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Symposium: The New Europe

Henry Judd

Marshall Plan: Phase II

New Headaches for Europe’s Economy

(July 1949)

From The New International, Vol. XV No. 5, July 1949, pp. 137–140.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

If it is true that Western European capitalism has effected a remarkable productive recovery and overcome a series of problems, then, it may be asked, what lies behind all the present difficulty, why is there this permanent cry of “crisis” and “disaster”? The ironic answer, it seems to us, lies in the fact that European capitalism (and we exclude the Iron Curtain nations which, for the moment, must be considered outside of Europe) has progressed back to a state of comparative “normalcy.” That is, the character and quality of its current problems are characteristic of declining capitalism: the functional and structural weakness of a sick organism which expresses itself in unemployment and price problems; financial, currency and commercial problems; and, above all, trading, marketing and business problems.

For a variety of reasons we need no list here, the elementary problem of the postwar period – that of setting in motion the wheels of production – must be considered as largely solved, in capitalist terms. Western Europe, from a productive standpoint, is definitely an active and going institution. In 1948, its production increased by 9 per cent, and is now 15 per cent above the 1938 level. Last year’s exports from Europe increased by 30 per cent over the prior year. In every field of production, ranging from heavy to consumer’s industry, there has been enormous progress. We must understand, of course, that this expansion started from the lowest point conceivable and it is hardly our thesis that European capitalism has achieved an expansion which reverses the historic tendency of a falling off in the rate of its productive increase beginning in the 1920s. Only to take into account the increase in population since 1938 would suffice to brush aside such an illusion. This is no matter of rejuvenation of European capitalism.

Our point, however, is that a material basis, in the form of goods, wealth and services, once more exists and it has long been our contention that this is a minimum requirement for the resumption of political life in Europe, particularly in democratic and socialist terms. The outstanding proof of this, of course, is Western Germany, where productivity has risen now to 86 per cent of its 1936 level.

The essence of this “New Europe” lies in the revival of its economic life which has, in turn, meant a resumption of social, cultural and political life and brought a definitive end to the stagnation of 1945–46. Western Europe lives and breathes again; a fact for which we can be more than thankful!

Who Shall Benefit?

It is our intention to outline some of the new economic and social problems that this revival has created. Obviously, a new struggle for the products of society has commenced. That is the real nature of politics in Europe today: which class and sector of the population shall benefit from the renewal of life? In which direction shall European society turn, now that it again has a comparatively solid floor and foundation under its feet? While confusion may be dominant, it should not be thought of as the former apathy and indifference so characteristic of post-war Europe.

Europe’s masses have only general conceptions and negative attitudes as to what they desire. Stalinism, of course, nourishes itself upon this. But there is again time to think, to read and to contemplate. Social life is no longer a question of bare physical survival: masses are working, earning some money and eating regularly.

Today’s problems are related to the working and operation of the system itself; therefore, the thinking of masses is related to the problem of how to make the economy operate in an effective manner, to the advantage of all. This means that the gist of European problems is again genuinely social in character, and any revolutionary movement or group desiring to progress must approach all matters with the broadest possible outlook and understanding. The real reason why the so-called Fourth International has vanished from the scene is that it could not understand the nature of postwar Europe’s social problems, and confined itself to a “political” approach in that term’s narrowest meaning.

The recovery of Europe is largely due to American pump priming, the proper term to describe the first phase of the Marshall Plan. America contributed $12 billions between the end of the war and the start of the Marshall Plan. To augment this recovery in production, another $5 billion was given in 1948, the first year of the plan itself. This has had two significant and conflicting consequences, in addition to what we have indicated above. First, Western Europe is now able to resume a limited independence not only in relation to America, but to the rest of the world, including Stalinist Russia. Secondly, what has been called the second phase of the Marshall Plan is now upon us. Having saved the patient, so to speak, by an emergency blood transfusion, Dr. Imperialism is now planning to make his demands and collect his fee. But the patient, ungrateful wretch that he is, not only has other ideas, but feels himself at least partly equipped with the strength to carry them out! Western Europe is now capable of offering resistance to the overbearing and arrogant economic demands of America, as we shall see in examining the case of England. Those who felt that Marshall Plan aid meant some automatic enslavement and subordination of European economy to America neglected to examine the multisided effects that an elementary productive recovery would have.

