America Needs Foreign Aid
( Originally Published 1952 )
`The reduction and eventual termination of foreign assistance will create tremendous economic problems at home.'
President Harry S. Truman
April 2, 1950,
AMERICA NEEDS EVER EXPANDING FOREIGN MARKETS TO STAVE off depreSsion. Even before the second world war, her economic order was much more dependent upon foreign outlets for its surplus goods than is generally realized. American exports during the last years of peace averaged only $3 billion annually, a mere four to five per cent of the nation's business; but this seeming trifle was as vital to it as the infinitesimal quantities of vitamins in food are to the human body; and exports, even then, were the very staff of life for many branches of the economy.
The farmers had to sell abroad nearly every second bale of cotton, every third bale of tobacco, every ninth ton of wheat they raiSed. Tool and machine makers had to export 28 per cent of the machine toolS and metal-working machines they made, i8 per cent of all agricultural and printing machinery, and 16 per cent of all textile and sewing machines. Automobile manufacturers had to rely on foreign buyers for every fourth or fifth truck and every fourteenth pasSenger car; without those exports, they would either have made no profitS or would have had to raise home prices by about one-quarter, riSking a further drastic fall of automobile sales.
Hollywood got one-third of its income from abroad, and many American films would never have been made had not their scripts been rated promising for export. 'In 1940 not more than four or five out of every ten pictures were able to recoup their production costs from domestic showings alone', Business Week wrote on July 23, 1949, when Hollywood needed still greater exports.
Three to four million workers and farmers, with their families, depended on work for foreign markets. Without these export jobs, the total number of 10 million jobless at the time would have grown not only to r3 or 14 million but possibly to 15 or 16 million. For had the export workers lost their jobs and purchasing power, they would have dragged with them many others who had their employment from the wages the export workers spent; and such a swollen army of unemployed might well have turned into one of rebels against an economic order unable to give them a living.
After the war, the need for foreign sales became still greater. The nation's total productive machinery had been expanded by almost one-half. Population growth enlarged the labour force by one-fifth. And the average worker's increasing productivity tended to outpace his purchasing power, threatening to leave greater and greater unsold surpluses of goods.
Early post-war conditions disguised the magnitude of the urge for larger exports. It took time for industry to reconvert to peace production and make up for war-created shortages. And accumulated wartime savings for a while kept domestic demand at an exceptionally high level. For America to export at all in 1946 and early 1947 appeared to many as charity toward a shattered world, rather than the timely effort it was to forestall competitors, cultivate old clients and stake out fresh markets for the coming years of glut.
Yet clamours for larger and larger exports were heard even then. America "may produce itself into a bust" unless greater world markets are developed, George L. Bell, deputy director, Office of International Trade, Department of Commerce, said', according to the New York Herald Tribune of October 14, 1946; 'domestic demand will be "pretty well supplied" by American industry within two or three years. It will be up to our overseas trade to supply the gap from then on. [For example], the machine tool industry has decided that the only way fully to utilize their wartime-increased capacity is to plan a decided expansion in overseas business. One group recently confided that unless they are successful in developing a big overseas trade in the next nine months they will have to drop 5o per cent of their employeeS.'
This was nine months before Secretary of State George C. Marshall gave the historic address at Harvard University that led to large-scale aid for American exports through aid to Europe.
Even before this came about, America already exported these shares of all she made: 6.1 per cent of chemical products, 6.7 per cent of passenger automobiles, 6.8 per cent of electrical machinery and apparatus, 9 per cent of rolled steel products, 11.5 per cent of anthracite coal, 15.9 per cent of agricultural machinery and implements, 19.5 per cent of freight cars, and 19.7 per cent of trucks (according to the President's Council of Economic Advisers). The farmers exported 2.3 per cent of their wheat and 30 per cent of their raw cotton and tobacco.
Of the total volume of all factory and farm products with domestic and foreign buyers 11.7 per cent were sold abroad.
Altogether, during the year before the Marshall Plan, America's $14. 1/2 billion exports were 7.2 per cent of the nation's business, a two-thirds larger share than in the thirties. Yet even this was far from sufficient. 'The Department of Commerce hopes that foreign trade will account for 20 per cent of our national business', continued the report about the warning of Mr Bell. 'Such a volume, he predicted, will mark the difference between profit and loss for many industries in the future.'
