approved on September 16. A loan of $25,000,000 was extended to China September 25.

At that juncture, on September 27, 1940, Germany, Italy, and Japan joined in a ten-year military-economic alliance. This tripartite pact, as Secretary Hull immediately observed,2* did not substantially alter a situation that had existed for many years; nevertheless it formalized the alliance for aggression in Europe and the Far East and hardened the choices before the United States in the future. The Japanese Government publicly mentioned the question of war with the United States October 5, protested on October 7 the prohibition being placed by the United States on further exports of iron and steel scrap to Japan, and on October 13 included the United States in a general invitation to other nations to join the tripartite pact. Repatriation of Americans from the Far East was immediately announced by the United States. In Europe, Italy-joined by Albanian forces-attacked Greece October 28. On November 12, Foreign Commissar Vyacheslav Molotov began consultations with the German Government on subjects then unknown. Hungary and Rumania joined the tripartite pact late in November.

On October 26, 1940, Secretary Hull declared that, in view of the evident aggressive intent of the tripartite pact and of the developing menace to the United States, impregnable defense, established "as speedily and as completely as possible," had become the "first need." He said: "To have peace, we must have security. To have security, we must be strong." 25 Defense, not alone neutrality, had become the guideline of our foreign policy. The national electoral campaign during the autumn, which on November 6 resulted in the re-election of President Roosevelt for a third term, disclosed differences over methods and program in the emergency confronting the Nation rather than partisanship with respect to this fundamental point of view as expressed by the Secretary.

Throughout these autumn months Great Britain, under the heavy bombardment of the blitz, was purchasing supplies under the "cashand-carry" provisions of the neutrality act. The dwindling possibility of continuing such cash purchases had been formally brought to the attention of this Government in the summer of 1940 upon receipt on July 5 of a British aide-mémoire concerning their difficulties. Under the circumstances in which immediate American defense was to a major degree contingent on continued British resistance, this problem was under urgent consideration in Washington by August. It was then that standardization of arms was begun, partly to reduce expenses. And it was then that the possibility of requesting Congress

"Ibid., p. 251.

25 Ibid., pp. 331-36.

to authorize loans for British purchases was rejected by the Cabinet lest such borrowing be on an insufficient scale and lest Allied war debts later impair the peace.2

26

The Secretary in his address of October 26 had declared that any contention that this country should not continue to afford "all feasible facilities for the obtaining of supplies by nations which, while defending themselves against barbaric attack, are checking the spread of violence and are thus reducing the danger to us" was "a denying of the inalienable right of self-defense." This was the principle upon which lend-lease was based. The method to implement it developed in coming weeks. On December 17 the President at a press conference proposed as a solution to the supply problem the lending of the needed materials themselves, rather than the money for their purchase.27 Following his address on December 29, devoted to the program of making the United States the arsenal of democracy, and stressing the necessity of integrating into our defense activities the war needs of Britain and other free nations resisting aggression, the President on January 6, 1941, requested Congress to pass legislation authorizing lend-lease.

END OF THE FIRST PREPARATORY EFFORT

IN THE CLOSING months of the year 1940 the last seven meetings of the Interdepartmental Group on Post-War International Economic Problems and Policies were held, beginning October 15 and ending December 17. These meetings constituted a second series, distinguished by being devoted for the first time wholly to postwar preparations as originally projected for the Group. The work was done in accord with a program proposed by the Chairman, who stressed, as in the original plan for the entire work of the Advisory Committee on Problems of Foreign Relations, the necessity of basic research as the foundation for policy recommendations.

Under this program, the research would take into account alternative possibilities with respect to the world situation at the end of the war. The postwar political alignments of states and the over-all political and economic policies that would result from such alignments, as yet indeterminable, were of necessity major factors for consideration in any study of postwar economic problems. Widely varying assumptions, therefore, with respect to these factors, including the possibility of a German victory, had to be borne in mind. Furthermore, the unpredictability at that time of the economic effects of the actual fighting and the duration of the war made it necessary

26 See E. R. Stettinius, Jr., Lend-Lease, Weapon for Victory (New York, 1944), pp. 55-65.

27 Ibid., pp. 1, 65.

to assume also wide variations from the prewar data on which the Group's studies had to be based. Consequently, with a view to the eventual utilization of these studies in the formulation of policy, they were to be in a form permitting their rapid adjustment to a developing situation.

