Washington

ATLANTIC

September 1949

on the World today

THE British crisis is freely called around the Capitol “ the crisis of the Marshall Plan.”In the crowded corridors of Capitol Hill, the view is held pretty widely that in present circumstances the second year’s appropriation for the four-year Economic Coöperation Administration will be the last. Why? Because of the feeling that under the Marshall Plan there has been a move away from, rather than a move toward, the working economy of Europe that Secretary Marshall envisaged.

Instead of an economy, there are economies — all developing with Marshall Plan money as selfdirected units, with no prospect of an interchangeable currency or a common market. Even those who still have faith in Sir Stafford Cripps’s good intentions toward an open economy feel that he is either a prisoner of the economic situation in England or a prisoner of the closed Socialist economy which is now supported by a bewildering series of bilateral agreements. Some say he is a prisoner of both situation and economy.

No such pessimism, however, is expressed by the top officials who deal wilh the British. They exude a strained confidence. Secretary of State Achcson thinks the press has exaggerated the crisis, and his sanguineness was reported in the British papers side by side with references to the “supreme gravity" of the crisis by Britain’s own top officials. John Kenney, former Navy Under Secretary, who is taking Mr. Finletter’s job in London as head of the ECA mission, actually calls the crisis “minor.”

Paul Hoffman, ECA administrator, caught between his troubles in England and his troubles with a Congress seeking to turn the Marshall Plan into a vehicle for dumping surpluses on Europe, clings to a faith that the “permanent solution" promised by Cripps in September will eventuate. He has a high regard for Cripps.

Both Hoffman and Secretary of the Treasury Snyder have gone on record in favor of devaluation of the pound, though devaluation would not restore a Continental economy, unless there were a general realignment and a free exchange of currencies.

The triumphs of ECA

In the stocktaking on the Marshall Plan there are notable plus signs that might he missed in the present disappointment. Production has been lifted to pre-war levels, inflation has been virtually licked, and Communism in Western Europe has been rebuffed.

These are signal triumphs. They testify to the sleepless efforts of a corps of ECA heads of mission of outstanding caliber working under the direction of as capable a trio as has ever been drafted for a major task: Paul Hoffman, Averell Harriman, William C. Foster. Hoffman is a first-class operator. His deputy, William C. Foster, has the reputation, acquired as Under Secretary of Commerce, of being the best administrator in Washington.

Harrimun in the field keeps his eyes (and tries to keep Europe’s eyes) oil the goal of Continental integration. To be sure, he gets help from some of the Europeans. Belgium’s Paul-Henri Spaak, for one, is a tower of strength to the persistent Harriman. All three of ECA’s head men, moreover, drive themselves and their staffs as if they were really embarked on a crusade. Hoffman’s job is made the more onerous by the endless nagging at him on Capitol Hill.

What does Hoffman really think of it all? His demeanor is unruflled and ingratiating but he puts the issue in England in unvarnished economic terms: from the workers there must be more manhours of performance; from management better management. Efficiency and proficiency — these would do the trick.

What can Britain?

Less responsible officials are less optimistic. They are nowadays involved in long discussions on how to “save” Britain. What possibilities are they considering? Bigger and bigger buying for American stockpiling of critical materials? Congress would not vole more funds than the regular post-war 500 million dollars. Underwriting the pound? Nobody but a fool would assume such a responsibility, and leave Sir Stafford Cripps to manufacture pounds at bis own whim.

Development of American industries in Britain? There is unlikely to be investment of more capital in Britain while there is no assurance that profits can be transferred into dollars. Slashes in the American tariff? In the present recession, the hope is a pipedream; though, as long as the present system of nation-states endures, sooner or later America, for its own as well as others’ salvation, must learn to live as a creditor nation. Anyway, the British have never taken advantage, as the Canadians have, of the American import cuts of last year.

Finally, what about devaluation? This in itself is of assistance only so long as wages are not raised to equalize the currency cut. With a Labor Government in office, this equalization would come quickly, if not immediately; so that the cost problem would arise again as the great barrier to selling goods in the dollar area.

