The Atlantic Report on the World Today
FOR several months the United States has been pursuing two policies concerning the reconstruction of Europe’s economy. At Geneva, between April and September, we tried to persuade most of the nations of the world that the new Charter of International Commercial Practices must be patterned on Cordell Hull’s ideal of free, multilateral trade. That is one way of saying that the United States favors a system under which the industry and agriculture of every country will find their own levels in a world of free, capitalist competition.
On the other hand, in Paris during August and September, we said something very different to the sixteen nations which were framing their answer to Secretary Marshall’s offer of American aid. There, we used our powerful influence in favor of a Western European planned economy. We told these impoverished European countries to get together and pool their production.
Our attitude in Paris meant that we should like to see a European customs union. A customs union, however, involves even more than the abolition of all tariff barriers. It also implies the ironing out of differences in efficiency among nations and a trend towards uniform taxation, social services, and wage standards; for if big differences in these fields persist inside the customs union, some member nations will be at a great disadvantage compared with others.
Our sponsorship in Paris of a planned economy for Western Europe also meant that we want Britain, France, the Ruhr, Belgium, Italy, and lesser manufacturing countries to harmonize their steel production. This aim seems to suggest the creation of a new international steel cartel on a governmental plane, a proposal which collides head-on with the Geneva Charter relating to restrictive business practices.
Free trade or collectivism?
How can one reconcile these contradictory American policies? One explanation may lie in the different purposes behind the two conferences. In Geneva we set out to attain an open field for United States trade throughout the world. Our resources, advanced technology, ability, and energy spared us any fears which less efficient countries might feel concerning survival on a highly competitive planet. But in Paris, by offering them generous economic and financial help, we were organizing in the American camp a group of nations which could serve as a counterweight against Russia. Some of these sixteen countries — Greece, Turkey, and Portugal for example — needed no American coaxing to move further away from the Soviet Union and nearer to the United States. Others — like France, the three Scandinavian nations, and Switzerland — were reluctant to impair their relations with Russia.
None of these lands, however, could afford to spurn the prospect of Marshall aid. As the price for financing their recovery, we pressed some or all of the sixteen to integrate their economies, thus improving their value as our allies in the AmericanRussian struggle for power.
The balance sheet at Paris
The conference on the Marshall Plan produced a report to the United States in which the most gifted economic experts in Europe present a highly informative collection of facts regarding Europe’s economy in 1947. This report sheds light on the causes of economic chaos in Europe; and it illustrates very ably the general nature of the problems which Europe faces in trying to get its economic system moving in high gear again.
The national ambitions and fears of each of the sixteen countries prevented any real unification of the various economies even of a rump Europe. Several groups — France-Italy, Scandinavia, and Greece-Turkey — are on the road towards setting up customs unions, and Benelux (Belgium, the Netherlands, and Luxembourg) has already achieved one. But the great tariff-free union of Western Europe is simply to be “studied” and is likely to remain an object of philosophic contemplation.
The Paris conference’s report reveals clearly how the devastation of war wrecked agricultural and industrial output in each of the sixteen nations and in Western Germany. It tells of the decline in Europe’s production of cereals, meat, milk, sugar, potatoes, coal, coke, steel, and almost every other esscntial. It describes how the war shattered inland and maritime transport, how electric generating plant has fallen far behind public requirement.
Europe’s dollar shortage
The report shows how the dollar shortage was created partly by the breakdown of normal trade between Western and Eastern Europe. Food for which the sixteen nations and Western Germany must now look to the Western Hemisphere normally came from the east, and southeast of Europe; Western Europe paid for it by exporting manufactured articles to Eastern Europe and the Balkans. This healthy flow of goods between East and West has been blocked by the division of Europe.
Western Europe’s normal commerce with the Middle East, and with East Asia has also been interrupted. Those regions used to import a large volume of Western Europe’s industrial output and, in turn, supplied petroleum, fats, tin, cotton, copra, coffee, rice, tea, jute, hemp, and many other commodities. Europe’s sale of its produce to the nonAmerican world provided currencies which could be converted into dollars or pesos for necessary purchases on the American continent. All these reasons, and more, for the dollar crisis are made plain in the report of the sixteen nations to Washington.
Varnishing the truth
When it came to writing about the effects of this crisis upon the economy of the sixteen countries between noAv and the end of 1951, the report was sweetened to make it more palatable to American opinion. It was rewritten twice on the demand of William L. Clayton, the top-ranking American government official then in Europe, who repeatedly shook a linger at the Paris conference leaders.
The first revision of the report under United States pressure resulted in the merciless slashing of several figures. In mid-July the Paris conference provisionally estimated the dollar deficit of the sixteen nations and Western Germany during the four years of the Marshall Plan at 29.2 billion dollars. Mr. Clayton indicated that such a sum would scare the daylights out of the American people, who were being asked to foot almost this entire bill. The figure was cut to 22.5 billion dollars.
