The Atlantic Report on the World Today: London

THE British Cabinet has been at pains to impress upon the world the hardships entailed in its rearmament drive. Here is how London’s official comment runs: To shoulder the new preparedness burdens without substantial American help would throw back British recovery just as it is lumbering to its weary feet. Following the switch to greater munitions production, British exports are likely to be lowered and imports raised, upsetting the nation’s trade balance.

The public is being reminded that world price trends have been moving remorselessly against Britain and will probably become si ill more unfavorable. In the nine months following devaluation of the pound in September, 1949, prices of British imports– especially of food and raw materials— rose by 20 per cent. In the same period, prices of British export goods — notably of manufactured articles—went up only 5 per cent. To reduce exports and enlarge imports, as rearming will necessitate, is particularly awkward when Britain’s terms of trade have been worsened by 15 per cent and are continuing to deteriorate.

Then, the government goes on, there are Britain’s financial obligations to other countries. Sterling balances, which are mostly war debts owed to India, Australia, Egypt, and others, amount to the equivalent, of about 9 billion dollars. Britain’s creditors are likely to say, “We want to use that money. If you British can’t repay us in goods, we‘ll have to convert more of it to buy in America or elsewhere.”

This threat, officials emphasize, makes it yet more risky for Britain to draw on her dollar reserves to purchase American materials for arms production. Although the gold and dollar nest egg has been hatching nicely, in purchasing power it is still equal to only about one quarter of the pre-war reserves.

The plan to spend 9.5 billion dollars in the three years starting next April involves the highest defense outlay ever made by Britain in peacetime. It will mean doubling the present output of military equipment. As a million conscripts have received training since 1945 and as there are additional reserves of 4 million men who were under arms in the recent war, the government is putting overwhelming emphasis on producing munitions rather than on manpower.

Finally, it is being pointed out that Britain is proposing to increase its military expenditure by 45 per cent; that until now the British have been spending on their armed forces 7.4 per cent of the national income, contrasted with only 5.9 per cent in the U.S.; and that even with the additional American appropriation for defense, Britain will be matching approximately the United Stales outlay of 10 per cent for armed preparedness. So much for the government’s version.

Will the U.S. Britain arm?

Critics are putting the ease in a different light. They stress that the United States is being asked to pay one half of the increase in military expenditure under Britain‘s three-year rearmament project. That would be over and above Marshall aid.

If the U.S. were to make a contribution near the sum requested, that would minimize both dislocation of the British economy and sacrifices said to be in store for the British people. It would reduce to an average of less than 500 million dollars a year their extra rearmament load. This looks extremely modest against the setting of Britain’s national income, which totaled more than .31 billion dollars in 1949 and has since been rising.

Furthermore, the higher rate of productivity already attained would more than pay for an extra 500 million dollars annually for armaments. Industrial production in the United Kingdom is running 9 per cent higher than a year ago, or over twice the rate of increase which the government had assumed. Britain will have an additional real output in 1950 valued at least at 1.4 billion dollars, from which she could comfortably meet the proposed 500million-dollar increase in arms expenditure, always supposing that the U.S. will finance the other half.

Finally, Britain is going to reap very large advantages from America‘s own rearmament, besides the assurance that it will buttress British defenses. Stockpiling in the United States will entail larger U.S. purchases of such British Commonwealth products as rubber, wool, and tin. As a result, hundreds of millions of American money will pour into the sterling area’s dollar pool. Rising prices of these commodities will further benefit the British Empire. All this will give heightened security to the sterling area’s dollar position, which has already improved from 1.34 billion dollars before devaluation of the pound a year ago to 2.42 billion dollars by mid-1950.

Substantial new American military assistance, Britain’s gratifying rise in production, and dependable revenues for the Commonwealth from its growing raw material sales to the U.S. are among the things which prompted the Times of London to write of “rearmament without tears.”

■Britain dues not expect war

The plain truth is that British opinion, including that, inside the Cabinet, believes that the Korean storm will blow over and that another world war is unlikely soon. If it were not for Washington’s gloomier view and for American prodding in London, it is very doubtful whether Britain would have moved, even to the present extent, in the direction of war preparation.

There is reluctance throughout Europe, not. least in Britain, to tread this path. It is partly due to a civilized disgust at the prospect of another carnage, accentuated by atomic ruin. It is also motivated by economic hesitancy. The British are exceedingly loath to incur the commercial disadvantage of switching their metal and other industries from peace production to munitions. It is unpleasant to bury your nose in armaments while the Germans, the Japanese, and other trade rivals are recapturing foreign markets.

Nor does the Labor Government relish the necessity of calling off exfension of the welfare state, and of retrenching on social services, food subsidies, and housing credits. That could cost Labor votes at the next general election.

