What Are We Trying to Do?

February 28, 1949

From the beginning the basic aims of the Marshall Plan have been vague and confused. If anyone pointed to the economic misconceptions behind it, he was told that its aims were primarily political. If he called attention to its political inadequacies, he was told that the plan was primarily economic. Trying to pin down its purposes has been like trying to nail a custard pie against a wall.

Politically the Marshall Plan was an irrelevant way of dealing with the problem that the proposed Atlantic pact would face up to directly. Unfortunately, just at the time when our military assurances to Western Europe, as the President has insisted, should be strong and unmistakable, our leading senators wish to make them weak and ambiguous.

Probably the most influential economic argument for the Marshall Plan a year and a half ago was the plea that Europe was starving. A typical cartoon showed an emaciated woman in rags, labeled “Europe,” begging for a crust of bread while a pompous, overfed windbag, labeled “Congress.” callously debated the matter. While the picture of European starvation was overdrawn and its causes misconceived, the wheat-crop failure in France, for example, was real enough. But now that European crops are good, American crops the greatest in history, and world prices are plunging downward, Administration spokesmen run in all directions at once. They urge us to send more food to a Europe that needs it less, in order to keep up American farm prices. Or they demand “emergency” expansion of storage facilities—when stocks of grain are already at record levels—in order to enable American farmers to withhold still more food from a world that these officials themselves insist is short of food.

It is frequently declared that the purpose of the Marshall Plan is to “raise European living standards.” But it has never been made clear to what level they ought to be raised. Is it conceived to be America’s duty to restore each European country’s living standard to that country’s prewar standard? Why? And what of countries in which industrial-production indexes already exceed the prewar figure—for example, Great Britain, Ireland, the Netherlands, Norway, Sweden, and Denmark? Why must we continue to pour in free help?

Or suppose (what is in fact true) that there are wide prewar and present discrepancies between the average per capita incomes in different European countries. Should we try to equalize the averages and bring the poorer countries up to the richer—perhaps with help from the richer? The National Industrial Conference Board has made a valiant effort to determine the average per capita 1947 national incomes of the ERP beneficiaries. Some results: Greece, $117; Austria, $302; Netherlands, $392; Norway, $448; Belgium, $608; France, $661; Great Britain, $723; Denmark, $730; Sweden, $848.

It is clear that if the primary purpose were to eliminate poverty and to equalize living standards, the distribution of ERP help would be vastly different from what it is. For example, with reciprocal-aid provisions of the ERP, France gets 27.4 percent of the total, Britain 20.5 percent, and Belgium less than 1 percent, though the Belgium per capita income is already below that of France or Britain.

What the ERP has in fact been trying to do is to pay for each country’s foreign-trade deficit. Yet the size of its foreign-trade deficit is unrelated to a country’s living standard or total production. A table of comparison might astonish Congress. The truth is that each country’s trade deficit is today brought about mainly by a coercive exchange control combined with a false currency value. But successive Administration witnesses urging a continuation of the Marshall Plan have either treated this cause as negligible or ignored it altogether.

As a nation we have been pouring billions of dollars into Europe and are planning to pour in still more billions, without seriously stopping to ask ourselves just what it is that we are trying to do.