Day of Disillusion

December 3, 1951

For the last two or three years we have been repeatedly told about the “miracle of recovery” brought by the Marshall Plan in Europe. And suddenly another European crisis is upon us; suddenly the British can’t solve their balance-of-payments problem; suddenly the French economy is in another tailspin; suddenly everybody complains about a “dollar shortage” again. And suddenly, once more, it is all our fault.

It seems that, as Europe reminds us, we just can’t do anything right. Not only do we give them too little money, but we give it for all the wrong things. We give it for armament, whereas the real need is for Europeans to live more comfortably. Thus The London Economist says bluntly that “rearmament is a serious threat to the internal stability of Europe” and: “It may prove healthier for Europe to receive more dollars to keep its civilian economies steady and fewer to defend its frontiers.”

The French are sure of it. In a dispatch from Paris to The New York Times of Nov. 10, Harold Callender wrote: “High officials here contend that while the aggregate of United States aid may be sufficient, too much has been earmarked for military use and not enough for civilian economies. ‘Europe is not ready for all the military equipment that is provided, but desperately needs dollars to buy raw materials to keep its industries going,’ said one expert. Moreover,” Callender continued, “the French are annoyed by the slow receipt of [U.S.] aid.”

The situation has reached a point where even American taxpayers are beginning to ask questions. Here is an excerpt from a letter I have just received from one of them in Switzerland: “As I travel through Europe my admiration for the patience of the American taxpayer grows in the same measure as my disgust at the inefficiency and nonchalance of the Europeans. As I look around me all over Western Europe at the business-and-pleasure-as-usual attitude, the crammed theaters and movies, football matches, horse racing, automobile racing, and stores full of everything to buy, I know that nobody ever gives credit to the long-suffering American taxpayer, who has made all this possible through the billions given to foreign countries.”

Why has postwar recovery in Europe proved so transitory and insecure, so vulnerable to recurrent crises? Clearly because it has never rested on a sound basis.

The rate of recovery in Europe after 1947 was no more than what might have been expected in any case, if we judge by the standard of previous postwar recoveries. And the Marshall Plan got far more credit even for this result than it earned. Macaulay in his History of England, reminded his readers that “No ordinary misfortune, no ordinary misgovernment, will do so much to make a nation wretched as the constant progress of physical knowledge and the constant effort of every man to better himself will do to make a nation prosperous.” EGA got credit that belonged to what Macaulay called “the exertions of private citizens.”

In fact, it is an open question, when we consider the present French and British crises, whether Europe would not be better off today if we had never given it a dollar of Marshall aid. For then it might have been forced to take the hard course that alone would have brought a durable recovery.

Contrary to the outcries from European officials, the present crises in Europe are not the result of our failure to provide enough dollars, or the result of their own tremendous armament effort. They are the results of their own spending, inflationist, controllist, and socialist policies. In my 1947 book, Will Dollars Save the World, I pointed out that “The report of the sixteen [European] nations shows that they have no intention of abandoning the major policies which have brought them to their present crisis. They will continue as before to impose price control and exchange control, food subsidies, cheap money, ambitious capital investment programs, government-dictated production, nationalization, and socialism.” Well, they are still at it.