America's Answer

See Cover EGA was one year and $5 billion old.

"America's answer to the challenge facing the free world!"--so President Harry Truman had trumpeted at its birth in April 1948. In a tremendous twelvemonth, EGA had primed the pump of European recovery, pushed ahead through Communist attacks and sabotage, plucked 270 million people from the brink of chaos and despair. By all this it had added immeasurably to the chances of the U.S. and the world for enduring peace and prosperity. In the words of its chief, ECAdministrator Paul Gray Hoffman, it was on the way to proving itself "the best bargain the American people ever bought." Time to Breathe. ECA's most spectacular birthday present was the North Atlantic pact; it marked the flowering of economic cooperation into a joint plan of Western defense against Communist aggression. As Britain's Sir Stafford Cripps had said: "In one year EGA has done more for European unity than was accomplished in the preceding 500 years." The finest birthday testimonials came from the people EGA had succored. Eighteen months ago the 10,000 workers of Europe's biggest tire plant (Fort Dunlop) at Birmingham, England, faced what some of them called an economic Dunkirk.

Their machines had ground to a stop because there was no carbon black, the toughening agent which comprises about 30% of a tire's rubber carcass and tread. The supply from the U.S. had been cut because of Britain's shortage of dol lars. "For days," remembered one grimy worker, Leslie Joseph Pridmore, last week, "our machines stood silent and we were idle. Without 'black' we couldn't go on.

Black's our life. If we don't get it, we're out of work.

"If there was a boat crossing the Atlantic with black aboard, we'd follow its progress across the Atlantic, and wait for it to dock. If we heard it was at Liverpool, some of us went out to meet the trucks on the way from the docks. We begged the drivers not to stop even for a meal on the road, but to rush the black to the factory. It was terrible, desperate.

"Then Marshall aid started, and black was put on the list. We've never had to worry since. Regular as clockwork the trucks have arrived, loaded with bags of black. The machines have kept on, and the men."

Wiping a carbon-black wrist over a sweaty carbon-black brow, another worker said: "This Marshall aid has got my thanks." A third said: "It's given us a breathing space." A plant official echoed: "Marshall aid saved us from catastrophe." He spoke as simply as if he were saying: "Unless I breathe, I die."

Time to Sit. Up & down Europe there were variations of the Birmingham theme. London's Daily Mail shuddered to think what Britain would be like without ECAid: "Bread, cake and pastry supplies cut to half of what they are now. Butter, cheese and sugar rations down by one-third. No cotton goods in the shops. Footwear supplies drastically cut. Cigarette and tobacco supplies cut by 75%. New housing programs down by half . . . Private motoring cut ... to 40 miles a month or less . . ."

EGA had helped France off the bread ration, cranked her textile and electrical industries into booming production. It was rebuilding rail transport, curbing black markets and inflation through fiscal reform and more production, filling the shops with goods again. In the park along Paris' Champs Elysees, Pierre Lignes, a municipal worker who rents out public chairs, shrewdly remarked: "Without Marshall aid probably very few people would be sitting down--most of them would be rioting and bashing each other over the head with my chairs."

Frenchmen understood, however, that the purpose of EGA was not to provide leisure to sit down, but to keep France's factories going. The independent Parisien Libere ran a special supplement under the heading: "Aide toi, le del (I'oncle Sam) t'aider a" (Heaven [Uncle Sam] helps those who help themselves). Georges Villiers, president of the Council of French Employers (representing 600,000 businessmen), preached: "The Marshall Plan makes everything possible if we do our share . . . Instead of giving over to class hatred about the division of our wealth, let us double or triple the quantity of this wealth . . ."

Thanks to ECAid, Holland's Rotterdam was getting steel for new docks, cranes, sheds, bridges. Norway's fishermen had new nets from yarn spun in Italy out of cotton from the U.S. Danish stockmen had more fodder corn and oil cake; they could produce more bacon and butter for Britain and other customers. In Italy's Genoa harbor, the S.S. Conte Grande was being restored to service (see cut).

Western Germany, in contrast to the first three postwar years of hunger and desolation, looked almost prosperous again. Factory chimneys belched smoke as Volkswagen and Opels, Rolleiflexes and Leicas, steel girders and Rosenthal china flowed from production lines. Pneumatic hammers chattered as new buildings rose from the ruins of Munich, Frankfurt and DueDue Duesseldorf. Bizonia's industrial output had jumped in nine months from 41% of the 1938 level to 68%. Exports had nearly trebled.

A Definition of Selling. Paul Hoffman took ECA's birthday in the supersalesman's stride he had brought with him out of big business into big statesmanship.

