London, April: This may be the wrong moment to dwell upon the relationship between America and Western Europe, as seen from the capital of what in more spacious days was known as the British Empire. The U.S. public—one is told by news commentators and transatlantic visitors—is deeply engrossed in the Presidential election stakes, and whatever energy is left over from this topic must inevitably be shared out between two other (literally) burning problems: Vietnam and the racial crisis. Nonetheless it remains one's duty to report that a turning-point has been reached in yet another area. Starting from the first tentative moves in Washington last January to stem the outflow of dollars, and continuing via the gold rush in March and the subsequent monetary conferences, something has changed in the relationship between the two halves of the North Atlantic partnership. The Europeans, to put it baldly, have formed the impression that in future they will have to act jointly (a) to preserve their interests and (b) to guard against irrationality in Washington. They are even beginning to think that it may be up to them to help keep the U.S. ship of state upon a more or less even keel.
Now this is something quite new. Until recently, the West Europeans—with the single exception of the French—had assumed as a matter of course that, whatever else might be said about the United States, at any rate its power was unchallengeable, its global role clearly defined, and its internal stability to be taken for granted. Similarly, it was supposed that Western Europe could be safe only under the U.S. nuclear umbrella. As a corollary of these beliefs, it was likewise held that the North Atlantic alliance formalized in 1949 would go on, even if France withdrew, as theoretically she had the right. None of this can any longer be regarded as certain. It is not even certain that, confronted with a choice between an “American” and a “European” orientation, countries such as Britain or West Germany will invariably come down on the American side. They may or they may not (the Germans in their present mood probably will not).
The extent of France's, and therefore Europe's victory in this crucial area has been concealed from the Anglo-American public by the near-unanimous flood of drivel printed in the more prestigious English-language papers; not to mention the popular news media, whose grotesque antics on the occasion of the international monetary crisis last March finally drew a protest from the Economist, itself among the major culprits in misinforming its clientele as to what was actually going on in the world. Habitual readers of this influential journal have yet to be acquainted with some elementary facts about Europe (not to mention Southeast Asia or the Middle East)—e.g., the fact that the present British government never had the smallest chance of being allowed to enter the Common Market, let alone disrupt the alliance between France and Germany—the open and avowed aim of every British official at home or abroad. But all this is trivial compared to the overriding fact that the union of Western Europe is currently beginning to take the form of a movement away from the America of Mr. Johnson and his cronies (one can hardly describe them in more dignified terms).
For a start, consider some of the recent utterances of Harold Wilson, always a reliable weather-vane, if not in other respects a very remarkable public figure. In his devaluation broadcast last November, the Prime Minister terminated with a rhetorical flourish to the effect that “we are on our own now”—a pathetic echo of Churchill which predictably evoked scorn and ridicule from his hearers. Four months later, on March 21, there took place the following brief exchange in the House of Commons:
Mr. Marten (Banbury, Conservative) asked the Prime Minister if he would discuss with the U.S. President the question of a joint feasibility study of the North Atlantic free-trade area proposals, in view of the similar study now being undertaken in the United States.
Mr. Harold Wilson (Huyton, Labour): No. As the House knows, there is no evidence that a North Atlantic free-trade area is a realistic present alternative to membership in the European Economic Community, which remains the government's prime aim. In these circumstances, a diversion of resources to a major feasibility study could not be justified.
Now it may be said that Mr. Wilson is in the habit of changing his mind quite frequently, even on important issues, and that anyway he had left a back-door open. It may also be said that the chances of his decrepit government being invited into the EEC are about equal to the chances of Mr. Johnson's administration turning South Vietnam into a model democracy. The fact remains that Mr. Wilson has begun to edge away from the close embrace of Mr. Johnson, and when he does this the writing on the wall is plain for all to see. For Mr. Wilson in the past has not only been the most loyal of Johnsonians: he has actually gloried in the role of America's Trojan Donkey. On the occasion of a visit he paid to Washington in July 1966, he responded to the President's toast by saying for public consumption: “We are in Europe already, and we can look forward to playing a bigger part in Europe if we can get the conditions that make this possible. But we would never do that if it meant turning our backs on our Atlantic loyalty and—if I can use the phrase from your White Sulphur Springs speech—our Pacific loyalty as well.” You don't hear Mr. Wilson, or any other British public figure, uttering such sentiments today. The emphasis is all on European solidarity (not that this is going to do the present team much good, though it may help its Tory successors in the 1970's). As for “our Pacific loyalty,” that went down the drain in January, when the date of departure from Singapore was suddenly advanced from 1975 to 1971. I shall come back to this later on. For the moment, let us look at the European picture.
