency for foreign economic affairs might be to arrive at an organizational arrangement which would seek to embody the advantages of both solutions. Such a compromise solution could conceivably be accomplished by extensive reorganization of the Department of State and the Foreign Service, and the ultimate provision of a separate unit for foreign economic affairs in the revamped department. Or a solution might be more readily accomplished by the establishment of a Department of Foreign Affairs as an executive department within which there would be a department of foreign economic affairs as a subordinate administrative department.

Which of these possibilities offers the more promising solution from the standpoint of the conduct of foreign economic affairs depends not only on the future size and nature of the programs, but also in part on how the organizational and personnel problems of the Department of State and the Foreign Service are to be resolved. Other considerations than foreign economic activities must be taken into account, in arriving at a final solution. In any event, the emergency nature of foreign economic activities today requires that immediate decisions be taken regardless of whether they provide the most desirable ultimate arrangements.

Organization for the defense emergency

The first step toward a better organization of foreign economic programs in the current emergency is the consolidation of related activities into one program. The basis for such consolidation rests on the fact that maximum results from the standpoint of global economic strategy require central direction of the use of limited material resources and skills. When similar programs are separately operated, there is bound to be overlap and duplication, conflicts between program objectives, and failure to realize maximum results. The impacts of economic aid in one part of the world have inevitable repercussions elsewhere, and make it imperative that all efforts be directed