William L. Lockhart Clayton

After visiting Europe, Under Secretary of State for Economic Affairs William Clayton sent Dean Acheson his memorandum “The European Crisis” on May 27, 1947, asking to discuss it with George Marshall. Clayton argued that wartime physical destruction was compounded by nationalization, land reform, the severing of commercial ties, and the loss of capital by private firms, all of which had damaged production and trade. He estimated the annual balance-of-payments deficit of Britain, France, Italy, and the U.S.-occupied zone of Germany at a minimum of $5 billion, including a need for 30 million tons of U.S. coal and 12 million tons of grain. Britain and France could cover the deficits from their gold and dollar reserves only until the end of the year, he wrote, while Italy would reach that limit sooner.

Clayton proposed that the United States provide $6 billion to $7 billion worth of goods annually as grants for three years, alongside a common European recovery plan led by Britain, France, and Italy. The goods could include coal, food, cotton, tobacco, and shipping services; combined with the work of the International Bank and Fund, such aid was to restore European production and economic self-sufficiency. He argued that U.S. productive capacity was sufficient, but that making goods available required changes in domestic consumption and fiscal policy, financing through taxation rather than additional debt, and a public explanation of the plan. The memo linked Europe's threatened economic, social, and political disintegration to the loss of U.S. markets and the risks of unemployment and depression at home. Acheson later recalled that Clayton had exerted the greatest influence on the Marshall Plan's final form; Marshall's June 1947 Harvard address then outlined a broad framework of European cooperation and U.S. assistance.