In Washington, D.C., the ECAdministrator was bending every trick of persuasion and enthusiasm to justify every dollar's worth of ECAid to Congressmen charged with the duty of using Uncle Sam's dollars well. For the next 15 months

ECA wanted another $5.58 billion (see NATIONAL AFFAIRS) ; anything less might well be penny wise and pound foolish. Between sales talks Hoffman flew off to his Pasadena (Calif.) home. There he treated the local Chamber of Commerce to an earnest, effective sales sermon on ECA--the kind of speech he has been making at least once a week, usually to American businessmen, since he was sworn in as administrator a year ago.

The Hoffman approach begins with the Hoffman definition of selling: "The process of transferring a conviction from the mind of the seller into that of the buyer." The fundamental conviction he sought to transfer was that ECA, under American business leadership, could be an extraordinary diplomatic vehicle, not only for the recovery of Europe and the security of the world, but also for the future of free enterprise.

It strikes some Europeans (and some Americans) as amusing and contradictory that Paul Hoffman should be using an economic plan in the hope of furthering free enterprise. Long ago the socialists kidnaped the word "planning," and hung the label "chaos" on capitalist activity. Those (including millions of non-socialists) who swallow socialist semantics note that EGA requires European governments to look ahead, to budget the materials they want, and to account for the use thereof. "Aha," they say, "Hoffman's ECA is encouraging socialism."

There is some truth in this warning, and Hoffman is often reminded of it; but it is slyly short of the whole truth. For the crack about Hoffman and socialism misses a historic point: the American businessman is the planningest creature to appear since Noah, unimpeachably advised, built, stocked and sailed the Ark. The American free enterpriser does not lash about blindly in the economic storm of socialist fantasy. He is a wary mariner who proceeds by chart and sextant, guided by the wrecks that mark the shoals and by the transcendental firmament revealed in certified accountancy. The free enterpriser plans his own way, not the way of his suppliers, his competitors and his customers. He does not try to plan the coast along which he sails.

The socialist planner seeks to rebuild the coast to fit the course he intends to sail. All things must be under his hand. His instrument is "control." The free enterpriser plans in order to foresee, to adapt himself and--at most--to modify the outside factors. His instrument of modification is the salesman. The salesman can deepen a channel or construct a breakwater. He can modify by persuasion, but, by definition, he does not control. For many years the salesman, rather than the banker, the engineer, or the industrialist, has been the typical figure of American free enterprise. Paul Hoffman is a salesman--an adept of planned persuasion. And it is a salesman's planning, not a socialist's, that Paul Hoffman brings to Europe.

Way of a Salesman. Now 57, Paul Hoffman has been coming up through free enterprise ever since his boyhood days in Illinois. His father was an unshackled personality of New England ancestry who studied the flute in Germany, tinkered endlessly with engines, perfected a system of heat control, and finally moved to California, where he raised avocados and helped develop the Calavo (avocado growers) association (a notable example of planned selling).

The family (there were five children) had its financial ups & downs. Son Paul wanted to be a lawyer. At 17 he entered the University of Chicago, where because he was only 5 ft. 2 in. tall (he is now 5 ft. 9 1/2 in.) he was known as "Peewee." Then Father had a financial down and Paul, after a year of college, was forced to go out and work. "Imagine what would have happened," Chicago's Robert Hutchins now says, "if Paul had graduated!"

He began in Chicago as a salesman of Halladay cars, and had his most notable success in Chicago's rural areas. His technique involved a direct form of market research. He would invite the local banker for a ride; automobiles were still enough of a novelty in 1910 to make that approach acceptable. Instead of trying to sell the banker a car, Hoffman would ask him for a line on the neighbors. He usually wound up knowing who wanted, needed and could afford an automobile. By this plan Hoffman saved a lot of breath, sold a lot of cars.

Later, young Hoffman trailed his family to California, where he got the Los Angeles Studebaker agency. A limiting factor in those days in what later became a virtually limitless automobile market was the lack of roads in Southern California. Hoffman led civic campaigns for better, safer roads. This planning with a vengeance paid off. By 1925, when he was 34, Hoffman had become a millionaire.

Meanwhile, he had served as an artillery lieutenant in World War I and had met a fellow salesman who had so much sales resistance that Hoffman could not sell him a Studebaker. He was from Massachusetts, name of Brown, and was in the dry goods line. Hoffman never succeeded in quoting an automobile price that clinched a sale. Fascinated by a man he could not persuade, Hoffman persisted until Brown's daughter Dorothy returned from school in the East. Hoffman married her. They have six children, three grandchildren.

In 1933 he was called in to rescue the Studebaker Corp. from receivership, and continued speeding up the company ladder to its presidency and an eminent place in American business.

Babyface Battler. As a supersalesman, Hoffman had outstanding talents, some natural and others undoubtedly acquired. An amiable, mild-mannered exterior and ability to relax, no matter what the strain, were coupled with integrity, self-discipline and an indestructibly competitive spirit.

