Paul Mattick

The Keynesian International

Published: in Contemporary Issues 8, Spring 1951 Transcription: Adam Buick

I
Anticipating America's role in the ake o! the !irst orld ar, President "ilson encouraged his !ello # citi$ens in 191% b& sa&ing that ' e must pla& a great part in the orld hether e chose it or not' "e ha(e got to !inance the orld in some important degrees and those ho !inance the orld must understand it and rule it ith their spirits and ith their minds'' The simple message he had to bring, he added, as merel& this: 'li!t &our e&es to the hori$on o! business'')1* +is anticipations ere !ul!illed be&ond all e,pectations' The ar destro&ed -urope's dominating position ithin the orld econom& and the .nited States turned !rom a debtor into a creditor nation' America's rise to supremac& continued uninterruptedl&, and out o! the second orld ar she emerged as the orld's sole creditor' But though her 'e&es are still li!ted to the hori$on o! business', and though in business terms America indeed rules the orld, its pro!itabilit& is /uestionable and its !uture insecure' "ith the 'end' o! the second orld ar and in (ie o! the (ast de(astation o! both -urope and Asia, the re(i(al o! the disturbed orld econom& became America's responsibilit&' +o e(er, .nited States aid to the outside orld as still concei(ed in business terms' 0espite America's persistent !a(ourable balance# o!#trade throughout the inter# ar &ears, it as still held possible that an international trade e/uilibrium could be re#established through international lending and in(estments' 1n Al(in +' +ansen's opinions o! 1925, !or instance, unceasing American loans ould not onl& secure !ull emplo&ment at home but ma& lead to such a general e,pansion o! capital as to allo !or repa&ments and interest' '1! e manage our o n a!!airs reasonabl& ell,' he rote, 'i! e enter into international co#operation on international monetar& and !inancial arrangements, and i! the !oreign loans are in(ested in producti(e and use!ul pro3ects, then it is reasonable to suppose that o(er a long#run period the interests and amorti$ation charges can be paid' The& ill be relati(el& small in proportion to total international transactions and can /uite easil& be managed in a reasonabl& stable and prosperous orld'')4* This cheer!ul statement based itsel! on the unrealistic hope that 'the rise o! 5ussia on one side o! the globe and the economic and militar& po er o! the .nited States on the other, ''' presents a ne basis !or orld securit& and peace',)6* and on the pro3ection o! 7e&nes' unpro(en monetar& theor& o! capital e,pansion !rom the national to the international scale' The illusion o! a continued American#5ussian co#operation ithin the !rame ork o! the .nited 8ations as soon shattered, ho e(er9 not a lasting peace but the 'cold ar' !ollo ed the de!eat o! the A,is po ers' 8ot the desired integration o! the orld econom& but inescapable po er politics determined America's lending polic&, the outright grants, and :arshall Plan aid' 1t is hoped, o! course, that these 'emergenc& steps' ill incidentall& help strengthen the necessar& trend to ards a orld#trade e/uilibrium, and that the seemingl& unpro!itable subsidies o! to#da& ma& &et become to#morro 's pro!itable business' But thus !ar, the& ha(e led onl& to ne 'emergenc& steps' in a consistentl& disintegrating orld econom&' Testi!&ing in behal! o! the -uropean 5eco(er& Programme, Secretar& o! State 0ean Acheson pointed out, that in order to maintain the (olume o! American e,ports hich the !ree orld needs, it ould be necessar& to allo !or -uropean imports, to in(est American capital, to grant loans, and to continue to gi(e gi!ts' '1t is in the carr&ing out o! such a polic&, and in our determination ''' to do it ho e(er long it takes and hate(er it re/uires o! us,' he concluded, 'that the !rustration o! the 7remlin's design !or orld dominion lies';)2* <! the a&s mentioned to maintain the re/uired (olume o! American e,ports, onl& the last is o! immediate signi!icance' This as made clear b& Paul =' +o!!man, ho stated, that 'b& 1956 the :arshall#plan countries ill barel& ha(e their noses abo(e ater' and that 'no substantial impro(ement can be e,pected !or the ne,t decade'' +e !elt, 'that it ill take !i!t& &ears !or -urope to come back to here she can bu& and pa& !or hat the& need !rom us and ser(ice alread& e,isting loans'' To ask -urope to accept aid in the !orm o! additional repa&able loans, he considered an 'immoral act', as such loans could ne(er be collected' >ar !rom despair, ho e(er, Paul +o!!man pointed out, that the second orld ar ' ill ha(e cost