We have said that the crisis of Europe differs vastly from that of several years ago. Before explaining these differences, we should briefly state the economic nature of this new crisis:

Dollars Versus Pounds

  1. In part it is a continuation of the old. The shortage of dollars is almost as acute as before, and it is estimated that Western Europe’s uncovered dollar balance (deficit) at the end of the Marshall Plan (1952) will still be between $2 and $2½ billions. For the year that began July 1, 1949, the shortage will be $4½ billions, or only about $190 millions less than the previous year. All participating nations are asking for huge dollar grants, in many cases larger than the previous year, with the exception of England, which has requested only $923 millions as compared with $1,239 millions the previous year. All this signifies, of course, that the unbalance of trade remains as distorted as before.
  2. Trade between the Eastern and Western sectors of Europe, one of the principal keys required for unlocking general European stagnation, has failed to materialize and grow. This, of course, is essentially a political factor and it appears likely that current political developments will break up this jam before long.

It is often asked, has the Marshall Plan been a success? A satisfactory answer would require a complete definition of what is meant by “success,” and such an effort would be in vain since each nation and each tendency participating in the plan has its own conception. In general, the Marshall Plan has been partially successful for all those involved in it and a complete “failure” from the Russian viewpoint.

It is the second phase of the plan, now under way, which will determine whether the risk run by the nations of Western Europe in accepting conditional aid from capitalist America has been worth the game. It is the second phase of the plan which will determine correspondingly for American imperialism whether or not its expenditure of profitless billions up to now has been worth the game, from its standpoint.

It is premature to attempt any answer to this question. We shall only indicate the problems already created as this second phase begins, the tendency of which will be to set Western Europe in constant and growing opposition to the United States, reviving under new conditions that struggle of Europe vs. America which Trotsky formerly described.

Who Is Helping Whom?

First, with the initial phase of the plan largely over, what are the new objectives of the United States in continuing its aid to Europe? We may summarize them as follows:

  1. An immediate objective is the revision of the system of payments already agreed to by the ECA (the control body regulating intra-European aspects of Marshall aid) so as to end the rigid system of holding tight to dollars, and to permit a freer form of currency payments. This was, in part, the heart of the recent conflict between America and England which ended in a temporary withdrawal of American demands.
  2. To force a general lowering of European prices, primarily through a devaluing of all European currencies – including the pound, franc, lira, etc. The purpose of this is to satisfy that aspect of American policy which desires to .see an expansion of European exports, making it possible to close the gap further between exports and imports and thus move closer to achieving a balance of trade essential for economic health.
  3. To return as quickly and closely as possible to the prewar system of unfettered trade, under which system America could compete in the European markets on an “open door” basis.
  4. To break up European cartel and price-fixing systems (such as exist still in Germany) wherever possible. This is one manifestation of the broad policy to limit European recovery within definite bounds. It may be said, in point of fact, that the Marshall Plan will ultimately become a definite fetter upon the expansion and growth of European economy, but that point is not yet reached.
  5. To break up all closed off international market arenas (such as the so-called sterling area, and the French colonial area) and permit free entry of American competition. This is combined with an unwillingness to permit access to any American markets, including the United States itself.

In face of this, one would expect that the natural tendency of Western Europe would be to draw together, in some common economic union of self-defense from the danger represented by America. It might seem, in fact, that the oft-heard expression in America in favor of a “United States of Europe” (even Dewey!) would contradict American policy and aid Europe to draw together. But talk in America favorable to European unification must be clearly understood for what it is. Its conception is a strictly limited one, in terms of certain economic measures such as tariff agreements, currency measures to stimulate business and inland transport arrangements, etc., which will aid the short term American perspective of setting Europe up on its economic feet. American imperialism does not want a unified Europe, a solid bloc of nations with a powerful economic base to support itself. It is aided in this by the incapacity of Western Europe to unite itself in any serious way, even against the approaching danger of the new Marshall Plan phase.

