Belgium: Experiment in Freedom

May 12, 1947

BRUSSELS—It is only an hour’s airplane trip from Paris to Brussels, but in that hour one passes from shortage to comparative plenty. The most dramatic evidence comes at night, when the streets are ablaze with electric signs, contrasting with the blackness of Paris or London. Belgium’s output of electric power in March was 80 percent higher than the rate in 1936–38. This in turn was made possible by a coal output ranging from 85 to 90 percent of prewar levels.

In Belgium, as in France, the complaint is that coal is the great limiting factor on production. Yet an index just prepared by the newspaper Agence Économique et Financière gives Belgium’s overall industrial production as 108 percent of the prewar level in March, with an estimate of 112 for April. This compares with an index for France of about 88 percent of the prewar level and for Holland of about 80.

Comparative plenty is also found in the stores. There is a wide variety of imported clothing. Nylon stockings have actually become a glut on the market. Cigarettes seem plentiful. In restaurants one has little trouble getting coffee, tea, sugar, butter, California oranges, and other fresh fruits. For Belgium has deliberately followed a different policy from that of its French and British neighbors. It has not discouraged or prevented imports.

The Belgian authorities figured correctly it was worth risking a shortage of foreign exchange in order to stock up adequately with materials for industry, to “fill the workman’s belly,” and to give production incentives to their people. The policy has paid handsome dividends. Belgium has not lost exchange, though the statement of the National Bank of Belgium for April 17 shows a decline of 5,716,000,000 francs in gold compared with the corresponding date a year ago. It shows a compensating increase of 5,135,000,000 francs in foreign exchange holdings.

Belgium has sought to deal with inflation through its causes rather than by trying to suppress its symptoms and results. Immediately after the German occupation, the government mopped up a huge excess of outstanding currency to prevent any further inflationary effect. The authorities boast that since the end of 1945 they have been able to prevent the total supply of money from increasing. There is still a heavy budgetary deficit, however, and this problem is far from solved. Yet the country has been remarkably successful in holding up the value of its currency, which has actually gone to a premium over the British pound on the outside market. This spectacle—together with governmental pledges against nationalization or new taxes on capital—has increased Belgian confidence and led to the voluntary repatriation of Belgian funds from abroad.

The Belgian Government has been working hard for the reduction of foreign trade barriers. It has removed almost all restrictions on imports. This policy is no doubt inspired by self-interest. Belgium is a “transformation” country heavily dependent on foreign trade. But the policy is also farsighted. Just as foreign exchange controls force domestic controls and vice versa, so external and internal free trade go together. Since early 1945 Belgium has been steadily relaxing price controls and rationing. In any case, it seems unable to enforce controls. It is estimated that about 80 percent of all Belgian agricultural products go through the black market.

The desire of Belgians for freedom of trade has led to perhaps the most heartening single development in the whole of Europe. This is the pending customs union between Belgium, the Netherlands, and Luxembourg. The agreements, already signed by representatives of the three governments, now await ratification by their legislatures. They contemplate adoption by Belgium and Holland of identical tariff schedules, designed more for revenue than for protection, and the gradual elimination of trade barriers between the two countries. When this union has been completed, “Benelux” will be the greatest foreign trading market in the world next to Britain and the United States.

But the real importance of the union is symbolic. When other countries are rushing toward more economic nationalism, tighter trade controls, and dreams of autarchy, when they pay freedom of trade chiefly lip service, Belgium and Holland are getting a model for action.