the .nited States ?1 trillion 6@@ billion be!ore it is !inall& paid !or', in (ie o! hich the :arshall aid e,penditure necessar& to a(oid another ar, ' ill turn out to be the greatest bargain the American people e(er had'')5* The political and economic relations bet een the American and the -uropean Aontinent, represent onl& one aspect o! the po er problems besetting the orld' There is the /uestion o! Asia, o! the back ard countries in general, ith hich .nited States polic& must concern itsel!' +ere, ho e(er, America has met ith little or no success' 8o :arshall Plan elds the -astern nations to the .nited States, no Paci!ic pact matches the Atlantic pact' Boans and direct aid could not stem the 'liberation' mo(ements hich terminate in the 5ussian po er bloc' Apparentl&, the ar in the Paci!ic &ielded nothing9 the hole o! Asia, e(en more than the rest o! -urope, remains contested ground o(er hich ne ars ill probabl& be !ought' To escape these ars, President Truman o!!ered &et another 'bargain' to the American people b& initiating the so#called 'Point >our' programme !or technical assistance and general aid to economicall& under# de(eloped countries' Being President, ho e(er, and there!ore budget#conscious, :r' Truman outlined his programme in a limited !orm and in business#like !ashion' Suspected o! harbouring 'socialist tendencies', he stressed the need !or the out!lo o! pri(ate in(estments bene!icial to back ard nations' To accelerate such endea(ours, he recommended that the '-,port#1mport Bank be authori$ed to guarantee .nited States pri(ate capital ''' against the risks peculiar to those in(estments', such as the 'dangers o! incon(ertibilit&', and the 'dangers o! e,propriation'' Although :r' Truman made it clear 'that the de(elopment o! under# de(eloped economic areas is o! ma3or importance in our !oreign polic&', he !orestalled all possible accusation o! !ostering 'dollar diplomac&' b& suggesting the closest co#operation bet een the .nited States, the 1nternational Bank !or 5econstruction and 0e(elopment, and the .nited 8ations <rgani$ation in the e,ecution o! the programme' The Administration's 'Point >our' proposals ere critici$ed because o! their narro ness and stinginess' This is no !ield !or pri(ate in(estments, it as said, as the conditions in -urope and Asia do not attract pri(ate capital despite all guarantees' The hole pro3ect as too insigni!icant to a!!ect the miserable li(ing conditions in back ard areas' 1t should be enlarged, should encompass more territor& and release greater acti(it&9 it should be go(ernment#!inanced, and carried out in a true spirit o! internationalit&' Cames P' "arburg, !or instance, sa in the Administration's proposals 3ust another e,ample o! America's 'bargain# basement diplomac&', in hich the 'immaturit&' o! her !oreign polic& mani!ests itsel!' +e pleaded !or the e,tension o! the 'Point >our' programme !ar be&ond the considerations o! its originators, and !or its integration ith the :arshall Plan, so as to &ield a broader plan o! orld# ide reconstruction and de(elopment' Because America has at present 'about t ent& billion dollars a &ear o! e,cess producti(e capacit& to use in the implementation o! her !oreign polic&', "arburg suggested a huge programme o! capital e,ports designed to 'build up the purchasing po er o! the other nations o! the orld to a point here, e(entuall& ''' the dangerous gap in America's balance o! pa&ments ill be eliminated'')%* >oreign aid, in :r' "arburg's opinion, must be more than 'merel& another instrument in the e,isting negati(e po er struggle'' 1n the ords o! the President, it must reall& 'help the !ree peoples o! the orld, through their o n e!!orts, to produce more !ood, more clothing, more materials !or housing, and more mechanical po er to lighten their burdens'')D* <nl& thus ill the& be enabled to combat E!alse doctrines' and to de!end the democratic a& o! li!e' <ut o! other considerations but in the same (ein, Senator Brine :c:ahon, in speaking on the problems o! the h&drogen bomb, suggested a &earl& e,penditure o! ten billion dollars !or !i(e &ears, !or the 'Point >our proposals, the de(elopment o! atomic energ& e(er& here !or peace, and general economic aid and help to all countries, including 5ussia'' B& such a polic&, he said, ' e ould ha(e probabl& sa(ed mankind !rom destruction b& !ire, and e ould ha(e pa(ed the a&

to ard :a ne era o! unimagined abundance !or all men, based upon atomic energ& constructi(el& harnessed'')8* <n the other side o! the Atlantic, on the recei(ing#end so to speak, an e(en greater optimism supports the spending polic&' 8ot thinking in terms o! ar, and assuming a !ull -uropean reco(er& through American help, 1reland's !oreign minister Sean :acBride, !or instance, en(isioned a coming situation in hich both -urope and America, in order to maintain !ull emplo&ment, ill be !orced to disencumber themsel(es o! chronic o(erproduction b& a& o! some !orm o! peace#time lend#lease and the periodic cancellation o! international credit balances' +e proposes the sending o! all surpluses to the orld's under#de(eloped areas9 a pro3ect to be !inanced b& a gigantic American#-uropean 3oint in(estment pool' 'Surplus output,' he said, 'should ne(er be considered a problem as long as people in an& part o! the orld are under!ed and li(ing in subnormal conditions, until, as 7e&nes has been /uoted as sa&ing Fthe last +ottentot o ns a 5olls#5o&ce carF')9*