It would be wrong to interpret the Marshall Plan only as a measure to provide export relief for America; but the increasing need for foreign markets as a means of forestalling depression at home ranked very high among its motives. The popular press scarcely mentioned this aspect because it showed up so clearly the shortcomings of America's unreformed economic order; but business people were kept aware of it.
'Why U.S. Offers Aid To Europe—Loans And Gifts As Way To Check Recession', United States News explained on July 4, 1947. 'If world buying power is exhausted, world markets for U.S. goods disappear. The real idea behind the program, thus, is that the United States, to prevent a depression at home, must put up the dollars that it will take to prevent a collapse abroad.'
The very urgency of pushing the Marshall Plan through a tax-shy Congress was dictated by this domestic need. 'With unprecedented demand for goods at home and record exports, the rate of output in industry still is declining a bit', the magazine warned a week later. `There are cutbacks in textiles, machinery, transportation equipment, other industries. The new foreign-aid plan will be intended in part to keep exports moving so that goods will not back up at home, clogging markets.' Chester Bowles, the former 'Economic Stabilizer', told a Congressional subcommittee on September 26, 1947: The United States is heading toward some sort of recession which can be eased by quick approval of the Marshall Plan.
The real argument for the support of the Marshall Plan is the bolstering of the American system for future years', United States News wrote again on February 2o, 1948. 'It means an underwriting of American prosperity.'
Among the many powerful business groups insisting on aid for themselves through aid to Europe were the oil interests, of whose benefits from the Marshall Plan Fortune magazine said later that, 'indeed, if the E.C.A. had not started to supply the dollars that summer, their foreign business would have fallen flat [for] since then more than one-tenth of all E.C.A. expenditures, some $90o million' were spent on oil; and the 'diplomats of the cotton kingdom', who, according to the Wall Street Journal of March 24, 1948, were 'throwing their influence behind the Marshall Plan ... hoping to revive their once magnificent empire of foreign markets'.
It would also be unfair to deny that Americans sincerely wanted to help the world with the $3o-odd billion of tax money they spent up to 1952 on the Marshall Plan and other post-war grants and loans—as much, according to official figures on national consumption expenses, as the combined gas, electricity and telephone bills of all American families during that period. Relatively few of them even realized that this foreign aid was also a device to 'prime the pumps' of the nation's export trade, was badly needed foreign aid in reverse, for America.
Finally, there is no denying the fact that most of those American surpluses of food and raw materials, equipment and other manufactures which were thus sent abroad were useful to the nations that received them. In the case of Western Europe, that American aid added about 2 1/2 per cent to average national incomes during those post-war years.
Europe, of course, had reason to regret that it had to accept those goods as 'gifts', which stressed her dependence on the goodwill of the United States, and as loans, which would remain a burden for years to come. For a fair and businesslike squaring of the allies' accounts of gains and losses from their common enterprise of war would clearly have established that America owed her allies a large balance that should have been paid off as the plain debt it is—a much larger balance in fact than the gifts and loans some of them were granted, with many strings attached.
More will have to be said in a later chapter about the impact on the world of American aid; but it is important in this context to make it quite clear that gifts and loans, largely motivated by American depression fears, were not what the post-war world needed most from the United States.
What the world needed and still needs most from America is that she put her own house in order, that her giant economy be made stable, predictable, expanding, and able to trade and co-operate fully and consistently with other nations.
Stable—that means America must free herself from the danger and fear of depression and therefore from the temptation to seek false, world-disturbing remedies in a reckless fight for foreign outlets and in work-creating armaments.
Predictable and expanding—that means America must know and plan where she is going, what she will have to buy and sell and invest abroad in years ahead, always aiming at the full and steady use of her great capacity to produce and consume and thus to help stimulate production, trade and progress in other countries.
Co-operative—that means America must let the nations of the world compete fairly for each other's trade; must let them sell a maximum volume of their export products in the American market which reaps nearly one-half of mankind's total income; so that, with their own dollar earnings, they can buy from America, the owner of more than half of the world's modern industry, the greatest possible quantities of all they need to speed up the development of their economies.
