-~ I '' FOR THE PRESS INTEFJfATIOHA.L P .O.NK FOR RECONSTRUCTION AUD DEVELOPMENT RELEASED IN m:w YORK Press Release No. $5 Y.tarch 16, 194E5 Address by Jolm J. McCloy, President of the International Bank for Reconstruction and Development, before The OverJeas Press Club of America, Waldorf-Astoria, New York City, 1:ew York, Ti~1esday, !'farch 16 1 1948. It is a great pleasure and honor to be asked to attend this diri..ner even though I am now called upon to perform tor it. What with the high sophistication which attends all writers wto have travelled far and been places, I wish it were possible for me to do nothing more than to sit here and absorb. Once on my feet., however, r.;y instincts are to go tl:rough rrry usual routine and tell you about t,he corporate structure of the International Bar:k for Reconstruction and Development, to suggest to you how wise are its policies, how talented its staf'f, and how worthy its obj ect:i.ves. ~faen the BariJc was first formed it was considered a mighty institution with enormous potentialities. It • was never as big as some of the headlines painted it but it was something extra- ordinary both as to its size and pur,ose. Today, with new agencies being set 1.:1p or talked of to cover so~called dollar shortages in all uarts of the world it would appear that we have some formidable competitors in the r~covery field. This i3 particularly so when such agenci0s derive their 1-:1oney :trom the public treasury and are not concerned in many situations whether the money is repaid or not as long as very general objectives are attained. I am no.,G complaining, however, 0f a lack of borrowers. The advent of these other agencies and these larger sums direc-1;,ed to basic recovery not on;ty, in my judgment, do not render ineffective the work that the Bank ma~r clo but greatly increase its possibilities for effective operations. They will if w0ll administered tend to bring about the sooner that state of economic equilj_briura or near equilibrium which will enable the Bank to function in its most appr0priate field with more confidence and grea tor security• ThG European crisis ha11 had the tendency to educate the public better as to tho appropriate f'unctin:-is of the Barik and to moderate some of tho transportG with which the organization of tbc Bank was initially hailed in 1944. It is now realized that it is not and cannot, bo tho overall financor of the accumulated balance of payment deficits of tho world nor is it the financ0r of tho accumulated five-your plans of thG world. It is, or can be, a continuing international banking facility capable of financing or rather assisting to finance economically strategic and productive projects through- out tho world where the local efforts Justify such assistar.:.ce. It has roal flexibility and ovGn if some piece of financing cannot be termed a "projoct 11 in tho strict sense, the Bank can undertake it if it is shown that it is productive and stimulating to trade and recovery. If there is a. liroi tation upon tho amount of capital it may provide bocnuso it is necosonry to nppoul to investors for its eo.rJito.1,. that is likowino tho Bank's strength o..nd I vonturo to so.:y that, by r0a.son of this o.ttachnent of the Bank's uotivitioo to the nooosoity of conpcting · with other investing possibili tics in tho co.pi tnl r.1.1.rkot, thoro lios porhr:ps the grcntcst olo:mcnt of tho Bank's streneth and i11dopo11do11co. ... ,I, - 2 - The Bank appears small now in relation to t,h~:J ~1arsllall Plan but if it can be., as it was designed to be, the bridge b0tween government .8.nd vrivate financing, if it can restinmlate tho flow of pr:i.vate capital about the world, its 1:.,otontialitie will compare favorably with those of the Harshall Plan and it will contin\':.c e. 1.1f:H·~- ful existence long after the Marshall Plan has passed f1:om the scene. Th0 Bank I s