Wartime American Plans for a New Hungary

Document 1

Minutes of the Subcommittee on Political Problems, May 9, 1942

Strictly Confidential Minutes P - 10

Meeting of May 9, 1942.

Present:
Mr. Welles, presiding
Mr. Hamilton Fish Armstrong
Mr. Ray Atherton
Mr. Isaiah Bowman
Mr. Benjamin V. Cohen
Mr. Norman H. Davis
Mrs. Anne O'Hare McCormick
Mr. Leo Pasvolsky
Mr. Paul Daniels
Mr. Paul B. Taylor, secretary

Mr. Welles, in opening the meeting at 11:10 a.m., stated that, as agreed upon at the last meeting, the discussion would deal with a potential Danubian federation and with its component parts.

He then asked Mr. Pasvolsky to explain a map, prepared by the Office of the Geographer in collaboration with the Division of Special Research, of the territories of the Austro-Hungarian Empire, the boundaries of the post-war Succession States being superimposed. Mr. Pasvolsky pointed out on the map the changes in political status which took place in respect of each part of the Dual Monarchy. Mr. Welles said that this explanation gave a very clear picture of the area.

He suggested that in approaching the problem of the morning, we might leave Poland out of consideration and attack the problem principally from the political point of view, with its economic aspects also considered, of the utility of a Danubian federation per se. We might then consider the enlargement of the arrangement to include Poland and possibly Austria. He supposed that the initial problem is to determine whether there is anything of value in the conception of the reconstitution of Austria-Hungary. He then asked Mr. Armstrong for a statement of his views on this subject.

Mr. Armstrong asked whether the question referred solely to a Habsburg restoration or whether any type of government of the area might be considered. He himself did not believe in the practicabi1ity of a Habsburg restoration. He admitted that such a régime might be imposed, but he thought this would be going back to something which it had been necessary to destroy at the end of the last war--it would be a re-creation of a principal factor in creating the last war. He would not necessarily favor a veto of the restoration of a Habsburg (presum- ably Otto) in one of his own countries, but he would point out that such a veto would not necessarily come from us but rather from within the countries in which the restoration was to take place. The sine qua non of a restoration would be social reforms in Hungary (i.e. land reform) and political reforms along democratic lines in both Hungary and Austria.

Mr. Welles then inquired the opinion of the other members concerning the general nature of a possible Danubian federation. Was it conceived as purely economic, or as also political in nature? Mr. Davis expressed his feeling that such a federation ought at the beginning to be purely economic. Such a union would help a broader kind of political unity to develop without its being forced. It would give time and incentive to work on the development of more complete union. Mrs. McCormick inquired whether the union should not also be political: Even the possession of purely economic powers would force the federation to assume political functions. Mr. Davis agreed that if the Danubian countries were tied together economically, they would surely have to stand together politically. He thought that they might have to have some close political union, but he questioned whether one should try to go so far at first. He thought it more feasible to think of a confederation than of a federation.

Mr. Armstrong pointed out that here, as in the discussion on Germany, the question arises whether any historical precedents exist for federation in which the countries devolve from unity to federation--in which a united country becomes a member of or is broken up into a federation. Here, of course, one could not speak of, a direct transition from a unitary state to a federation. Rather, this development would take place with a twenty-year period in between. Mr. Welles said he could think of no such precedent and asked whether Mr. Bowman had any in mind. Mr. Bowman replied that while there were a few cases chiefly in Latin America, some of these existed chiefly on paper, were of short duration, and were in any case not applicable to the present problem. Mrs. McCormick added that there probably have been a few modern examples, but that they have been short. She pointed out, however, that strong support for a Danubian federation has existed for some time in the Danubian area itself, and that a number of specific proposals for such a federation have been made. Mr. Welles suggested that the Central American Union would be a case in point. The parallel was, however, not exact, and he could think of none in Europe. Mr. Armstrong pointed out that most federations were agglomerations of individual states, but that here the process would be reversed: a devolution from unity to a looser organization.