These qualities come out not only in Hoffman's work but also in his play. He likes an occasional highball but he does not smoke; he was a chain-smoker until one day five years ago, when he quit--successfully. He is a card fan--poker, gin rummy, bridge--who takes pleasure in matching wits, in competitive foresight.

Golf is still his favorite weekend diversion. His game is thus described by a crony of the links: "I always tell him, 'Paul, I don't like to see you in a trap. That's when I'm most afraid of you.' The guy never gives up. He even pep-talks himself by saying, 'Now, Hoffman, you damned fool, hit the ball!' Yet he'd rather give than ask an edge in competition. That kindly smile and glassy eye get you. He's a babyface Battling Nelson."

Millions lo Billions. Hoffman entered government by way of wartime service. As head of the Committee for Economic Development (TIME, Sept. 6, 1943), he surveyed the possibilities of a serious postwar recession, helped talk scores of businessmen into laying careful plans for a quick reconversion to peacetime production. The contacts and the reputation he made with CED helped when Harry Truman and George Marshall drafted him for EGA. From millions, Paul Hoffman moved into the realm of billions--the $5 billion of ECA's first year to be followed by an estimated $12 billion in the next three years. The EGA law, leaning on Secretary of State Marshall's famed Harvard speech of 1947, ordered the ECAdministrator "to sustain and strengthen principles of individual liberty, free institutions and genuine independence in Europe . . . achieve economic cooperation ... a healthy economy independent of extraordinary outside assistance." It also directed him to cooperate with 20 foreign governments, coordinate-with 24 other U.S. agencies, execute 13 specific responsibilities related to European recovery, 14 responsibilities on behalf of U.S. farmers, businessmen and consumers, and seven other miscellaneous duties.

"It's fantastic. It just can't work," exclaimed one of the new administrator's top aides as he studied the law. "Let's try it for a while," said Hoffman placidly. Somehow or other, it began to work.

The first chore was recruiting. Washington bureaus, hard pressed to preserve an irreducible minimum of talent in the postwar return to private enterprise, gaped enviously as Hoffman pulled one topflight man after another into the roster of his great public enterprise. He minimized his own persuasive zeal. "We draft them," he said. "I feel very deeply about it. If we get a turn-M. Chopin, Jr. down, I say: 'O.K., go home and try to live with yourself.' They usually turn up in about ten days."

The key figures were pretty solidly from business ranks--investment bankers, corporation lawyers, steelmen, paper & pulp men, automen, soft-drinks men, and so on through a miniature Who's Who of management and ownership. ECA's Washington staff has now expanded over ten floors of the Maiatico Building, with 916 employees in the U.S. ECA's operating staff in Europe (see below) is larger, numbering 2,236 in personnel.

"To Stir Imagination." The next chore was "programming"--the complex process of screening EGA grants and loans to 19 recipients.-

This job was attended by a burdensome weight of paper work. As supplies got going from the U.S. to foreign shores, an equally burdensome weight of businessmen seeking favors for their products knocked on ECA's door. Last month

ECAdministrator Hoffman tartly remarked: "Confusion seems to persist in some quarters as to whether the Marshall Plan is a European recovery plan or a project for American aid. This is the most pressing problem facing us at the moment."

At his Washington desk Hoffman is a shirtsleeves administrator, working early & late, even-tempered, ready with smile and soft humor. At first he took to solitary soda-fountain lunches to save time, now he has small lunches with other officials, often at the Metropolitan Club. When he appears before Congress he turns on some of his old salesman's magic, has earned widespread respect for candor and readiness with information. "You should see him operate with Congress," said a colleague. "Whenever a knotty one comes up, he slaps his knee and says: 'Senator, you're entirely right. You've hit the nail on the head.' Next thing you know, the whole room is full of Senators working like mad to help Paul Hoffman solve his problems."

A fifth part of the time he was away from Washington, traveling more than 90,000 miles at home and overseas. In Paris he told European leaders, assembled to blueprint economic cooperation: "Make no small plans, for they have no magic to stir the imagination of men." He preached the gospel of productivity, the continuous planning of improved production techniques. He found that European industrialists had a bias against new methods, just as U.S. producers had a bias in favor of them. In America's cities he told his hearers of ECA's success in stopping Communism, of what was being done and what remained to be done.

Prosperity & Unity. The ECAdministrator laid down the problem of Marshall planning v. socialist planning this way:

"It is essential that the European governments, regardless of how much or how little they control their respective national economies, have clearly in mind what they are trying to accomplish, and shape all their policies to the ends in view. This means planning. But it does not require any government to increase or decrease already existing controls over its own citizens. However, we believe that in the end this kind of planning will result in fewer rather than more controls, because it contributes to prosperity, and prosperity discourages regimentation, while depression invites it."