II
The unrealistic thinking here recounted, hich tries to make an economic (irtue out o! the political necessit& to support and stabili$e the non#bolshe(ik orld, can ser(e as no more than an apolog& !or the current subsidi$ing practices' Although the& are supplemented here and there b& direct militar& aid, !inancial means o! control are still o! ma3or importance to the "estern nations' Authoritarian methods o! control are a(ailable onl& to a limited degree under the e,ceptional circumstances o! occupation and ar' <ther ise, as 0ean Acheson has pointed out, E"e do not intend, nor ish, in !act e do not kno ho , to create satellites'')1@* The strict political integration that characteri$es the 5ussian relationship to her satellites, here the latter's go(ernments are merel& e,tensions o! the :osco go(ernment, presupposes a totalitarian outlook, terroristic methods o! control, and determination to ards a complete integration o! the (arious economies into the centralisticall&#directed 5ussian autarch&' All that the .nited States can at present do in controlling other go(ernments, or in in!luencing their policies, is to o!!er or to den& !urther material and !inancial aid' 0egrees o! collaboration and control are thus determined b& the (arious national needs and their urgencies, and b& the means a(ailable !or !oreign aid' "hile the needs o! the nations are unlimited, the material and !inancial means are not' This is one o! the reasons h& American aid !inds man& ob3ectors, ho tr& either to cancel it, or to cut the una(oidable e,penditures do n to a minimum' The arguments against e,tensi(e !oreign aid are based on the competiti(e or monopolistic needs o! some industries, on the traditional ideolog& o! a balanced budget, on the demand !or lo er ta,es as an incenti(e !or pri(ate in(estment, on the !ear o! a strong go(ernment vis--vis the business interests, on the illusion o! a possible retreat into a ne 'isolationism', and o!ten merel& on the a(ersion to pla& Santa Alaus on other than the Ahristmas da&s' These arguments indicate actual and imagined discrepancies bet een 'social' and 'pri(ate' interests or, rather, bet een the business interests and the national needs as interpreted b& the go(ernment' To compromise the (ar&ing interests is supposedl& the !unction o! democratic go(ernment, or vice versa the compromise is thought to constitute go(ernment polic&' 1n its broad outlines and basic direction, o! course, !oreign polic& is determined rather b& the long#run needs o! national securit& and national gro th, than b& the shi!ting po er constellations o! (arious pressure groups at an& particular time' Still, the manner in hich the 'general line' is maintained, is to some e,tent dependent upon the changing !ortunes in the internal political struggles, hich result at times in contradictor& decisions'

"ith regard to !oreign polic&, to be sure, the go(ernment alread& en3o&s a large degree o! independence, enabling it to !ollo an elected course o! action to its end' But it does not possess the unhampered authoritarian manoeu(reabilit& gi(en to the 5ussian ad(ersar&' 1t must still ask !or !unds, and its demand ma& not be granted' Assuming then that America's e,pendable !unds ere as large as the& are thought to be b& those ho ant to !inance orld peace, their unimpeded distribution to this end ould presuppose the e,istence o! an omnipotent go(ernment' Short o! this, their actual emplo&ment ill depend upon the distribution o! in!luence and po er as bet een go(ernment and business ithin the go(ernment and ithin the business orld' The arti!icialit& o! the /uestion 'to upend or not to spend !or orld securit& and peace', is brought to the !ore b& the !act that the surplus output o! the .nited States, and the hoped#!or surplus production o! a re(i(ed -urope, are /uite insigni!icant hen compared ith actual human needs in the under#de(eloped areas o! the orld' The& are e(en small hen compared ith the actual needs in -urope and America' There ould not be much surplus output in the .nited States !or some time to come i! the needs o! the lo #paid sections o! the population ere gi(en consideration, i! slums ere abolished and orking conditions humani$ed' "hate(er surplus production there is, does not su!!ice to mitigate to an& noticeable e,tent the near#star(ation or actual !amine conditions under hich the bulk o! humanit& e,ists' But e(en i! the surplus output could be raised so as to become an e!!ecti(e eapon against the po(ert& that endangers the peace, it cannot be e,pected that a 'share#the# ealth plan', hile re3ected at home, ould !ind application on the international scene' +elp is o!!ered, there!ore, onl& to those ' illing to help themsel(es', that is, to nations capable o! de(elopment and read& to support a '!ree' orld econom&' To initiate their capital !ormation and, e(entuall&, to partake in the resulting re ards, are the economic reasons ad(anced in support o! the political considerations o! the !oreign aid programme' The alle(iation o! human miser& is seen as the b&# product o! a larger output and a greater producti(it& in the back ard regions9 the pump#priming polic& o! the depression &ears is to be applied internationall&' But not ith the optimism and abandon o! the earlier national schemes o! go(ernment#!inancing, hich had been based upon its assumed 'multiplier e!!ect' on consumer spending' Although pump#priming in under#de(eloped nations re/uires not onl& monetar& means but also technical assistance, 0ean Acheson made bold to sa& that 'the remarkable thing about this kind o! help is that &ou can get big results b& making a comparati(el& small outla& o! dollars !or the ser(ices o! skilled people'')11* -(en be!ore an& t&pe o! help as actuall& mobili$ed, he assured the American people that American aid ould not build large mills, mines and !actories, but ould merel& support an educational programme designed to teach the people in the under#de(eloped regions to do things !or themsel(es' This !orm o! aid, o! course, is not a practical solution !or the problems besetting the back ard nations in 'terms o! !ood, shelter, and a decent li(elihood', but sol(es at most the emplo&ment problems o! some Americans hunting !or 3obs abroad' And e(en this is /uestionable, as the technical 'kno #ho ' ithout the technical ' here ithal' is /uite super!luous'

III
The meagre suggestions o! =o(ernment, Aongress, and Senate ith regard to American aid under 'Point >our' 3usti!& the accusations o! insincerit& and lack o! understanding brought !orth b& those proposing a global :arshall Plan' Their o n 'generosit&', ho e(er, is as inapplicable as the 'realistic; go(ernment# programme is meaningless' 1n the !irst place, there is the di!!icult& o! raising the !unds necessar& to !inance the peace o! the orld in an econom& in hich no one, and no institution, has at an& time super!luous !unds, here at all times all !ight !or a larger share o! the national income hate(er its si$e'