Mr. Davis said that Dr. Bene was the main factor in keeping the Danubian countries from getting together at the end of the last war. Each of the Succession States followed a highly protectionist and competitive policy toward the others. Hungary, for example, succeeded in establishing an industry in competition with that of Czechoslovakia, and then granted it high tariff protection. All of the leaders in that area realized that they should get together politically, but they found themselves unable to do it economically. Mr. Armstrong queried whether Mr. Davis' statement concerning Dr. Benes applied to the period immediately after the Peace Conference. He himself thought that the chief problem was that the leaders in all these countries felt themselves on the skids and were unable to act. Mr. Davis recalled that in 1930 and 1931, there was a strong feeling in the Danubian area that a union was necessary, and that they were even talking about having someone come in as a director. Each leader, however, was afraid to tackle it himself. Mrs. McCormick pointed out that the Little Entente was the chief factor in preventing the creation of such a union.

Mr. Atherton said that Lord Lothian had been one of the strongest advocates of a federation in Central Europe, and that he based his idea upon the British Empire scheme. Mr. Welles agreed, and then referred to the plans of Prime Minister Sikorski and of Mr. Tibor Eckhardt. Sikorski's idea, he said, is one of complete economic federation and of incipient political federation among the Baltic states, Poland, Czechoslo- vakia, Hungary, Rumania, and Yugoslavia. The Eckhardt plan was similar but purely economic, as was categorically stated by Eckhardt. His plan, however, embraced two federations: the first to consist of Poland and the Baltic countries including Finland; the second group to include the Danubian states, that is, Czechoslovakia, Hungary, and Rumania. While there might be links between these two federations, each was envisaged as an independent state. Mrs. McCormick said that mention might also be made ofthe Hodza plan, which confines itself to the Danubian area. Mr. Hodza, she pointed out, being a peasant is chiefly concerned with the agricultural problem. His plan expresses the aspirations of the "Green Internation- al".*

Mr. Davis thought that the big powers--France, Germany, and Italy--have always been an obstacle to the creation of a Danubian union. He himself had always had the feeling that a settlement of the Danubian area could be the key to peace and security. In his view, the most fatal mistake made at the end of the last war was the failure to create unity in Central Europe. While Wilson's Fourteen Points had called for the lowering of trade barriers, in actuality no practicable scheme for accomplishing this was found.** Mrs. McCormick agreed, pointing out in particular that if we could get a plan for the Danubian region, it would help considerably in dealing with the German problem. Mr. Davis, referring to the difficulty of establishing a federation, said that it is a terrible problem to get local government into operation. He thought that a proposed plan should not interfere with local government but should work from it. He did not like the idea of setting up a broad framework first that would lead to dictation of all matters of local government.

Mr. Atherton queried whether it would not be wiser to proceed in the reverse direction. He said that in establishing a federation we would naturally interfere as little as possible with local govermnents. If, however, we could get a broad framework of a federation, it would then be possible for the local people to adopt policies which would contribute to it. If, however, no such framework were created, the local govern- ment bodies would exhaust themselves in the kind of rivalry and unconstructive effort which had gone on in the past.

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* "Green International" was the international association of the European peasant parties between the two world wars. It was established in Prague, in 1922; between 1928 and 1930, the number of participating national peasant parties was 18. Its ideology was a typically Eastern European democracy of the peasantry. [The notes of the editor are identified by asterisks.

** Wilson's Fourteen Points was a presidential program for world peace delivered to the United States Congress on January 8, 1918.The removal of trade barriers was covered by Point III: "The removal, so far as possible, of all economic barriers, and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance." In, Richard B. Morris, ed., Basic Documents in American History

(New York, 1956), 154-155. Mr. Cohen was asked whether he would have somethmg to say on this question. He replied that, in his view, economic functions cannot be separated from political functions. The performance of economic functions can take place only in a political framework, but we should try to have the federal administration as small as possible so that each group will feel that the rules are being administered by the states. He thought this form would provide the best basis for later evolution. He pointed to the early American experience and observed that to have the states administer the rules tends to increase their power. This gradual process toward unity would be best adapted to the Danubian situation. Moreover, the economic functions of the modern state embrace much more than the problem of tariffs. The control of such matters must in some way be linked back to the states. Mr. Davis conceded that if an economic unit is created, it must have what amounts to political authority. He thought, however, that we should not try to force any exact form of government upon the countries concerned. Mr. Cohen agreed that he did not favor strong centralization.

