Mr. PAUL. Mr. Speaker, I rise to make some comments about the Marshall plan because my interpretation is somewhat different than the conventional wisdom of the past 50 years.

I happen to believe the understanding of the Marshall plan is probably one of the most misunderstood economics events of the 20th century. The benefits are grossly overstated. The Marshall plan through these many years has been used as the moral justification for all additional foreign aid. And once I hear it, I assume we are on the verge of extending and expanding our foreign aid overseas.

When we look at the total amount of money that flowed into Europe following World War II, the amount that came from the American taxpayers was not large. The large amount came from corporations and investors who believed that Europe would be safe and secure, so the large number of dollars then flowed into Europe.

It was interesting that the conditions were improved in Europe not so much because of America but sometimes in spite of America, because many of our economists went to Europe at this time and advised them that the most important thing that they do, especially in Germany, was to maintain price controls. Here in this country we did not learn, and hopefully we have finally learned the lesson, but we had not learned until at least 1971 that wage and price controls were not a good idea.

Yet Ludwig Erhard at that time defied the strong advice by the American advisers and took off wage and price controls, kept taxes low, kept regulations low, produced political conditions which were very conducive to investment, and this is what caused the real recovery in Europe.

Political assistance, funds flowing into a country through political maneuvers, are never superior to those funds that flow into a country for reasons of the political stability. Because Europe did invite capital, this was the real reason why Europe recovered.

Foreign aid is used frequently throughout the world to help people. But if we look at Zaire and Rwanda and the many countries of the world, foreign aid has really been a gross failure. As a matter of fact, it does harm because it encourages the status quo. The market is much smarter than we as politicians, because if the market and the political conditions are not right, that country that wants capital must improve those conditions to invite the capital. A good example might be in Vietnam at the current time. They changed their conditions to invite capital. So there must be an incentive for those countries to change their condition.

Foreign aid very often and very accurately, I believe, is a condition of taking money from the poor people in a rich country and giving it to the rich people of a poor country. I think there is a lot of truth to that, because the burden of taxation and inflation and the many things that our average citizen and our middle-class citizen suffer comes from overexpenditures and good intentions whether they are here at home or overseas. We believed at that time, and strongly so, I guess, still, that the government’s responsibility, whether it is through government expenditures or through the inflationary machinery of the Federal Reserve, that if we stimulate an economy, if we prime the pump, so to speak, that we can stimulate the economy. This was the argument after World War II, that we would prime the pump. That is not a free market notion, that is a Keynesian notion. There has been no proof that this is beneficial. Really what counts is a sound currency. Germany after World War II and even to this date is known to have a harder and sounder currency than any other currency in Europe. Political stability is what is necessary, not taking money from taxpayers of one country and shifting it to another one.

Foreign aid very often, not so much the foreign aid that went to Europe, and I would grant my colleagues, the other conditions compensated and did not allow the foreign aid to be damaging so much as the foreign aid, say, to a country like Rwanda. That was so destabilizing, because the politicians get hold of the money and they use it for political reasons. Money to help a country must go in because conditions are beneficial, that encourage investment, that encourage the market to work.

Mr. Speaker, I would argue that there is a different interpretation, but I know that the support for this measure is justified.

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