But aside !rom this, the immediate pressures o! the pre(ailing po er struggles ithin the nation, among the nations, and bet een the t o dominating po er blocs, e,clude the adoption o! a orld# ide el!are programme !or the abatement o! the social and imperialist !rictions that dri(e the orld to ards ar' -ngland's prosperit&, !or instance, depends upon o(erseas supplies o! essential !oodstu!!s and ra materials' -ngaged in an attempt to regain her !ormer e,change position, she can hardl& share the enthusiasm !or the industrial de(elopment o! the back ard areas' 1n !act, she cannot help but sabotage such endea(ours, since Ean&one !amiliar ith the present compelling desires o! under#de(eloped primar& producing countries to industriali$e and to turn to the domestic production o! manu!acturers ill reali$e the special dangers hich no con!ront the balance o! pa&ments o! a countr& in -ngland;s position';)14* A real concern !or the back ard nations ould be strange, 1ndeed, at a time hen the highl&#de(eloped industrial enem&#nations are turned into under#de(eloped areas ith a great amount o! unemplo&ed 'kno #ho '' At the !irst sign o! a re(i(al o! Capan;s industr& 'the cotton manu!acturers o! =reat Britain ''' called upon American mill operators to 3oin in an e!!ort to limit Capan's acti(ities ''' American shipping operators, !earing the e!!ects o! a resurgent Capanese merchant marine are !or pre(enting the reopening o! orld shipping to Capanese (essels'')16* And this not ithstanding the alleged preoccupation ith the increase o! orld production and ith the e,tension o! orld trade, and not ithstanding Capan's damaged and orn# out industrial e/uipment, her paucit& o! natural resources, her 8@ million population in a decreased area, unable to !eed themsel(es sa(e b& increasing industrial e,ports' This attitude contradicts the current propaganda !or a general betterment o! li(ing standards' 1t made no sense to Senator :cAarran, !or instance, ho ondered about the 'senseless polic& o! destruction o! =erman industrial !acilities' and the 'en!orced paral&sis' o! the =erman econom&' '0estro&ing steel plants in "estern =erman&,' he said, 'and then using American dollars to erect them else here is shortsightedGa useless e,penditure o! .nited States mone&'')12* As e ha(e learned !rom 0ean Acheson, ho e(er, 'steel plants' are not in the 'Point >our' programme, so that 'else here' can onl& mean the "estern nations allied to the o(erall strateg& o! the 'cold ar'' The American#5ussian po er con!lict commits the .nited States to the attempt to secure the continuation o! "estern -urope in its present socio#economic !orm' This implies the propping#up o! the "est# -uropean nations and the support o! their policies vis--vis (an/uished =erman&' 1t implies both the :orgenthau Plan and the :arshall Plan' As =erman& cannot be re(i(ed ithout altering the e,isting po er relationships, all re(isions o! the :orgenthau Plan re/uired a relati(el& greater strengthening o! the Atlantic#pact nations' But no real -uropean re(i(al is possible ithin the setting o! the 'cold ar' and ithout a !ull regeneration o! the =erman econom&' American aid to "estern -urope can there!ore not be terminated, despite the time#limit set to the :arshall Plan' This is the dilemma o! a (ictor& hich destro&ed one aspirant !or orld rule onl& to raise another' <! all American aid in the post# ar &ears about 9@ per cent, ent to "estern -urope' "ith the accentuation o! the con!lict bet een the '-ast' and the '"est', little aid ill be gi(en the back ard areas' This miserliness !inds its reason not onl& in the need to concentrate upon the urgencies o! the moment, but also in the di!!icult& o! !itting the back ard regions into the American strateg&' 1n the di(ided orld o! to# da&, there is no independent a& !or the under#de(eloped nations to partake in orld a!!airs' The& must line up ith either one or the other o! the po er blocs' The& cannot choose !reel& bet een competing social s&stems, but are sub3ected to internal and e,ternal pressures o!ten ine,pressible in terms o! dollars and cents' 1t ill there!ore not do, to ask the Ahinese 'people' to compare the 5ussian credit o! 'no more than ?25,@@@,@@@ per &ear' ithF the American 'grantGnot loanGo! ?2@@,@@@,@@@ ''' in the single &ear o! 1928',)15* in order to con(ince them o! the unreasonableness o! their choice o! allies' 1t is not 5ussian