Mr. Armstrong, referring to the Sikorski and Eckhardt plans, inquired whether these two men have definite ideas as to the arrange- ments which should be made for the rest of the territory. He pointed out that Bulgaria, Yugoslavia, and Greece are not included in the Eckhardt plan. Each plan, he said, leaves Austria out temporarily for strategic reasons. He understood that a certain pressure exists in London and in other capitals for the Anschluss or Austria and Germany. Eckhardt, he said, is working closely with Otto, who is interested in Austria and not in Hungary. The Sikorski plan, he thought, was a little less self-seeking in a nationalistic sense than that of Eckhardt. It must be remembered that Poland would be a relatively powerful state. The larger the group, the less power Poland would necessarily have. Thus, Sikorski's plan was not a mere scheme for establishing Polish hegemo- ny. However, the motive of the Eckhardt proposals seemed to be that of trying to restore as much of Austria-Hungary (especially Hungary) as possible. Transylvania, for example, was included. Mr. Welles said that the Eckhardt plan leaves the political organization out. Its basic idea is that of two relatively self-sufficient economic units. Yugoslavia, Greece, and Bulgaria are not included in it. The Balkan states, he said, see less economic possibilities in such schemes and are less interested in them than are the states further north.

Mr. Atherton raised the question whether the two groups envisaged by the Eckhardt plan were too small to compete with Russia. Mr. Davis said that there is no particular intercourse between the Baltic and Danubian groups. Mr. Atherton, referring to the northern of these two envisaged units, said that it would merely repeat the type of structure established after the last war--a unit with no outlet except through the Baltic. This must, he thought, be another outlet--to the south. This brings us back again to the Polish plan.

Mr. Welles then asked Mr. Bowman whether, in his view, the Eckhardt plan provides for two relatively self-sufficient economic units. Mr. Bowman doubted that it did, saying however that the practical question involved consideration of what would happen up to the time of the establishment of a federation. The time factor would have to be kept into consideration, as it actually overshadowed the question of federation. The height of power of the United Nations will be the end of the fighting. At that time the moral and military power of the United Nations could instantly re-arrange the territorial situation. Later this would become increasingly difficult. It must be kept in mind that immediately after the fighting, some shifting could be done which was not based entirely upon what had existed before. These shifts, he said, could be stable insofar as they were rational and took into account practical political considerations. He pointed out, too, that the countries in this area are in general unstable, politically inexperienced, and nationalistic. Economic matters are so confused with political motives that the meaning of the maneuvers of these countries is often obscure. We would also want to take Russia and Germany into account in deciding this question. Furthermore, how far can we ourselves go politically in making any arrangements stick? He quoted Oppenheim's statement that in 1920 the world had been "shocked at its own boldness." The peoples of the world, and particularly the American people, had in 1920 rapidly retired from the bold conceptions of the Peace Conference period. He asked whether we will experience that again. Is it not true that all of the suggestions which we would make rest on the assumption that we are not going later to be frightened by our own boldness? Otherwise, what we do here is purely "paper stuff." He wondered whether the political leaders will not soon have to undertake the task of mobilizing support in public opinion. In other words, we have a second assumption in addition to our first assumption of a complete victory by the United Nations: We assume that we are not going to be afraid of our shadow afterward. He would emphasize, therefore, that we should not limit ourselves to considering what has been done, but that we should consider what is possible with a rational set-up.

He questioned whether economic associations that do not carry with them political associations--the type which we had been discussing-- are feasible. What is it, ha asked, that draws out loyalty? Nothing, he answered, only (1) "the dream that experience destroyed" (i.e. the League of Nations) and (2) nationalism. This latter, he said, rests on human nature, on the ties to the land, the family, the neighborhood, etc. Therefore, if we say "unite," public opinion will oppose the suggestion; but if we urge union for the common interest with a limitation of sovereignty, in which account is taken of these local ties and in which, purely on grounds of common interest, these local units join together, public opinion may accept it. In his opinion, a league of nations that will allow regional autonomy seems best. That was his feeling also in relation to the German question. He suggested that in considering the Danubian federation, we ask two questions: First, how did it work when free to do so? We can't ignore the fact that Germany has a preponder- ant interest in the Balkans. He referred to an article written by Mr. Armstrong in Foreign Affiairs in 1932,* in which the high proportion of German trade with this region and the small proportion of trade of Great Britain and France with it was stressed. On the other hand, Germany accounted for about eighteen percent of this trade, a figure which has been greatly increased since. Mr. Armstrong pointed out that 1932 was about the last year in which the situation in the area was normal. The Tardieu Danubian plan of that year was really the last plan of this sort which received any consideration. He noted that this plan was strongly favored by Herbert Butler in apook which Mr. Welles had recently recommended: The Lost Peace.** ask, namely that of seeing what it is that is to be changed. He suggested that much research work had been done concerning the actual economic structure and functioning of these countries, and that this material would be very useful. He doubted whether Eckhardt and Sikorski, for example, had done much on this task. The question he then defined as being: What boundaries shall we put around what area?

