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Office of the Press Secretary

For Immediate Release May 21, 1997
                            PRESS BRIEFING BY 

The Briefing Room

2:43 P.M. EDT

MR. JOHNSON: Good afternoon again. The second part of our briefing on the President's forthcoming trip concentrates on the Marshall Plan, and we're very fortunate today to have Lincoln Gordon from the Brookings Institution, and Ambassador Vernon Walters, who was General Marshall's aide during the time of the Marshall Plan.

So, gentlemen, I welcome you to the White House podium.

AMBASSADOR GORDON: What I did during the Marshall Plan I wrote an article about in 1988, which was published, called "Recollections of a Marshall Planner." If anybody wants a copy, there are about 10 or a dozen here, and you're welcome to them.

What I want to do this morning is just introduce this with six points quickly. The first is that the Marshall Plan I regard as the embodiment of success, for simple reasons. First, it accomplished more than hoped for or anticipated. That is, Europe was better off, had recovered more by 1951 than we hoped it would in 1952. Second, its purposes were accomplished basically in three and a quarter years instead of four and a quarter. And thirdly, it cost only $13.5 billion, not $17 billion, which was the projected amount. Now, if anybody can show me some other governmental program, foreign or domestic, which did more than was hoped for, took less time, and cost less, I'd like to know about it. I think the Marshall Plan is unique.

Second point is that it was not an easy sell to the public and Congress. You got to remember that 1946 had a certain resemblance to 1994. It was the year in which the Republican Party took control of both Houses. President Truman was not doing very well in the polls. Most people, except for Truman himself, thought he would be defeated if he ran for reelection in 1948. And the country had been spending a lot of money and didn't like the idea of continuing large expenditures.

Nonetheless, and this was the difficult sell, having already spent something like $15 billion since the war ended on relief and rehabilitation -- what was called GROA, which was Government Relief in Occupied Areas. That meant mostly Germany, of course, in Europe, and Japan in the Pacific. Spent that. And the big thing was that in 1946 we made a loan on very easy terms of $3.75 billion -- incidentally, for present prices, multiply everything by seven, all these numbers that I give you; present prices are about seven times what they were in 1948 -- $3.75 billion, that's the equivalent of $22 billion or so. And we sold it to the -- or the administration, I was not then it -- sold it to the Congress saying this is the last really big extraordinary expenditure on European recovery.

And you come back a year later and say, we slipped, we really need a four-year effort -- four and a quarter actually, in detail -- and it's $17 billion. That was not an easy sell to a politically hostile Congress, wouldn't have been an easy sell even to a Democratic Congress.

How was it sold? There was an extraordinary campaign to win over public opinion. There was a committee chaired by Secretary of Commerce Harriman, but he was the only government official on it. It had the leaders of American business, the leaders of American agriculture, the leaders of American labor, and a number of highly respected academics, and it came out with the unanimous report supporting the program. They in turn, each in his own particular specialty -- I say "his" because in those days there were not women in committees like that -- were able to make the sale.

Arthur Vandenberg, Republican senator, who was chairman of the Foreign Relations Committee, who had been an isolationist before the war, got converted -- partly, personally, by George Marshall, partly by some other key people -- and his role was crucial.

Christian Herter, who later became Secretary of State, was a member of Congress from Massachusetts. He set up a series of subcommittees to go visit the European countries that were to participate in the country. One little subcommittee for each big country, and then one for groups of countries like the Holland and Belgium, or the Scandinavian countries. They came back, written reports, personal impressions and the like, dozens of high-level and medium-level speeches.

I think my own level is certainly not high, it was medium. But I made several. We were all subject to command to go out and talk about this program. In February, 1948, as the legislative period was coming to its climax, Stalin helped us by intervening with a very heavy hand in Prague. It led to either the suicide or the pushing out of a window of Jan Masaryk, the son of the founder of Czechoslovakia and the complete communist take-over of the Czech government, and that helped. I think it probably would have been passed anyway. It was passed finally early in April, but the size of the majority in Congress was undoubtedly substantially helped by that -- sometimes known now as the second "definistration" of Prague.