Since America has failed to reform her economic order she has also been unable to act according to those principles. And when country after country began to recover from the war and the revival of international competition put her professed trade ideals to a test, America was unprepared to meet the challenge of constructive world leadership.
Shortly before the Korean outbreak, the clash between the United States and the nations she tried to aid was drawing near.
`An international trade war is in the making', William E. Knox, president of the Westinghouse International Company, told a Chamber of Commerce meeting in Des Moines, Iowa, on April 7, 195o. 'New signs of crowding and jostling are appearing in world trade', states U.S. News & World Report on June 22 1950. 'U.S. Losing Its Hold On Brazil's Trade—Our Share Of The Market There Now 42%, Compared With 61% Six Years Ago', the New York Times of April 22, 195o wrote in alarm; although the American share in the Brazilian market still was 'far above the 1938 level of 24 per cent'.
A revival of foreign competition on the American home markets, ever so slight as yet, caused even greater fear. 'Four important kinds of foreign-made industrial tools and equipment have started to invade American markets in large volume', the same paper reported the day after. Again, on June 25, 1950: 'Cheap Japanese tools are now being offered in large volume. . . . The low-priced competition from Japan is paralleled by other low-priced hardware offerings from Great Britain and Germany.' And when a few varieties of steel were offered for sale in the United States: 'a price war has broken out between New York steel warehouses and importers selling European steel, with importers offering price cuts of io to 18 per cent. . . .'
All the while, America has actually been fighting the very nations she wanted to strengthen, fighting them with all the means of old-fashioned protectionism she condemned elsewhere. No other 'free' nation in the modern world protects its industries with customs tariffs as high and with other import handicaps as manifold and drastic as the United States—the one which, with its unexcelled mass production facilities and its enormous domestic market, should have the least to fear from foreign competition.
'High tariffs and other hindrances to imports into the United States can frustrate the most determined European efforts to increase dollar earnings', the Economic Cooperation Administration told Congress on May 8, 1950. The combination of barriers' around the American market `may well make it impossible for Europeans to attain the volume of exports necessary to maintain essential imports.' The quagmires, pitfalls and fences which protect the high protective customs walls of the United States are 'antiquated, cumbersome and in many respects inequitable', vesting . . . 'discretionary authority in customs appraisers'. Because of 'the unpredictable classifications of goods, importers cannot know in advance whether an article will be dutiable at 20 or 5o per cent', or more. And the Buy American Act of 1933 further restricts government purchases of foreign materials.
Moreover, Big Business possesses its own additional means of suppressing foreign competition. The steel industry's domestic customers, for example, were 'threatened by United States steel suppliers with "difficulties" in getting the steel they want if they buy foreign steel for any purpose', the New York Times reported on March 11, 1950; through pressures which are 'informal and unwritten but effective . . . [so that] Europeans sometimes despair of ever being able to earn their dollars honestly by selling a good product at a good price in the United States market'.
If a minor customs duty is to be reduced, 'the tariff brings together a combination of many powerful lobbies in the capital', the same paper observed on March 5, 1950; but the tariffs protecting major economic interests are sacrosanct and never even come up for discussion.
Agitation for even higher tariff walls rises whenever the drift to depression or a mere lull weighs on industry and agriculture. In this agitation the leaders of labour have recently joined those of business. With unemployment increasing and domestic business activity continuing to show a steady decline, demands for the levying of higher import duties on many items to hold at least the local markets may be expected to grow', wrote the New York Times on June 12, 1949. 'Previously, labour has not been particularly interested in the United States levying heavy import duties to protect domestic industry. This field generally has been left to investors. In recent years, however, labour has become highly organized and its leaders are now quick to point out the difference in wage levels here and abroad when an industry is threatened with curtailment as a result of imports. . . .'
The less the Marshall Plan succeeded in solving America's surplus problem, and the more the fear of depression rose, the greater became the gulf between avowal and performance in America's economic attitude toward her friends abroad. 'The schizophrenic policy of this country seeks to make Western Europe sufficiently robust to leave her invulnerable to the Communist threat', the economist Seymour E. Harris wrote (New York Times of July 5, 1949), 'but perhaps also sufficiently anaemic so that she will not compete with exporters from this country. These objectives are irreconcilable.' Bewildered inquiries about America's real intentions came from Western Europe; for there was 'growing confusion abroad about the real trade aims of the U.S.', which 'just don't seem to square with current actions', as U.S. News 6-World Report wrote on February 17, 1950.
