WHAT WILL BE THE EFFECT OF THE NEW RUSSIAN ATTITUDE ?

Mr. PLEVEN. Well, I will also put my questions very frankly. First, I would like to know what is the reaction of a body like this one on the new Russian attitude. Do you think it will have the effect of increasing the difficulties you have with your own public opinion to continue to aid Europe and to aid the rearmament of Europe?

The CHAIRMAN. I will ask Senator George to answer that. I saw he made a comment in the paper this morning.

Senator GEORGE. It is right difficult to answer for the same reasons that you gave with reference to your own country. I do not believe that this latest attitude by the Soviet Government will defeat or prevent the carrying forward of the general program that we have heretofore followed with reference to NATO and all the other related questions. It may have some effect on the amounts to be appropriated in connection with, of course, what other problems we have here at home, but I think that the attitude of the Congress may be, and of the American people will be, that it is quite too early to rely upon a changed attitude that is very, very significant, and that we will go ahead with the program much as we have heretofore gone along with it. That is the very best answer I can give you.

But, of course, if something very radical should occur, if for instance, the Soviet Government should step in and say that, "If you will join us in the neutralization of all of Korea-will you bring an end to the fighting in Korea?" we would, of course, be confronted with a changing public opinion in this country.

At the moment, this new attitude of the Soviet Government has operated, I think, to give to them more or less the initiative in world affairs, and in dealing with these problems that press so hard upon us, and it would be quite impossible to say what the effect would be if the Soviet Government should say that, "The Republic of China stands ready to join us with you and with the British, of course, and with others in the neutralization of the whole of Korea, to be followed by cessation of all hostilities, and the withdrawal of almost all troops from Korea," and that would present us with a problem which might have much to do with our general attitude, but I think the only answer I could make to you is, that so far as the Congress is concerned, and so far as the American people are concerned at this time, it is quite too early for us to interpret the change in the Russian attitude as being at all fundamental.

Mr. PLEVEN. It is very important for me, the words that you say.

WOULD U.S. ACCEPT A SEPARATE PEACE IN KOREA ?

May I ask another question? What would be the attitude of this country if the Russians were to propose a peace in Korea but were refusing to have any undertaking as regards peace in Indo-China? Would you consider it possible to accept peace in Korea without getting at the same time peace in Indo-China?

Senator GEORGE. I do not think so, and for that reason I have never thought that they would suggest anything that would be acceptable to us. But it would be somewhat embarrassing, to put it in that way, for us to so far lose the initiative if they were to say that, "We will completely neutralize all of Korea, and we stand ready to neutralize it," but there is still Formosa and there is still Indo-China, and with respect to those areas, I am sure that they would have no proposal that would be at all acceptable to us.

EFFECT OF REDUCED EXPENDITURES ON THE U.S. ECONOMY

Mr. PLEVEN. If you are continuing substantially to balance your budget, your military expenditures, and your aid to Europe, what is the effect you expect upon the economy of your country? Do you think it might bring a real decline in the economic activity? Are we to take seriously those signs that appear at the elections which seem to indicate that people would appear to feel that they would be afraid of a slowing down?

Senator GEORGE. I think it would have a very real effect on our economy. I think if we would reduce our expenditures by even $6 billion for general defense purposes at home and for aid and assistance abroad through NATO or through mutual security or any other activities in which we are engaged, I think it would have some effect on our economy.

It would be unavoidable; I think that it would have a certain effect, and for that reason I think we are going to proceed very much as if this new attitude of the Soviet Government has not hardened into anything upon which we can rely.

It reminds me very much of a statement that used to be made by an old colleague of most of us who have been longer in this service. He said that if a man lied to him once it was the man's fault. But if that same man lied to him again it was his fault. I do not think we are going to accept anything now in a way to affect seriously our general programs that we have been carrying on, carrying on with Western Europe and with you.

ADMISSION OF COMMUNIST CHINA TO THE UNITED NATIONS

Mr. PLEVEN. If a part of an offer from Russia was, say, a real stoppage of war in Korea and in Indo-China, and the inclusion of Communist China into the United Nations, what would the situation be?

Senator GEORGE. I would anticipate they would do that. They might include Indo-China, but they would be almost obliged to couple with that a proposal not only for the admission of the Republic of China, the People's Republic, into the United Nations, but they would have to also couple with it some disposition of Formosa, so I do not anticipate that they will go further than deal with the Korean question and admission into the United Nations of the Chinese Republic.

Senator SMITH. I think they will do that inevitably.
Senator GEORGE. I think they will do that inevitably.

Senator SMITH. That is where we cannot go along, you see, without solving the other problems, too.

Senator GEORGE. Particularly if they say that is a condition upon which they can guarantee the neutrality of all of Korea with, perhaps, some promise of a vote by the Korean people to determine their own future destiny, and I do not think they can bring in Indo-China and Formosa, and I do not think they will. But that, of course, nobody knows, nobody knows what they may do. It depends upon what their own condition is, and whether they really desire to end this war in China at this time, at least, for a good or bad motive.

Mr. PLEVEN. Am I taking too much time?

The CHAIRMAN. No. You might direct your questions to some of the others.

Senator SMITH. I think you are doing pretty well.

The CHAIRMAN. I might say I think Senator George has expressed more or less the consensus of opinion here. With his background he has a peculiar faculty of expressing very clearly the ideas that I think are more or less the ideas of America at present.

ECONOMIC SITUATION IN THE UNITED STATES

I just want to comment in relation to the economic situation that we have in this country, of course, a tremendous backlog of projects in the States. If we could balance the budget and cut taxes that would return considerable money into the pockets of the people, of course, as you see, and would also give the States an opportunity to get additional taxes which they could have go into expenditures, and it operates more or less as a check and a balance, if it works well. In other words, while people are fearing a recession, I do not think that Senator George meant to imply any such thing as a recession.

