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Ben Hall

Books in Review

ECAnomics

(July 1949)


From The New International, Vol. XV No. 5, July 1949, pp. 159.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).


Economic Recovery Program
by Seymour E. Harris
Harvard University Press.

Can ERP solve the key problems of Europe and its relations with the United States? Seymour E. Harris, Harvard economics professor, bids caution in his sober and scholarly book, The European Recovery Program. Writing as an advocate of ERP, but highly critical of many aspects, he warns, “Above all it is essential that the ERP should not be oversold as the Bretton Woods program was to some extent.”

Mr. Harris focuses on the economic aspects of the program without himself forgetting that “political and military developments are likely to be decisive.” By thus delimiting his subject matter he subsumes the most favorable social conditions: preservation of peace and successful neutralization of Stalinism. Consequently we can see clearly how knotty the problem of Europe really is. Even if the intricate economic factors can be brought into balance, “decisive” events can supervene. And the latter is outside the scope of this work.

The author views two aspects of European recovery. Destruction of industry, and general economic and social dislocation of the war created an acute crisis which is being overcome by ERP relief measures and by a gradual rise of production and national income. (Although even by 1951, he points out, Europeans will not live as well as they did in 1938.) He warns that ERP must not “become too much a businessman’s organization” and it must not be conceived simply as “an organization for dumping surpluses.” For the chronic crisis of Europe lies elsewhere and cannot be settled by such measures.

“The most difficult problem confronting Europe,” he writes, “is not the expansion of output but rather the elimination of the large deficit in her balance of payments.” This standpoint is thoroughly documented by statistical material. Europe requires tremendous quantities of commodities from the United States but it cannot earn the dollars for payment.

In the last 33 years, Europe received $80 billion in goods from the United States which it could not pay for at all and an additional $20 billion which it had to buy with gold shipments. It must buy in the United States but it cannot sell its own goods in markets where it can get dollars in exchange. As the competitive position of the U.S. vis-à-vis Europe improves, the difficulties of Europe multiply. Even if ERP succeeds in its stated objectives, Harris fears that the long-term obstacles to European equilibrium will not be overcome. And he concludes: “Here is the most perplexing problem of all.”

The problem is even more perplexing than the author concedes. For what he sees in terms of its manifestation in trade and finance is in reality a social dilemma of vast implications. Given a world dominated by American capitalism with its control over vast quantities of heavy industry unmatched anywhere in the world and its ability to choke opponents out of the market with cheap products, what place is Europe, also a producer of manufactured goods, to play in the worldwide division of labor and industry? Viewed in terms of historical development, what is it to produce and where is it to sell? The author gives no hint of a reply.

Will the United States be able to finance ERP without disorganizing its own political and social stability? Mr. Harris replies: Yes. But his prescription for continued social health is an ill-tasting medicine:

“... high taxes, and economies in public expenditures; control of the use of scarce resources, with particular emphasis on discouraging excessive investment and non-essential use generally; a resulting stability of prices with pressure upon labor and farmers to desist from inflationary policies.”

Possibly, possibly. But it is a program which reads more like the War Deal than a Fair Deal.


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