George C. McGhee Oral History Interview

Notice
This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

RESTRICTIONS
This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened December, 1977
Harry S. Truman Library
Independence, Missouri

[1]

MCKINZIE: Ambassador McGhee, a lot of historians are very interested in why people go into Government service. There was an account in Current Biography several years ago which quoted you as saying that you went into the oil business as a young man because it offered you the best way to get rich in a hurry so that you could afford to go to work for the Government. Had you at this very early stage in life decided on this course?

MCGHEE: I'm not sure I said it in quite that same brash way. However, there is no question

[2]

that I had decided to seek a public career early in my life, and one of my reasons for going into the oil business was to make it possible economically to be free to do this. I was influenced a great deal by the three years I spent at Oxford where there was a great tradition for public service, and I came to attach significance to it at that time.

MCKINZIE: At that time did you know significant public figures in American life? Had you met Will [William C.] Clayton?

MCGHEE: No, not at that time. I first met Mr. Clayton when I came to Washington as a member of the War Production Board before we were in the war. I worked closely with him at that time when he was head of the Reconstruction Finance Corporation.

[3]

MCKINZIE: You spent a couple of years in Government in the War Production Board before you went into the Navy. Did that experience teach you anything which was to have a bearing on your later philosophy of self-sufficiency, or lack of resources in the United States?

MCGHEE: I was working in the field of raw materials. The Combined Raw Materials Board was a British-American board set up to allocate raw materials between the Allied Nations. I was deputy executive secretary of this board and learned from firsthand knowledge the conditions under which raw materials were produced in the world; the economics of their production; and, where their markets were. It gave me a very valuable perspective into the general resource field, which has always been one of my continuing interests as a geologist, particularly specialized in

[4]

oil. I had an insight from a professional viewpoint.

MCKINZIE: Many of the other people who worked in the War Production Board became very convinced of the necessity of planning in the postwar period as there had been planning during the war period. Some people were saying, as early as 1942 or '43 when you left, that the problems of winning the peace or of stating the peace were going to be as complex as the problems of supplying the war. And since this very carefully orchestrated production system had worked during the war, it ought to be continued in the postwar period. Did you have any of those feelings?

MCGHEE: Yes. That's one of the reasons that I wanted, after my term in the Navy was over, to come into the State Department and sought a position with Mr. Clayton.

[5]

I, having participated in the war effort, was very keen to help dismantle the machinery set up during the war; to effect a peacetime transition; to assist those countries that had been ravaged by the war; and, to combat the efforts on the part of the world Communist movement to take over some of these countries by force.

MCKINZIE: You said earlier, before we started recording, that you considered Will Clayton one of the great living Americans of that day, and yet you worked for him. That's a very high tribute to pay to a man for whom you worked.

MCGHEE: I knew him very well, and the results were a much greater appreciation of his qualities. He was an extraordinary man, self-educated, very unassuming, a handsome fellow, of courtly manners. The best self-educated

[6]

man I've ever seen. He knew more about any subject than anyone who talked with him, including the ministers who called on him from other governments. I had a marvelous opportunity to get to understand his economic philosophy. I attended all of his meetings. When people called on him, I sat in the corner and took a memorandum of conversation and got action on what he had decided. Having watched him in action for over two years, I could tell you pretty much what his reaction would be to any circumstance. It was a great education to me.

MCKINZIE: One of the questions that's come up in recent years is just how influential his economic philosophy was in the State Department in 1945 and 1946. It was after all quite different than what had been in effect in the distant past.

[7]

MCGHEE: His economic philosophy was very simple. It was that of a private trader in commodities on a world scale, trading without any help or interference by Government in buying and selling cotton all around the world. His firm had 5,000 employees in Brazil alone and bought and sold cotton on a tremendous scale. Out of this came his own private trading philosophy, and that dominated our Government. He was much more important in the international economic field than anyone in the Department of Treasury or in the Department of Commerce, or the aid agencies of that time.

MCKINZIE: Mr. Clayton was not alone in believing that when the war finally ended there would be a period of a couple of years in which European nations, particularly, would rebuild

[8]

themselves. Then if they pursued a free trade policy, there would be more integration of world economies and an upward spiral of standards of living. What went wrong?

MCGHEE: What went wrong was that the European countries didn't have the resources to recover without our help in a very large way. The mere creation of a condition for free trade was not enough. They couldn't make the payments for the raw materials they needed. Their economies were so depressed that the partnership between the cities and the country had broken down, and the country didn't supply the food for the cities. Although Mr. Clayton was trying to create an international trade organization, which would create free conditions of world trade, he very soon recognized that the Europeans couldn't make it on their own. He was, in

[9]

my judgment, the principal originator of the Marshall plan.

MCKINZIE: Would it be fair to say that international financial institutions such as IBRD, IMF, and the Ex-Im Bank were inadequate to the task of reconstruction of Europe?

MCGHEE: Yes. They provided the framework within which trade and investment could take place, but they didn't provide the capital. The countries had lost all of their capital as a result of the war. The British loan was the first recognition that we had to provide extraordinary amounts of capital to individual European countries. But even that wasn't adequate and was obtained only with very great difficulty from the Congress.

In initiating the Marshall plan, Clayton and others recognized that the

[10]

need was much greater than we thought. His estimate of 14 billion dollars proved to be almost precisely accurate. That's just what we transferred in the years under the Marshall plan. This raised the level of capital available, and introduced the principle that they would reconstruct their countries on the basis of a cooperative effort under a single coordinating mechanism.

MCKINZIE: Did you go with him to Geneva in April of 1947 when he attended the GATT convention or something, and people evidently personally pressed their needs for...

MCGHEE: No. I'm very familiar with his actions during this period because I was staying home looking after the office. It was a meeting of the ECE. The ministers of the various countries who were there impressed

[11]

upon him their need for foodstuffs and raw materials for their plants. France in particular, as I recall, had a tremendous deficit in wheat. This was one of the principal matters he gave attention to. He went to Paris for that purpose, and when he came back, he wrote his famous memorandum which described the need and the necessity for us to make a move. In my judgment this memorandum (which by the way I carried from his sick bed to the Under Secretary of State) was the single most important impetus for the Marshall plan.

MCKINZIE: He was so concerned about the need for immediate action that he gave you this memorandum?

MCGHEE: He had just come back from Europe. He had the flu, or something and was in his bed.

[12]

I went out to show him telegrams and to see what was on his mind. He had written this memorandum and gave it to me. I took it immediately to the Under Secretary.

MCKINZIE: One of the things that always comes up in connection with the Marshall plan, is why the United States decided to do it the way it was done. There was after all this organization that you've already mentioned, the ECE, and there was, or could have been, a special agency of the United Nations to administer it. Was that seriously discussed in the office in which you worked?

MCGHEE: I didn't play an important role in the policy discussions leading to the Marshall plan. I am sure that the various vehicles were discussed, but ECE included the Eastern European countries. Once Russia turned down

[13]

their participation in the Marshall plan, this mechanism was not adequate. I don't think anyone felt the United Nations (this includes not only the countries of Europe but the whole world) would have provided an adequate mechanism. So it was necessary to set up a new ad hoc committee in Paris under the chairmanship of now Lord Franks.

MCKINZIE: At the time this was being planned did you recall the discussions about whether or not to invite the Soviet Union, with the hope that they would or would not p