The manner in which these diverse factors pull Europe now one way toward unity and now another way toward disunity can be best illustrated by current efforts to loosen up European trade. Here is the New York Times’ comment on the results:

The Economic Cooperation Administration is now engaged in a big drive to force Europe to take great risks by loosening trade barriers and making currencies more freely convertible. Europeans are beginning to ask whether there is any use taking risks, including depreciating their currencies, to improve the competitive position of European exports if the only market in which they can earn dollars is to be closed to one community after another as soon as their competition makes itself felt.

The Only Market

The “only market” referred to is, of course, the United States. To put an end to the dollar shortage, Paul Hoffman has declared that America must “double its imports from Western Europe by 1951.” The tendency today, given the current regression, is in the opposite direction.

A series of new factors further complicate the picture, and lead to what we have described as the “new crisis” in Europe. There has been a decline in American world prices* but British, French, Belgian, etc., prices remain the same. In competitive terms, English prices particularly are too high. England is struggling to maintain her exports, but to do this she must become more competitive in price offerings. How to do this: by lowering wages and thus dropping production costs, or by devaluing the pound? England is simultaneously struggling to maintain her bilateral trading area (the sterling area) against American encroachment. The whole British trading system is a bilateral one of protected exports, whereas the American trading system is a sharply competitive one, seeking to batter down doors. This is the basis for violent American opposition to the recent British-Argentina trade pact which was, in effect, a barter agreement; this is the basis for the new Anglo-American rivalry. Britain is fighting to save the pound, preserve whatever dollar reserves it still has, and to keep its protected sterling trading area in the world.

Other immediate factors aggravate this “new crisis.” England, seriously disturbed by the possibility of competition from a revived Western Germany for continental markets, desires to push Germany in an easterly direction and is thus anxious to rebuild East- West trade, but the United States works to subordinate such trade to political objectives in winning away the satellite nations. This, of course, is but one part of a larger problem which may well become the key problem of Europe: the astonishing revival of Western German production (now 85 per cent of its 1936 rate) means that Europe’s greatest productive apparatus is rapidly getting back into business. In fact, since Western Germany is not permitted any armament production, we have the ironic circumstance that this part of Europe is producing a mass of finished and consumer goods (electrical equipment, books, textiles, etc.) without the burden and hindrance of supporting a war machine! Shall this production flow eastward or westward? This is already a central problem, and there are those who believe that American imperialism will more and more openly encourage revived German capitalism and make of it Americans chief prop in Europe. But the question of Germany’s new role is a subject in and of itself and demands separate consideration.

The final factor responsible for the “new crisis” is the worldwide business recession, which has depressed orders, trading and transactions in all countries. The buyers’ market has replaced the sellers’ market and there is no reason to expect any reversal of this trend. The volume of business is dropping and, with the exception of England, where export still flourishes, the problem of unemployment is common to all nations.

We have indicated the important factors influencing the economic life of the New Europe. For the most part, they are familiar and could hardly have come into existence without the substantial recovery we have described. Has this now reached its peak? It appears that only the revival of a serious East-West trade could act as a new stimulus, comparable to last year’s Marshall Plan grants, but who can say whether this will come?

There is definitely a “leveling off,” and that at a low level indeed! Nowhere can mass living standards compare with pre-war standards. The 1948 economic survey of the United Nations, issued in Switzerland, indicated this and, more seriously, indicated that economic autarchy had been stimulated rather than broken down by the Marshall Plan. Borders, tariffs, customs, etc., are as insurmountable and difficult as before. In the long run, of course, this indicates that all the old problems remain as before: economic nationalism and inability to unify; a low level and high- cost productivity; contraction of the internal market, with a more bitter struggle to share the world market, etc. The classic problems of European capitalism are now back with us. The patient, once semi-conscious and prostrate, is now back on his feet only to discover he suffers from a dozen bothersome and incurable ailments!

But nothing can do away with the fact that a substantial material basis exists for the pursuit of the democratic and socialist struggle. It is our opinion that the serious and real struggles of the future throughout Europe will be intensely social in nature. They will be over the fruits of this social and material revival, and plans for substantiating it. The abstract issues of ideological politics and the question of war will recede into the background. The people of Europe have long since heard what each and every political tendency proposes: they now want to know how to carry these things out, in the specific.

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