Here we have what at first sight seems like a plain contradiction. On the one hand, the British Government says it wants to join the EEC and has no use for an Atlantic free-trade area. On the other hand, its representatives are consistently to be found battling for the American viewpoint at international monetary conferences. Moreover, Washington's crisis measures last January to stem the outflow of dollars had the effect of grouping Britain with Canada, Australia, New Zealand, and Japan, while the Continental Europeans went into a different (and less favored) category. Clearly, the Six of the EEC were then intended to bear the brunt of Washington's efforts to reduce the U.S. payments deficit, while Britain, Canada, Australia, Japan, and the oil-producing countries, were placed in a different class in regard to U.S. investments abroad.
But that was before the gold rush last March and the battle to “defend the dollar”: an absurd phrase, considering that not a single economist of any distinction would treat as a matter of principle the question whether gold is purchased at thirty-five dollars an ounce, or at twice or thrice that amount. No matter, the Johnson administration, having nailed its colors to this mast (how long will it be before they are hauled down?), the Six of the EEC suddenly found they had a means of putting pressure on Washington by cooperating, or failing to cooperate, in the sham battle to keep the official gold price stable. The gold price cannot be kept stable, if only because there is no way of effectively preventing the “leakage” of central-bank reserves into the “open” market; and the whole issue is largely meaningless anyhow, since a world rise in the official gold price would make no difference to the value of the dollar in terms of other national currencies: the only thing that really matters. But the gold panic, and the consequent flurry of international monetary meetings, has had the effect of dramatizing the split between the Anglo-American group and the Continental European bloc. The latter suddenly turned out to possess a degree of internal coherence which had not been suspected. Moreover, the U.S. administration found it possible—indeed necessary—to deal with the EEC as a more or less equal partner, at any rate in the monetary field. Never mind that the gold issue is largely mythical, and the alleged danger of a “world economic crisis” the brainchild of excited journalists working upon half-understood hints emanating from official sources. The outcome has been to publicize the rift between Continental Europe and the Anglo-American group: the latter, plus Japan and Australia-New Zealand, has been shown to prefer the dollar to gold.
Now it is of course part of the Anglo-American mythology that all sensible people want either a dollar standard or a new international paper currency, and that only de Gaulle's antiquated prejudice in favor of gold stands between the world and a rational monetary arrangement. But no one in Europe believes this. After all, people can read, and they know (from reading Le Monde, for example) that even the General's sharpest critics share his determination to have done with the constant American payments deficit. This deficit has two main sources: Vietnam, and the export of American capital to Western Europe. Some of the latter takes the form of genuine investment in European industry. The rest is “funk money” held in Swiss banks (and as such liable to provoke another monetary panic a few months from now, if the unofficial gold price tempts its owners to convert from Swiss francs into yellow metal). There is a further twist: it is believed that a large proportion of the 2,000 million dollars annually spent by U.S. troops in Vietnam finds its way through Saigon back to the Eurodollar market: the European “free” market in expatriate dollars. The money comes in mainly through France (a consequence of the long-established French ties with Southeast Asia) and eventually winds up in Swiss banks, where it joins the billions held by Arab and Persian owners of Middle Eastern oil royalties. These funds animate an unofficial gold market centered on Beirut, the Persian Gulf, and Hongkong; and whatever the authorities may assert to the contrary, there is no way of stabilizing the official gold price while billions of convertible dollars (some estimates run as high as $15,000 million) are floating around in this fashion. That is why the current arrangements among the central banks have merely bought time.
To the more radical theorists, none of this matters: they are convinced that gold will eventually be demonetized anyhow and replaced by an international currency managed by the World Bank or some such institution. But the short-run choice is not between gold or “paper gold,” but between gold or the dollar, and the dollar has been rendered unstable by the policies of successive U.S. administrations and the growing unwillingness of the Continental Europeans to hold dollars as a reserve currency. West Germany is expected to have a payments surplus equivalent to several billion dollars this year, and few people believe that the Bundesbank will want to add to its dollar holdings. It will, of course, play the game so far as the gold market is concerned, but its officials will be all the more insistent that the U.S. should scale down its payments deficit—and not by shutting out European goods either! As for the French, they have already hinted that, while the Bank of France will do nothing to undermine the official gold price, it cannot accept “unwarranted foreign interference”—such as inquiries from the U.S. Federal Reserve as to the purpose of French gold transactions. Paris may in the end agree to the creation of “special drawing rights” (vulgarly known as “paper gold”) on condition that the International Monetary Fund ceases to be American-dominated. The argument is that America should not be the only country in the world to have its deficits underwritten abroad. “To accept this system,” said M. Michel Debré last March, “is to accept the idea that America alone is responsible for policing the world.” In other words, if the U.S. wants to act as the Western world's political and military trustee, it ought to consult (at the very least) its allies about its policies. This notion may be new to Americans; it is becoming very fashionable in Europe.
