confidence for the President and the Secretary of State the views of these Governments on the possibilities, in the light of their desires, of establishing a stable and lasting peace. Proposals were not to be offered or committal positions taken. The Under Secretary did not present any papers except for a brief memorandum on the bases of United States foreign economic policy as developed in preliminary form by the Subcommittee on Economic Problems in February and subsequently released for publication."

Upon his return, March 28, Mr. Welles informed the President and Secretary Hull that, important as the territorial, political, and economic problems were, security was the basic problem in Europe. While immediately there was no chance of durable peace if the basis of negotiations was political and territorial adjustment, he believed that there might be a slight chance for restoration of peace if a practical plan of security and disarmament could be proposed by the United States and other neutrals and agreed upon by the great powers of Europe. The only possible source of initiative for such an attempt, he concluded, appeared to be the United States. This report, together with the continuing and deepening impact here of the war abroad, focused attention on security as prerequisite for V peace. These findings entered into the Department's preparation of policy thenceforth.

Throughout these early months of 1940 the stagnant period in the war had continued without essential change. A treaty of peace was signed between Finland and the Soviet Union March 12. In the west, hostilities had remained inactive. Suddenly on April 9, without warning, German land, sea, and air forces attacked neutral Norway and Denmark. Denmark was overrun in hours. Norway fell under Nazi control by April 24. To prevent its being used as an Axis base, British troops on May 9 occupied Iceland, which had suspended Danish royal powers on April 10 and initiated direct consular relations with the United States on April 24. Germany attacked the Netherlands, Luxembourg, and Belgium on May 9; all three had fallen before twenty days had passed, and the German forces had pressed into France. On May 10 Winston Churchill became Prime Minister of Great Britain. On May 11 Allied troops landed in the Caribbean possessions of the Netherlands, at Curaçao and Aruba, in order to insure that these areas, with their valuable oil refineries and strategic advantages, did not fall into Axis hands. Meanwhile, in the Far East, Japan expressed concern for the maintenance of the status quo of the Netherlands East Indies. Secretary Hull, in diplomatic

Department of State Bulletin, II, 155. The Soviet Union and Finland, engaged in local hostilities, were not included in either of these developments. 7 Ibid., II, 461.

conversations and in a public statement on April 17, warned against prejudicing the peace of the South Pacific.8

The Government in Washington became preoccupied with trying to limit the extension of the war and with meeting the grave situation created by this widening scope of hostilities. An immediate task was to persuade Italy not to enter the war. The President undertook such action by telegrams to the Premier of Italy, April 29, May 14, May 26, and May 30, sent through the American Ambassador, and by parallel efforts with Pope Pius XII through Myron C. Taylor.10 Midway in that unsuccessful effort, and again at its end, the President urged the Congress, in view of the possibility of attack on vital American zones, to authorize vast extensions of the nation's air, military, and naval defenses in the light of the lessons so far learned from the actual combat in Europe and to provide selective training of manpower.

Meanwhile, before Mussolini's attitude was known and when a conference of neutrals was not yet patently impossible, the Subcommittee on Political Problems undertook to prepare views on European organization for possible use if events permitted. Its discussions on April 19 and 2611 and on May 6 revolved about the establishment of a European "political body" representing both individual states and regional groupings, with which would be associated a permanent court of justice and a series of special advisory and technical bodies. The brief discussion of these ideas led not to conclusions but rather to questions: What minimum attributes must a regional organism in the critical area of central Europe have? What particular structure of organization would be suitable there? How would it work from an economic standpoint? What area should such a regional group include?

Here the discussion of the subject stopped. The war's westward sweep late in May 1940, when the retreat from Dunkirk began, compelled intensive development of American defense and immediate consideration of the economic and political consequences to the United States of a possible German victory.

"CONSEQUENCES TO THE UNITED STATES OF

A POSSIBLE GERMAN VICTORY"

CONSIDERATION of the implications of a German victory were well under way in the last week of May. Either of two general economic

Peace and War, p. 515.