economic aid that turned Ahina 'communist', but the 5ussian success in the last ar' There simpl& is no other po er in Ahina's pro,imit& able to counterbalance 5ussia's ne in!luence in Asia' 8either ill it do to point to the 'lack o! an& sign o! a great programme o! industriali$ation' and to surmise that 5ussian polic& intends Eto make AhinaEs econom& more HcolonialH than be!ore, so that it can pro(ide !oodstu!!s and ra materials !or the ne industrial area o! Siberia';)1%* >or hether this is so or not is /uite beside the point, as it is no 5ussia's turn in Asia' And 5ussian imperialism incorporates the Asiatic 'liberation' mo(ements, and the attempts to 're(olutioni$e' their economic li!e along state#capitalist patterns' The turmoil in the 'a akening' back ard regions cannot be ended b& aiding their de(elopment, as it is this de(elopment hich causes the !erment' A changed orld situation pre(ents this de(elopment !rom !ollo ing the direction o! the laissez faire ideolog&' 1n all "estern nations go(ernment control o(er the econom&, and o(er social li!e in general, has been steadil& increasing' This has long been a !act in 5ussia, and it is nearing completion in her satellites' -(en the American econom& operates more upon go(ernment than upon pri(ate capital' .nder such conditions, Ahina;s de(elopment, !or e,ample, could onl& lead to the completion o! the totalitarian structure prepared b& the 7uomintang' B& supporting this t&pe o! de(elopment, as Cohn 7ing >airbank rites, '5ussia is still turning to her ends the potentialities o! re(olution in back ard areas'' As the !irst prere/uisite !or a success!ul po er competition in Asia, he suggests 'a continued e(olutionar& de(elopment in the .nited States', the content o! hich, ho e(er, he does not re(eal' But this m&sterious 'e(olution' is to enable America 'to retain leadership in the orld# ide struggle !or indi(idual political libert& hile at the same time aiding other peoples in poorer circumstances to de(elop hate(er degrees o! collecti(ist or socialist econom& the& need to meet their problems'')1D* But h& stop there I "h& not include the 'people in poorer circumstances' ho are in -urope, or e(en in the .nited StatesI +o e(er, as little as 5ussia is inclined to support pri(ate propert& in the .nited States, 3ust as little could America be interested in the de(elopment o! state#capitalist s&stems abroad' 1n the second orld ar, to be sure, totalitarian and democratic nations !ought as allies against other authoritarian po ers, and e(en to#da& American and British loans reach Jugosla(ia' But such alliances do not a!!ect the di!!erences bet een the competing social s&stems, e(en though the imperialist di(ision bet een authoritarian and democratic regimes is re!lected in all the liberalistic nations as the problem o! state#control and nationali$ation' "hat in some countries still appears as a con!lict bet een go(ernment and business, mani!ests itsel! on the orld# ide scale as an opposition bet een 'communism' and capitalism' Still, the opposition is real and cannot be resol(ed b& a& o! argument' Pro!essor >airbank's impro(ement upon the propaganda#slogan o! the peace!ul side#b&#side e,istence o! capitalism and socialism is e(en less realistic than the original' 1t o(erlooks, moreo(er, the !act that the totalitarian state ith all its collecti(i$ation is not a socialist societ&, and it ignores the ob(ious d&namics o! the pre(ailing social s&stems, hether based on pri(ate#propert& or state#o nership, hich tend in the direction o! a centrali$ed orld econom&' 8ot ithstanding these centrali$ing tendencies, nobod&, o! course, ob3ects to the de(elopment o! an& part o! the orld 'in principle'' But it must not un!a(ourabl& a!!ect the (ested interests o! to#da&, it must not decrease the pro!itabilit& o! the e,isting capital, nor diminish the political po er o! the dominating states' 1! possible, it must be a controlled de(elopment, suited to the economic, political and strategical needs o! the great po ers' Thus conditioned, the 'principle' is (iolated more o!ten than not, and !oreign de(elopment, in practice, is !urthered b& ad(anced nations onl& to the e,tent to hich it enhances the interests o! the latter' The emphasis, to be sure, is no on po er9 &et, po er !or its o n sake is neither a capitalist ideal nor a solution !or the pre(ailing social and economic problems' 1t is used so as to lead to a return o! orld conditions, in hich nothing matters but pro!itabilit&, seen as the medium !or a boundless capital !ormation on hich the general el!are presumabl& depends'

>rom the point o! (ie o! po er politics, ho e(er, it appears more practicable to retain the strength o! the "est#-uropean nations than to create ne allies !or America in the back ard regions9 /uite aside !rom the /uestion hether or not the under#de(eloped countries ould be illing to accept this honour' To turn these areas into !ormidable obstacles in the a& o! 5ussian imperialism ould re/uire !ar greater supplies than those needed to bolster the Atlantic de!ences' :oreo(er, the back ard nations o!!er !e er guarantees that American aid ill not be turned against American interests' That "estern -urope has priorit& in American strateg& is clear also to the -uropeans, !or other ise -ngland ould not be able to suggest that American aid to South#-ast Asia should be accompanied b& a proportionate reduction o! the British debts in that area, that is, be turned into aid to Britain' <ther ise the& ould not present the solid anti#5ussian !ront o! to#da&, or carr& on their o n colonial policies in contradiction to the promises o! 'Point >our'' At an& rate, the distribution o! American surplus production all o(er the globe ould spread it ine!!ectuall& thin' American#5ussian relations ha(e reached a point o! deterioration, here all polic& is geared to the e(entualit& o! ar' At such a time, hen 'a massing o! 5ussian troops on the Jugosla( border, or an& here else in -urope, could add three to !our billion dollars to the countr&'s present budget', )18* one cannot e,pect much s&mpath& !or the long#run needs o! the orld econom& as a hole' Particularl& not in !ace o! a go(ernment budget alread& e,ceeding 24 billion dollars, and in (ie o! the !orthcoming additional e,penditures set b& the stockpiling o! critical ra materials, the de(elopment o! ne and e(er costlier eapons, and the general increase o! a t&pe o! production 'consumable' onl& b& ar' 1ndeed, in the orld as it is to#da&, a consideration o! the long#run needs o! the orld can lead to a desire !or ar, in order to remo(e the obstacles to this end, i! onl& to stop a de(elopment hich threatens to turn most o! the orld's labour into Sis&phus#labour'