Let me remind you of the scale: $17 billion over 4.25 years was the program. That would be $117 billion today. That was the program, we didn't spend that much. The actual expenditures in the first year were $5.3 billion, which today would be about $40 billion. It was then two percent of our gross national product. If you looked at two percent of today's gross national product it would be $140 billion in on one year. Now, you think about congressional attitudes and public attitudes about spending government money, all of this in foreign aide, most of it on a grant basis, some on loans on very easy terms.

The third point I want to make is that the actual working of the plan was in three successive phases. The first was essentially relief and rehabilitation -- destroyed industry, destroyed housing, getting food to starving people, particularly in Germany, shelter, transportation going again, coal and energy supplies -- in those days, coal was the main source of energy -- water systems hooked up in cities again. All of that kind of thing. Very, very basic relief and rehabilitation.

Second thing was the rebuilding of productive capacity. In early 1950 I visited the Krupps Work in Essen, in the Ruhr Valley, just east of the Rhine -- extraordinary thing. In those days, Germans were working on a six-and-a-half day week, only Sunday afternoons were taken off. This was on a Sunday morning, people working like blazes all over the place. And they had a map showing how it had been before the war, what had been taken out by the Russians in the form of reparations. Anything that could be unbolted from the floor had been removed and shipped off to the Soviet Union. But that was the spirit and one could see that recovery was going to be pretty rapid there.

But the third thing, which was certainly as important as the other two, absolutely indispensable, was the removal of intra-European barriers to trade and payments -- barter arrangements. Alfred Friendly, who was a great correspondent of The Washington Post for many years -- been dead for seven or eight years now -- took leave from the Post for half a year. He was Averell Harriman's press officer. He composed a very amusing so-called operetta using popular tunes at the time. One of them was a French minister getting on the stage with a Belgian minister and singing to the tune of "Love for Sale," will you swap a little bit of steel for Chateau Neuf Du Pape. That, in fact, epitomized the kind of arrangements that were made between European countries. Obviously, that had to be done away with.

There were all kinds of quantitative restrictions, as well as tariffs. None of the currencies were convertible, one to another. And the big thing that year, that was in the spring of 1950, was the creation of the European Payments Union.

Next point, it was a genuine partnership. The OSCE, the Marshall Plan organization in Paris, was very effective in spite of various hot disputes, tremendous dispute in 1949 about the exchange value of sterling, which was -- a pound was worth $4.03, basically the pre-war rate of exchange. There was a lot of tension between the American and British governments. The British government, of course, was a Labor Party government. Sir Stafford Cripps, the Finance Minister, Chancellor of the Exchequer, was a very strong, devoted socialist. He tried desperately to keep the rate at $4.03. It was draining the sterling system of reserves. Finally, in the fall of 1949, it was moved to $2.80. There was a lot of tension there.

There was tension between social democratic governments, like the British and the Norwegian on the one hand, and conservative, like the Belgian and the Swiss and once they got their economic miracle going, the West Germans, the German Federal Republic.

There was a big debate in connection with the European Payments Union as to whether it should be European-wide, covering the whole area, or whether it should be focused on a small inner group of hard currency countries, known as FINBL, France, Italy, Netherlands, Belgium, and Luxembourg. And yet all of these things were ironed out through genuine cooperative give-and-take with Europeans contributing ideas just as freely as we were, and with a kind of recognition on all parts that there was an important set of common goals.

Fifth point, what did it make possible besides European economic recovery? Three things, I think, stand out. One, it made it possible for West Germany to be restored to full partnership, full participation in Western Europe as an equal sovereign state. That was symbolized in October '49 when a German minister came to the OEC, representing the Federal Republic for the first time on absolutely equal terms with everybody else. This Marshall Plan was the first international organization anywhere in the world in which Germany was represented on fully equal terms, starting in October 1949.

And that in turn made possible the Shuman Plan, the European coal and steel community, started in 1950, basically one of several brain children of Jean Monet, the father of the European Economic Community, the European Union as we call it now. Monet's original policy, I think, was based on the fact that he saw that German iron and steel production was going to get bigger than French. And in those days, there was a sort of mythological idea that the power of a country depended on how many ingot-tons of steel they produced.