Freer trade, according to the official American thesis, was to be the salvation of the free world; but the very wording of the celebrated Havana Charter for an International Trade Organization under the United Nations, sponsored by the United States, proved her own inability to live up to this promise. The United States has written into the charter several restrictions designed to protect particular American interests', Business Week stated on February 25, 1950. Yet, even in its badly distorted form, the charter never came into force because it still did not go far enough for the vested interests to make them sanction its ratification by Congress.
These are some typical examples of the way the logic of America's unchanged economic order has forced her to interpret 'freer trade' in practice.
`At least three Marshall Plan countries—Sweden, Norway and Denmark—which have been urged by the United States to boost their dollar-earning exports, have been denied the means of doing so by selling butter to the United States', Associated Press reported on December 1, 1949. For a provision on the statute books of Congress still makes it possible to bar foreign farm products 'when it is essential to the orderly liquidation of temporary surpluses of stocks owned by the government'. Since the Scandinavian butter was 'too cheap' the ban was invoked, although 'the action conflicts with—and, in effect, suspends—trade pacts under which the United States agreed to accept sixty million pounds of butter yearly. . .
Western Europe as a whole, far from able to grow all the food she needs and chronically worried about the high dollar cost of imports, was beginning to produce too much food for the comfort of America's export interests. 'As the Marshall Plan tapers off, the problem of getting U.S. farm surpluses to food deficit countries will become more and more acute', stated Business Week on October 1, 1949, criticizing some Western European countries on the grounds that they 'expand their domestic and colonial production of food [particularly their] output of cereals and sugar'—because this 'can't help but mean more expensive food, higher living costs, and ultimately a weaker competitive position all-around'.
Due to a bumper crop, France had 3 million tons of wheat available for export. But a French delegate complained at the U.N. Economic Committee for Europe in June 195o that 'Germany, right next door, cannot buy more than 8o,000 tons of French wheat until she has imported from the United States her full quota' of dollar wheat.
Canadian farmers were 'threatened by United States wholesale dumping policies . . . whereby American agricultural surpluses will be offered at prices below cost in the world markets', Minister of Agriculture James Gardiner was quoted by United Press on January 20, 1950; but 'he made it clear that a protest would not accomplish anything effective for Canadian farmers anyway.
America is harsh on her hard-pressed friends and allies when anything they do in their economic plight might be construed as 'discrimination', when they seem to use 'cartel' and 'dual pricing' practices or 'subsidize' their foreign business. Yet America's own post-war record on such matters is much worse. As a rule, the world hears little about actual cases since the aid-receiving governments cannot afford to antagonize Washington; but from time to time typical examples have become known.
On discrimination, there was among many other cases the refusal of the city of Seattle to award either of two British bidders a contract for the supply of electrical equipment. Their respective offers, at $514,860 and $571,632, lost out against the $751,000 bid of the American General Electric Co. (one of the leading advocates of saving the world by converting it to America's system of 'free enterprise'). 'This is precisely what the vast majority of responsible Europeans believed would happen in all industrial fields if and when Europe demonstrated an ability to earn dollars by selling in the United States market', the New York Times wrote on January 27, 1950. 'This distrust of American willingness to follow through on the Marshall Plan . . . is one of the few beliefs about America common to Europeans of all shades of political opinion.'
On cartels, the paper's economic editor wrote on December 26, 1949: 'Well, if Europe has any that are more airtight than the one the United States Government runs in sugar, then this writer, for one, has never heard about it.' He referred to one of the periodic denunciations of European cartel practices by Paul G. Hoffman, the Marshall Plan administrator. Moreover, it is on record through the studies of the Twentieth Century Fund that American cartels regulate 42.7 per cent of the sales of all manufactured goods, 47.4 per cent of agricultural products, and 86.9 per cent of minerals. Before the war, American firms and their foreign cartel allies restricted the freedom of about 20 per cent of America's foreign trade, according to the Temporary National Economic Committee; and there is every indication that these practices continue. Congressional monopoly investigators were told on April 24, 1950 by James S. Martin, former chief of the decartelization branch of the American Military Government in Germany, that 'cartel agreements were being quietly resumed by 1947 . . . to suppress development of the steel industry in areas which it is United States policy to develop under the Marshall Plan'.