'Ibid., pp. 519–22, 526–32, 536-40, 542-44.

10 Wartime Correspondence Between President Roosevelt and Pope Pius XII, with an Introduction and Explanatory Notes by Myron C. Taylor (New York 1947), pp. 5, 27.

"See appendix 5.

possibilities became clear. If the German onrush were checked and the war was prolonged, European peoples would face a long period of economic strain and lowered standard of living. If the Allies were defeated, the German system of economic autarky would probably be extended to most of Europe and an effort made to extend it to the colonial possessions of defeated states. The result would again be a lowering of living standards and social deterioration. For our Nation, the basic consequence of a German victory in Europe would be emergence of a "postwar" situation that might confront the United States with "peace-time" problems of greatly different character and portent from those heretofore envisaged.

Accordingly, an inclusive range of economic action might possibly be required of this Government, and consideration of the subject on an interdepartmental basis became essential. The need for such interdepartmental consultations had already been recognized in connection with the proposed conference of neutrals, and the basis for organized consultations had been laid in the plan projected the previous March. An informal group in the Government, of the highest technical competence, was called together on May 27 by the Chairman of the Subcommittee on Economic Problems, which itself never convened again as a separate body. The new group was constituted under the name of the "Interdepartmental Group to Consider Post-War International Economic Problems and Policies," and its establishment was agreed upon in discussions between Secretary Hull and the other Cabinet members concerned. Four Departments were represented initially: State (Leo Pasvolsky, Chairman; Adolf A. Berle, Jr., Lynn R. Edminster, Herbert Feis, Henry F. Grady, and Harry C. Hawkins); Treasury (H. Merle Cochran and Harry D. White); Commerce (Louis Domeratzky, Richard V. Gilbert, and Grosvenor M. Jones); and Agriculture (Mordecai Ezekiel, James L. McCamy, Howard R. Tolley, and Leslie A. Wheeler). In the later meetings, additional representatives from these and other agencies of the Government participated.12

"Additional representatives participated at various subsequent meetings: State Department (Emilio G. Collado, Richard Eldridge, Leroy D. Stinebower, H. Julian Wadleigh, and David Williamson); Executive Office of the President (Lauchlin Currie and James V. Forrestal); Reconstruction Finance Corporation (Clifford J. Durr); Federal Loan Agency (Warren Lee Pierson); Treasury (V. Frank Coe, Simon G. Hanson, and W. L. Ullman); Surplus Commodities Corporation (M. W. McGuire, and Milo Perkins); Commodity Credit Corporation (C. B. Robbins); Tariff Commission (A. Manuel Fox, E. Dana Durand, Oscar B. Ryder, James H. Hibben, Frank A. Waring, and Mark A. Smith); Commerce (P. A. Hayward, E. G. Holt, and W. S. Salant); Interior (Clark Foreman); Agriculture (George B. L. Arner and Arthur W. Palmer); Federal Reserve Board (Walter R. Gardiner, E. A. Goldenweiser, C. P. Kindleberger, Chandler Morse, and Woodlief Thomas); Coordinator of Inter-American Affairs (Nelson A. Rockefeller); War (Maj. Paul F. Logan, Lt. Col. William A. Sadler, Capt. H. R. McKenzie and additional officers); Navy (civilian representative not identified in records).

This Group was to organize, direct, and review studies bearing on the problems of postwar international economic relations, to be made in the individual participating departments and agencies. Its objective was to clarify the possible alternatives of foreign economic policy open to the United States.

The Subcommittee on Political Problems of the Advisory Committee on Problems of Foreign Relations began on May 31 to consider other foreseeable consequences of a possible German victory.