role in the future, as in the past, will be to make prodt1.ctiv0 loa.ns with ;;ood prospects of repayment. Such loans will be the more po:3siblc if a broad be.se is given to the reestablishment of a sound EuropGan economy by the proposed r~covory program. But I repress tho instinct to talk more about tho inst:ttution of which I am a mombor., partly bocauso I arn not really att.e~pting to sell bonds, at least to this audience, partly bocaus~ tho events of the past few wo0ks have crowded in upon us so closely as to direct our attention to other subjoc-to. I wish wo could ap:.n·oaoh a solution o.f the world ni tuation "today :,Ji th the certainty that tho application of dcfini t.~ Jtulos would c1.chiovc dcfini ta ronul ts v.1.thin a dofinitc p0riod., It would be so much easier if this woro tho caso. All wo would nood to do would bu to l0Et.:r~1 our rules slavishly and follow then con- plotcly. I o.m reminded and also comforted by a story of ~·Jinston Churchill which, as • writers you may appreciate, if you have not hoard it too many timos before. It seems that Mr. Churchill, uf.tor working on a d1~aft of a partic,1larly important and inspiring speech, sent it over to tho Foreign Office for their corruno~ts 9rior to his d";:llivoring it. In.the course of tho a.raft speech Churchill had ended one of his mighty passages with a proposition. In about 24 hours tho speech co.mo back with no coir..rnont of substance upon it, but a IPorcign Off:i.co purist had neatly en- circled tho offending proposition and carrotcd it back ,;i.p to its proper :)lace in tho sentence. Tho Primo Minister took one look at the correction, roared hls rage, und imrnodilitoly dispatched n note to the Foro1gn Office, "This is the typo of arrant podantry," tho note ran, "up with which I will llot put, 11 I am inclined to think tho. t thoro arc many rules in the book which will have to be ro .... cxam:l.n0d and oven dofiod before we aro finished with this mn.ttor of world rocovol"y. Tho imponderables arc so groat and tho cross currants so conpJ.ox th'l"'i:i I very much do1.1.bt that tho familiar rules can bo suocGssfully applied to tho o:ctrom0ly fluid world situation that wo now fr.J.Co, In tho first :9lo.ce th0 whole concept of aid on tho sco.lo un,;1ortalrnn since the end of the war and now further contompla ted 1.mdc1.. tho Europoa.n Hocovory Program is without proccdont in history, Its VC'r'J sizo :-md gono1 osi ty pro~1t:>l:o problor.1s -which no economists or J.:>oli ticians have hithorto ovor boon cc.llcd upon to face. Tako morcly ·the now fa.mot.is problom of' -'che countcJ'part ... and we oha.11 hoar much more about it, I believe, before we are finished. I ~ofor to tho use of local curr0ncy to bo derived from salo of goods received in tho f'orm ot' gran-~s from tho United States. In tho case of, say, Italy if tho proposed or ro.thor talked of: dollar g:ranti arc forthcoming and a.re convcrt0d into lire nt froo rates tho total sum would com- • pare with the entire outstanding currency issue of tho country. If 'the Unitod States is to dispose of tha·!;j muny lire, $Omo objoctivc group :must ane should control it. He have already ha.d the oxperionce of the diss:lpation of simil.'.:'.r. funds in tho co.so of UNRRA and it is clear that not to c:corciso control oV.')r tho local curroncy proceeds of those grants invi tos inflationary and othor wa.stof,:i.l tendencies whoso * 12 s , .-we - .3 - baneful effects could roa.dily f1·•ustrato t.ho objoctjv·Js of tho ont:tre grant. This is only 0110 of the new a~:1d por~)loxing problors which this groat advonturo in intor- na tional oconomics pososo This brings mG to tho w!:ol8 mn.tkr of tho c~dministration of the Rocovory Plan. You hoc:.r r;mch o:: tLo ty)o o:': man noodod for this task - somo se.y ho m.ust be a businossman., somo that he i,1u.3t, bo a st.:1to;.:lt".an, tliat ho must ho.vo wiC:e J.r..nowlodgo, tha:t, ho must hr.VG o. distinguiehod rocord of 2.dm:LniotrL·'.tion bel15~nd bin, that h.