NATIONAL SECURITY POLICY


700.5/7-1950
       Memorandum of Conversation, by the Secretary of State

TOP SECRET                            [WVASHINGTON,] July 19, 1950.
  Mr. Clayton'* called at his request. He said that the problem before
us was how the free world could arm itself in order to get sufficient
strength within sufficient time to defeat the menace of communist
aggression. The essential part of this problem was to accomplish this
result without the United States going broke. If that occurred, we
should have lost the struggle. I agreed that this was the problem.
  Mr. Clayton stated that in his opinion the only way in which this
could be done was through federal union of the democracies. He par-
ticularly spoke of the importance of bringing Australia and New
Zealand into such a federal union. I asked how this would affect the
immediate military and financial program since the basic task was
for all the democracies to devote a much greater percentage than at
present of their national income to military purposes and since mutual
aid is already a principle in this effort. Mr. Clayton said that if western
Europe was overrun there might be the possibility of the British
Fleet's surrendering to the Communists, whereas under the federal
union this would not occur.
   Mr. Clayton went on to say that his principal point was not a mili-
 tary one but an economic one. He thought that it was not possible
 to get the necessary economic strength unless all financial and trade
 barriers were removed and that, under the present small national
 divisions in Europe, economic strength was not possible. He said that
 the President had an opportunity to become one of the greatest men
 in history if he would pick up this idea and move forward with it
 quickly. He urged me to withdraw the State Department's opposition
 to the resolution now pending before the Thomas Subcommittee so
 that the matter could be acted upon by the lCongress and the public
 response in the United States could be obtained. He thought that if
 we took the initiative in this matter, the people of the democracy
 would override the administration and insist on the formation of the
 federal union. I told Mr. Clayton that I would give the most careful
 consideration to what he said, as I always did to his views.
   In leaving, Mr. Clayton said that in his opinion between 20 and 30
 percent of our national income should be devoted to increasing our
 military strength and that anyone who opposed such a program would
 meet with intense opposition throughout the country. I said that the
 Department was and had been keenly aware of the urgent necessity
 for the most speedy and substantial increases in the amount devoted
 to the defense purposes.
                                                   DEAN ACHESON
  'William L. Clayton, Assistant (Under) Secretary of State for Economic
Affairs, T946-1947; previouisly Assistant Secretary for Economic Affairs.


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