AMERICA AND EUROPE
I MMEDIATELY after Mr. Marshall's speech at Harvard on June 5th, in which he said that the countries of Europe should draw up a programme designed to put the continent on its feet economically, there was talk of America saving the world through a new lend-lease policy. However desirable that end may be, an examination of the orders of magnitude of maximum American aid and minimum European needs indicates that it will be difficult to achieve. It must be realised that Mr. Marshall has, at one and the same time, to assure himself that such a vast new pro- gramme of aid will be accepted first and foremost as an encouragement to self-help, and to warn the American public that unless it consents to this programme it can hardly escape the universal disaster which will follow. As things stand the danger to the world which is being built up through the chronic lack of balance in America's international trading account is as important a factor for the world to-day as is the qualified promise of further American aid. A reasonably clear understanding of the nature of world needs, of the necessity for a balance between dollar expendi- ture and dollar income, and of the connection between the. two is found in the State Department. But the State Department in the last analysis is a servant. The masters are the American people, and the American people have not yet fully realised that their servants are better informed than themselves.
At this moment, even though Mr. Marshall's prestige is high, and even though Mr. Truman is only just over the latest hump in the switchback of popularity, an examination of America's part in the world economy must give rise to grave misgivings. On May 8th Mr. Dean Acheson made a speech which is almost as important as a foundation document of the Truman Doctrine as the President's own original speech of March 12th. Mr. Acheson made it plain that positive economic aid to freedom-loving coun- tries was as much a part of the doctrine as resistance to those who wished to interfere with freedom. But at the same time he pointed out that American exports are running at the rate of $16,000 million a year as against imports of $8,00o million. As they stand the figures contradict the doctrine. Mr. Acheson saw that, and made suggestions for filling the gap. Mr. Marshall also sees it, as his Harvard speech shows. But does the average American see it? And even if he does, will he choose to undertake the vast and unprecedented programme of grants and loans which will put the matter right, or will he take the opposite risk which goes with let- ting the balance pile up until it topples over into default, bank- ruptcy and an American slump? . Unfortunately the second alter- native cannot be ruled out yet. And, even more unfortunately, there is a doubt whether the most brilliant enlightenment could overcome the difficulties of the immediate situation.
What are those difficulties? In the roundest of figures they are contained in Mr. Acheson's estimate that in 1947 United States exports of goods and services will exceed imports by $8,000 mil- lion. That figure is so important that it needs a little further examination. The estimate of the United States Department of Commerce, which Mr. Acheson used, is that in 1947 the United States will supply 16,200 million dollars' worth of goods and services to the rest of the world. On the other hand she is expected to buy about $6,700 million worth of goods, to pay $200 million in interest and to buy services up to about $2,000 million. That leaves a gap of about $7,300 million. It can be partly closed by gold shipments and drawing on existing dollar reserves (say $1,400 million together), and private gifts and remittances by Americans amounting to $5oo million. There will thus be $5,300 million still to be covered by Government loans and outright gifts. It is likely that the gifts will amount to $1,900 million this year, so that the final amount to be covered by loans is $3,400 million. But in the course of the next few years the gifts will fade away and the gap will not, so that America faces a loan outflow of about $5,000 million for some years to come. Faces is hardly the word. There has been a widespread tendency to look the other way, which is only now weakening for the first time.
Once again the vital importance of the subject demands some- thing more than the round figure and the short answer. There are many ways of bridging the five billion dollar gap and they must be listed. It is not likely that the economic battle will be won through a single device. Those observers who argue that all that is needed is an increase in American imports, or an expan- sion of American overseas investment, or any other one panacea, have simply failed to grasp the magnitude of the problem. To fill the gap of $5,000 million, American imports would have to be twice what they were in 1946. Or again, American invest- ment abroad would have to be four times the net outward capital movement in the year 1928, a year which easily broke all records and (as Wall Street will never forget) immediately pre- ceded the greatest slump in history. Arguments for a single cure- all are sheer quackery. When Mr. W. Randolph Burgess, the vice- chairman of the National City Bank of New York said in London a little while ago that American investors will not be so free with their money now as they were between the two wars, he was speak- ing the truth. And when Mr. John McCloy, the president of the International Bank for Reconstruction and Development, said " If we could strike the rock of American financial confidence, there is a lot of water to be drained out of it " he was talking in terms of miracles which do not happen in these latter days.
If there is an answer it must be a composite answer of which greater American investment is only a part. Certainly there must be an increase in American imports, and the quickest device for securing that would be the abolition of the tariff wall around the United States. But if the International Bank cannot strike water from rocks neither can free traders cause walls to fall down at the blast of somewhat rusty trumpets. Yet still there is a chance that the barrier will be reduced and the flow of imports increased. The suggestion'that American exports might be reduced is more dangerous, the world's needs being what they are. But an attempt might be made to cut out the non-necessities. Govern- ment lending will have its part to play, but whether it is done through the International Bank or through the American Export- Import Bank, it is ultimately the individual American investor who will have to find the money. And even if the strong resistance in that quarter is overcome, it will still be necessary to find the right goods at the right prices. The controls which give the Administration the power to obtain and export those goods are due to expire on June 3oth, and it would be unwise to rely on their renewal. All these things must be done quickly and at one and the same time.
Mr. Marshall is setting about the task with method and deter- mination. He has been doing it for some time and the State Department was already doing it before he took over. It was already known that the planning division of the State Department was work- ing on an estimate of world needs, that other countries would be asked to help make that estimate, and that the countries of Europe would be asked to tighten up their internal economic arrangements —particularly for food collection and rationing—as a condition of further American aid. Mr. Marshall devoted over half his speech to the last point and in doing so he put his finger on the most important issue of all. Unless American aid is primarily regarded as a support during a period of capital reconstruction, rather than as an uncon- ditional dole, it will be money thrown down a bottomless drain. It is not to the interest either of America or of the world that Europe should be full of remittance men. American aid is aid for production, not for consumption. It is only when the matter is looked at in this light that Mr. Marshall's statement that the coun- tries of Europe must estimate their needs makes sense. Con- sumption needs are infinite, whereas an estimate can be made of a capital construction programme. In France it has already been made in the Monnet Plan. It is also this fact which sets a gulf between post-war aid and lend-lease. Most lend-lease goods were for consumption—for destruction in war. Any future aid will be, directly or indirectly, for the rehabilitation of the productive machine. It is this fact on which Mr. Marshall insists, both to the prospective recipients and to his own countrymen. His policy requires a willingness to make a sound investment and a corre- sponding willingness to buy the products of the new factories and machines. The sheer financial size of the transaction raises the doubt whether it will ever be carried out. The fact that it is still not beyond American capacity raises the hope that it will. But the keystone of the whole edifice is European willingness, not merely to accept aid, but to put it to productive use.
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