Even a glance at Britain’s rearmament program suggests a big time-lag before its fruits ripen. Many months will pass in planning and talking with manufact urers be fore orders are placed. Then new machinery must be bought. Arrangements have to be made to get from America machine tools, raw materials, and components, as well as dollars which Britain would be free to spend in any part of the world.

Existing machinery in Britain must be retooled. Several hundred thousand workers are probably to be transferred from peace to war production. Britain’s limited rearming halts far short of a war economy, but it will attain its full volume only in 1952.

Objection to our Asiatic policy

Retail stores report a marked absence of any “scare” buying, such as occurred in America. This offers ample evidence that the British people do not sense any threat of early war. They are roughly aware, however, of what is happening. Asampling of public opinion indicated that 99 per cent of the people had heard about the Korean fighting, and that 68 per cent approved American intervention, 15 per cent disapproved, and 17 per cent didn’t know. Since this test was made, British popular support of U.S. action in Korea has grown.

Opposition has been concentrated against two facets of American policy: the objection to seating Communist China in the United Nations and the decision to defend Formosa against Chinese Communist invasion. Criticism of the U.S. attitude on both counts has extended far beyond the British Communist Party. Even the Sunday Observer, an independent London newspaper owned by the Astor family, has been scolding the United States for refusing to realize that “recognized or not, the Peking government is the effective government, of China.”

It is a strange experience to find a reputable British Tory journal indicting America for threatening to wreck Britain’s new policy of “anticolonialism.” Having given freedom to India, Pakistan, Burma, and Ceylon and promoted the advance towards self-government in other parts of the Empire, Britain now professes uneasiness at actions which hamper the West in challenging Moscow as the true friend of the great Asian national movements.

“This policy, from Pakistan to Indonesia, has ended colonialism,” wrote the Observer, “eased t the tension between Asia and the West, and created a new community of free and friendly nations. Does it count, for nothing that nearly all these nations now feel solidarity with Communist China and side with her over the Formosa question, even while they oppose aggression in Korea? Is their advice to be contemptuously disregarded and their good will and trust, so laboriously earned, to be thrown away? Is our whole wellthought-out Asian policy to be laid in ruins for the sake of keeping a paltry island in the discredited hands of General Chiang?”

Many utterances along these lines can be heard and read in Britain, multiplying as one moves from Conservative into Labor Party and tradeunion camps. This diplomatic view was expressed by the British Minister for Commonwealth Relations, Patrick Gordon-Walker. Speaking at a press conference during a visit to Sydney, Australia, Gordon-Walker said, “In the event of Chinese Communist forces clashing with United States forces protecting Formosa, the British Government will accept the view of the majority of the United Nations.” Here was endorsement of the U.S. government’s confidence that it could rely on our British ally, regardless of queasy feelings.

Britain and the Schuman Plan

The Far Eastern crisis has had a profound effect on the Schuman Plan. It has intensified the urgency with which France and Germany are preparing to pool their steel and coal resources. It has driven them to insist even more strongly on the principle of a supranational authority and to move more openly towards West European federation.

Yet these are the very aspects of the Schuman scheme which, from its birth, antagonized Britain. Britain’s refusal to become a full member became inevitable owing to her outright rejection of federalism and her unwillingness to submerge her sovereignty under a dictatorial authority. Constitutional checks and balances, which the French have since inserted into the plan, utterly failed to dispel these British objections.

On the other hand, the outlook for Britain’s association with the plan, without complete participation, has improved. The British intend to link themselves with the technical side of the emerging Continental steel-coal fusion. They want to be connected with the producers‘ associations of the six founding nations and with the plan’s commit tees on wages and labor conditions.

Above all, they wish an arrangement on partitioning markets, reserving to themselves the Commonwealth and the bulk of Latin America. Taken together with the Schuman Plan countries, Britain produces one third of the steel of these seven nations, and one half their coal. The British are such large producers in relation to the Schuman group that a trade war would be madness for both parties.

This buttresses the British belief that an understanding on markets, perhaps after some delay, will emerge. The situation has led the French and Germans to see in the British attitude a desire to harvest the benefits of the plan without being bound by its responsibilities. But there is space for maneuvering and bargaining here.

The Korean conflict and mounting fear of world war have changed the; background against which the Schuman Plan was conceived. Its pattern originally reflected the report of the Economic Commission for Europe, foreshadowing a surplus of 8 million tons of steel in 1952. This explains why British critics (forgetting that their own country is honeycombed with cartels) decried the Schuman project’s “restrictionism.”

Forebodings of artificial steel scarcity have evaporated with the new impulse to rearm. Who now thinks of shutting down obsolescent plants? Even less efficient steelworks are wanted since a swift doubling or trebling of arms production is the aim.

Integration of Western Europe, including Britain, will now come from common defense projects. On this ground, without early political federation, Britain and the Schuman Plan members can come to terms. Joint military preparations will throw across the English Channel a drawbridge which could later be turned into a more lasting structure.