AMERICA AND THE CRISIS
By GUNTHER STEIN New York. THE way most Americans look at the British crisis is that of well- meaning friends at a sick man's bedside who are so much pre- occupied with worries and fears about their own health that their reaction to the patient's suffering, a mixture of sympathy and self-pity, of anxiety for him and for themselves, culminates in an acute sense of frustration. To many of the plain people of the United States the British problems are only a reflection of their own, of those same domestic problems for which they fail to see a solution.
Right from the start, Britain received insufficient funds for her reconstruction, they hear. The millions of American war veterans are neither surprised nor willing to make an issue of it. For they too, with all their claims, are suffering from the refusal of Congress to furnish the billions of dollars that are needed to provide them with adequate housing. The American loan to Britain, initially too small to be-effective, it is now proved, was diminished in its pur- chasing power by a virtual 25 to 30 per cent, depreciation of the dollar. The American victims of price inflation, clerical and other workers in weak bargaining positions, teachers and government officials, disabled veterans and retired pensioners and bondholders, have experienced a similar shrinkage of their originally precarious incomes, and are less impressed with the British plight than with their own. Britain suffers from the .dollar shortage of her customers, Americans are told, and is worried about the prospects of the eventual reaction to the American boom. Millions of imall manufacturers, shopkeepers and professionals in the United States are in the same position. The difficulties of Britain pale by the side of those Americans may soon experience themselves.
On the political plane, the sense of frustration 'at the course Ameri- can developments seem to take is growing with the realisation of the magnitude of the British crisis and its possible effects on the United States. Britain needs much more help than a mere adjustment of the original Anglo-American loan conditions, much more in terms of funds than the additional amounts Washington's Export-Import Bank could possibly provide before Congress resumes in January. Britain cannot wait on the chance of the Marshall offer being trans- lated into a Marshall plan of doubtful range and value ; and what she needs even more than sufficient financial accommodation is some measure of certainty about a stable and truly progressive course of America's economy during the next years. All this is recognised by Government officials, economists and probably a majority of the country's politicians. It is the discrepancy between the needs for rapid, broadminded, long-term American action on a world scale based on equally farsighted and thorough domestic measures, on the one hand, and the near-paralysis in which American policy-makers find themselves, on the other, that causes their thinly-veiled helplessness. The present Congress clearly was not given a mandate for action of this kind. Its members, on the whole, are not the men who could devise it, even if they wanted to ignore the popular do-nothing mandate into which American voters were talked last year. Partisan differences, daily made more acute by the approaching presidential elections of 1948, split them too. deeply to permit the Truman Administration to live up, even with adequate temporary policies, to its best realisation of American and world needs.
Behind the scenes, the controversy about the world struggle between American "free enterprise" capitalism, West-European Socialism and Soviet Communism increasingly confuses the issues immediately at stake. In the eyes of many on the Right, and especially in Wall Street, the " danger " of having British and French Socialism survive, together with the British and French economies, looms larger than the danger of the collapse, both of the managed economies and of Western Europe itself. In the eyes of many on the Left, the danger of strengthening Britain in her European and Near Eastern roles as America's anti-Communist vanguard by giving her the economic assistance she needs appears greater than that of seeing American isolationism reinforced through further deterioration of British ability to co-operate in a peaceful readjustment of world conditions. And the Centre, potentially stronger than either of the extreme wings, is paralysed between attempts to force Britain as far as possible into free economic enterprise and the twin fears of increasing anti- Americanism among the British people and of the last-minute estab- lishment of close economic ties between London and Moscow.
The main facts in the dome'itic economic situation are inflation, inordinately high industrial profits, lagging purchasing-power and stagnating industrial production. The average American price- level, measured by official index figures that tend to understate the actual increase in various commodities, especially in steel, whose actual prices are not a matter of public knowledge, is 20 per cent. over the same time last year ; 50 per cent, over the time the war ended two years ago ; and a full too per cent. above 1939. Most prices, particularly of foodstuffs and steel products, are continuing to rise. The net profits of America's largest corporations, the leaders in the upward movement of prices, are at an all-time high. During the first quarter of 1947 they were 40 per cent, above those of the year 1946; 82 per cent. above 5945, the year of high war profits and victory ; and 140 per cent, over those of 1939, the year of profitable recovery from the depression. Total pay-rolls of production workers in all manufacturing industries—a yardstick that greatly overstates the extent to which American purchasing-power as a whole has kept up with prices—are 22 per cent, above those of twelve months before; only 21 per cent. above the time of VJ-Day, 1945 ; and 210 per cent. higher than in 5939. Yet these figures indicate not only wage rises but also a very considerable increase of the total number of workers on industry's pay-rolls—by 7 per cent, over last year ; by 8 per cent. over 1945; and by 52 per cent. over 5939. The physical volume of production, finally, is now only 16 per cent, higher than it was a year ago ; i per cent. below VJ-Day month, August, 1945 ; and 72 per cent. above 1939. It has actually fallen 2 per cent, since last March and is expected to drop further, or at least to stagnate, while prices are likely to continue their rise for some time.
The danger signals are unmistakable : business profits are far in the lead of the main economic curves ; they are followed by a record rise of prices ; purchasing power has been lagging behind both since the end of the war and has been dropping even more in recent weeks ; and the volume of industrial production, the only curve actually to fall off, .both since VJ-Day and again during the current year, runs far below the others. Exceptionally large exports, probably taking up little less than to per cent, of the combined volume of agricultural and industrial production during the last twelve months, played an unusually effective role in maintaining economic activity in the United States. But exports have begun to fall off—already by 25 per cent.— and are expected to continue their downward trend in consequence of the increasingly acute world-wide dollar shortage and of the disturbing influences of the British crisis. This is happening pre- cisely at a time when the lag of domestic purchasing-power was beginning to' lend especial importance to the maintenance of large exports. Once again, as in the thirties, economic disturbances in the outside world are thus tending to accelerate a downward trend in American trade. What might be called the " world-minded " faction in the United States draws the conclusion that a maximum of dollar credits must be given to Western Europe without delay, if for no other reason than to prevent a very dark future for the American economy. Isola- tionists take the extreme opposite view, according to which America's economy must make itself as independent as possible of the world economy if it is to avoid the increasing danger of being dragged down by it. Instead of more and more billions being squeezed out of the American taxpayer in order to enable the country to give away surplus goods to the outside world, the economic isolationists argue, taxes and the national debt should be reduced to the utmost, so as to put additional purchasing power in the hands of American domestic custo:ners ; and they demand that industrial capacity, instead of being expanded for the purpose of saving managed economies abroad, should be restricted to the extent to which American buyers and solid foreign cash customers can be expected to absorb American goods.
The first information that is trickling out about discussions of Western Europe's needs in Paris and Washington further aggravates this controversy. For the figures hinted at are such as to reinforce the arguments of the economic isolationists and to frighten even the most enthusiastic advocates of all-out help to Britain and other Western European countries. There is grave doubt whether Con- gress will consider annual outlays of such size, especially in view of the further rumour that even those sums are not considered sufficient by the experts to enable Western Europe to get on its feet within four or five years. What is doubted even more is whether Congress would be willing to couple the necessary grants to dollar-starved countries with economic policies at home that would safeguard the outside world against the dangerous consequences of the economic upset in the United States that must otherwise follow an unchecked inflationary boom.
Too little help, given rather late after much painful partisan con- troversy in -Congress, and without the necessary assurances for a stable yet reasonably expanding American economy, is therefore what well-informed Americans. hesitantly predict from present indications. No one would forecast what the consequences of this might be to the United States and the world.
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