Not that the U.S. lacks defenders in Britain; but they are to be found mainly among economists who don't know or don't care about the real world. “Politics proposes; but economics almost always disposes,” one of these pundits wrote loftily last January. A few months later he got his comeuppance in the shape of an economic panic initiated by the political blunders of the Johnson administration. The argument one generally hears in these quarters is that the whole thing is really a fuss about nothing: after all, the U.S. payments deficit equals only one-half of one per cent of America's gross national product, so why worry? The answer is that the U.S. has been acting as Europe's banker, and bankers can't afford to become insolvent even if they have a heap of capital assets to back them up. The London Spectator—a conservative journal—put it very clearly on March 22: “The plain fact is that America cannot both manage her economy at home and conduct policies overseas which together add up to a continuous payments deficit on a substantial scale, and at the same time expect the rest of the world to hold its monetary reserves in dollars. This would remain true even if gold did not exist at all.” It would also remain true even if de Gaulle did not exist. It is indisputable that he does his best to unify Continental Europe on an anti-American platform; but he is able to do it only because the Johnson administration has handed him an issue which neatly links expert worries with popular sentiments: the hopeless war in Vietnam and its repercussions in the monetary sphere.
Still one can hear it said that, whatever the Continental Six of the EEC may in the end decide to do, Britain at least has a choice: she can range herself with the U.S., Canada, Australia, and Japan, in a free-trade alliance and let the European gold bloc go hang. As Peter Jay put it in the (London) Times on January 4 (in a message cabled from Washington): “By the time devaluation has put Britain on its feet and the United States deficit has been reduced to less than $1,000 million at the expense of European industry, the whole thing may begin to look so different that new political sums will have to be done. A protected and technologically underdeveloped Europe, cut off from the mainstream of competitive world trade, dependent perhaps for settling its international debts on an obsolete stock of gold from which the dollar backing has been removed, would confront a more rapidly growing, larger, and more technologically sophisticated North American and Pacific market.”
Stout words. But what sort of place would the United Kingdom have in such an arrangement? “It would be a free choice for Britain,” added Mr. Jay. “We might of course go under, but the fatal wound would at least not be in the back, as it would be if we settled for being technological cock of the softer European market—assuming indeed that we could even be that.” These heroic sentiments were uttered on the morrow of Washington's decision to give Britain preference over Continental Europe in the matter of U.S. overseas investments. Their author adheres to the Gaitskellite school, which has always placed Anglo-American solidarity ahead of all other considerations. But for this kind of option to make sense, the Wilson government would at least have had to proclaim its determination to stay in Singapore until 1975: instead of which it did the exact opposite, thereby pulling the rug from under the surviving champions of the “special relationship.” Nor is the drift toward Europeanism and/or Little Englandism likely to be reversed by a Tory administration in the 1970's. Faced with the alarming spectacle of Mr. Johnson's America, the leadership of the Conservative party has begun to opt for Europe—reluctantly but definitely. And once the Establishment has closed its ranks, with both major parties committed to the same orientation, the issue is as good as settled.
Admittedly, some rear-guard actions remain to be fought, for Whitehall, as usual, would like it both ways: get into the Common Market (together with the Scandinavians) and still count among America's favored allies. But the scales are tilting inexorably against this kind of orientation. “It is no longer heresy,” a columnist in the liberal and pro-American Guardian wrote last January, “to regard the American takeover of key European industries as a very grave threat, or to point out that it has been facilitated by American inflationary policies. . . . It is easier to export inflation than to export goods, and so long as the American government continued to run a huge deficit, European firms had little protection against monopolistic bids by their American rivals.” The writer went on to quote from M. Servan-Schreiber's controversial bestseller Le Déft Américain, where the current economic rivalry between Europe and America is termed “the first great war fought without arms or armor.” By no stretch of the imagination can this influential French editor and author be described as a Gaullist, yet the arguments he advances, and the policies he advocates, amount to the sort of Europeanism which until quite recently was the preserve of the Gaullist school. There is now a competition going on in France between government and opposition, each trying to sound more “European” than the other, while Herr Kiesinger tells his countrymen that West Germany's future cannot lie in “a sort of North Atlantic imperium” and his government drags its feet over the signing of the joint Soviet-American draft treaty on nuclear proliferation.
