The Road Uphill: Belgium's Post-War Recovery



WHEN the Belgian government returned to Brussels on September 8, 1944, from its wartime stand in London, it found a country prostrated by the ravages of war. Nazi controls had reduced the economy to a state of pernicious anemia; and prices had soared to 1,500 per cent of their prewar level. (I refer to the actual cost of living, not to the official price scale, which meant nothing at all, as no goods could actually be obtained at those prices.)

A year later, our prosperity was a surprise to everyone. All the factories were going at full blast, so were the building yards. Prices had declined to about one quarter of their level at the liberation. The rate of exchange was stable, the monetary reserve untouched. And people were talking about “the Belgian miracle.”

But there had been no miracle. There had been, first and foremost, work —hard work by all the Belgians; and next, sensible measures, adopted at the right time in vital segments of the economy, and carried out with discipline by the nation.


I mention this first and must apologize, since it was my own responsibility. But I give it first place because it was here that the fastest action was needed, and here that, by the force of circumstances, the action taken was the most spectacular.

A terrible evil was undermining Belgium — inflation. The money supply (currency and bank balances) had more than tripled during the war, rising from 55 billion francs to 155 billion francs. On the other hand, the supply of goods had drastically decreased. Bombings had destroyed one part of it; another and larger part had been looted by the Germans. Scientifically planned, this looting had intensified both the sources of inflation. Belgian factories were compelled to send to Germany part of their production: hence a shortage of goods. To get paid, these Belgian factories had to apply to the so-called Issuing Office (Institut d’Emission) set up by the Germans soon after the invasion; and the Issuing Office had discounted their notes, becoming itself a creditor of the Reichbank of Berlin: whence an increase of paper money without actual counterpart. By the time of liberation, the credit of the Issuing Office with the Reichbank had risen to 63 billion francs. Needless to say, this credit was no longer worth even 63 peanuts.

The bull had to be taken by the horns, and we did just that. All money had to be deposited, all bank accounts declared, within five days. Of the 155 billions in circulation, 98 were withdrawn — 59 billion permanently blocked, 39 temporarily frozen. To unfreeze these last assets, the holders had only to prove that their use would contribute to the restoration of the national economy; and, very rapidly, they were turned into free accounts. The other 59 billion were made available later on for the payment of special taxes, and about halt the amount was thus absorbed. Later still, the other half was turned into government bonds, redeemable over a period of twenty years. The significant fact is that at a crucial moment a sound relation was established between the volume of paper money and the volume of goods, and thus in one stroke inflation was nipped in the bud. Even at present, after nine years of almost continuous prosperity — with a reinvigorated economy, with stocks replenished, and with plants reconditioned— the money supply amounts to 175 billion francs, only about 10 per cent more than the amount we found on our return to a Belgium looted and ruined.

These results show that the program launched in 1944 has been carried out unremittingly over the last eight years, thanks to the government’s determination to balance the budget and to the wise credit policy of the National Bank.

There are many picturesque sidelights on the preparation and enforcement of the monetary decrees we passed. Our whole course of action had naturally been arranged before the liberation. The new bank notes, which were to replace those turned in, had been printed in London. Their total weight was 120 tons, and shortage of transportation almost made the whole plan fall through. Every available vessel was earmarked for troops, equipment, and munitions. But thanks to the ingenuity of an American officer, we procured two invasion barges which took the precious bank notes to Rouen, whence they were carried by rail to Brussels.

Deposit offices had been opened all over the country. People formed long lines in front of them, particularly on the first two days, but without unpleasant incident and, on the whole, with good humor. Three times, I stood in those lines myself, incognito, to see the reactions of my fellow countrymen at first hand. As might have been expected, I heard myself cursed rather often and occasionally sentenced to death in absentia. But most of the people realized that the measures taken were necessary, and they considered the apparent sacrifice imposed on them nothing in comparison with the suffering and ruin which four years of occupation had brought.

Of course the tax evaders and the war profiteers thought differently. For them, the monetary decrees were a catastrophe from which they tried to escape by disposing of their bank notes in all possible ways. Peasants were seen burning them — shoveling them into the fire — rather than declare them. The driver of a 1935 Ford was stopped in the street and was offered a million francs ($22,000) for his car. For five days, the most incredible exchanges took place.

On the other hand, the reverend mothers of several convents sent me their warmest thanks. One of them wrote to me: “We are very poor. . . . When the declaration of bank notes began, we had only 100,000 francs. On the first day, we received anonymous gifts which brought this sum to one million; and, by the time the declaration period came to an end, we had ten million. Thank you, Mr. Minister. Thank you with all our heart.”