One was the threat that, with the German conquest of countries in Western Europe having possessions in the Western Hemisphere, transfer of those territories to Germany might ensue. Secretary Hull and the President had already approved the draft of a proposed joint resolution regarding this possibility for immediate submission to the Congress. Under this resolution, the United States would refuse to recognize or acquiesce in a transfer of territory in the Western Hemisphere, regarded as including Greenland but not Iceland, from one nonAmerican country to another non-American country. In the event such transfer appeared likely, the United States in addition to other measures would immediately consult with the other American republics to determine upon the steps to be taken.

The phrasing of this resolution was deemed broad enough to cover Canada and the contingency of a removal there of the seat of the British Empire if the British Isles proved unable to withstand attack. The Subcommittee believed that the resolution would have a salutary effect in Europe and a reassuring effect in this Hemisphere. Resolutions along the proposed lines were adopted by the Senate on June 17, 1940, and by the House on June 18.13

Another threat envisaged was that, for economic reasons, one or more of the Latin American republics might become politically dependent upon Germany if that state were to organize Europe as an economic union. A third was the possibility that Japan might move into the Dutch East Indies and other Pacific areas. The Subcommittee on Political Problems concluded that all possible preparations should be made to assure the adequate defense of the United Statesgoing beyond measures limited strictly to the Western Hemisphere. Toward this end it was believed necessary to enable the Allies, by changes in existing legislation, to establish credits in this country and to purchase from this Government supplies that could be spared. So great was the danger in the sight of the subcommittee members that the fear was voiced that American opinion might not be ready to act until too late to save the Allies, leaving the United States in a most adverse position as regards the victor or victors.

With the formulation of these views, the Subcommittee on Political

13 S. J. Res. 271, H. J. Res. 556, 76th Cong., 3d sess. The resolutions were not, however, reconciled until Apr. 10, 1941; Public Law 32, 55 Stat. 133.

Problems ceased functioning as a group. Its individual members became engrossed in the urgent tasks arising out of the broad program for bulwarking the national safety.

The outlook rapidly became more menacing. In the first two weeks of June, hostilities spread throughout the Mediterranean and into Africa. On June 10 Italy entered the war against France and Great Britain. Spanish troops then occupied the International Zone of Tangier. The boundaries of defined combat areas were extended by the United States under the neutrality act to this further area of war. In Eastern Europe, spearheaded in each case by an ultimatum, Soviet troops in succession entered Lithuania, Latvia, and Estonia between June 15 and June 17, and the Soviet Union received Bessarabia and Northern Bukovina from Rumania June 28.

Above all, however, loomed the plight of France and the fearful consequences of French defeat. As Italy struck, the French Premier, M. Paul Reynaud, desperately appealed to the United States for help before it was too late and promised that France would fight if necessary from North Africa and the French possessions in the New World. On the evening of that day, June 10, the President publicly condemned Mussolini's decision and declared that the United States would "extend" to the Allies "the material resources" of the United States. To the French, the President replied that American efforts over the weeks just past to provide airplanes, artillery, and munitions to the Allied Armies would be redoubled, "so long as the Allied governments continued to resist," and he stressed the necessity for the French fleet to continue operations.14

The vital role of the French fleet was repeatedly emphasized to the French Government during the next week, with the warning that American friendship with France was at stake, and assurance was received that the French fleet at least would not be surrendered to the enemy. On June 14 German troops entered Paris. The Governmentsin-exile of Poland and Belgium moved from there to London, where the Netherlands and Norway had already established their Governments. On June 17 France asked Germany for an armistice, which was signed on June 22. One with Italy was signed on June 24. General Charles de Gaulle called for continued resistance by "Free French" from overseas.15 While the French fleet did not fall into the hands of the Germans, that part of it remaining in French ports continued to cause anxiety for more than a year.

The capitulation of the Netherlands armed forces and the French request for armistice terms sharply raised the problem of whether

14 Peace and War, pp. 545-53.

15 General de Gaulle was recognized on June 28, 1940, by Great Britain as leader of the Free French. On July 10 Marshal Henri Philippe Pétain was given dictatorial powers within France by the French Parliament.