'As for dual pricing, we have had it, of course, for years, in the form of subsidized exports of our so-called "basic commodities",' the New York Times stated on December z6, 1949; 'and last week we were reminded that the phenomenon is not entirely limited to the domain of agriculture. While much was being made in Washington of the fact that the steel industry was raising prices on its domestic products, few seemed to pay any heed to the news that it was simultaneously reducing its export prices.'
The classical example on government subsidies is that 'the American taxpayer finances the total cost of merchant-marine construction and half the operating cost'. (New York Times, September 25, 1949.) For 'foreign merchantmen would chase U.S. merchant ships off the high seas if it weren't for subsidies from Congress', Business Week wrote on February 4, 1950.* The Economic Cooperation Administration actually 'penalized eight European countries for failing to ship at least half of
* The new passenger liner United States, which took the Blue Riband of the Atlantic from the Queen Mary in July 1952, was built with the aid of $43 million state subsidies, i.e. 59 per cent of the total construction cost of $73 million, certain Marshall Plan imports in American vessels', the New York Herald Tribune reported on December 26, 1949. The leaders of the C.I.O. Maritime Union even urged Congress in March 195o to require by law that not only the customary half but all government-financed aid materials for foreign countries be transported in U.S. flag vessels.
Post-war America also needs much larger foreign outlets for its surplus capital than ever in the past.
It might seem strange that, at least before the Korean war, there should have been a surplus of investment funds, while official compilations showed that some $120 billion worth of badly needed public works could not be carried out for 'lack of money'; while, `to put a decent roof over the head of every American, a total of some $134 billion' was required for investment in housing (Business Week, September 10, 1949); while American industry, in the estimate of Professor Sumner H. Slichter of Harvard University, lacked most of the $70 billion worth of new equipment to modernize its factories (Fortune, February 1949); and while many businesses, big and small, complained of a dearth of 'venture capital'. But it was no stranger than that there should have been large surpluses of food and other goods at a time when Americans needed so much more of everything than they were enabled to buy; no stranger than that America already suffered large, painful unemployment, even though so much work remained undone.
`Every man here with any connection with American business knows that one of the major financial problems confronting American businessmen today is what to do with surplus', stated Norman M. Littell, a former U.S. Assistant Attorney General, speaking to a Congressional committee in February 1948 about the 'unprecedented corporate surpluses' that were not being reinvested in industry for fear of enlarging the nation's productive capacity too much.
`Investors Seeking Outlets In Europe', the New York Times on May 22, 1949 entitled a report about the 'contracting volume of business activity in this country' which caused investors to seek employment abroad for 'their surplus funds'. 'Where To Invest $59 Billions—Insurance Firms Seek New Outlets For Funds', U.S. News 6. World Report wrote on April 7, 195o, describing the worries of the large insurance companies about the idle 'billions that keep rolling in year after year'. Insurance companies, naturally, are not free to expand into risky foreign fields, but their chronic post-war plight of too much money yielding too little interest is an indication of the magnitude of the nation's underemployed funds.
The world certainly could use a great deal of American investment capital. For the 'backward' nations are eager to push ahead with new economic development. To conquer want and fear, stagnation and backwardness, all of them have been planning or at least wishing to tap their dormant wealth and modernize their methods of production with new techniques and new machinery. American capital, followed by American equipment, could help them greatly in the process. And even in the most advanced countries there is still great scope for mutually beneficial American investment, and willingness to facilitate it on acceptable terms. But it is implicit in the character of the unchanged economic order of America that its capital surplus cannot freely be used for the most necessary development work in the outside world.
This surplus now mainly accumulates in Big Business itself, rather than in the hands of large numbers of individuals. Popular foreign investment by the traditional means of publicly subscribed loans has virtually ceased; just as publicly subscribed stock and bond issues for domestic purposes have yielded to corporate 'self-financing' out of excessive profits. 'Direct' foreign investment by large business corporations has taken most of the place of the former public loans.