IV
1t is in order to escape the ine,tricable conse/uences o! a consistent po er polic&, that the suggestions !or a global :arshall Plan are made' 1t seems more rational to pa& !or the a(oidance o! ar than to pa& and die in actual ar!are' And i! the ar should come ne(ertheless, the allies ho shall ha(e been on b& such a polic& ould still enhance the cause o! the .nited States' This seems especiall& plausible to those ho think that help e,tended to the outside orld ill ultimatel& bene!it America's econom& as ell, and ho !eel sure that an uninterrupted general increase o! production ill pro!it all nations and ma& be instrumental in the paci!ication o! the orld' The theoretical background !or this trend o! thought is to be !ound in Cohn :a&nard 7e&nes' theories o! the depression &ears' -conomic stagnation, large#scale unemplo&ment, and the eclipse o! international trade had led 7e&nes to the conclusion, that the classical theor& o! a sel!#ad3usting market mechanism can ork onl& under special circumstances hich, ho e(er, no longer e,ist' +e held that in a 'mature' capitalist s&stem an economic e/uilibrium ith !ull emplo&ment needs !or its reali$ation go(ernment inter!erences hich ould !urther the in(estment o! capital' The& ere to o(ercome a so#called 'li/uidit& pre!erence' on the part o! the capitalists, ho, beset b& !ear o! a declining pro!itabilit&, ere thought to be engaged in a kind o! in(estment strike' 1n 7e&nes' (ie , the 'li/uidit& pre!erence' could be broken b& monetar& policies hich lo ered the rate o! interest' -conomic acti(it& could be bolstered b& !iscal policies, manipulating go(ernment re(enues and e,penditures so as to compensate !or changes in pri(ate demand' Barge public orks could initiate an all#round ad(ance o! economic enterprise and, !inall&, a isel& planned state# controlled in(estment polic& ould possibl& end depressions altogether' The simultaneous pursuit o! these policies b& all countries ould increase both the le(el o! domestic emplo&ment and the (olume o! international trade' This in(ol(ed abandonment o! a !i,ed gold standard and a return to some protectionist practices, but 7e&nes as con(inced that the discarding o! the traditional rules o! international trade need

not lead to an in3urious competition !or a !a(ourable balance#o!#trade' 1t ould rather o!!er the e,isting e/uilibrium tendencies an opportunit& to operate under conditions o! e,pansion instead o! conditions o! contraction' 7e&nes thought that a controlled monetar& in!lation and de!icit#!inancing ould enable the go(ernment to resume, increase, and regulate production' "ith the econom& again in !ull s ing, the de!icit could be reco(ered and the mone& stabili$ed' And the 7e&nesian theories !ound application during the depression and e(er since' Those ho oppose this theor& o! 'spending' point to an inescapable and !inall& unbearable interest burden in the ake o! an increasing go(ernment debt, hich, b& hampering pri(ate enterprise, ill undo the temporar& gains ith a (engeance' Against this, it is said that a certain proportionate de(elopment bet een the national income and the national debt, ould render the latter harmless' 1t is also argued, that an internal debt cannot reall& be considered a debt, as the mone& taken out o! the s&stem is again returned to it9 that !rom a 'social point o! (ie ' the hole procedure ma& be looked upon as a mere matter o! book#keeping' Theoreticall& it is not di!!icult to pro3ect this position !rom the national to the international scene' And this pro3ection is made eas& b& the actual dependence o! the "estern orld upon the American econom&, and b& the di(ision o! the orld into t o competing socio#economic s&stems' 1! it is true that the nations o! the "estern orld stand or !all together, the& ma& (er& ell be considered an entit&' 1! the "estern orld is not such in !act, a de(elopment in this direction ould no doubt be !urthered b& the adoption o! a 'social point o! (ie ' hich transcends the narro national interests' A slackening econom&, according to 7e&nes, ma& be re(i(ed b& !ostering either the 'inducement to in(est' or the 'propensit& to consume', or else b& attending to both simultaneousl&' +e !a(oured an emphasis upon the 'inducement to in(est', as he !ound e(en the 'mature' societ& short on producti(e capital' There are others, o! course, ho ould like to emphasi$e the 'propensit& to consume' but do not kno ho to go about it' The onl& kind o! 'consumption' hich has thus !ar been !a(oured, as the destructi(e consumption o! ar' This makes the 'mature' societ& some hat less mature and !inds the orld in still greater need o! additional capital' 7e&nes sa the dilemma, but in !ace o! large#scale unemplo&ment, he thought that e(en aste!ul loan e,penditure might enrich the communit&' 'P&ramid#building, earth/uakes, e(en ars ma& ser(e to increase ealth,' he said, 'i! the education o! our statesmen on the principles o! the classical economics stands in the a& to an&thing better';)19* And ar, including de!icit#!inancing on an unprecedented scale, did gi(e an enormous impetus to the e,pansion o! the American econom&' <! course, some other countries did not do as ell, and still others ere reduced to rubble in the process, but !or America ar did 'enrich the communit&'' 8o , ho e(er, an old problem arose ane : hat to do ith the additional producti(e capacit& ac/uired during the arI -(en be!ore the ar, 'e!!ecti(e demand' had not been large enough to assure !ull emplo&ment' To man& people, the ans er to this problem is /uite simple9 all that is necessar& !or a !ull utili$ation o! America's producti(e capacities, the& think, is to create 'e!!ecti(e demand' !or peace!ul purposes, 3ust as it had been created !or purposes o! ar' Some, like Thurman Arnold, think that the destruction o! -urope has sol(ed the problem alread&' '0uring the depression,' he said, ' e got no here' The great lack as the absence o! e!!ecti(e demand !or our production' Batel& these demands ha(e been created out o! sheer necessit&, and 1 think e are in a da n o! the greatest industrial era this countr& has e(er had'')4@* "hen /uestioned, ' hether he reall& thinks that in order to ha(e prosperit& e are in need o! the destruction o! ar', Arnold ans ered: '<! course destruction is sometimes necessar&' "hen +itler achie(ed po er, the destruction seemed necessar&''' 8o it is necessar& to meet the threat o! 5ussia ''' and perhaps a certain amount o! destruction or dislocation ma& accompan& the threat, but it is necessar& to do it' And hat has happened because o! that necessit&I "e ha(e gotten on our toes and e are going places'')41*