Other measures were taken in the strictly financial sphere, that of securities and slock markets. All these measures aimed at clearing up the situation from the start, from the moment of Belgium’s rebirth. They were followed by a gradual return to normalcy, to individual initiative and free enterprise, Belgium’s trump cards in the past.

In the same way, exchange controls were relaxed, and all that is left of them today is a system so pliable that Belgium could easily change over to a policy of convertibility whenever international circumstances favor such a move. Through the domestic measures already taken, Belgium is one of the countries which has done the most toward the eventual return of international convertibility.

In economic matters, too, it was necessary to take as a starting point the situation left by the occupation and act accordingly. Prices were fixed, everything was controlled and regimented. The process of decontrol took place gradually. At present, price controls are limited to rents, bread, coal, gas, and electricity. Everything else is free.

Quota restrictions — always fewer in Belgium than elsewhere — have been reduced in accordance with resolutions passed by O.E.E.C., and even beyond. Provisions made by the Belgium-Luxemburg Union at O.E.E.C. abolish 60 per cent of (he restrictions on food stocks, 82 per cent of the restrictions on raw materials, and 78 per cent of the restrictions on manufactured goods. But the releases actually put into effect go still further, and add up to 91 per cent of the total. In this sphere, also, it may be said without bragging that Belgium is a pioneer of progress.

U.S. Aid

This sketch, rough as it is, of the course taken in the last nine years in the financial and economic field, would be incomplete and one-sided if it did not take into account the part played by the United States in Belgian recovery.

Right from the time of the liberation, our policy was to place at the disposal of the allied armies all the country’s resources and, above all, its entire working force; and we saw with pride our contribution to Reverse Lend-Lease rise 130 million dollars above what we had received through LendLease. Furthermore, this same policy brought into our economy a particularly precious supply of dollars and sterling.

Later, that program of broad co-operation and magnificent human understanding called the Marshall Plan had its impact on our economy. Some people, in America itself, have regretted that it contained “disincentives to recovery"; and that Belgium, which had done so much on its own to restore its economy, should have had proportionally the smallest allotment in the plan. I do not share this feeling. First of all, nobody can deny that the aid we received was most useful to us. Furthermore, if we got back on our feet, it was not with the idea of obtaining a larger or smaller slice of what American generosity might some day provide. What moved us was a sense of national dignity which was rewarded by the very result of our effort.

Social Security

War and the Resistance had brought the various social classes closer together. Even before the liberation, thought had been given to assembling under one law the various provisions for social security in force before 1940, to getting them harmonized and expanded. On December 28, 1944, the basic law was passed, and later was implemented through a series of decrees.

The cost of social security amounts at present to almost 34 billion francs a year, which is more than 13 per cent of the national income. Ten billion are contributed by the government, 16 billion by the employers, 8 billion by the workers.

This is a large commitment, and one which could become a burden in the event of an economic depression. On the credit side, however, it can be pointed out that since 1944 not a single long strike has been organized in Belgium. There has been no social strife. In addition, the atmosphere thus created has led to a sharp rise in production. The index for industrial output, taking 1948 as a base, shows a rise from 82 in 1938 to 114 in 1952, and was still at 105 in 1953 when the effects of the Korean war boom were over. Exports have risen from 22 million tons in 1938 to 25 million tons in 1953.

International Policy

The whole of Belgium’s outlook toward foreign affairs has been governed by one key idea: the progress of science has completely changed the premises of political, economic, and monetary problems. From a national scale, they have moved to a world scale. Conflicts are no longer between men or groups of men, but between giants. It is better to be part of a giant than to be crushed between two giants.

Nor does this conviction stem from any belief that such conflicts are inevitable. On the contrary, one of the best ways of avoiding them is through a better balance of power. Belgium, remembering the lessons of the past, is more than willing to play its part in this balance.

Quite realistically, then, casting aside formulas belonging to a vanished world, Belgium has found itself in the vanguard of the great movements for international integration. The Benelux Customs Union is the concrete embodiment of Belgium’s willingness to sacrifice certain local interests in the interest of freer trade and larger markets. The same common-sense reasoning caused Belgium to take an active part in the formation of the European Payments Union and in the implementation of the Schuman Plan.

In the political sphere, Belgium has been a firm supporter of the Council of Europe: we believe that the groundwork must be laid for a supra-national organization which alone can safeguard the independence of individual nations, and we are willing to face the necessity of national adjustments. Similarly, we have backed the European Defense Community, on the ground that it is better to have twelve German divisions within the framework of a European defense system than fifty German divisions on their own which might be turned against us.

None of these ventures are perfect, nor are they yet operating successfully; but each one of them offers great hope. My country will devote itself to the realization of this hope with all the fervor it brought to its own recovery from ruin.

Translated by Nancy Lenkcith