The French had tried to detach the Ruhr Valley and put it under allied administration. That failed. They had tried to detach the czar, but there was a plebiscite, and that failed. So on the principle of join-them-if-you-can-lick-them, Monet came up with this notion of an international or supranational administration of the coal and steel industries of northwestern continental Europe. They invited the British to join, but the British were not interested at that time.

And that in turn was the foundation of the later proposal for a European defense community in 1951, and finally the Treaty of Rome in 1956, which was, of course, the European economic -- the Common Market, the European Economic Community, and today is the European Union. None of that would have been possible without the successful Marshall Plan, although those ideas were not part of the original Marshall Plan thinking.

And finally, I would say, NATO as an effective working alliance rather than a mere paper guarantee of non-neutrality. When that treaty was signed in April 1949, basically it simply meant that if another war broke out in Europe we wouldn't sit around for three years the way we had from 1914 to 1917 and again from 1939 almost to the end of 1941. And then it was the Japanese who pushed us into it. We would be involved from the start.

But the conversion into an effective working alliance, the sending of Eisenhower to set up the Supreme Allied headquarters at that time near Paris, near Versailles, the building up of an effective joint military organization, all of that would not have been possible without the Marshall Plan.

So I end by asking whether there are any analogies to the situation of Russia today. That could become a very long, long argument. In 1991, Graham Allison at Harvard had this idea he called the Grand Bargain, which was a sort of Marshall Plan scale assistance to Russia to help in privatization and the conversion of the former Soviet Union into democratic and capitalist market oriented systems.

I had great doubts about that at the time. I still think, as I think one of our former ambassadors in Moscow said, if we'd done it probably another $20 billion would today be in Swiss bank accounts belonging to abarachiks (phonetic) who have suddenly become capitalists. But, in any case, I don't think it was a genuine analogy. There may be an analogy today between Germany in 1947 and Russia in 1997, but that's a different story.

Q You didn't mention the Churchill speech, Iron Curtain speech, wasn't that also -- and wasn't there really the threat of communism taking over Europe as a spur to the Marshall Plan?

AMBASSADOR GORDON: Oh, no question about it. Marshall had spent -- Marshall originally hoped that the German problem could be resolved by genuine agreement among the four occupying powers, because the French were sort of marginal -- they were given a zone, although they hadn't earned it by fighting, so to speak. But Marshall spent weeks in four-power conferences, and the most important which led directly to the formation of the Marshall Plan was in the spring, I think starting in April, March or April of 1947, a couple of months before the speech was delivered that we are commemorating next month.

And by then it became clear to him that there was no possibility of a genuine four-power agreement. But the Russians intended to keep -- the Russians originally, two years earlier had thought that -- we now know from the Russian archives -- had thought that unified Germany might be to their interests on the extraordinary ideological theory that the communized part of Germany, the East German sector where they had their troops, would be so successful and so attractive that if you open to the West Germans the possibility of joining that they would just all rush to join up with this glowing society in East Germany.

Well, of course, by 1947, it was obvious that that was not going to be the case. The German situation was still pretty poor then, you know. The real beginning of German recovery came with Erhard's currency reforms, which started in April 1948, while the Marshall Plan legislation was just about the same time it was passed. And then by 1949 they were showing these signs of very rapid recovery and what was called in those days the German Economic Miracle. By 1950, it had taken off like a rocket and kept for the next 10 years this extraordinary economic accomplishment in Western Germany.

But the other concern about the communists, apart from Germany was, of course, in France and Italy. The electorate was running pretty consistently 33 percent Communist Party in Italy and 25 percent Communist Party in France. And there were all kinds of things apart from voting. You know, there were the trade unions in both cases were run basically by Communist Party apparatus people. They tried to sabotage the Marshall Plan once it was passed -- all kinds of things. I remember the rumor that the sacks of flour that we were exporting during this first phase of avoiding starvation would make any man impotent if he ate. This was a communist plan.