-:; must be to.ctful, that ho :must bo roo.listic, t.ha·::-, h0 r:iust be imn.gina tivo. Ho must combine tho d:Uigonco of n bird do:'~ with tho p9.ti0nce of Job. I doubt thn.t thcro is anyone who conbines tho q~1ali ti·'.)s whid1 tho job so obviously no eds G Yot a :mn.n will ono day be coL·,ct.)d c~nd I ventur ..:; to say thc.;t, 't-:- ·1ocvor ho may be and 1,rl th r.11 1 his likely shc,rtcomin;:ss, givon a st~bs-cnnt:L'.J.l rcco:cd of ability and charactGr he will somohow g:Jt along o.nd tho ta~1k will bG woJ.l 2.dJ.:rLnisto2."cd, assuming only ho doos not recoivo too much a.dvice or :10.vo too many bosses. Han:r t~··in::;s ho can do and y·:it many things arc bound to occnr over which the o.dmi11istiratio:1 wlll havo ct.bsolutely no control and oomc of t~'1Gr.l 1J1.ny W·'Jll dotormin-:) tho success or failure of ·0:r..0 entire v0nti::.ro. What is important is that the public as a whole and tho press, tho Congress, and the rucipionts adopt a tol.Jrant and undorstandine; attitude towc::.rd this suprmno.t.y difficult tn.sk of udministratj_on. · With tho best :men administering thoro will still be irri tat,ing misunderstandingc, crudi tics of op()ration, ar.d frustrations, all of which a.ro :1rcsont in the fc.rmation of any hasti2.y :)rocted agency, to say nothing of tho poculia:::- difficulti0s of this ono. Those diffi- cul tios will ull bo supcr~_mposod on the noYor 00.sy rola tionsl:ip of debtor and • creditor, or of donor u.nd do11c0, and ull tho whilo I think we can count on a virulent and vigorous prop@.ganda ornc:.natine from t~1e ono:r:n.os of recovery socking to 0:xploi t mistakes, to rnisropros(.mt rnoti vo:-:1, and goucrall:r to poison poo:JJ.o' s 111i_nds against tho program. Unloss pcop2.o in this country I but r:1oro po.rticulctr;:r pooplo in the countries which arc to bo the rocipio:nts of tho aid, und,Jrsto.nd the difficul tios of ad..'11ini- stration, submerge their own selfish intcrosts., a11d ri.bovo all kGop in mind tl10.t this adventure is a mark of go:1or0si ty c.nd gcod w:i.ll w:l thout., as I l1flvo said, a precedent in history, it may f~il, H5-story i.s full of ox:amplos whore the dominant world power hc.s sought to rupross its compcti tors c:.nd bend their economies to its own purpose. There arc none that I know of on an:1·thing li!m this scale w:10ro tho cL.iof Gff o-r:t is to rebuild former friend and f·::irmor cnoriy alil{c: to a posi tj_cn where they may vigoronsly compete with tho c1onoro It :rr. tty bo truly said that -this is only a matter of solf-intorost, but tho lea.st that can be said of it is t}mt ~.t is onG o:f th0 0:x:a:raples of enlightened solf-intorost of which the pages of history thus fur have been all too blank. How the progra1i1 is to bo administorod in Uashinzton is important but llow it is L1:, be adrr.inistorod in E-cirope is oven uorG iraportant., :1o hav0 alrondy soon some encouraging signs oi' Europoa.n coopora"i:iion in both tho economic and political fiGld in Europe but it cannot be too hoavlly onphasizod tho.tit is upon tho i11it:tn.tiv0 ar..d cooperation cf tho Europeans that successful !-)rogros8 of the program primc.rily depends- I would urge thnt Goracwhoro at tho core of -t:,ho adJ:ainistration in Eti.ro~o thoro should Lo sot up an orgr1.niza·tio~1 w}1ich is something :·;1oro than a group -;Jf national roprosonto. tiYos who u.suD-11y a.ro 1111~-~blo to accomplish :more than a series of • politicnl compromioos. Rather, it is ossontio.l, in my judgment, that thurci.bo 3,n intornationa.l sto.ff owing o.llogianco to no national govo1mmt:nt but to tho udmini- -4- l' .:t' stration headed by a European director of roc?gnizod inde11ondoncG, courngo, and ability• The director would not be :merely a r.1outhpioco for tho Amorican agency though Lo would act u11dor its gonc:ral