Many of the giant manufacturing concerns are continually enlarging their international networks of assembly plants and branch factories, subsidiaries and partnerships, shifting part of their production from the United States into their erstwhile export markets, where they can reap larger profits through cheaper local labour and the avoidance of foreign customs duties. Yet the corporations cannot be expected to sink capital into enterprises outside° their business orbit and direct control, and still less to help competitors.
Investment of this kind has therefore remained relatively small, in terms both of America's need for capital outlets and of the world's hunger for investment funds—quite apart from the fact that much of it has been in factories producing cosmetics, 'soft drinks', fountain pens, patent foods, and other non-essential American 'brand' products, which have only added to the difficulties of existing industries in many countries.
The recent growth of America's capital surplus has coincided with an increasing desire of business and government for control over more foreign raw material resources, a purpose which the investment of capital can well be made to serve.
Large publicity campaigns were launched immediately after the war to tell Americans that their country, the wealthiest on earth, was really a Have-Not nation, sadly dependent upon the outside world. Their motorcars contain 300 foreign materials, brought in from 56 countries. Of the 74 ingredients blended into their Coca Cola, Pepsi Cola and other 'soft drinks' no fewer than 6i come from abroad. Their soaps and toothpastes, powders, lotions, lipsticks need 15o basic foreign elements; and so on. What if those supplies failed to come in? What if the flow of foreign metals ceased?—of lead for the plumbing fixtures on their bathtubs and washing machines; of tin to coat steel sheet for the billions of cans in which they buy much of their fruit and vegetables, coffee and beer; and especially of iron ore for all the steel they use, now that domestic ore supplies are running dangerously short. For the miraculous Mesabi range of solid, high-grade ore from which the steel industry so cheaply covers eighty-five per cent of its needs may be exhausted in less than twenty years. What then?
The drain on our natural resources has been staggering', the U.S. Secretary of the Interior stated on January 25, 1946. 'Only nine of the major minerals remain in our known domestic reserves in great enough quantity of usable grade to last a hundred years or more. Our known usable reserves of twenty-two essential minerals have dwindled to a thirty-five year supply or less. . . Even if we had a hundred years' supply of all the metals we need, it would not mean that we would be safe for a century.'
Americans were warned by a Congressional Committee: of the petroleum that drove their cars and buses and heated their furnaces, only i8 years' supply was left; their lead resources would be depleted in 12 years, their bauxite for making aluminium in 9, their platinum in 4, their mercury and asbestos in 3, their manganese in 2 years. And what about uranium for atom bombs?
Since the domestic oil wells threatened to run dry and the Mesabi iron mountain would soon be levelled flat and only little uranium was being found in the country and the nation's security was involved in every case, America could no longer rely on mere purchase, but must own or at least effectively control convenient foreign sources of supply. In fact, America would have to make her very diplomacy a 'mineral diplomacy', as a professor at the U.S. Military Academy at West Point said in February 1948.
This is how the fear of raw material poverty merged with the fear of farm and factory surpluses and with the fear of a world in the throes of change and revolution, and coloured the post-war international policies of the United States.
A good part of the relatively small 'direct foreign investment' of Big Business went to stake out claims for America's mineral and oil diplomacy. But this, too, remained little in comparison with the American capital surplus and the world's need for investment funds.
What hopes there may have been of channeling American surplus capital investments into the development of non-strategic raw material resources in economically backward nations, and particularly of their agriculture, were disappointed.
In general, the 'investment climate' was deemed unfavourable in most foreign countries because of the prevalent trend of social and economic change away from private enterprise. And America became more and more aware of the danger of creating direct or indirect competition for her own agriculture and industries.
Not only has American capital failed to help the world exploit on a large scale its potential wealth of soil and subsoil: even as a buyer of foreign raw materials the United States has proved unable to stimulate such development. For, during the semi-stagnation years until the Korean war, American consumption was far below its wartime peak, and it remained as ever erratic and unpredictable. Worse still, the urgent need for the export of America's own surplus raw materials and the growth of her synthetic industries actually did a great deal of harm to 'backward' countries which American foreign policy intended to support.