As the ideas o! the :arshall#planners admittedl& do not spring !rom a ne l&#arisen sense o! international solidarit&, but !rom the consideration o! a&s and means to stop 5ussian e,pansionism, it is clear that the& assume that 3ust as in the case o! the destructi(e demands o! ar, the momentaril& 'uneconomical' dispersion o! American surplus#production ma& lead in the end to an 'e!!ecti(e demand' allo ing the American econom& to operate at !ull capacit& e(en under conditions o! peace' Behind this reasoning lies the con(iction, that American production needs an 'e!!ecti(e demand; larger than that brought !orth ithin the boundaries o! the American econom&9 that !or the latter to !lourish, the orld must be read& and illing to bu& her products' 1t must be a orld o! 'open doors', o! !ree competition, in hich the .nited States could not !ail to succeed because o! her dominant position in production' +o e(er, the greater the optimism ith regard to modern producti(e capabilities, the more pessimistic the outlook ith regard to 'e!!ecti(e demand'' 1t is idel& !eared, that the end o! :arshall Plan aid ill be a catastrophe !or both -urope and the .nited States' >oreign aid, it is held, pro(ided a 'market' !or American goods other ise unsaleable' The -uropean re(i(al is based on production !or e,ports, hich the .nited States cannot accept, and the back ard nations cannot a!!ord' 0espite its (ast de(astation, "estern -urope su!!ers alread& !rom an unmarketable surplus o! steel, coal, and other industrial commodities' Because there is no demand !or -uropean goods in America, there is no 'e!!ecti(e demand' !or American goods in -urope' To better their balance#o!#trade, the -uropean nations cut or !ree$e their ages, reduce their imports, and dri(e !or greater e,ports, regardless o! the needs at home or the repercussions in other countries' The general dri(e !or greater production, it is !eared, ill end in a ne and orld# ide depression' '.nless e can ad3ust human societ& so that the t o dangersGre(olt against po(ert& and unmarketable surplusesGcancel each other out,; said Bord Bo&d <rr, 'our ci(ili$ation cannot sur(i(e e(en i! another atom bomb is ne(er dropped'')44* "hile there is a lack o! 'e!!ecti(e demand', there is, o! course, a great need o! !ood, coal, steel, and all kinds o! commodities' 0espite :arshall Aid, and despite the 'surpluses' o! the re(i(ed -uropean econom&, her people lack ade/uate !ood, lack coal to heat their d ellings, lack steel to rebuild their bomb#torn cities' 1n America, too, in spite o! her surplus#production, a large minorit& li(es in dire need and a ma3orit& hopes to better itsel!' The use o! the actual and the potential surpluses ould, indeed, re/uire the adoption o! an internationall&#oriented 'social point o! (ie '' But, then, the 'surpluses' ould be recogni$ed !or hat the& are, a grotes/ue and misleading mask o! ell#being upon the emaciated !ace o! uncountable unstilled ants' The orld ould stand re(ealed as one o! great shortages, generall& in need o! social and industrial emancipation, so as to lighten the burden o! the people in the ad(anced as ell as in the back ard nations' To ha(e an immediate e!!ect, a 'social point o! (ie ' could !ind reali$ation onl& in the !ree sharing o! the orld's surpluses, based on urgencies o! need' 1n the long run, it ould ha(e to lead to the re#organi$ation o! the orld econom& and the re#di(ision o! its labour to ard a orld# ide co#operation tending to end the economic and political phases o! human miser&' At this time, ho e(er, the 'social point o! (ie ' is con!ined to the pla&!ul speculations o! economic theorists, and e(en here, it is a social point o! (ie ith limitations' 1n its present !orm, it is a point o! (ie leading to a conscious search !or a&s and means to maintain the social status /uo' To the economists, this means !irst o! all guaranteeing !ull emplo&ment or, at an& rate, hindering the rise o! large#scale unemplo&ment' Bet een the t in#e(ils o! unemplo&ment and o(er#production, it is the latter hich seems to man& people the lesser one' 1t is in an& case easier to get rid o! surplus commodities than o! a surplus population, hich, !urthermore, ma& be needed again !or a sudden e,pansion o! industrial acti(it&' +o e(er, as ages are 'costs o! production', the maintenance o! pro!itabilit& o! the producing enterprises e,cludes the distribution o! the surplus product (ia the age s&stem' This s&stem itsel! e,cludes '!ree distribution' to the need& la&ers o! societ& on an& signi!icant scale, !or under the age#s&stem people ork onl& i! the&