Mr. Davis concurred in Mr. Bowman's suggestion that the economic group of the League of Nations could be very helpful in a study of this sort. He referred especially to Mr. Loveday and said that Mr. Loveday and his group had done more on these questions than anyone else. Mr. Bowman said that he had one thing more to add. His earlier statements had not implied any disbelief in economic regions. These regions must, however, be worked out very carefully, and perimeters can be drawn only on the basis of close study.

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* Hamilton Fish Armstrong, "Versailles. Retrospect," Foreign Affairs, (October 1932), 173-189.

** Harold Beresfold Butler, The Lost Peace. A Personal Impression (New York, 1942). Mr. Armstrong presented the view that it is of importance to organize these areas in the strongest possible way. This, he said, is a fundamental part of the establishment of peace in Europe. He pointed out that in earlier times there was a buffer state between Russia and Germany. When this was taken away during the last war, Germany tried to organize the entire area. Later on, after the war, we tried, and the entities which we created were not strong enough. He pointed out that several regional groups have so far been envisaged. The aim must be to make these groups strong. He himself would hate to plump for a plan that would make any other regional plans unlikely. If were are to impose political sacrifices such as the loss of sovereignty and social and economic sacrifices such as the breakdown of the land-owning class in Hungary, it will be necessary for us to make these sacrifices general and not limited to some one country or class. He pointed out also that a larger grouping offers less chance for the play of political motives than does a smaller one. In the Eckhardt plan for example, one sees these old ambitions again. Summarizing his views, Mr. Armstrong said that the most hopeful course in the long run is that of making the area of the fedaration as large as possible; of securing it by an international organization; of forcing all concerned to accept the federation. This includes not only the Danubian countries; Germany and Italy must not ask preferential treatment, and we and Great Britain must not ask for most-favored-nation treatment. In that way he would try to emphasize economic factors rather political factors, but to make an area large enough. He thought that there was a chance that if this were done, the federation would constitute a limit upon Germany and upon a resur- gence of the old Slav-German struggle, which is a danger for the future.

Mr. Welles, concurring, said that a requisite of any plan is the recognition of nationality. What must be done is rather to avoid its becoming pernicious. He thought as large an area should be included as is possible from a practical standpoint. Whether the organization later becomes political or not, we can start in this way. If such an organization can be established, it wouid be a counterpoise to both Russia and Germany. Mrs. McCormick agreed that the federation would have to be large. Mr. Davis said that the Danubian countries have always put politics ahead of economics. If we should reverse this, creating solid economic conditions, the opportunity will be provided for a healthy political development. Mr. Armstrong pointed out that there is less chance that outside great powers will control a large unit than a small unit.

Mr. Atherton, returning to the question raised by Mr. Bowman, questioned how much interest American public opinion would have in Europe after the war. The average person is interested in little beyond local matter and cannot be counted on for a sustained interest in international affairs. Accordingly, it is likely to be our general policy to interfere as little as possible in most European situations. We may, however, lay down certain areas in which this country can be expected to have an interest.

One of these would be a dismembered Germany, another France and England, and a third a general economic grouping of Eastern Europe as a counterweight to Russia and Germany. Mr. Atherton further voiced his opinion that American post-war interest will lie more in the Far East than in Europe. Mr. Welles disagreed with this, stating that in his view the American people will demand a determining voice in the European settlement as well as in the Far East. Mr. Atherton, disagreeing, said that we will be drawn more into the Far East than into Europe. Mr. Welles, conceding that certainly we would be involved in Far Eastern affairs, did not believe that this would affect our participation in European affairs. Mr. Atherton observed that it possibly would not do more than to dissipate our strength. Mr. Davis and Mrs. McCormick agreed that the American public would certainly feel that it does not want another world war to start in Europe.