There is a link between the American recession and the British crisis. Government economists on the whole seem to agree with the Slichter description of the recession as a “readjustment.” This means a change-over from a sellers’ to a buyers’ market brought about by the overtaking of demands piled up during wartime shortages. But the readjustment hit the British immediately.

First, prices of American imports of foods and raw materials from sterling areas began to sag, in some cases deeply. Second, quantities of those imports started to fall off as American business turned to the task of using up its inventories. On top of this, the very talk of devaluation has resulted in cancellations of American orders for British manufactures. However, the quick impact of these factors upon the sterling economy serves to demonstrate to American officialdom its basic weakness.

Everybody to export

Part of the preoccupation with the British crisis is due to uncertainty about its reaction on the United States. Gone is the day, now that a buyers’ market is here, when the United States was trying to restrain its exports. The goods were badly needed at home to fill shortages and to cope with inflation. This situation made the Marshall Plan one of the most selfless acts in history, or, if you prefer, a grand act of enlightened selfishness.

Now the case is different. Exports are needed in order to sustain America’s drooping economy — just at the time when the British, in self-defense, are imposing new import restrictions and trying to persuade the sterling area to do the same. Diminished exports are thus in the nature of an added difficulty for America in making a smooth transition. There are, of course, other impediments, mainly in labor difficulties. Perhaps, indeed, the budget deficit and the pledge of deficit spending might be added.

The President faces the facts

It took President Truman a long time to change his tune on the economic situation. It is not that he is stubborn. The fact is that, in the nature of things, government planners cannot be as resilient as private planners.

Look at Britain. She has a directed economy, with civil servants acting as importers in bulk, and on long-term contracts. Most of what Britain is eating and using today from abroad (except for free Marshall stuff) was thus bought in a sellers’ market, at high prices. Examples of bulk purchases by the British are copper at 23 cents, sugar at 5½ cents.

Mr. Truman is, of course, not operating a directed economy, and where he made his mistake was in clinging to a government program to lick an inflation long after the inflation had been licked by the marvelous fruits of American farm and factory.

The only criticism of Mr. Truman’s anti-recession program concerns his insistence on deficit financing He insists there is no slump, yet produces a program which in part is anti-slump. He rejoices over the maintenance of consumer buying power and consumer spending, yet wants deficit spending in order to fill out consumer buying power.

Dr. Edwin G. Nourse, Chairman of the Council of Economic Advisers, insists that the arms program to buttress the Atlantic Pact should he squeezed out of the national military budget. His view seemed to place him on the side of the economy advocates. But he later put himself on record in behalf of Truman spending.

The Mood of the Capital

The mood of the Capital is pretty lethargic. Perhaps the Russians have to be blamed (or thanked) for that. It almost seems as if Congress can be needled to action only by crises.

It is difficult to say which is the more lumbering, Mouse or Senate. The House likes to think that with its rule of limited debate it is more expeditious; but here the public business has to cope with tyrannies either in the chairmanships or in cabals. Unification of the armed services, for example, was stymied by a pro-Navy cabal, though the President, using his new reorganization powers, has managed to get around it.

The delay over the ratification of the Atlantic Pact was most serious. Secretary Acheson wanted ratification as a weapon during the Foreign Ministers Conference in Paris. He didn’t get it. He wanted a swift as well as decisive vote. He didn’t get it.

The President is walking circumspectly in the matter of the release of atomic information to the British. On the Hill there is a good deal of atomic isolationism. The front man is, of course, Senator Hickenlooper, but back of him, without doubt, is Senator Vandenberg, who is said to keep in touch with events through Admiral Strauss, the isolationist member of the Atomic Energy Commission.

At a Blair House conference between executive and legislative heads, Messrs. Eisenhower, Acheson, Lilienthal, and Johnson put up the argument for a maximum information policy. It was apparently not convincing enough. Even General Eisenhower, in a powerful, passionate plea, failed to change the Senatorial scareheads.

Yet what is the Atlantic Pact but a recognition of military interdependence? How can it be really effective unless some system of division of military labor is worked out on the basis of mutual confidence?