Evening star., 1949-08-28
Europe's Economic Future

europe ECOHOH1IC TutuIS
In its report to Congress on the first
years operation Of the Marshall Plan for
European recovery, the Economic Coop
Grafton Administration has painted pic
ture of mixed colorS-bright as far as the
short-term situation is concerned, but
soberingly gray and uncertain in relation
to the long-range outlook.
The plans achievements to date are
clear. Within period of twelve months,
the participating countries have staged
remarkable comeback. In keeping with the
main objectives of the European Recovery
Program, they have made good use of
American aid to check imitation, increase
trade among themselves, expand their
exports and step up their industrial pro-
duction to point well above the preWar
volume.
Stated another way, the Marshall Plan
in its first year has succeeded in averting
the economic collapse of most of Western
Europe. Industrially, agriculturally, So
cially, politically and otherwise, it has
brought to that part of the world a
renewed stability that could not have been
attained without it, The stability, in turn,
has served to undermine the Communists,
whose influence has declined proportion
ately with the disappearance of the chaos
on which they had previously thrived. In
terms of the cold war, in short, the ERP
has been a factor of topmost significance
in stopping the advance of the Red tide.
Had there been no such effort during the
past twelve months, the Kremlin today
would have far easier time of trying,
through direct and indirect aggression, to
spread its dominance over the entire con-
tinent, all the way to the English Channel.
But there is a paradox involved in all
this The Marshall Plan, as the ECA has
told Congress, unquestionably has been
great success in pulling the participating
countries out of the economic doldrums.
Unquestionably, too, its continuation for
the remainder of its scheduled four-year
life is indispensable to the safety of the
West and will keep on paying rich divi-
dends in the sense of being vital weapon
against the Russians in the cold war. Yet
here is the paradox which must be faced:
Although the economies of the ERP par
ticipants have recovered spectacularly in
relation to the immediate situation, al
though most of them are producing more
industrially than ever before in their his
tory, they cannot be said to have laid the
foundations for permanent stability. On
the contrary, despite what has been
accomplished in short-term sense, their
long-term outlook seems to have under
gone no perceptible improvement.
Why is this so? AS pointed out by the
ECA, whose views on the matter are shared
by everybody familiar with current eco
nomic forces, the answer revolves around
dollars. Although there has been impress
sive internal recovery in the different ERP
countries, those countries have been able
to earn by exports only a fifth OF what
they need to pay for the imports they
must have from dollar areas, meaning
particularly the United States. This
inability is most dramatically illustrated
by Britain's plight. The British are pro-
ducing more than they did before the
war, and they have done better than any
other participant in increasing their sales
abroad. Yet, despite this, they have
reached point Of crisis: They are running
dangerously low on their dollar reserves,
which means they are losing the where
withal vitally needed for the goods they
must buy to keep their economy going.
4. AS far as Britain is concerned, part OF
this problem is attributable to the Socialist
policies of the Labor government which
tend to raise production costs. The over
all situation, however, has its roots IN
something much deeper than mere political
practices. It involves factors like the tre-
mendous changes wrought by the war
for example, the unprecedented concentra-
ton of economic strength in the United
States and the shattering Of the traditional
patterns of world trade. One of the more
troublesome realities in this connection is
that while our friends abroad need dollars
and can get them only by selling goods to
us, we are so nearly self-sufhcient as to be
a strictly limited market for their wares.
The four-year Marshall Plan-indispen-
sable though it is-cannot solve this
problem; it can only help to make it more
MANAGEABLE. The same may be said OF
such things as the modification of Labor
ite policies in Britain. The situation Is
tremendously complex. Finding way out
of it will require craftsmanship Of the
highest order, including efforts aimed at
making the United States heavier i'm
porter, reviving East-West trade, and
bringing about the economic union of
Western Europe. Failing that, as the ECA
has intimated, the situation is likely TO
be grim when the ERP stops doing business
in 1852.
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