must' .nder conditions o! a declining international trade, the ph&sical character o! the surplus product ma& e,clude its consumption altogether, or o(er#production ma& e,ist in all !ields o! production simultaneousl&' Because o! these and other reasons, the hope to rid societ& o! its o(er#production through !oreign aid is irresistible, as this seems to lea(e the social and economic conditions at home largel& undisturbed' But not !or long' 1t is not di!!icult to propagandi$e the orking population to produce !or !oreign aid, as the& ha(e (er& little sa& in such matters an& a&' But it is less eas&, and bound to become impossible, to con(ince the enterpreneurs and businessmen that sharing America's ealth ith other nations ill ser(e their o n ends too' Although a !oreign aid programme allo s !or a larger production than ould be possible ithout it, the go(ernment 'bu&s' the surplus commodities ith !unds e,tracted !rom the communit&' And though in this a& it helps some corporations hich could not !unction ithout a stead& demand, it helps them at the e,pense o! others hich are still able to !unction independentl&' To the latter, !oreign aid means merel& a greater ta,#burden, reducing their incomes and limiting their e,pansion, thus endangering their (er& e,istence' The& are opposed to it in the sense in hich the& are opposed to public ork programmes, hich also a!!ect some interests !a(ourabl& and others un!a(ourabl&' The& pre!er less than !ull emplo&ment, hich brings ith it a readier acceptance o! an increased producti(it& b& stationar&, or slo er rising, ages' The& !a(our the conditions that make !or an increase o! the market#demand through lo er costs' And in so !ar as the& are able to assert themsel(es, the& ill limit the !oreign aid programme' As a means to secure !ull emplo&ment at home, the !oreign aid programme raises a /uestion o! e,pedienc&9 hether to cut do n production and !eed the unemplo&ed, or to keep emplo&ment up b& supporting !oreign go(ernments and businesses' >oreign aid ould here be a t&pe o! hidden unemplo&ment, an e,pensi(e !orm o! ork#relie!' And the arguments !or and against public ork programmes ould co(er those on the /uestion o! !oreign aid' +o e(er, 3ust as a continuous increase o! public orks ould disturb pri(ate enterprise, since it limits its sphere o! action and hampers its e,pansion, so ould a constant out#!lo o! surplus production !inanced b& public !unds, !or this, too, sets borders to business e,tension and leads !rom stagnation to deca&' 1t ould amount to a re(ersal o! the hitherto practised polic& o! pri(ate ealth concentration, hich ould (iolate all the rules that sustain the pre(ailing societ&' 1t could end onl& in the dreaded nationali$ed econom&, hich it set out to pre(ent' 1t ma&, perhaps, arrest the gro th o! 'socialism' in other nations, but onl& to !urther it in the .nited States' Sel!#de!eating as a permanent and large#scale polic&, it ill be emplo&ed onl& as an instrument o! po er politics designed to secure the !ree capitalist orld'GThe +ottentots ill ha(e to get along ithout a 5olls#5o&ce'

Notes:
)1* Wilson Papers, Kol' 1K, pp' 449#466' )4* America's Role in the World Economy, Penguin ed, p' 16%' )6* 1bid', p' 5 )2* The e! "or# Times, 44nd >ebruar&, 195@' )5* 1bid'

)%* Point-$our% &ur Chance to Achieve $reedom from $ear' 8e Jork, 1929, p' 6%' )D* Inau'ural Address, Canuar&, 1929' )8* The e! "or# Times, 6rd >ebruar&, 195@' )9* The (tatist, Bondon, 1@th 0ecember, 1929' )1@* The e! "or# Times, 1Dth :arch, 195@' )11* The e! "or# Times, 61st :arch, 195@' )14* C' -' :eade, Plannin' and the Price )echanism, 8e Jork, 1929, p' 111' )16* The &riental Economist, Tok&o, 41st :a&, 1929' )12* The e! "or# Times, 8th April, 195@' )15* 0ean Acheson in an Address on *+(+ policy in Asia be!ore the Aommon ealth Alub o! Aali!ornia' LThe e! "or# Times, 1%th :arch, 195@'M )1%* 1bid' )1D* The *nited (tates and China, +ar(ard .ni(ersit& Press, 1928, p' 669' )18* >rank Pace, Cr', 0irector o! the Budget, in a speech be!ore the American 5etail >ederation' LThe e! "or# Times, 2th April, 195@'M )19* The ,eneral Theory of Employment- Interest- and )oney, 8e Jork, 196%, p' 149' )4@* Proceedings o! a Aon!erence sponsored b& 'The -conomic and Business >oundation', 8e "ilmington, Pa', 4@th 0ecember, 1928, p' 18' )41* 1bid', p' 41' )44* The e! "or# Times, 1st :a&, 195@'