'Brazil, Egypt, India and other foreign producers cannot compete in Europe, for example, with U.S. cotton supplied free or almost free to the users by the Economic Cooperation Administration', US. News & World Report wrote on May 27, 1949. 'Growing U.S. self-sufficiency is depriving many a country of its best chananain -earn dollars' through the development of natural resources and trade, the paper reported on September 16, 1949.
Domestic nylon and rayon closed the American market more and more firmly to foreign raw silk. Synthetic rubber increasingly took the place of natural rubber. The jute sales of India and Pakistan in the United States at times fell to three-fifths the level of the depression year of 1937, partly because of the use of American cotton and paper substitutes. Foreign hide producers lost part of their sole leather, belting and other business to American synthetics. Foreign pig bristles and hemp yielded to nylon for use in brushes, rope, rugs and fishing nets; copra and palm oil to new chemical detergents; and foreign natural insecticides to domestic, artificial ones.
Whatever normally imported product America can possibly grow, make or substitute, she wants to produce at home—always impelled by the twin motives of seeking greater profit and of reducing her reliance on the outside world.
It is symptomatic that, when a common African plant was found to 'hold the answer to the prayers of millions for cortisone', the new remedy for arthritis, Washington sent an expedition to Africa for 'seeds, roots, cuttings and plants [to be] transplanted in tropical areas under the jurisdiction of the United States', as the New York Times reported on August 16, 1949, `so that this country would never be cut off from [what may] become one of the most important plants in the world'.
Moreover, the utter dependence of many nations on the export of their primary products has not only made them more vulnerable than ever to the slightest business setback in America, their main market, but often exposes them to something close to American dictation on prices. 'The United States spoke out sharply to the rubber-producing countries against "speculative" rises in the price of natural rubber', the New York Times wrote on June 1 o, 195o, implying that America 'would be willing to step up its production of synthetic rubber if the price of the natural product went too high'. As a result, rubber prices came tumbling down, widening the British dollar gap.
A typical case of American interference with the price policies of weak supplier nations was that of coffee in the summer of 195o. For many years, all through the thirties and early forties, this principal export commodity of fourteen Latin American republics had to be sold at disastrously low prices, while the cartelized industries of the United States kept high the prices of the goods those coffee growers had to buy from them. Colombia, for example, since 1929, lost $1 billion on the difference between the falling prices she received and the mounting prices she had to pay. Yet when coffee quotations eventually rose after the war, due to a natural shortage, and at last came back to parity with the price levels of other commodities, a U.S. Senate Subcommittee took these steps: it encouraged a housewives' boycott of Latin American coffee; it advised the Government 'carefully to scrutinize' any loans to countries dependent on coffee exports; and it asked that an official of the anti-trust division of the U.S. Department of Justice attend all their meetings in the Coffee Commission of the Inter-American Economic and Social Council. Finally, Washington used the Marshall Plan organization, in the name of developing backward areas, to launch competitive coffee plantations in African colonies.
Altogether, the United States has 'demonstrated inability or unwillingness to cope with the responsibility arising from its premier position in the world economy', an official Indian delegate, Dr B. Adarkar, charged before the United Nations Economic and Social Council, according to the New York Times of February 24, 195o. He might have added that America has thereby also demonstrated her inability to benefit herself by benefiting the world through development- and trade-inducing policies. For America's economy has derived less relief from her foreign trade policies than she would have done had those policies been more sensible.
Although the Marshall Plan helped postpone the depression, it failed to keep American exports on the 1947 record level of $14.5 billion. During the period before the Korean war they sank from year to year: to $12.5 billion in 1948, $11.9 billion in 1949, and $10.2 billion in 195o. This was still over three times the dollar average, and almost twice the physical volume, of the last pre-war years. It meant a rise of the United States' share in the total export trade of all the world from 12 1/2 per cent in pre-war days to 21 per cent in the late forties. But it was not enough for the American economy.
The combination of the Marshall Plan, the struggle against her slowly recovering competitors and her capital exports did not suffice to prevent America's industrial production during the years before the Korean war from lagging far behind capacity. It did not suffice to prevent some eight or ten million Americans from being totally or partly unemployed.
