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Most of these men graft to live, and there is no possible way to stop this sort of graft until all Government employees, military and civilian, receive a living wage. But raising of Government salaries will increase the inflation, inflation will raise the cost of living, the rising cost of living will quickly absorb the raises in salaries, graft will start again—nobody will be better off. How can China break this vicious circle?
Where the U.S. Comes In
There is only one answer: Finish the war. This is where the U.S. comes in. We can break the vicious circle at several points, and at a cost to ourselves which will be small compared to the advantages to be gained for our own security.
The most astonishing facts to be found in China today are not in the realms of war or politics but in finance. Chinese Government expenditures, when translated into U.S. dollars at the prevailing rate of exchange, are on a Lilliputian scale. To govern the 450 million Chinese in a territory one-third larger than the U.S. and to carry all the expenses of the war, the Chinese Government now spends approximately the same sum annually as the municipal government of New York City.
It is a fact that the total Government expenditures for the year 1947, at the present rate of exchange, will amount to approximately $1 billion U.S. It is a fact that all the trillions of Chinese Government currency outstanding could theoretically be bought, at the present rate of exchange, for only $250 million. . . .
These figures are of the first importance for only one reason—they prove that the problem of giving effective aid to China is within dimensions that we can handle. . . .
The problem must be attacked at once on three fronts: 1) economic and financial, 2) military, 3) political. Since the essence of the problem is the ejection of every armed Communist from the soil of China, an intelligent project can be prepared only on the basis of an estimate of the time it will take to win the war. American military experts believe that this may take as long as three years. The Chinese are more optimistic. But let us accept the American estimate and try to sketch a Three Year Plan and estimate its cost. . . .
During the next three years China will need to import large quantities of American cotton, tobacco, wheat, oil, gasoline and many manufactured articles. She will therefore need credits. The highest figure for such necessary credits given by American and Chinese economic experts is $250 million a year—a tiny fraction of what is said to be Europe's requirements. Let us scale that down to $200 million and budget for our total Three Year Plan $600 million of credits for purchases in the U.S. from this autumn to the autumn of 1950.
To control the inflation China needs now a portion of the credits we have envisaged, perhaps $75 million. The remainder of the $200 million for the first year of our Three Year Plan can await action by the Congress; but either from the U.S. foreign relief program or the Export-Import Bank, or some other source, this $75 million must be obtained in the next 30 days. . . .
How to Fight Inflation