Skirmish

A struggle to decide the economic shape of Europe is building up. One of the open ing skirmishes was fought last week when eight leading representatives of OEEC (Organization for European Economic Cooperation) met in Paris. The engagement was screened by a fog of long technical words and its result was inconclusive. When the meeting ended, however, the advantage lay with Britain's Sir Stafford Cripps. He had skillfully checked a drive by ECA and some continental nations to reduce currency exchange barriers between European nations.

The struggle would continue. Its issues, little understood in the U.S., might turn out to be more important than anything on which the Big Four Foreign Ministers might agree. Europe's political future and its military defense were closely tied up with its economic prospects. Would Europe develop toward a great unified area of free trade? Or would each nation protect itself with barriers which would strengthen the parts but weaken the whole?

Stultifying? On the eve of last week's Paris conference ECA's Averell Harriman put the issue thus: "...Success [of the ECA program] would be impossible in a system made up of small, autarchic, uneconomic national trading units, each one dedicated to self-defeating self-sufficiency, each one standing off his neighbor with ingeniously stultifying restrictions."

From ECA's very beginning this proposition had been recognized--in theory. But in its first year, ECA, faced with an emergency, tended to the opposite direction. ECA sometimes stimulated fast production in a way that worked against future European economic unity and overall efficiency. Example: before the war, The Netherlands made heavy purchases from Belgium's big railway equipment industry. Today, the Belgians do not want to trade with The Netherlands because the Dutch can pay them only guilders, not now convertible to dollars. Like everyone else in Europe, the Belgians want dollars to buy in the U.S. So the Dutch are building their own railway equipment industry just across the Belgian border. They are using Marshall Plan dollars to duplicate a Belgian industry which ought to have a Dutch market.

Masochistic? Privately, but more & more loudly, leaders of many continental nations are blaming Britain for working against a unified Europe. They attribute this partly to its Labor government's love of planning, with the controls and restrictions that planning brings.

Continentals call this tendency "dirigisme" it is increasingly unpopular on the Continent. The French, Italians and even the sober Belgians consider the British taste for controlled austerity to be somewhat perverted--what might be called economic masochism, or love of suffering. The British look down their noses and reply that their controls are merely good housekeeping.

Against that background the OEEC group met last week in Paris. Their assignment was to renew or to change the Intra-European Payments agreement, which runs out this month. Britain's objective was to make the new plan as much like the old as possible. Belgium's Paul-Henri Spaak and French Finance Minister Maurice Petsche were expected to carry the ball for the liberal Harriman position.

Cripps first took care of Spaak, who was presiding as chairman of the OEEC group. Cripps told Spaak that he would go along with any liberalization plan that fulfilled one condition: it must not increase the drain of dollars. Spaak agreed. That took him out of the subsequent play, because all the plans for freer exchange of European currencies also involved slightly freer convertibility into dollars.

The liberalizers presented a plan for intra-European payments which had been worked out by Harriman's ECA experts; the dollar cost to Britain would be only 50 million. The British repeated the word "only" in horrified voices, with the expression of an alcoholic's wife on being told that he had had "only" four drinks.

Cripps (who used to make up to $150,000 a year as a lawyer) is too smart to enter a doctrinaire Socialist defense of controls as such. He opposed "automatic flexibility" of exchange through a central pool for multilateral ECA transfers between European nations; Cripps proposed "organized flexibility," which meant continuance of bilateralism. The essential difference was that the liberal plan would lead in the direction of cost competition, which Cripps fears.

Petsche caved in almost immediately because he feared Britain's power to cut down nonessential imports from France. It was soon clear that no drastic changes were in sight; the OEEC leaders agreed to meet again for another try at a payments plan.

Bankerlike? The British victory had more behind it than the old Crippsian skill. To all continental nations, save Belgium and Switzerland, Britain stands in the same creditor relationship that the U.S. has toward the Continent and toward Britain. The Continent now needs British pounds and products more than Britain needs the Continent's currency and products. This weight in the British position can only be balanced if the U.S. throws its super-creditor's weight--hard--on the "liberal" side of the line.

Another source of British strength derives from the "prudent housekeeper" argument. It runs this way: "We all want an economically united Europe and freer trade--and some day, maybe, we'll have it. But today any plan for freer transfer between European currencies will lead to a dollar drain somewhere that Europe can't now afford. If we let the uncontrolled continentals get their hands on our scarce dollars, they will simply buy Cadillacs with them. Really, is that the way to run a bank?"

This argument has a lot of force, since the British as well as the Americans are bankers to the Continent. Its force is somewhat diminished, however, by persistent evidence that the British talk like bankers but think like Socialists. At the Paris OEEC meeting, for instance, one British expert was heard to say: "Yes, I know the loss [in Britain's dollar supply] might be small, but if we don't know, we can't program. My real objection...is that it interferes with the plan." Said another learned Laborite succinctly: "Of course we want competition--but without uncertainty."

The U.S. has the naked financial power to break up restrictionism. But the U.S. position is not simple. Socialist or not, Britain is the most reliable U.S. European ally.The U.S. cannot let Britain wreck the hopes of European unity. On the other hand, the U.S. must make very large allowances for Britain's contributions to European recovery and for the way Britons want to conduct their affairs.

The U.S. cannot make Britain drink French champagne, even though it would be good for that pale, austere look, and good for a prosperous Europe that the world needs.

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