As to Europe's future, Hoffman saw a bold and hopeful prospect: "In order to build a united Europe, you first have to build Europeans. The European organizations that have been formed and that are at work now are building Europeans. For the first time in history, a body of men are beginning to think and plan and build together as Europeans and not as nationals of separate states. They are developing more and more the habit of working together, of looking at their problems as common European problems. They are getting in the habit of having their economic plans criticized, and of criticizing those of other countries, and of working those separate plans into a common program. They are working as Europeans, with but one thought in mind: the economic recovery and economic unity and the well-being of Europe as a whole."

Unsound Patient. The first year's statistics showed the EGA nations on the recovery road (see chart). Industrial production (not counting Western Germany) had jumped 14% above prewar. Steel production in all EGA countries was up from 30 million metric tons in 1947 to approximately 40 million in 1948. Agricultural output in 1948, a good crop year, about equaled prewar. In spite of this record, Europe's living standards were still below prewar; much of what was produced went to repair war damage or to replace foreign assets spent or lost during the war. EGA, facing its second year, was shifting emphasis: less for straight relief (foodstuffs, raw materials) and more for reconstruction (materials such as heavy machinery, transport equipment, etc.).

But Europe was still far from sound economic health. ECA's first $5 billion had given powerful stimulus to a patient on the verge of economic collapse--a life-giving transfusion pouring U.S.-paid commodities into anemic arteries of production and trade. After the transfusion, what? Paul Hoffman and his EC Amen faced a problem of diagnosis and bitter medicine--'for Americans as well as for Europeans.

Basically the patient was suffering from a great, unfavorable shift in the balance of world trade. Economists call it "disequilibrium," trace its origin to the years long before the two World Wars. In the 19th Century, Europe's foreign commerce was at a palmy, classic equilibrium. Surpluses from her busy factories sold readily abroad, were exchanged for raw materials at prices favorable to Europe. Gradually at first, then with mounting impact, U.S. factories produced at a tempo of output and efficiency that Europe could not match. The World Wars deepened the disequilibrium by tremendously weakening Europe's trading position, vastly strengthening America's.

Meanwhile, some economically "backward" countries (e.g., India) had advanced industrially to the point where they could manufacture many of their own goods. Others (e.g., Argentina) found themselves able to charge more for their unmanufactured exports to Europe. "The terms of trade" with these countries had turned against postwar Europe, which had to export more to get the same amount of food and raw materials.

After the war, there was a natural recovery in Europe, but in 1947 the production curves (see chart) began to turn downward. Main factors were the dollar shortage and (in some countries) Communist strikes and sabotage. EGA is properly judged not by how much it has increased production as compared with 1947, but by how much misery, depression and chaos it has staved off.

Western Europe, after a year of ECAid, was still selling abroad only 50% of what it was buying abroad with U.S. helping. Experts calculated that Europe might sweat the deficit down to $2,500,000,000, and no further, by 1953, when ECAid should end. Warned Paul Hoffman: "A condition of overwhelming significance." Unless faced head on, he added, EGA would become an ineffective relief program, and all hopes of taking Europe off the U.S. dole would be shattered.

Bitter Medicine. Paul Hoffman faced it head on. To his fellow Americans he spoke straight from the shoulder. The U.S., he said, must do two things:

"1) Help restore European production of all those goods ... in which she is normally and potentially self-sufficient, so that she will no longer require imports from us; and

"2) Accept whatever temporary or permanent change in the normal trade pattern comes as a result of fuller use of European resources . . ."

Then, driving the point closest home, Hoffman gave a hard example of what he meant: "We in the automobile business may shudder, but still we must not get too violent, as we see our European dealers shift over to selling British-made motorcars. We must exercise this restraint because at the present time most of the Marshall Plan countries cannot buy American motorcars unless the American taxpayers give them the dollars with which to buy them."

"I am utterly convinced," he proclaimed, "that Europe could supply [the U.S.] market with an additional $2,500,000,000 worth of goods . . . After all, $2,500,000,000 represents approximately only 1% of our annual gross national production . . ."

This was the supersalesman talking--not the supersalesman for autos but for free enterprise, freely planned by free men, determined to resist both chaos and tyranny.

*"To coordinate" in federalese means to operate in the wide and active areas where one agency's enabling statute or directive overlaps the enabling statutes or directives of other agencies. An agency head who "coordinates" over-aggressively is known as an "imperialist"; one who achieves a golden mean of grabbing just enough functions from another agency is known as an "operator"; one who does not "coordinate" aggressively is known as a "fuddy-duddy." The word in its debased meaning has proceeded from Washington into the armed services: soldiers now speak of "coordinating" a drink or a girl. * Austria, Belgium, Britain, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, The Netherlands, Norway, Portugal, Sweden, Switzerland, Trieste (Western zone), Turkey, Bizonia, French zone of Germany.

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