One World or Many?

October 7, 1963

VIENNA—In the seventeen years since 1946 I have made ten trips to Europe, and like other visitors I have been struck each time by the steady and often accelerative increase in prosperity. Each year Europe seems more like America; the people are better fed, better dressed, better housed, and above all better automobiled. For example, in Austria, from which I am writing, the number of automobiles has increased ten times in the last ten years, and there is now one passenger vehicle for every fourteen people. Of course this growth has its bad side; and traffic jams in European cities, with their narrow winding streets, are often worse than in the U.S. But this increasing prosperity has now become an old story.

In Germany, at Wiesbaden, I attended a “German-American conference” of which the host organization was the German Institute for the Study of Middle and East European Problems, and the guest organization, the Foundation for Foreign Affairs of Chicago, which had been host to the German group in Chicago a year and a half ago. Among the speakers from the United States were Gen. Frank L. Howley, formerly in command of the American sector in Berlin, Stefan Possony of Stanford University, and Strausz-Hupé of the Foreign Policy Research Institute at the University of Pennsylvania. There were also some representatives from half a dozen European countries. Because so much difference of opinion was expressed, even between nationals from the same country, it would be impossible to present a consensus; so I yield to the temptation to quote only an epigram from journalist Robert Ingrim, who remarked that “Mr. Kennedy seems to fear nuclear bombs more in the hands of his friends [his European allies] than in the hands of his enemies.”

AUSTRIAN DILEMMA

From the end of the war, and until 1961, the Austrian economy showed almost the highest growth rate in Western Europe—an average of 12 percent a year from 1945 to 1961 and an average of 6 percent calculated from 1953 to 1961. For the last year and a half, however, the expansion has slowed down to a rate of only 2½ percent.

In fact Austria, which is heavily dependent on foreign trade (about a third of its entire production is exported), has arrived at a crossroads; either it must integrate its economy with that of the Common Market or it will be inescapably driven into the sphere of Soviet power and influence. Until now roughly half of Austria’s exports have gone to the Common Market and more than 60 percent of her imports have come from there. Already 17.5 percent of Austrian exports go to the Communist bloc. Some Austrian economists (notably Prof. Franz Nemschak, head of a semiofficial research organization) point out that unless association can be achieved with the Common Market, Austria will be forced into more bilateral trade with the Communist bloc, increased governmental planning, loss of productivity, and eventually complete loss of political freedom and independence.

FOREIGN ISSUES TAX

Most European bankers, businessmen, and economists with whom I have talked are appalled by our Administration’s proposed “equalization” tax on sales of foreign securities in our market. Of course they are concerned about the increased difficulty of meeting Europe’s capital needs. But they also quite honestly think the proposed action self-defeating from our own point of view. The proposal, they say, has undermined confidence in the dollar. Before the President’s proposal was made, an American underwriting group had almost finished arrangements for a $20 million loan to Austria. Based on previous experience, Europe itself would have bought 60 to 80 percent of this loan. Negotiations, however, had to be suspended in favor of short-term bank credits. So this could mean a net outflow of $20 million instead of only $4 million to $8 million.

But most of all Europeans are baffled by this move, on the part of the previous “banner-carrier” for free capital movements and international integration, back toward economic isolationism and restrictionism.