directions. His strong relatively in- dopondont position would enable him to serve as tho foccl point for tho common endeavours of all tho po.rticipo.n.ts. His opganization, of course, would hfl..vo to opornte in full cooporn:t.ion with tho .American ngoncy and his rocom:nondati.:ms thor0- for0 woulc1 ordinarily be accepta.blo to that agency, but tho latter would always have tho final say as to tho use of American funds. I soc many advantag0s in tho cstablishrlcnt of such a European orge.niza.tion. In brief, I boliove it would tond to disarm partisan oppo~ition to tho i'·hrsha.11 Plan within the EuropGa.n countries, it would increase tho prospects that decisions would be made on a broad-gauge economic basis, and it would holp to cn1i~t tho full coopora. tion of European govornrilGnts c.nd nationals. This nppoa.ls to me o.s a particularly good suggestion because of my 0x- perfonco with such a sto.ff in the Int.orno.tionnl Bank, but tho timo has come when further debate or discussion as to method of operation is less imp0rtant than action. The dec.dly analogies of the recent nows lcmve us li ttlo time for diploma.tic maneuvers, li t.tlo timi:; to dobo.to just how mu.ch is exa.ct1y nooded for tho first yeewr' s effort or how well articti.latod tho adr.tln:i.s-brn.tion co.n be 1:1.ado. Grim events have occurred c..nd if I ma.y step out of my role as h0ad of an intorn:i. t:lonn.l organiza- tion for a moment I would ;:Jay that tho day has arri vod fo1" tho Uni t0d Sta.tns to be clear c..nd prompt ro. thor than overprecise• One can trutl-ifully say that dollars ca..rmot save the world; that many other things must also be enlisted. Thero is such force behind tho suggestion that political and ovo11 military ste3ps must lik0w:i.s0 bo taken, or that t!:is or that oth0r artJa of the world must also be helped but the fact rcn'lins that economic aid to Europe is not only a mighty weapon, it is the first one wo have dr!lwn and this is no time to brandish it. halfhoart:Jdly. ThGro aro too many poopl0 who are uncf;rtain, tired, and fearful who look ago.in to tho wost for hope. Boar in mind that most officials and politicians, as well ~s businessmen in Europe havG something more to foar today than loss of prc3tigo, office, or profits. It takes courago o.:1d hope to resist. Thero was a Polish proverb in the days when tho Polos wore being op)rosscd by the czars and the kaisers of the time. It was "God is very high and Franco is far away." Such a philosophy justified many comprorr.ises yet it never complotoly prevailed no more than it will todt:i.J• Great powers of strength and rosi.sto.nco to oppression re1-;m.in in tho world und thoy can bo mu.stored again in favor of freedom, only no uncertain noto can bo blown on tho trinnpot at the outset. I have hoard it said that our C')nstitutional system doos not ndoquatoly become our position as a world loador. llith all its advertised defects, particularly as they show up in a politica.l yGar, tho SJstcm has bean tested frequently a.nd sovoroly enough in our history to ca.uso us to hosj_ta.to to cha.11gc it. Under it we have acted with strength, and unison in real m:iorgcncios. At a.ny rutc we can nei thor change it nor allow l t to s tvJ. tify us now. 1·foilo other propo so.ls c.ro fo!T.'~ng and while still more ominous ovonts portend lot us not forgot that tho best • clear chance for ~oaco lies in tho pr~mpt oconorrd.c rocovo~r of Europe, It is important, however, tlw.t we got on. with it. To be snre tho Unitod Sto.tos must stand strong before the world today and i t is foolish to suppose in this world tb1t your influence can roach far vtl thout strongt;a but, tho opportunity which thG economic recovery of Europo and its closer integration today uffo1·ds must not be missed. With all our othor wiso propo.ratioris tbis still ron10.ins tho first and mos·t, proIPising objective for us to achieve.