Senator GEORGE. Oh, no, but I think it would mean a slowing down—

The CHAIRMAN. Yes.

Senator GEORGE. [continuing] To some extent of our economy if we cut too deeply into our expenditures.

MOTIVES FOR THE RECENT SOVIET INITIATIVE

Mr. PLEVEN. Now, I want to turn to one of you, you see-There is one explanation of the Soviet moves which is also back in my mind. I believe that in the last few months a lot of figures have come to appear, much through the agency of the United Nations Economic and Social Council, which show really tremendous economic development, both in the Soviet and in the bloc of the Eastern European Communist States. It seems to me that we are not giving enough attention to this huge economic growth. They are developing much faster than we do in certain parts of Europe.

I wonder whether one of the ideas of the Soviet, if they can get a certain lull, you see, in the present situation, is not to demon

strate the greater ability of the regime, which is very centralized and which has a coordinating authority, but to raise the standard of life higher than in the democratic countries? I wonder whether this aspect of the Soviet policy has retained the attention of you in this committee or the attention of people in America?

Senator SMITH. I do not think we have given as much attention to it as we should have. I felt myself that their present move is a different strategy to give them time to consolidate and, perhaps, do the very thing you are suggesting.

It is possible also that they are having some internal troubles there that they want to get readjusted. We hear rumors of their differences, the differences between Malenkov and Beria and these other fellows, and the strength in the center is not as great as it was with Stalin holding onto the thing. They are a little fearful of what may come out of that, and they want an opportunity to construct internally.

On the other hand, we have people saying to us that that very fact may put us in more danger because a dictator like Malenkov, if he feels weak at home, he may see an advantage in having a sudden row with a foreign group, such as ourselves or the Western powers, the Western States, in order to consolidate his country at home.

I gather from your statement that you feel they really have made substantial economic progress that may be dangerous to us all? Mr. PLEVEN. I have been impressed, you see, by the figures which have been given publication. Of course, I do not know how those figures have been collected, but they are through the United Nations. Senator SMITH. It is a very big question as to whether they are getting accurate figures; we do not get anything else behind the Iron Curtain.

Mr. PLEVEN. That is a question. But one of the last issues, in the issue of Economics, there was a study on the progress on the six nations in Europe which were Communist which, in fact, I always use an an argument myself in favor of a united Europe, united Western Europe, because I say they have already made their own community. But the figures are very striking. It shows a growth in the production of steel, in the output of raw materials, which is really very impressive, and it shows that they are able to plow back into their economy a very substantial proportion of their national product.

Senator SMITH. The conclusion from that then is that probably this change of strategy and this friendlier approach means that they think they will be more successful in winning the world over if they can show the world what they have done economically rather than try—

Mr. PLEVEN. I would not say it is probable, but I would say it is another opportunity which we should not disregard.

Senator SMITH. I agree with you absolutely, it is a very important suggestion you make, and we should give attention to it.

Mr. PLEVEN. I have talked about them at every opportunity because I believe it is very serious.

SOVIET STRATEGY IS CHANGED BUT NOT THE OBJECTIVE

Senator SMITH. I have a feeling that while there is very definitely a change of strategy, I doubt if there is any change in their overall objective, which is to move into the world as rapidly as they can with this philosophy, and I still feel that the conflict of ideologies is at the heart of this whole thing, and as to the phase of the global matter, you cannot solve this by centering it in Korea and ignoring China for

one moment.

Mr. PLEVEN. No. no.

Senator SMITH. You cannot settle it in any one corner and have it settled there, so long as the overall picture is what it is. Our problem is the overall global problem, and that is why I am so enthusiastic about the integration of Europe. If we can get Europe together as a community to work with us, we are so much stronger.

Mr. PLEVEN. There is no doubt of that.

Senator SMITH. I am sure you feel that way.
Mr. PLEVEN. I know, sir.

THE COAL AND STEEL COMMUNITY

Senator SMITH. I know [Jean] Monnet, with whom I talked in Paris, was very enthusiastic.

Mr. PLEVEN. I saw Monnet; I talked to him before I left, and really it is fascinating to hear the kind of problems which we already are meeting in the coal and steel community; to see a problem now, for instance of French coal going straight to the South of Germany, and the Ruhr coal going to my own part of France, you see, because it can go more easily to the sea, and in parts like my country, the industrialists already recognize that they have got better terms for iron scrap, for coal, then they used to have. It opens up all the secrets of the old cartels, too, and one discovers that the real difficulties are not, as the people once used to say when we were debating the ratification of those agreements, the differences between the production costs between France and Germany; in fact, the differences do not come so much from the production costs; that always comes from particular selling arrangements which are only to the old cartel situation.

The CHAIRMAN. If you will direct any further questions to those two gentlemen at the end of the table, they are very good heads. Mr. PLEVEN. I think I will not have many questions, but I will put one which is difficult to the Senator.

Senator FERGUSON. I asked you one that was off the record; maybe you can do the same.

SOUND ECONOMIES ESSENTIAL TO DEFENSE

Mr. PLEVEN. I know enough of this country to understand that there are necessities, you see, just as there are in our own country, that people want reduction of taxes, and so on. I realize that very probably that will mean a reduction of your defense budget, a reduction of your credits for the European aid. How do you think it will be possible to avoid that this reduction be interpreted by world opinion and, particularly in Europe, as a sign that, coinciding with the new attitude of the Soviets, you bring down your preparations or your plans?