We launched through our trade union movement, the AFL-CIO, a very effective program to start organizing non-communist trade unions. The old official unions in both countries were almost 100 percent communist run. So all of this was part of it. But in 1947, of course, what's his name was still living, had written his famous ex article -- George Kennan -- ex article in foreign affairs, 1947. And that caught on, I mean a tremendous amount of attention, the whole notion of containment as a possible and desireable policy. And it had both these internal political aspects of reducing communist power in countries like France and Italy, which were the two biggest, most vulnerable ones to possible communist takeovers then; and also the external aspect.

And Korea, when the war broke out in Korea I was then in Paris working with Harriman, I represented the United States on what's called the Program Committee of the OEEC . My counterparts from the European countries were, I would say, upper middle, maybe third level people, but close to policy-making. I happen to have a bad cold that day -- June 25th, also my wedding anniversary -- and I was at home, and I got half a dozen telephone calls from Europeans who were other members, my counterparts on that committee -- all the same line, thank God your President acted -- sending McArthur back to fight with the South Koreans against this invasion from the north --because if he hadn't we would have been next.

Now, the Archives raised doubts as to whether, in fact, there was a plan to invade Western Europe, but the psychological and political reaction in Europe was, my God, this is just a dress rehearsal in this unimportant little country in the Western Pacific, but we are the important ones. And that is when NATO was converted from being just a sort of political guarantee into being a real force -- what it became, a real military alliance.

AMBASSADOR WALTERS: Good afternoon. I've been asked to talk to you about General Marshall as a human being. General Marshall presented from outside such a formidable, austere figure that people weren't always sure that he was a real human being. I can assure you as someone who worked very closely for him, he was indeed a very -- in fact, I think I have two letters that I intend to give to the Marshall Memorial after I've taken them on trips around World War I battlefields with his wife -- which the whole letter was handwritten, and it was signed, "affectionate regards." General Marshall was not a man who threw "affectionate regards" around lightly.

General Marshall was the man who created the armies of Eisenhower and the armies of McArthur that won the war. I went into the army as a young soldier in 1941, when the U.S. army was the size of the Belgian army. I don't mean proportionately. It was literally the size of the Belgian army. Three years later it had nine million men in it. He built those armies. Churchill once called him the architect of victory because he built the armies that won the war in both theaters of operations.

He was a very austere man. And once Mrs. Marshall told me the reason why she married him was that he was the first officer she never saw get drunk. And I'll be honest with you, I don't drink, except in the service of my country. (Laughter.) Where I've done a considerable amount of drinking, to be polite, and everything with everybody else. But General Marshall was a widower and he married when he was Commandant of the Infantry School at Fort Benning -- he married Mrs. Marshall.

And she wrote a wonderful book called, Together, which described her life with him very well at an earlier date. And the book always stayed in my memory because he was in Paris in 1948 for the U.N. General Assembly, and President Truman decided he was going to send Chief Justice Vincent to Moscow. And General Marshall was very upset by this and thought it was a bad idea and went through -- back to the United States to talk President Truman out of this. And he did so successfully. He said, take my wife down to the Normandy landing beaches. I said, General, I wasn't there. He said, I know, but you know all about it. I said, I was in Rome cursing those landings -- because that day we had liberated Rome and the liberation of Rome was on page five of the newspapers. So we were not too happy with them.

But, anyway, I took her down and he came back -- and he'd heard me at some point complain about the lack of fresh milk, and he brought back six cartons of milk from the United States. Mrs. Marshall on that day asked me to come up to her room to give me this book she'd written. General Marshall came in and he, as I say, he was a formidable-looking man. And he said, Walters, what exactly is going on? First I ask you to take my wife away for the weekend and now I find you in her bedroom. (Laughter.) General Marshall -- it wasn't the sort of thing you expected to hear.

I only saw him twice in his life with tears in his eyes. Once was when I took him to the place in Italy where his step-son had been killed. And Mrs. Marshall, in describing the step-son -- the book was called Together -- said, "and they were together to the end." And he had been a young tank commander and he opened the tank to motion the German prisoners who were surrendering on the other side of the road, and someone shot him through the head. And General Clark, whose aide I was in Italy at that time, asked me to take General Marshall to the exact spot and had the tank crew there so they could talk to him, which I did.

The other time I saw tears in his eyes was when he got the Nobel Peace Prize, the only general in history ever to get a Peace Prize.

