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Labor Action, 27 February 1950


Sam Feliks

ECA Demands More ‘Integration’
But Europe Resists U.S. Sway


From Labor Action, Vol. 14 No. 9, 27 February 1950, p. 7.
Transcribed & marked up by Einde O’Callaghan for ETOL.


The Congressional hearing for the 1950–51 appropriation for the European Recovery Program started on February 21. At that time Paul Hoffman, ECA administrator, was expected to ask for a third year appropriation of about $3.1 millions to carry out the job of “integrating” the economy of Western Europe.

Paul Hoffman and other ECA spokesman will have the task of justifying this large sum in face of the pressure for cuts in government expenditures and the absence of any real indication at this time that the U.S. can force through its plan for “integration.” For two weeks ago Paul Hoffman returned from Europe after a meeting of the European Marshall Plan Council In which all factions in Western Europe refused to go along with U.S. plans.

Therefore, Feral Hoffman announced on February 17 that he is going to present a program for putting “considerably more power” behind the concept for “integration.” “We want Europe to accomplish in twenty-five months what might under less compelling circumstances easily require twenty-five years,” he added. It can only mean that the U.S. is going to attempt to crack the last vestiges of Western European independence.

The increasing pressure of the cold war as represented by the decision to produce the H-bomb and the Russian advances in Southeast Asia necessitate the building up of a strong monolithic economic and military bloc in preparation for a showdown with the Stalinist monolith. The U.S. is attempting to suppress any expression of independence in Western Europe, and this can only be accomplished by reducing Western Europe further toward the status of virtual vassals.

“Integration” is presented as a means of building up a Western Europe that will exert a pull on the East European satellites and thus split the Stalinist camp. But the very method by which this concept is carried out is a guarantee to work toward’ solidifying the satellites in the Russian camp. The “free enterprise” capitalism that the U.S. is attempting to force on Western Europe offers no acceptable alternative to the masses behind the Iron Curtain.

Failure of the Old Plan

The prospects of the Marshall Plan finding success even on the old- basis of ending the dollar shortage is shown to be extremely tenuous. At the early February meeting of the European Marshall Plan Council, the council nations indicated that at the scheduled end of the MP in 1952 there will still be a dollar deficit of $2 billion.

This estimate was made on the basis of four assumptions which reveal that even this figure is optimistic. They are (1) that MP aid will continue at a high level, (2) that business activity in the U.S. will continue at the level of the third and fourth quarters of 1949, and (3) that there would be a continued expansion of production and trade at the present price level.

All three points at this time are shown to be unrealistic. The effect an the slight “recession” in the U.S. in mid-1947 had a disastrous consequence upon the dollar deficit of Western Europe. It accentuated their dependency on U.S. prosperity at a high level, and brought about the subsequent devaluations of Western European currency with the slightest drop iir this level. In 1950, U.S. investment is expected to decline by 14 per cent and business activity is expected to decline In the latter half of the year. Therefore American imports can be expected to decline and the dollar gap to widen.

From this tendency develops the drive of Western Europe to discriminate against American exports. The attempt is to procure their imports in non-dollar countries so that when U.S. imports from Western Europe fall off with even the slightest “recession” in this country, Western Europe will not be forced to continue U.S. imports, much of which are essential, and therefore widen the dollar gap. The U.S., on the other hand, is forcing Western Europe to maintain this dependence oh U.S. exports. This alone would indicate the reactionary nature of the Marshall Plan.

The British White Paper on the ECA released in mid-January points out that trade is expected to decrease due to the falling demand for capital goods and increased competition from Germany and Japan. And a similar effect can be expected by the other MP nations.

Therefore, in face of the continued dependence upon the American economy, Western Europe is presented with a series of demands by Paul Hoffman. The ECA calls for the “liberalization” of trade, that is, the loosening of the controls set up to protect the economy from outside^competition and to direct their recovery program.