At that point Mr. Welles asked Mr. Pasvolsky for his views on the question of the morning. Mr. Pasvolsky began by saying that he was embarrassed on two scores: first, that he disagreed with much that had been said as to the value of a Danubian federation, and second, that he considered the political questions involved in this more important than the economic ones. He believed he could best present his views by describing the course of thought pursued in writing his book of the Economic Nationalism of the Danubian States some years ago.* He had started, he said, in an effort to prove that the dismemberment of Austria Hungary was a crime. He found, however, that his studies led him to the opposite conclusion. He had started with the proposition that Austro-Hungary had been an economic unit as opposed to the fragment- ed post-war Danubian world, and that therefore it was necessary to get back to the Dual Monarchy. He had limited himself to the economic aspects of the question because he saw no reason to believe that even a start could be made on the political aspects. He found that Austria- Hungary before the last war consisted of two politically autonomous units--a true federation under the Crown. The two parts were united

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* Leo Pasvolsky, Economic Nationalism of the Danubian States (New York,

1928). in a customs union and for certain other purposes. He discovered, however, that even with this organization, Austria and Hungary nearly broke apart whenever they had to revise the tariff. Concentration of agriculture and industry in different parts brought about disagreement. He found also that every ten years, in connection with the renewal of the Austro-Hungarian Bank, there was sharp strife. These difficulties were always reconciled but generally along the lines of Austrian desires. In his opinion, the reason for this was that political reasons governed all these actions, and that Austria was the dominant factor politica1ly. Mr. Welles asked whether Austria was not also financially dominant. Agreeing that it was, Mr. Pasvolsky made a second observation about pre-war Austro-Hungarian economic functioning. Hungary succeeded he said, in building a textile industry and in competing with the industry of Czechoslovakia. How was this possible? First, Hungary had enough banking resources; second, the Hungarian Government used its power to buy uniforms in order to further home industries; third, the Hungarian state railway administration imposed different freight rates, and these tactics were paralleled in other fields by measures which are generally called administrative or indirect protectionism. In summary, pre-war Austria-Hungary solved its economic problem only through forced industrialization with the use of foreign capital and through the exportation of 200.000 men per year. After making this study, Mr. Pasvolsky had gone to the five Succession countries. He had pointed out that if they were to have a union, its tariff would have to be established by diplomatic negotiations as opposed to the method of majority vote in Congress in this country. Admitting, he said, that it would be possible to adjust internal differences among the states, "Who will determine the unified tariff?" It was clear that this would need to be done by negotiation. The uniform answer which he received on this, however, was, "We will think about that when we come to it." Only once, he said, had this question really been faced. That was in the project for a customs union between Austria and Germany in 1931. He noted, however, that even in that proposal, they had omitted the unified tariff and had recourse instead to the mere grant of reciprocal tariff preferenc- es between the two countries. The entire plan, he pointed out, was only a preliminary project for a customs union and not a customs union itself. Continuing, he said that a primary problem of an economic federation

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* The plan for a customs union between Germany and Austria was presented by Austria's Minister for Foreign Affairs, Johann Schober, on March 20, 1931. It fell through, due to the leading European nations, primarily of France's, Great Britain's and Italy's, opposition. is its relations with the outside world. A second problem is whether the territory is really self-sufficient. He stated that in his view, the Danubian territory is not at all self-suffcient. Even if, he said, Czechoslovakia and Austria were willing to give up their agricu1tural tariff protection, this would afford to the other Danubian countries only a small additional market. Similarly, if the agricultural countries of that area were to give up industrial production, this step would increase by very little markets of the industrial states of the area. The result is that all of the Danubian states are forced to deal chiefly with non- Danubian states and are therefore thrown back on their need for relations with the outside world. This means, he added, political decision.