There was a dignity about the old man which was not pompous. He would have a way of disconcerting people. Someone would say to him, General, I stake my reputation on this. General Marshall would say, that's very interesting, General. Exactly what is your reputation? (Laughter.) Which was fairly disconcerting to the guy.

He understood -- he had no feeling of vindictiveness about the war. He understood that the Germans, the Nazis had to be eliminated. And I must say, I was once sent on a mission where I was to tell people that we were about to bomb Libya because of Gadaffi blowing up that cabaret in Berlin. And I remember, in Germany they said to me, but that's -- a military solution, there was no military solution, you should give more time to negotiations. And it was more than I could resist -- I said, tell me exactly what kind of negotiations were used to remove Adolf Hitler from the German government. And that was the end I heard of the negotiations part of it.

General Marshall was a very human man. He once told me that one of the pictures that had pushed him to this Marshall Plan was a picture of a little Austrian boy holding up a pair of new boots that someone had sent. And the expression on his face was absolutely the beatific vision. And I know a friend of mine, an army officer, who owned -- his family owned a shoe factory in Tennessee. And they sent 10,000 shoes to Europe. And I said, because of the picture? And he said, because of the picture.

He understood that. Yes, it was to stop the Soviets from overrunning Europe. Europe was and is the largest industrial infrastructure in the world. Europe was and is the largest pool of skilled labor in the world. And if it passed into the other hands, either by violence or by elections, the whole balance of world power would be changed.

And he understood that we had to do something. And, as the architect who had created the armies that had helped defeat Germany, he had the moral authority to say, we've got to do something now to put an end to the situation in which Europe is.

I was in Bogota with General Marshall, and there was a revolution. And 1,000 people were killed the first day. And they burned the house of the Liberator, Bolivar, which is like burning Mount Vernon here. And General Marshall, I remember we were having lunch in the house, and General Carter, who was General Marshall's assistant, came in and said, somebody has just shot the leader of the opposition downtown. And I said, then there is going to be a war or a revolution now. And he said, Walters, you shouldn't make statements like that in the presence of General Marshall. General Marshall said, why do you think that? I said, because the acrimony in the press between the two parties, the opposition and the government, is like us and the Nazis; it's not like a normal political opposition.

Then we heard the first shots. Soon there was shooting all around the house. At about 4:00 p.m. in the afternoon, a young Colombian lieutenant, wearing a German helmet, and 13 men showed up. A German helmet would make Liberace look like a Valhalla warrior. And this young lieutenant put his men at the front door -- there was shooting going on, audibly, around the house -- and sat in the front.

General Marshall, who was reading "Blood and Thunder on Bar X Ranch" -- he was very fond of westerns -- said, send the lieutenant in. So I brought the lieutenant -- he came in, reported like a British sergeant major. And General Marshall said, lieutenant, how many men do you have? He said, 13, sir. General Marshall said, they're all at the front door. The lieutenant said, yes, sir. He said, what are you going to do if they come to the back door? He said, I don't know, General, what should I do? And then the architect of the 9 million man army said, well, as I remember my small unit tactics, when you are defending a perimeter, what you do is garrison the perimeter lightly and hold a large, centrally located mobile reserve that can move rapidly to any threat on the perimeter. The lieutenant said, what do I do, General? He said, put one man at the front door, one man at the back door, and all the others in the garage where they can keep warm. Bogota is at 9,000 feet and the nights are very cold.

The lieutenant eventually became the chief of staff of the Colombian army on the basis of personal instructions from General of the Army Marshall. (Laughter.) His name was Valencia.

One day General Marshall was in Bogota for the inter-American conference there. This is where I first really got to work with them. And that night the Argentine embassy was giving a great reception for Evita Peron, who had come to assist, to be present at the conference. And I was dying to see Evita Peron -- I was much younger than I am now. But I didn't know whether I could leave him. We were in these villas up in the mountains at Petropoli, which you know, near the Quesandina Hotel (phonetic).

