Collectivism on Relief

July 19, 1948

The Marshall Plan is now in operation; and one of the chief misgivings of its critics is already being realized. This is that America would pour money into Europe without getting in return reforms that would really bring European recovery.

Nothing in the agreements concluded between the ECA and participating countries promises any real change from the ruinous postwar economic policies that these countries have been following. The British Government agrees, for example (and there are only minor differences in the French and other agreements), to “use its best endeavors” to make “efficient and practical use of all the resources available to it”; to think up “practicable projects for increased production of coal, steel, transportation facilities and food; to stabilize its currency, establish or maintain a valid rate of exchange, balance its governmental budget, create or maintain internal financial stability, and generally restore or maintain confidence in its monetary system; and to cooperate with other participating countries in facilitating and stimulating an increasing interchange of goods and services.”

Most of these promises are so vague as to be practically meaningless. They refer to ends, not means. Of course every government wants to use its resources efficiently: Of course it wants economic recovery, increased production, and a stable currency. It does not need to be bribed to want any of these things. The real question is: Has it been following or will it follow the policies likely to bring them?

In the opinion of the British authorities themselves, nothing in the agreement they have signed will require them to change their present collectivist course. As the London financial correspondent of The New York Times cabled: “Britain is, in fact, already doing its utmost to achieve these objectives. . . . On the question of early revision of the exchange value of the pound sterling, there is nothing in the agreement to suggest that this is at all likely or is at all necessary.”

So that’s that. Yet the simple truth is that European exchange control and overvalued currencies have not only brought about a chronic European trade deficit, which the American taxpayer is subsidizing, but have jammed up international trade and made such trade all but impossible even within Europe.

A recent Associated Press dispatch from London opened with the statement: “Trade in Western Europe is on the decline because most of the countries are too poor to buy from each other.” This is nonsense. The people within each of these countries are obviously not too poor to buy from each other. Countries that have things to sell to each other can obviously exchange them with each other. But when they set up a nightmarish system of bilateral quotas and import licenses for every transaction; when they insist on a pegged value for their own currencies far above what any free market will pay (or, to put it another way, when they forbid their own citizens to pay for American dollars the value that a free market would place on such dollars); when, in short, they make their currencies in fact inconvertible and prevent their citizens from buying other countries’ goods, then they must inevitably expect exactly the kind of breakdown of international trade that they have got.

The ECA agreements, with their vague rhetorical promises, will do nothing to halt the socialism, inflation, price control, exchange control, and government planning that are everywhere choking production and trade. Even the requirement for balanced budgets is rendered meaningless by exempting “deficits over a short period”—the length of which is nowhere specified. As for the interpretation of these pledges, is Britain helping to “maintain confidence” in its own money when it prohibits anyone from bringing more than £5 of it back into the country?

The Marshall Plan was put forward to aid participating nations “through their own individual and concerted efforts.” It is in fact a costly relief program that is not getting in return the only reforms that would make a real and lasting recovery possible.