The American Giveaway Mania

March 13, 1950

The Administration is now possessed with a mania for “lending” or giving away the American taxpayer’s money to any foreign government that it can coax into taking it. This mania grows by what it feeds on. The Marshall plan is only one channel for it. In addition there are the Export-Import Bank, the International Bank, the International Fund, the arms aid program, and the proposed global catchall. Point Four. Our foreign policy can almost be summed up in four words: “Give ’em more money!”

If none of these government handouts had been devised, Europeans would still have had great need for American capital. They would have had to apply for private loans. And they could have got these only by restoring the confidence of American private investors. It is not difficult to specify the reforms they would have had to make to inspire such confidence:

1—They would have had to assure anybody who put money into Europe that he could get it out again. This means that they would have had to make their own currencies freely convertible into dollars. They could have done this simply by dismantling their wartime exchange control.

2—They would have had to assure foreigners holding pounds, francs, or lire that these currencies would not depreciate. This means that they would have had to halt monetary inflation. To do this they would have had to return to balanced budgets.

3—To return to balanced budgets European governments would have had to give up nationalization, which has meant huge deficits in the nationalized industries. They would have had to reduce to manageable dimensions food subsidies and overgrown relief and “social security” programs.

4—They would have had to stop threatening still further nationalization, expropriation, and seizure.

5—They would have had to relax or abandon controls over wages, prices, interest rates, and profits.

6—They would have had to reduce excessive taxation.

If Europe had been obliged to attract private capital, such reforms would already have gone far farther than they have. They would have brought not only far more production, but the freer and more balanced trade, the “currency convertibility,” the “multilateralism,” and the “integration” for which our ECA officials have made futile exhortations. The reason for their futility is clear. As long as foreign governments can pick up easy money from our own government they don’t have to make these reforms.

As a result European recovery has not only been slow and precarious, but the recovery that has taken place has been in the wrong direction. Production indexes have gone up; but the added production is not primarily for export, as it should be, but for home consumption. So foreign trade is still unbalanced, and Europe’s self-induced “dollar shortage” remains.

The dilemma of the Marshall plan and of Point Four, the dilemma of every government-to-government handout, is plain. If our government imposes no conditions on its handout, the money is worse than wasted. If it does impose conditions, they provoke foreign resentment.

Our ECA officials vacillate between the horns of this dilemma. First they say that they won’t interfere in the “internal” affairs of these countries. Then, of course, the European governments getting our aid make in return none of the economic reforms so desperately needed. The British bureaucrats repay us by discriminating against American motion pictures and American oil companies. The French repay us by threatening the sale of Coca-Cola. Then our ECA officials talk of “getting tough.” But when it comes to a showdown they cannot risk insisting on reforms that would be really effective. So we end by subsidizing foreign-government discrimination against our own industries.

In short, government “loan” and gift programs like the Marshall plan and Point Four do not promote world recovery; they retard it. We are subsidizing and prolonging statism and socialism abroad, and imperiling our own free-enterprise system to do it.