The Example of Germany

The American press has tried to point out that the only obstacle to “liberalization” of trade has been Britain. But opposition to the American plans has come from all of Western Europe. What the “free enterprise” bloc led by Belgium, Italy and France had to do was observe the results of the American policy as carried out in Germany

Germany prior to October 1949 had a favorable balance of payments. Then the U.S. high commissioner ordered that all restrictions on trade were to be removed, that is “liberalized.” Now Germany has a large trade deficit of several billion marks, unemployment has reached two million and there is a shortage of capital for investment.

The rest of Western Europe looks upon Germany as an example of what may happen to them if they too “liberalize.” They fear the political and social consequences that would result from the havoc of economic disruption. It means the destruction of invested capital, upset markets and unemployment. Thus the Economist of London points out in its February 4 issue: “in a word, the liberal policy pursued by the government leaves it without the weapons needed to cope with the exceptional problems created by Germany’s special position.”

Britain, on the other hand, presents a series of objections from a more principled point of view. While the “free enterprise” nations raised objections primarily from the point of protecting investments and their markets, the British Labor government had direct political considerations.

The British Present an Obstacle

The Laborites are committed to a program of full employment, nationalization and a planned economy. Britain is also the banker and monetary manager of an international trading bloc, the sterling area. The U.S. plan for “liberalization” comes into direct conflict with these major interests.

The big questions are: How can the British Labor Party give up its controls over the British economy and its political program without committing political suicide? And how can Britain submit to the American conception of “integration” and surrender its position as. the head of the sterling area and not relegate ifself to the role of an economic dependent of the U.S.?

Britain cannot do either without reckoning with the consequences. The British Labor government as well as the Labor governments of the Scandinavian nations have been pursuing a narrow nationalistic economic policy. They have attempted to find economic stability through restrictive trade practices, and security through self-sufficiency. It is the reformist’s way of avoiding the contradictions of the market.

It is a method beset by pitfalls for it tries to negate the international division of labor. These individual nations are not in any sense self-sufficient, except on the basis of a depressed living standard. This method tends to result in restricted trade among the more developed areas and fierce competition for overseas markets, as if is now developing.

The sterling bloc presents the major obstacle to forcing Britain into a U.S. “integrated” Western Europe. It gives Britain a measure of independence when it. bargains in the European Marshall Plan Council. If the U.S. can weaken or break up the sterling bloc, then its task will be that much easier.

Already the U.S. has made inroads into the sterling area. The ECA forced Britain to make a 15 per cent cut in the annual payments of the war debt to the Commonwealth, predominantly India. Now for India to continue its development, it is forced to apply to the U.S.-dominated World Bank for a loan of dollars to buy U.S. machinery. Thus Britain is compelled to share, to a small extent now, its capital-goods market.

This accounts for the popularity of the scheme put forth by Walter Lippmann, New York Herald Tribune columnist. He proposes that since the amount of goods that Britain ships to the sterling area is about equal to the amount of Marshall aid to Britain, the U.S. should cut off funds to Britain and instead directly ship the same amount of goods itself.

This plan has a dual virtue from the point of view of the American capitalists. One is obvious: it breaks up the sterling bloc. The other is that although the amount of goods in value in the same, in kind they are different. While the U.S. exports to Britain a large amount of raw materials and only a small proportion of machinery, Britain exports to the sterling area mainly machinery and manufactured goods. This plan would be a boon to U.S. heavy industry in a period of declining investments.

The Marshall Plan nations feel that they have an important argument with which to oppose U.S. economic policy – U.S. dependence on Western Europe as allies in the cold war. It is believed that if they can resist U.S. pressure long enough, they can preserve their own razor-edge balance position.

This view is predicated upon the idea that the U.S. cannot afford to deny economic and military aid to Western Europe. The alternative is the weakening of the U.S. strategic position in Europe at a time when it is attempting to set up “areas of strength” in face of increased cold-war tensions.

The road open to Western Europe is dependent upon how much “more power” the U.S. will attempt to use, and above all the strength and vitality of the European working class to prevent this infringement upon their national sovereignty.

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