So happily I noticed that his schedule seemed to be free of anything. And I said, by the way, General, do you mind if go down to Rio, I have some things I want to do there. He said, no. I said, apparently you're going to stay here, yes? He said, we're not going anywhere. So I got all dressed up to go to this Argentine reception. And as I was walking out the front door, General Marshall said to me, give my regards to Evita Peron. (Laughter.)

You know, the people who thought he was so austere and didn't understand those things just -- it wasn't so. And curiously, at the Argentine reception, which was very crowded, we were all bunched up and I felt somebody tap me on the shoulder, and I looked around and it was Mrs. Peron. I was standing on the train of her dress. Later, she came up and he met her, and they talked together.

But this great man, this extraordinary man who was probably the most unselfish man I have ever known except for my own father, understood that we had a responsibility to the world. We could not let these people starve. We could not let these people back into a new coming of the dark ages like when the barbarians overran the Roman Empire. And Congress had such faith in him that they gave him $500 million -- those dollars multiplied by seven, as Ambassador Gordon said; that's $3.5 billion now -- to develop the atomic bomb without asking him what it was for.

General Marshall's dream was to lead the army that he had created in the liberation of Europe. President Roosevelt said to him, General, if you leave Washington, I will have many a sleepless night. I need you here. And so he gave up his greatest dream, which was to lead that army of liberation. And in a sense, in the end, he did lead an army of liberation.

When I got to Paris in -- incidentally, at this Bogota thing, Mr. Harriman was there, and he had already been designated to head up the Marshall Plan. And he knew I spoke a lot of languages, so he decided he wanted me. And he asked President Truman to assign me there. And someone said, but he's an army officer and yours is a totally civilian organization. He said, every ambassador has a military attache; I'm the ambassador at large; I want a military attache at large. And he got me. And my job involved a lot of traveling around in Europe with Mr. Harriman to explain to these trade unions, the non-communist trade unions and so forth, what we were really doing.

One day I took General and Mrs. Marshall to -- where he'd been with Pershing during World War I. And he was a good deal younger than I am now, but I always remembered, he said to his wife, around the next curve there is a monument from the War of 1870 to the 17th Brandenburg Infantry Regiment. As we came around the curve, 30 years later from when he'd seen it, there was a monument to the 17th Brandenburg Infantry Regiment. He also had that kind of a memory of remembering things and details.

And I think Mr. Truman, of course -- when General Marshall got to the State Department as Secretary of State, he was concerned at the lack of long-term vision, so he created the Policy Planning Group, which had not existed there before, to look some years into the future and start planning for what might lie down the road further along.

And George Kennan was the head of that group at the time. And he thought always of the future and where we were going. Human touch -- he had been quartered in World War I in the house of a woman in a little town called Gordracous (phonetic) in the east of France. And during the war he said to General Patton, if you go through Gordracous do something for Madame Juwat (phonetic) -- which was the lady's name. Patton pulled up a 2.5 ton truck full of food and then had a battalion parade past the house while she took the food on the balcony. (Laughter.)

When we went to -- in 1948, he said, call up and find out if Madame Juwat is alive. I did, she was. We went there the next day and he said to me, let's break it slowly, you go up and tell her. So I went up and she was there and she said, what are you doing here. I said, I'm here with General Marshall. She said, he's not here. I said, yes, he is and he wants to see you because he remembers. Now, incidentally, she had a son that was a prisoner of war in World War I and through General Marshall and General Pershing they got her son out of the prison camp a little earlier than most of the other prisoners. I mean, he did these sort of things, which if you see and remember -- nobody here is really old enough to remember -- but the austere figure that he presented, you didn't realize that underneath this was an extraordinary human being.

Q Whose idea was the Marshall Plan, actually? Was it his? I know he gave it at a commencement --

AMBASSADOR WALTERS: At Harvard, yes. But it was a very speech, it only had nine paragraphs. I think there was a general feeling in the United States of concern. Ambassador Gordon has told you how we spent $13 billion, but it was sort of somewhat more disorganized. And the Marshall Plan was done with the Europeans. We made them create a matching organization, the Organization for European Economic Cooperation.

