Evening star., 1949-07-06
World Economic UnbuIunce

Inc comprehensive report just issued
by the Economic Affairs Department Of
the United Nations is another authorita
tive indication of the profound malad-
juStmentS in international trade and
finance which threaten an economic re-
cession or even depression of worldwide
scope The report adds little basically
new to what is already known, but it ap-
proaches the problem from a more uni
versalized standpoint than other recent
studies, which have centered on the Euro
pean aspect in general and the British
aspect in particular.
It is generally admitted that Britain Is
the crux of situation which. though
highly complex and technical, boils down
to the fact that most of the world is eco
nomically dependent on the United States,
which stands head and shoulders over
other nations in developed resources, in
dustrial efficiency, and financial stability.
Those dependent nations headed by Brit
ain, need the goods we turn out and can
furnish them. But they cannot sell us
enough in return to settle their adverse
balances to us in dollars, gold or services
the only valid media of liquidating inter-
national accounts. Hence, a chronic dol
lar shortage abroad, which the Marshall
Plan has failed adequately to cope with.
Unless other remedial measures are de-
vised this dollar famine can produce the
gravest consequences to the worlds econ
omy, wherein we are emphatically in
cluded.
The question is, just what those meas
ures can be. 1t Is obvious that the United
States will not continue indefinitely to
shoulder the burden by extending grants,
loans or other capital transfers which
merely palliate the evil and do not con-
structively deal with 1t. At the time the
Marshall Plan was conceived, the problem
was thought of as a postwar emergency
which could be surmounted by our sta
bilizing aid over limited period. But the
experience Of the ensuing three years
shows that the economic dislocations in
Britain especially and in varying degrees
throughout Europe are much more deep
going than had been previously realized
Indeed, 1t Is now seen that Europe's in
creasingly unfavorable position in the
economic world started with World War I,
more than a generation ago, though 1t
has been enormously accentuated by
World War II. Britain's situation is worst
Of all and Is remediable only by a COM
bination Of measures so drastic that it Is
doubtful whether the existing Labor Gov
ernment will venture to put them into
practice. These heroic remedies include
sharp cuts in dollar imports, devaluation
OF the patiently over-valued pound sterling,
and drastic reductions in production costs
that would enable British goods to COM
pete more effectively In the world market,
including the dollar area. But these
remedies would mean further lowering the
British standard of living, already
"austere," raising domestic prices, and
trimming wage scales. Such a combina-
ton of sacrifices is generally deemed
politically impossible for q government
supported In the main by organized labor
and dedicated to the socialisdc concept
Of the welfare state" from which labor
chiefly profits.
1t Is therefore considered unlikely that
the Labor Government will go the whole
theoretically effective 1t could be. The
situation must get much worse before
more than palliatives or partial measures
are officially endorsed and worked for
Meanwhile, more compromises similar to
that worked out last week between ECA
and European benehciaries of the Mar
shall Plan can reduce the tension and
gain more time. But workable solution
to the problem remains to be discovered.