The research would be devoted initially to commodity studies on a world basis, which would then be used in studying the economic structures and interrelationships of various regional blocs. It would lead to appraisal of the economic strengths and weaknesses of the major countries and regions and of their trade, productive capacities, and consumption requirements. It would also involve consideration of such questions as the effects of German subjugation on the economies of the various European states and the results, both internally and externally, were continental Europe to become isolated. Alternative possibilities with respect to trade, monetary, and financial policies and relations were to be surveyed, as were shipping and transportation problems. The first item on the program proposed by the Chairman was a survey of the economic aims of Germany, Italy, and Japan, and the last was a survey of possible alternative foreign economic policies for the United States. The basic studies were to be undertaken by various commodity specialists in the Government, working in commodity groups.

To carry out such a program, small sub-groups began to evolve from the start, their purpose being to prepare reports for consideration by the full Group. At the first meeting in the second series on October 15, a sub-group was appointed to study a draft memorandum already prepared on German economic aims. At the second meeting on October 29, it was decided to establish immediately subgroups on cotton, iron ore, and petroleum. By the time of its last meeting, the Group had decided to establish eight commodity groups as follows: (1) foodstuffs, fats and oils; (2) fibers; (3) rubber, hides and skins; (4) coffee, tea, cocoa, spices, tobacco; (5) metals; (6) fuels; (7) lumber, pulp and paper; and (8) chemicals and other nonmetallic mineral raw materials. Their chairmen and members. were officials of technical competence in various Departments and agencies of the Government.28 Four sub-groups on regional studies. and one sub-group on commercial policy had also been established. The regional sub-groups were concerned respectively with Germany and the Continent of Europe, Japan and the Far East, the Soviet

28

The sub-groups, in the above-named order, were presided over by representatives from the following Government agencies: (1) and (2) Department of Agriculture; (3) Department of Commerce; (4), (5), and (6) Tariff Commission; (7) Department of Commerce; and (8) Tariff Commission.

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Union, and the British Commonwealth.29 This sub-group structure as agreed upon December 17 reflected the discussions in the Interdepartmental Group over the previous two months, when the Group had considered such papers as an outline for a typical commodity study and a general statement on the objectives of such studies and had reviewed the experiences of the commodity and regional subgroups then in operation. Thereafter, on three occasions beginning December 20, 1940, and ending March 3, 1941, the chairmen of the commodity and regional sub-groups met with Mr. Pasvolsky to consider the research problems being encountered in conducting the two lines of work.

However, the difficulties encountered throughout the first effort to make postwar preparations, arising out of the pressure of current problems, the largely ad hoc basis of the preparatory work, and the absence of an organized research staff, were reflected sufficiently even at the technical level of the interdepartmental sub-groups to cause the work rapidly to taper off, albeit without formal action. Such research as continued from the impetus of the Group practically ceased to be distinguishable from regular governmental operations. Within the Department of State, the surviving threads of this early pattern were caught up in new efforts made, step by step, to organize the preparation of postwar policy.

29 The chairmen of the first and third of these sub-groups were representatives of the Department of Commerce and of the second and fourth, an officer of the Department of State. In addition, a regional sub-group on the United States and the Western Hemisphere, three "subject study" sub-groups on monetary and financial policy, transportation, and population movements, and a sub-group on Alternatives of Foreign Economic Policy for the United States, were projected but not established. See appendix 6.

T

CHAPTER III

New Measurement and New

Organization, 1941

HE YEAR 1941 was decisive for the organization of the preparation of postwar policy. As the year began, organized research was instituted in the Department; as it closed, the decision was made to organize postwar preparation on a new and full-scale basis. The period between was one of spreading war, enunciation of broad longrange policy objectives, and indecision on the question of how to proceed with postwar preparation.

HOW TO PROCEED?

THIS QUESTION had two aspects; one concerned research, the other policy consideration. The efforts so far made toward preparation had shown that the establishment of a staff devoting its full time to research was a basic requirement for effective policy discussion. Such assistance of this character as had been given had been confined to the economic side of the work and was rendered by assignment of papers to junior officers having technical competence, most of them in the Division of Trade Agreements in the Department of State. Consideration of this matter began in conversations between Under Secretary Welles and Mr. Pasvolsky, who raised the need for organized research in the Department of State in relation to both war and postwar problems. Under then existing circumstances, these two types of problems continued to be inextricably intermingled. A specific proposal was made November 22, 1940, by Mr. Pasvolsky to establish a Division of Special Research "charged with the analysis and appraisal of developments and conditions arising out of presentday disturbed international relations and requiring special study as an aid to formulation of foreign policy." It was also suggested that this Division should collaborate with other interested Departments and agencies of the Government and should have such additional duties as the Secretary of State might assign. A small staff of only eight was contemplated at that time, comprising economists, Foreign