Whose idea? It is hard to say. It probably originated in this policy planning group, which he had created, to look where we'd be in five, 10, 15 years. But he adopted it and he sold it to President Truman, because it wouldn't have passed without President Truman. And I think General Marshall probably did more to convince Senator Vandenberg, who as Ambassador Gordon said, was an isolationist, to support this plan. And so it passed and so it came. And in those four years the gross national produce of Europe -- those three years, the gross national product of Europe, according to your figures, rose by 32 or 40 percent.

Q General, as a military man, what do you think about this move to expand NATO? Do you think the American people, one, understand that an attack on Budapest would be the same as an attack on Baltimore if Hungary is one of the countries it is involved in? And also --

AMBASSADOR WALTERS: I am not a member of this administration and I do not read the daily telegrams. And, really, when you don't read the daily telegrams you're fantastically ignorant of what's really going on. The only thing I can comment is, it seems to have convinced the Russians finally. But, as I say, I am not in a position to pass any real judgment -- at least, I am, but I don't think it would be appropriate for me to do it now. And any situation that threatens peace and that threatens the well-being of people is of concern to us.

You know, we are an extraordinary people. We are a unique people. We are moved by things that move only us and don't move other people. And human misery moves us very much. And I think this was it. He came back from one of these European conferences in which Molotov walked out and working with Kennan and with his people they developed the idea. They took it to President Truman. He supported it. They realized there would be opposition from the Republicans in the Senate. They enlisted Senator Vandenberg and he did it.

Q But, I mean, it's a military principle you can extend your lines too far. Is there a danger here that that may be what we're doing extending NATO?

AMBASSADOR WALTERS: Well, as I say, if I knew more about what was going on actually than what I read in the newspapers, and I've learned in a long life that a lot is going on that you don't know about in the newspapers -- I would be in a better position to answer that.

Q Ambassador Walters, have you briefed President Clinton? And also, he's going to use this occasion to talk about the next 50 years and the U.S. role -- how challenging is it for him to sell the importance of a U.S. world role --

AMBASSADOR WALTERS: I think it's a terribly important thing for him to do. But I have no words to the effect that he's going to do this. No one has told me that he's going to do this. But I think it is a wise way to -- to warn the American people of the various things that may lie ahead, some good, some less good.

Q One thing that both of you gentlemen are in a position to do, though, is to talk a little more about the historic parallels that you see between then and now. I mean, clearly the administration wants to take us back 50 years and say what was necessary then is needed now. Do you see that same parallel or not?

AMBASSADOR WALTERS: Well, I can't say that I do. It's a very different situation. I mean, you know, the Russians the other day just presented an aircraft 1.5 times the size of a 747. Anybody who thinks the Russians are in the gutter -- I've taken two recent trips and I speak Russian, so I can talk to the local people. Last October I took a boat from Moscow to Astrakhan, on the Caspian Sea. And when you arrive everywhere, in the morning there would be an excursion; in the afternoon I'd go out and hire a taxi and say, take me to a department store or, take me to the food market, take me to the fish market, take me to an appliance store. And I would talk to the local people. It's not nearly as bad as what you read in the newspapers.

Let me just give you two figures. Last year somebody bought 2,700,000 automobiles in Russia, including 76,000 Mercedes Benz's, which is about $100,000 a piece. I was in Astrakhan and I saw this huge area, like an American area of real estate developing, and they were building houses that I would judge in the United States would cost between $350,000 and a $500,000. And I said, who did these? They said, the rich. I said, you've got a lot of rich people; what is happening?

And I don't want to get into it, I'm getting away from my subject. Russia is developing a middle class. They've never had one under the czars, they've never had one now and to them anybody who has more than nothing is rich. The kids walk around and tell you, I only earn $100 a month, and I haven't been paid in five months. And I'd say, that's a beautiful leather jacket you've got. That would cost $200 in the United States. Where did you get it?

Q Black market.

AMBASSADOR WALTERS: But you had to have the money to buy it, even in the black market. Russia is not down in the ground like they tell you. I didn't see any sign of starvation, I'll be honest with you, in Russia. In Europe the starvation was everywhere.

When I got to Paris as a young officer, every other streetlight was out and no shop window could be lit at night. People would come to my mother, who was living with me, and say, you want to buy some whipped cream, you want to buy some butter? If you got the money, you can find anything.