In concluding, he said that in thinking of economic matters, one must distinguish nation, region, and world. The relation of a nation to the world is, he said, difficult enough. To throw in, however, a second element, the functioning of a nation in a regional group which would in turn have relations to the world, would introduce a new factor of strain in international relations. No regional area, he said, is better off by itself than in a well-functioning world. No region is really big enough to be self-sufficient. The evolution of the Danubian question was, he said, characterized by what followed the Tardieu plan,* the last regional plan which received serious consideration. Meeting at Stresa in 1932 in an attempt to alleviate the plight of agriculture, the representatives of Eastern European states turned away from strictly regional arrangements and embraced the idea that states outside the area concerned should grant preferential tariffs on their agricultural products. This illustrated the fact that the essential economic problems of the Danubian countries cannot be solved solely by those countries, but by arrangements which take account also of relations with outside countries.

Mr. Welles observed that this had been a very interesting analysis. Mr. Davis said that in the past Germany and France, not being really dependent upon the products of the Danubian states, had had the "drop" on them. Some South European states, however, such as Yugoslavia, were really dependent upon the Danubian area. Mr. Pasvolsky then

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* The Tardieu plan proposed closer economic cooperation, in the form of reciprocal customs concessions, between the six Danubian states: Austria, Czechoslovakia, Hungary, Yugoslavia, Romania and Bulgaria. The plan was named after French Prime Minister André Tardieu, who presented it on March 2, 1932. It failed to materialize because of the conflicts between the concerned nations, and because of counter-measures instituted by Germany and Italy. distributed copies of some foreign trade statistics for the Danubian countries which revealed the small volume of trade between the Danubian countries themselves and, on the other hand, the large amount of trade which each Danubian country had with non-Danubian countries. Mr. Davis then asked whether, if these states constituted an economic unit, they would not be in a better position to negotiate as a unit. Rumania, Yugoslavia, and Hungary, he said, are so competitive that they are not so susceptible to German power as are the other states. Mr. Pasvolsky indicated that he was particularly opposed to the Eckhardt plan on the ground that if a regional federation were to be established at all, it should be made within as self-sufficient an area as possible. He observed that gains might be made if competitive countries would get together and organize as sellers. This wou1d be similar to certain recent Pan-American arrangements. Such an arrangement would, however, presuppose an organization somewhat different from a federation. It would be an arrangement set up by treaty for dealing with other countries as buyers.

Mr. Welles then interjected that we might take the matter on that basis for the sake of argument. We might consider arrangements of this sort embracing Poland, Czechoslovakia, the Baltic countries, Hungary, Rumania, Yugoslavia, and Austria. It would be assumed that these countries would agree on a unified tariff. The great bulk of this economic area would be agricultural with only a small industry, which would mean there would be no really balanced economy. Turning to Mr. Cohen, he then asked what the latter's opinions on this matter were in the light of the experience of this country.

Mr. Cohen repeated his view that politics and economics could not be separated because politics plays a part in the determination of the economic. However large and rich a country may be, he said, it cannot be self-sufficient, and the attempt to make it so is not desirable. It does not follow, however, that some internal arrangements are not necessary. In this country, the large area of relatively free trade is an important factor in its prosperity. In Mr. Cohen's view, merely voluntary arrangements as to tariffs and the like by the Danubian countries would not work. It would be necessary to "institutionalize" these arrange- ments on some way. He was using the word "institutionalize" deliber- ately as he meant to leave his conception definitely flexible. He agreed with everything Mr. Pasvolsky had said except his conclusions.

In any case, proposals for regional arrangements would require very careful thought. As an additional possibility, he suggested that there be free trade as between the countries but not a unified tariff upon products from outside. Mr. Atherton pointed out that this would involve a central political organization of some sort. Mr. Cohen agreed, but thought its powers would be limited. Continuing, he raised the question whether we cannot create institutions that will assist in the construc- tion of a stable order in the area. There would of course be a larger regional unit for restricted purposes; within that, smaller entities constituting more complete unions. He thought we might consider enlarging the geographical scope of the projected area to go as far south as Greece.

Mr. Welles said the point was well taken. Continuing, he asked whether it is not true that some sort of economic union would be the only manner of bringing about a rise in the standard of living. Mr. Pasvolsky observed that this was precisely what he questioned. He did not deny that it would bring about some rise in the standard of living, but did not appear to think that this rise would be comparatively important. He had no objection, he said, to the establishment of a Danubian union of some sort if the countries involved wished this. Mr. Welles replied that these countries cannot be expected to establish such an arrangement by themselves: They need, he thought, to be told how to do it.

