Evening star., 1951-07-01

to consider a little Of the econe
In 1946, wartime controls wer'
lifted in virtually all Western
world countries. The suppressed
wartime imitation, held in checl
during hostilities by various con
trolls, Immediately blossomed ou
into postwar imitation. But b!
mid-1949, the pent-up wartime
demand was virtually satisfied
and the imitation had been alb
sorbed and frozen into the gen
eral economy. Prices and wage
were stabilized-although Stabil
ization was on a higher plateau
than before the war.
With production equal to ant
sometimes surprising demand
the wartime sellers market begaI
to give way to buyers market
Recognizing this changed marke
environment. Great Britain ant
a large number of countries botl
inside and outside the sterling
area embarked upon 80 per cen
devaluation Of their currencies
That is, they in effect marke'
down the price Of their currencie
in terms of dollars (Which is II
say in terms of golO in orde
thus to reduce the pricl Of thei
goods in world markets. BY do
ing this they were simply adver
tising to the world that thei
products now could be bought il
the markets of the world at "bar
gain prices
The principal objective of thi
currency devaluation was to OBJ
tain dollars and gold (the same
thing in international trade) witt
which to improve the balance O.
payments positions of the devalu'
ing countries.
Korea Changed Everything
The Korean war introduced &
whole new set of factors into tht
economy of the world. Korea ha!
virtually destroyed the buyer:
market, causing sweeping change.
in the pattern of international set.
tlements-changes which have
drastically altered both, the char.
acter and the magnitude of tht
dollar problem which the 194s
devaluation sought to solve. The
"police action" once again set II
motion powerful infiationary force.
which, according to a recently
released United Nations economic
survey of Europe, are now threat
ening to undermine monetary sta.
bility in most European coun-
tries" To correct this, the U. N
survey proposes a general revalua-
ton upward of all European cur
rencies. In short. it proposes the
reverse of the 1949 devaluation.
Now manipulation of currency
values is an old trick. 1t merely
gives the first manipulation 8
temporary advantage. Price con-
trolls and allocations of scarce ma
terials cannot solve the problem
permanently. The only real solu-
ton is increased production. But
with huge demands placed on the
production capacity of the West
ern world by the defense pro-
gram, it is a question whether OF
not it will be possible greatly tt
increase production in the West.
ern world-particularly in West.
ern European countries.
Industrial production in West
ern Europe, in 1850, rose 1S pei
cent above 1949 levels. As a re-
suit, trade between Western Euro
pean countries was greatly stimu-
lated. Moreover, these countries
were less dependent upon imports
from overseas-especially imports
from the North American dollar
area. On the other hand, export.
to overseas areas from these Euro.
pean countries rose sharply. Al
q result, the dollar and gold re.
serves Of a number of thest
countries, particularly Great Brit
ain, were greatly increased. II
fact, the improvement was sucl
as to make possible suspension O
Marshall Plan aid to the Unitet
Kingdom by the end Of the veal
Three Foctors Involved
This improvement in the ex
ternal economy of Europe in 1876
was due to three principal fac
tors: Q) Increased production
arising from increased productiv
capacity made possible by Mar
shall Plan funds; ca a readjust
ment in the value of currencie
in September, 1949, which CAV
devaluing countries a price ad
vantage in world markets, an
CD a marked increase in eco
nomic activity throughout tn
world, which gave rise to an in
crease in demand for Europea,
goods from overseas
This increased industrial pro
duction, of course. has been
welcome imitation antidote. TIL
trouble is, however, that it is nc
being properly supported by in
creases in the production of pri
mary raw material supplies neces
sary to such increased industris
production. For example, sue
vital primary products as WOO
copper. lead, zinc, nickel, molyt
denum. sulphur and tin are sti
in critical short supply. Failu1
to produce sufficient quantities {
these and other raw materials
one Of the principal causes of til
sharp rise in prices since the Ke
rean war began.
In general, world prices of ir
dustrial raw materials, especial
prices of such products as rubbe
tin, non-ferrous metals and texti
fibers. increased far more tina
prices for either foodstuffs {
manufactures