Washington

ON THE WORLD TODAY

WHETHER there will be a special session of Congress this year depends upon the economic situation in Europe. The indications are that by October the world’s dollar shortage will rise to a crisis. The crisis, if unrelieved, will take the form of restrictions imposed upon imports from America out of sheer inability to pay for them. Already the bars are beginning to go up. The effect on our national economy threatens to be a backing up of American surpluses, particularly of food, and this may provoke joblessness.

Our export surplus is now running at the fantastic rate of 9 billion dollars a year. If we reckon half a million jobs per billion dollars’ worth of exports, this export trade accounts for 4.5 million employed Americans. That, of course, is less than 8 per cent of our 60-million payroll.

But these things cannot be reckoned arithmetically, as was shown by our 1920-1921 experience, when the contraction in our export trade was felt in a slump which started among the farmers and ended up in the factories making goods for home consumption. The export situation is probably ahead of the building industries among the factors making for uncertainty in our economy.

Secretary Marshall’s Harvard speech was governed by two considerations. One was the effect in Europe of the dollar shortage. This dollar shortage is due not to our unwillingness to take imports from Europe (and so provide dollars), but to Europe’s lagging output. It is abnormal that Europe should be dependent upon America for coal and food.

The other consideration behind the Marshall speech was the certainty of a fresh call for American assistance. After an outlay of 20 billion dollars for European recovery, the legislators have got into the habit of calling foreign aid “Operation Rathole.” It is a question how far Congress would have gone in extending aid on a national basis.

For these reasons Marshall threw out the idea to Europe that the prerequisite of new American help was a program ensuring the integration of as many European economies as possible. Aid would be considered only on a continental basis. Agree on a “working economy” across national frontiers, said Marshall in effect, and we will ask Congress to finance the deficit in your means of creating it. It is a selfhelp and help program.

Washington is waiting to see a chart for an organized Europe. It would have welcomed at the initial meeting in Paris a declaration of interdependence, but, failing that, it insists upon machinery that will demonstrate integration. What is envisaged is an organization to give priorities to capital construction on a basis predetermined in terms of importance and speed in the revival of Europe; in other words, a Peace Production Board.

This organization would then allocate both European production and American exports of the material to go into these capital undertakings. Now this would be revolutionary. It would undermine national sovereignty. The possibility of a customs union growing out of a Peace Production Board is clearly in the realm of the feasible.

The Ruhr: powerhouse of Europe

The Ruhr always has been the powerhouse of Europe, and if it were put on its feet, the reconstruction of Europe would be well on its way. Soon after the Marshall speech the Joint Chiefs of Staff issued orders to General Clay in Berlin to push German reconstruction. But the political future of the Ruhr still has to be settled. It is putting the cart before the horse to revive, say, Germany’s steel industry without prior knowledge of its ownership or the disposition of its product. A French protest against the Joint Chiefs’ order brought this abruptly to American notice. French fears in this respect had to be assuaged before the coöperators in Paris could begin discussion.

It was unfortunate that after Secretary Marshall had seized the diplomatic initiative so dazzlingly, he should have allowed the military to put this initiative in jeopardy. Russia was given the propaganda point that we are interested only in building up a strong Germany as a Russo-American buffer. The loss now has been retrieved, but the incident shows the dangers involved in the hydra-headed conduct of our foreign policy.

French objections on Germany, of course, had nothing to do with Ruhr coal. The French agree that a coal scheme for the Ruhr should be the foremost objective of the new coöperative policy.

The failures in the revival of post-war Europe as regarded in Washington are headed by coal. They are Britain’s failures. She has failed to get back on an export basis for coal. She has failed to get coal output in the Ruhr (Britain’s zone) beyond 50 per cent of capacity. The result is to distort the AmericanEuropean balance of payments. Europe this year is importing American coal at the rate of 50 million tons a year. It has to pay around $20 a ton for it.

If there were a Ruhr Coal Authority, there might be some hope of making Europe less dependent upon us for coal. But the job has been so long neglected that transport will doubtless have to be provided before a bigger output can be expected. Transport is another shortage which, even after Europe has pooled her transport resources, will have to be repaired from America.

The third failure is French — the lag in French agriculture. If France had a good harvest it would reduce the food dependence upon America, especially in view of the iron curtain in Eastern Europe which separates Europe’s granaries from Europe’s customers. But the French prospect is bad: the French have had the worst wheat crop in a century. In stricken countries there is bound to be a call upon America for agricultural machinery.