On the contrary, nearly 600,000 export workers, the U.S. Department of Labor reported in the spring of 1950, actually lost their jobs due to the decrease in foreign business. Only 1,700,000 men and women in the nation's non-agricultural industries—the Department stated just before the outbreak of the Korean war—were still getting their living directly from exports in 1950, against 2,300,000 in 1947.
The Marshall Plan isn't siphoning off as much as expected', U.S. News & World Report stated already on May 27, 1949. 'Finding markets for what you produce is getting to be the big problem now. The U.S. is beginning to run up surpluses of almost anything you can mention. Bumper crops will make things worse. . . .'
'Again, we are up against the problem that has confronted us for half a century, excepting the two world war periods', the Dallas Morning News commented in May 1949 on the fact that 'domestic scarcities are changing to surpluses'. For, while 'the United States has never exported a great percentage of its total industrial production.. . export has always been the difference between good and bad domestic markets'; and its decline would mean 'quick and dismal depression'.
Big Business worried about insufficient markets for oil and steel, automobiles and chemicals, electrical goods and almost everything else it produced. 'Vigorous attempts to increase export sales are being made by many American steel companies', read a typical report in the New York Times on August 25, 1949; 'outlets for this country's excess steel supply are being sought principally in Western Europe and the Middle East'. Again on January 1, 1950: The American steel industry is becoming increasingly worried over recent and prospective losses of its rather substantial and profitable export business . . . estimated at 10 per cent of the industry's shipments of finished steel. . . . The United States Steel Corporation reduced its export prices on many key products on December 16, the same day that domestic prices were being raised an average of $4 a ton.'
The textile industry worried. The drop in export business,' the president of the Cotton Textile Institute said on April 3, 1949, is 'responsible in great measure for the decline in cotton goods prices and curtailed operations in cotton mills.'
Hollywood worried. 'Haunted by the spectre of a shrinking domestic market, movie men are looking overseas for peace of mind', Business Week wrote on April 29, 195o. The motion picture industry just finished counting up its gross from overseas operations in 1949; it piled $210-million high, nearly a third of the industry's total earnings. . . . In nine pictures out of ten, domestic returns alone (including Canada) don't bail a producer out of his production costs.'
The farmers worried. 'A warning that the United States, the greatest of all food exporters, was becoming "increasingly anxious about securing markets", was heard at the United Nations Food and Agriculture Organization', wrote the New York Herald Tribune on June 14, 1949. 'The Department of Agriculture today tossed millions of dollars worth of Government-owned surplus farm products on the export markets at prices below costs', Associated Press reported from Washington on January 18, 1950. 'There is trouble ahead for the American wheat farmers', United Press warned from Washington on April 7, 195o. 'Only about 18 per cent of the wheat now going abroad is being paid for by the importing country with its own dollars. The other 82 per cent is being paid for by the American taxpayer through foreign aid programs'.
Labour worried. 'We must be prepared to move toward a shorter work week when the Marshall Plan and the rearmament program are no longer sufficient to carry us along', Daniel W. Tracy, vice-president of the American Federation of Labor, stated on January 2, 1949.
The Government worried. The reduction and eventual termination of foreign assistance will create tremendous economic problems at home', President Truman said on April 2, 1950. 'It may well be that the United States exports will be sharply reduced, with serious repercussions on our domestic economy. . .
And the outside world was concerned about the political trends those economic worries set off in America. 'Washington would spend heavily on armaments to counteract deflation. . . . European business circles incline to the opinion that the United States would prevent it at almost any cost', the Paris correspondent of the New York Times reported on February 20, 1949. 'Some even mean the United States would prefer a war to another major slump. . .
The more the export trade failed to bring relief, the more armaments became the main weapon in America's domestic fight against depression. 'Armament business will continue to be very good', U.S. News & World Report consoled its readers on February 17, 1950 in a discussion of the general business prospects for 1951, which before Korea were considered 'much more obscure' even than those for 1950.
'Armament always can be pushed if private activity slows. War scares are easy to create, are nearly sure-fire producers of money for more and more arms. There are signs now that top officials are to start conditioning the public for greatly expanded armament programmes in the not-too-distant future.'
The World The Dollar Built:
The World The Dollar Built
The Captive Audience
Business Of Government
The Dangerous Drift
America Needs Foreign Aid
The Urge To Arm
Cold War At Home
Too Little - But Too Much
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