How We Subsidize Collectivism

April 10, 1950

The action of the House on continuance of ERP does not indicate that we are going to use any more common sense in dealing with the European economic problem in the future than we have in the past.

The Administration has dismissed all critical discussion of the Marshall plan as “partisan” and “isolationist.” It attempted to drive the new ERP bill through Congress under a barrage of emotional slogans and scare words. Though we originally offered Marshall aid to Communist Russia itself, it is now represented as our chief weapon for “combating” Communism. Once more it is implied, by the President, that refusal to vote for the Administration bill may bring on the third world war. “Failure to enact its full amount,” he writes, “would do irreparable damage.”

Properly resenting these tactics, but without leadership of their own, a bipartisan majority in the House did have the temerity to cut the authorization by the moderate amount of $250,000,000. They also cut the authorization for Point Four by $20,000,000. But they failed to recognize that in accepting the premise of Point Four—that the American taxpayer owes the rest of the world a living—they were letting him in for a bottomless obligation.

If the Senate is interested in the kind of revision that is really needed in the ERP program it could not do better than to read the article by Dr. William Röpke in the Commercial and Financial Chronicle of March 16. Writing from his European watch tower in Geneva, Dr. Röpke says supremely well what some of us have also been trying to say over here for the last three years. The present economic troubles of the countries of Western Europe, he points out, spring mainly from the nationalistic policies being pursued within those countries:

“It is no longer necessary to define those national policies. They are familiar ever since Hitler came to power and, under the guidance of Dr. Schacht, set the example of a type of national economic policy which we propose to call National Collectivism. It is the well-known combination of repressed inflation, collectivist controls, ‘full employment’, exchange control, state monopolies, bilateralism, subsidies, fiscal socialism, ‘cheap money’ policies, and the strange mixture of the restriction of private consumption and of public waste which goes under the name of Austerity. . . .

“With the exception of Switzerland and Belgium, all European governments still practice National Collectivism to the extent that they feel compelled to retain exchange control. It is exchange control, which is the real keystone of National Collectivism. . . .

“The devaluations certainly eased the strain, and they were in most countries the indispensable condition for the removal of exchange control. . . . But the chance offered by the devaluations has not been used, which means that the European governments resemble a surgeon who opens the abdomen without removing the inflamed appendix.”

Dr. Röpke then turns to the proposed European Payments Union. “It is being realized by most observers that convertibility of currencies is the cardinal problem. To restore convertibility, however, is tantamount to abolishing exchange control. Not daring to face this thorny issue, many people prefer to believe that there is something ‘almost just as good.’ It is the idea of a European Clearing Union. . . .

“The crucial point, however, is again whether the national governments retain exchange control or not. If they do, then the idea of a European Currency Union has hardly more sense than an American currency system would have if the United States would split into forty-nine systems of state collectivism and of state exchange control. If they abolished exchange control, then we have all the monetary integration we need without the new cumbersome machinery of a European Monetary Union.”

As a result of the evangelistic and intolerant fervor with which its sponsors promote the ERP over here, none of these economic realities is getting any serious attention.