Our Policy in Europe

December 8, 1958

A visit to seven European countries in a total of eight weeks is apt to produce kaleidoscopic impressions, but one or two stand out clearly. The first is a striking growth in prosperity compared with ten or even five years ago. Everywhere people are better dressed. Almost everywhere there is an astonishing amount of new building. This is most impressive in West Germany; but almost as remarkable is the new building in Belgium and in the northern half of Italy.

This new building has gone on in spite of—and even partly because of—rent control. All seven countries (except Belgium) have retained some sort of rent control. This usually takes the form of rent control on old houses and freedom from it on new ones. The result is increasing disrepair in old housing but some incentive to new housing, to which is commonly added the incentive of direct or indirect state subsidies. Where, because of the extent of inflation, rent control is most out of line with realities, as in France, the dilapidation of old housing and comparative lack of new housing is most noticeable.

BRANDS OF SOCIALISM

What stands out is not the differences in the economic policies of the various countries of Europe but the similarities. This applies even to Spain, which is under a dictatorship and still seems in large part cut off from the rest of Europe. Though all of Europe has been moving in the last five or ten years toward a relaxation of controls, most European economies are still marked by a continuation of socialism, protectionism, deficits, and inflation. While European “democratic” leftists have for twenty years been denouncing the “reactionary,” “dictatorial,” and “Fascistic” policies of Franco, it is hard, economically, to distinguish between their policies and his.

It is not easy to describe the difference, for example, between Italy’s Socialism of the left and Franco’s Socialism of the right. The Italian Government, through its holding company, Istituto per la Ricostruzione Industriale, popularly known as IRI (pronounced Erie), controls or owns stock in most large Italian industrial companies. The Spanish Government owns or controls large industries through a similar agency, Instituto Nacional de Industria, the INI. Both organizations came into existence because of an alleged emergency, but neither government seems in any haste to sell its securities back to private hands. If Italian industry has forged ahead faster than Spanish it is partly because IRI makes more effort to emulate the principles of private enterprise than INI, and partly because Italy does not put the appalling obstacles in the way of new private industry that Spain does.

WHAT WE COULD DO

Yet what is most puzzling in Europe is American policy. Why, for example, do we give our actual support and blessing to the proposed six-nation “common market”? This would discriminate against American goods, make it more difficult on net balance for American exporters to sell to the countries involved, divide Europe into rival trade blocs, and tend to increase, and perpetuate bureaucratic controls and protection rather than to move toward free trade. Why do we in Spain (or anywhere else) pour in American aid that obviously goes to subsidize foreign socialism and to prolong government controls, which in turn retard rather than promote economic growth and freedom?

There are two main things that we could do, in the economic sphere, for Europe and the rest of the world. The first would be to keep the dollar strong and beyond suspicion, a hitching post and a model for other currencies until they are restored to soundness. The second would be to open our markets to European goods, to encourage European industrial growth through the self-supporting and self-respecting method of trade, not aid. We are doing neither. At home we are pursuing policies of inflation, undermining the integrity of the dollar. In trade we are moving toward more protectionism, exclusionism, and quota systems. Abroad we are subsidizing, at the expense of the American taxpayer, exchange control, socialism, and inflation. Our so-called “foreign economic policy” is in need of thorough reform.