On this Volga trip, I found Italian canned fish in Samara, I found French Brie cheese in Khazan. You can find anything if you want to look for it, which means somebody somewhere has the money to buy it. So I just don't see any real immediate parallel with the Marshall Plan situation in Europe.

Q General, you both talked about the success of the Marshall Plan.

AMBASSADOR WALTERS: Why do I talk about the success of the Marshall Plan? I think it was --

Q What I was going to ask you is what you attribute the success to, the way the job was done or the nature of the job itself, that had to be done?

AMBASSADOR WALTERS: The nature of the job and the way it was done. Just remember that no other nation in history has ever financed its competitors back into competition with it. We are the only people in the whole history of mankind who have ever done that. That's what made it a success.

AMBASSADOR GORDON: Let me add a word to that. Among my later activities was being one of the foster fathers -- perhaps more than a foster father -- of the Alliance for Progress in Latin America, under President Kennedy. I then went to Brazil as ambassador and General Walters, who was then a colonel, became my defense attache, much to my benefit.

AMBASSADOR WALTERS: I had been stationed in Rome until you reached for me. (Laughter.)

AMBASSADOR GORDON: He thought it was a demotion, but he learned better.

AMBASSADOR WALTERS: I became a general during that time.

AMBASSADOR GORDON: Yes, we had met in Harriman's office in 1948, so our friendship goes back a long time.

On the question of the nature of the problem, you had all of the institutions -- if you compare the business of converting the former Soviet Union into modern-style market economy, that sort of thing, it's a different kind of problem because it wasn't so much a matter of dollar shortage or hard currency shortage in Russia, it was a problem of absence of privatization. To this day, land can't be owned by Russians. I mean, urban land can be, but rural land can't.

If you want to rebuild a sort of family farming economy, if you want to make use of the energy of the peasants to go back and fend for themselves, they've got to have ownership rights and land. It's clear as can be, but this ideological hang-up private ownership of land still sticks in the mud, so to speak, in that field.

Other institutions -- you've got to have bankers who understand how to evaluate credit risks. During the Soviet period, the communist period, there was no commercial banking. You've got to have the rule of law. You've got to have enforcement of contracts. You've got to have possibilities of bankruptcy. You've got to have a structure of capital ownership and capital movements. You have to have arbitration law. You have to have some regulations, weights and measures, and all of these kinds of things that make a market economy work.

And that is gradually being developed. It's coming much more quickly in the East European countries because, after all, they were only under communist control for roughly 50 years or a little short of 50 years, whereas Russia goes back to 1917. And even the pre-1917 Russian economy, although it was coming along, it was developing maybe 30 or 40 years behind western Europe. That 30 or 40 years made a big difference.

So this task of reconstruction in Europe in principle was relatively simple. People knew how to do things the right way, but they were stuck with the dollar shortage at the beginning, and they were stuck with these barriers to trade and payments. And once you got those out of the way, they took off.

We also instructed them in productivity methods, things of that kind. Paul Hoffman, the Marshall Plan administrator -- in this field, he and Sir Stafford Cripps, the socialist British finance minister, got along very well. And these teams were sent, management and labor both, they were sent across the Atlantic in both directions, first with Britain and then with the European continental countries too, to show people working in factories -- how is it that you're able to produce three times as much per worker in your kinds of factories as we are? The Europeans are very intelligent people; there was no basic problem about adapting those methods.

But the pre-World War II, and especially the pre-World War I European economies were class-ridden societies in which there was very little effective communication between the aristocratic elites and the working people. The middle classes weren't big enough. They were gradually getting bigger. But there was a tremendous of what in retrospect is social backwardness which had to be overcome. And learning American methods made a great contribution to that.

AMBASSADOR WALTERS: And in light of what Ambassador Gordon has just said, last week I was in Turkey, and the President, Suleyman Demirel, told me that he was one of the 18,000 young Europeans we brought under Marshall Plan funds to the United States to teach them techniques in productivity and management.

And I think we'll close what I have to say with quoting Churchill on what the Marshall Plan was: the single most unselfish act in the history of nations.

Thank you.

THE PRESS: Thank you.

END 3:30 P.M. EDT