Mr. Armstrong then asked whether some substitute of an interna- tional nature could not be found for the regional arrangement under discussion. Can't we, he asked, as relatively disinterested powers who will determine the peace, make that contribution? Such action, he said, would need to take place immediately at the end of the war. We should also, he thought, give economic direction to the efforts of these countries. All of their political decisions, he thought, must be central- ized. If this is so difficult to organize in a region, he asked, shouldn't we find some international substitute for it? Mr. Pasvolsky observed that to create a world system that would enable these countries to trade, would lend them really substantial help. Mr. Cohen agreed, but stated that the problem is rather this: What is the best way to work toward a satisfactory long-range solution? Mr. Pasvolsky agreed, but indicated that, in his opinion, the best way would be to secure agreement by the powerful nations first. If this were done, he said, the smaller and weaker countries will be forced to accept the scheme. Mrs. McCormick stated that we must take for granted that the great powers will reform to some extent. She pointed out that the responsibility for past conditions in the Balkans rests largely upon the great powers. Mr. Welles thought that there was always a possibility of our being misled, as Dr. Pasvolsky was being misled, into feeling that just because the great powers reform, human nature can't wreck the gains they had made. Some regional organization, he thought, may furnish a balance. By joining together, they can speed up their industrial organization and make themselves a more potent factor in Europe. Mrs. McCormick pointed out that up to now each Danubian country has been the rival of the others. If they could be brought to realize that their survival depends upon common action, they will accept the necessary arrange- ments. Mr. Welles thought there was a great deal in this point. Mr. Bowman said that these countries had once trusted the great powers and had been let down. Mrs. McCormick said that Prime Minister Sikorski and others realize that their nations must unite in order to exist.

Mr. Cohen then asked Mr. Pasvolsky whether, in the latter's opinion, if this country were divided into four states, we would have made more rapid progress with trade treaties than has been the case. Mr. Pasvolsky stated that less progress would have been made. Mr. Cohen, concurring, said that our experience showed that where central organization is weak, special influences are strong locally. This was, he said, an answer to Mr. Pasvolsky's question as to the proper approach to make. Mr. Pasvolsky answered that the problem would be somewhat simplified if we could have larger states. Mr. Cohen observed that we cannot create unitary states in the Danubian area. This fact does not, however, mean that an intermediate stage of organization cannot be found. Mr. Davis summed up Mr. Pasvolsky's view by saying that he believed that regional arrangements would be of some assistance provided the international organization was not neglected.

Mr. Welles then said that we must explore carefully the questions that had been raised. He thought it was time for this subcommittee to come into closer contact with the territorial subcommittee. For the next meeting we must have something much more definite to shoot at. It would, he said, be necessary to have a map which would show a potential economic federation with the territorial scope described by Mr. Cohen, including Greece and the other Balkan States, Austria, Czechoslovakia, Poland, and the Baltic states, excluding Finland. Finland would be considered rather as a member of the Scandinavian group. He suggested that the committee try to see whether such a unit would be economically conceivable, as he was beginning to think it was. That would be the fundamental question. If this could be done, what national regrouping in that area would be necessary to make the arrangement work, assuming that the units will have complete autonomy and sovereignty? The aim would be to get cohesive national groups. To that end, where should the frontiers be drawn? In answer to the question whether frontier adjustments could be considered, Mr. Welles pointed out that minority problems might make this expedient. Mrs. McCormick suggested that this might mean the establishment of smaller national areas in the groupings and asked whether, for example, Czechoslovakia would be envisaged as being restored with its pre-war frontiers. Mr. Welles said he would envisage as big a Czechoslovakia, as before with the possible exception of the Sudetenland, but that he had had the Hungarian minorities chiefly in mind.

Mr. Armstrong then asked whether the task was not big enough to postpone the consideration of frontiers until later and to think for the present of pre-war frontiers. Mr. Welles agreed. Mr. Bowman stated that the territorial subcomrnittee could take up this question in the afternoon.

The chairman closed the meeting at 12:45 p.m.

Paul B. Taylor, secretary

Box 55

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Wartime American Plans for a New Hungary