The conference experts had also assessed the participating countries’ dollar deficit for the year 1951 — after three years of American blood transfusion—at 5.8 billion dollars. This distressed Mr. Clayton even more. Were all these billions of dollars to plug only part of the leak? Was the multibilliondollar Marshall program, after four years, still to see Western Europe grappling with a deficit economy? Was there to be a repetition of the sad experience of the American loan to Britain, which — instead of making Britain a going concern after three years — was drained after one year?
Mr. Clayton’s displeasure put the chiefs of the sixteen-nation conference in an awkward quandary. They could either follow the United States “suggestion” and draw a less disquieting picture, or they could decide, if they honestly believed that Europe would still be running a large deficit economy in 1951 despite Marshall aid, that they ought to disregard Mr. Clayton’s chagrin and tell the truth as they saw it.
The acting chairman of the Paris conference was a talented Englishman, Sir Oliver Franks, 46-yearold professor of moral philosophy at Oxford. And what would one expect from a gifted Englishman, and a moral philosopher to boot?
The Paris conference compromised with Mr. Clayton. It cut its estimate of the 1951 deficit from 5.8 billion dollars to 3.45 billion. The new estimate fell short of prophesying complete equilibrium in the participating nations’ balance-of-payments after four years of American help. But it enabled Mr. Clayton and the Administration to present a less ugly forecast to Congress.
Just, how much any such prediction is worth, even when made by honest specialists, is extremely doubtful. It presupposes a Delphic insight into such obscure events as the trend of world prices during the next four years and into the world’s cereal harvests in 1949,1950, and 1951. What if the inflationary movement persists in the United States and if the crops are middling or poor?
Wanted: more determination
The Paris conference rewrote its report a second time following another intervention by Mr. Clayton. On this occasion, he demanded a more convincing presentation of Europe’s own recovery program. Individual European governments, instead of proposing “to consult one another,” were to pledge themselves to carry out the production increases and financial and monetary reforms recommended in their report to Mr. Marshall.
But these pledges, which have now been given, are promissory notes which most of the signatories will meet if they can, but which they may prove incapable of honoring, even with the best intentions.
On the self-help side of the recovery program, an impressive plan has been published. By 1951 the participating nations are to increase their coal output by one third above the 1947 level; they are to produce 40 per cent more electricity, 80 per cent more steel. Their farms are to yield as much cereals and milk as before the war, and achieve large advances over pre-war sugar and potato crops. This four-year production program may come true, and it would be a fine performance. But it is postulated on the return of financial stability in all these countries. To aim at a target is not necessarily to hit the bull’s-eye, though it’s better to have aimed and missed than never to have aimed at all.
Coördination or self-protection
It is unhappily evident that fear of a third world war is likely to prevent the Marshall Plan from attaining one of its major objectives: creation of a coördinated, planned economy in Europe. This purpose suffered its greatest setback when Russia and her satellites refused to join the Marshall Club. Failure to harmonize production in Western Europe has further bedeviled the project of the State Department planners. This fiasco was predictable. It was foreshadowed earlier this year by the unsuccessful effort of Britain and France to dovetail their two production systems.
Britain proposed that France should concent rate on her agriculture and let the British help meet the French need for more tractors and other farm implements. The French declined to reduce their tractor industry, because they must rely on such factories for building tanks. When the French amiably suggested that Britain should let France manufacture enough watches and clocks to satisfy both the British and French markets, it was the British who insisted on maintaining this industry as a source of precision instruments in wartime.
Each European nation, besides clutching its own war potential, is tending to expand it. Nationalism is enjoying a field day in Europe, as elsewhere. While statesmen continue to say the right thing, the governments are encouraging the familiar striving for national self-sufficiency which was exemplified by Germany under Hitler and Schacht.
It is the same old fear and distrust of people on one side of a frontier towards those across the border, of those with one ideology towards those with another, which has jammed a political spoke into the wheels of the Marshall Plan.
What will Congress do?
All the plans and hopes of the sixteen European nations will soon undergo a searching scrutiny in Congress. They will be changed substantially by the findings of President Truman’s committees on American capacity to help and on the volume of supplies that will be available to meet Europe’s needs. They will pass through another metamorphosis when adapted to the work of the Herter Committee, the mission of Congressmen who have been ably investigating the situation in the principal European countries asking American aid.
If the Marshall Plan is intended for rehabilitation, that is, to get the wheels turning, to improve the food and housing of the 270 million inhabitants of the sixteen countries and Western Germany, to break many of the temporary jams that are impeding trade — if the plan is designed to contribute towards these ends, it is likely to be an important success.
If, on the other hand, the Marshall Plan was conceived as a project to achieve more lasting results, to reshape the economy of Western Europe and build a roof under which the sixteen nations and Western Germany would live as one economic family, it is likely—at least in this observer’s view—to fail. Nationalism is still too strong.