What do we have to spare?

In Washington there are committees sitting which parallel the committees in Paris. They are preparing an inventory of resources so as to be ready when the Europeans submit their blueprint. Commerce Secretary Averell Harriman, who heads the inquiry, has gathered around him the cream of the nation’s leadership in research and business. The inquiry will have at its disposal studies the President has requested from both the Interior Department and the Council of Economic Advisers.

These studies are a necessary aid in the job of seeing how we stand when the call from Europe comes. About the only item we have to spare is machine tools. Machinery for mines and farms is short. Capacity for steam locomotives is available, as is that for rails, but in order to put the factories to work, we need steel, and steel is tight.

Steel output, which is estimated at 69 million tons this year, is insufficient to meet demands now coming from American industries. The only possibility of doing our part lies in the restoration of controls. As Secretary Harriman puts it, there must be a “deferment of cravings.”

More government controls?

How will Congress take to a scheme which might put us back on a wartime basis? The Eightieth Congress was elected on a program of “normalcy.” It started out by trying to do a job of spring cleaning on the controls, extravagances, excesses, and statutes associated with the war. But the job was only half done.

Part way through the session the realization was borne in on the legislators that the peace remained to be won. The realization was helped by the nearhysteria induced by the troubles with Russia. At any rate, the Eightieth Congress did two things which put the necessary weapons in the President’s hands for fulfilling the Marshall Plan. One was the renewal of export controls. The other was the renewal of the war power to divert capital goods from domestic markets.

Few people last November would have prophesied such a ready willingness to give the President export and allocation powers. These facts alone should encourage Europe as a whole to produce the kinds of import controls and allocation powers that are the necessary complement of ours.

Before adjournment a Select Committee on Foreign Aid was set up under the titular chairmanship of Representative Charles A. Eaton. Under him will be Representative Christian Herter, who will run the inquiry. Herter intends to set up committees parallel to the Harriman inquiry, and to dispatch them to foreign countries to see what can be done, what should be done, and what is being done. Already the Committee has at its disposal the testimony on domestic possibilities got together by the Vorys subcommittee of the Committee on Foreign Affairs.

The Eightieth Congress

This picture of President-Congress coöperation in foreign affairs makes last November’s prognostications of deadlock look a trifle sick. But even on the foreign front it hasn’t all been milk and honey. By no means. Congress tried to slip an import fee provision into the wool price support bill which was in flagrant disregard of our commercial treaties. It almost wrecked the Geneva conference for setting up an International Trade Organization, though this shows precious little life, anyway. President Truman’s veto stuck.

(continued)

Yet, as if to cancel out this legislative transgression, the State Department inserted a debt-collecting item into the bill for a fresh allocation of sugar imports. The clause was aimed at Cuba. Evidently Cuba owes money to private Americans for supplies to old Cuban administrations. It is a long-standing debt, and Cuba has offered to submit the dispute to the conciliation machinery set up under various inter-American agreements. Why the State Department refused to agree is a puzzle. Certainly this reversion to the big Stick is contrary to all our professions as well as our pledges. It will plague our Hemisphere diplomacy.

Speaker Martin said last November that the new session would open with a prayer and end with a probe. He was prophetic, except that he ought to have used probe in the plural. Congressmen are now scattered all over the country and all over the world looking into matters that require legislation. On the domestic front, investigations into prices, social security, and housing are planned. Lack of action on housing was one of the great omissions of the Eightieth Congress. At the same time Congress accepted the President’s plan for the reorganization of housing agencies.

THE MOOD OF THE CAPITAL

The mood of the Capital in these no-Congress days is one of thankfulness that all the dire prophecies of Executive-Legislative deadlock have not been realized. Next year, of course, will be the great test. That is the reason that constructive-minded people hope there will be a special session this year, so that necessary legislation will not be bedeviled by electionyear politics.

Take, for instance, national military training. Secretary Marshall attaches the greatest importance to such a measure. To him it would come as a mighty strengthener of his arm in the coming diplomatic tilts with Molotov. It would likewise serve to fill out the new security pattern which has been established by the unification measure. Whether, in spite of popular acceptance of the need for military training, it can be enacted is, of course, a moot point. But, clearly, the difficulty would be enhanced in an election year.

The Capital feels deserted, but Congress has left us to live with an aura of suspicion over the heads of Federal employes. It is anything but a pleasant atmosphere.