“So we are back at power politics,” a writer on M. Servan-Schreiber's L'Express reported from Paris in the London Spectator on March 22 “with the Americans and the French battling for the soul of Germany. America's bargaining strength is her troops on German soil; France's, her support for German policy toward a rapidly changing Eastern European world.” There are still a number of people in London who think the Germans will eventually come down on the U.S. side. Haven't they in fact done so over tariff cuts, “special drawing rights,” and other bits of financial manipulation? Yes, indeed—whenever the issue was not really fundamental, and whenever it could be represented as a straightforward quarrel between Washington and Paris. But all this is mere froth on the surface of an ocean in whose depths the real and abiding choice—the choice between Europe and America—has already been quietly taken: by the Germans no less than by the French and the other West Europeans. The British, it is true, are still hesitant. Having been twice barred from the Common Market, they are uncertain whether to persist in their new-found European role, or resign themselves to playing third fiddle in an Anglo-American empire. But for the shattering impact of the Vietnamese disaster, piled on top of the sterling-dollar crisis and America's growing racial trouble, the pro-Europeans might even have lost out, for dislike of Continental Europe runs deep in this island. It has taken the combined talents of Messrs. Johnson, Rusk, and Westmoreland to persuade the average Briton that no such thing as a genuine Pax Americana is in sight. What he sees instead is chaos, and his instinct tells him that Europe is a safer place to be in.
What then is to become of NATO? What indeed can be done about a military alliance when the danger it was created to meet has vanished almost from sight? Hardly anyone in Western Europe believes any longer that NATO is needed to defend the Continent against a standing military menace from the Soviet Union. Moreover, the technicians now tend to think that—while no such threat actually exists any longer—NATO would not in fact be very useful to Europe were it called upon to play its chosen role. “War game” studies at a British defense research establishment (according to the military correspondent of the London Times), “have led to the conclusion that a concerted Russian advance into Western Europe could not be held up for more than two or three days, even if all the West's seven thousand battlefield nuclear weapons were used. The assumption behind the study was that the Russians would match nuclear weapon for nuclear weapon in such a situation. Apart from the fact that a battlefield exchange of nuclear weapons of that intensity would virtually obliterate the battlefield itself, it is the view in Whitehall that at the end of the exchange the Russians would still have the numerical superiority in conventional troops with which they started” (The Times, 24 February, 1968).
Translate that into ordinary language, and you get a simple answer to the question what practical use NATO is, now that it has been neutralized by the parallel development of Soviet weaponry. Plainly what keeps the situation stable is the fact that neither side wants the kind of nuclear exchange which would inevitably develop if the Russian “steamroller” ever got moving. Nuclear weapons do deter, though it may be impossible to match conventional enemy forces on the ground. This was and is the justification for maintaining NATO in being, even though no one any longer credits the Russians with any intention of putting the matter to the test.
So far, so good. But having said this, the danger of an uncontrollable military muddle arising, perhaps in the Berlin area, from recklessness or miscalculation on either side, cannot be wholly ruled out. A clash in Central Europe could start almost by accident if either side misinterpreted the movements of the other, and it would then be rapidly escalated to the nuclear stage. “Crisis management” has not yet reached the stage of perfection postulated in some current literature on the topic. There is thus a case—even from the Soviet viewpoint—for keeping NATO in existence, rather than allowing the West Germans the degree of independence they would inevitably obtain in the 1970's if American and British forces were withdrawn. In fact there is reason to believe that the Russians are not really worried about NATO, though for the record they go on demanding its dissolution. Inversely, the Western allies are not as keen on German reunification as they are in the habit of asserting. A united Germany would inevitably upset the precarious balance now prevailing. It would overshadow Western Europe, alarm the Russians, and perhaps encourage the more irrational elements in Washington. It would also promote political and intellectual retrogression in Prague and Warsaw—not that the Poles need a lot of prompting. For all these reasons, German unification is undesirable; fortunately, it is also most improbable. This is not merely due to the prevalence of unreconstructed Stalinism in East Berlin. A more liberal East German regime, on the Czechoslovak model, would still have to stay within the Warsaw Pact, and it would still be indigestible from the West German viewpoint. The current “thaw” in Prague is welcome, but in military terms it portends nothing fundamental. All it signifies is the likelihood of East European Communism losing some of its more obnoxious features.
One thus comes back to the simplest argument of all: the present NATO arrangements are adequate because the Soviet leaders cannot be sure that a forward move in Central Europe would not trigger an American nuclear response. On the other hand, the West Europeans are increasingly skeptical about the promise that such a response will be triggered off. There was a time when America's readiness to run nuclear risks on Europe's behalf was beyond question. Today the French are not alone in thinking that it is highly doubtful whether the U.S. will in fact risk a full-scale intercontinental nuclear exchange for the sake of Western Europe. As for the consequences of a “battlefield exchange” the only certainty is that, when it is over, there will be nothing left worth defending on either side of what used to be known as the Iron Curtain. This is as obvious to the Poles, the Czechs, and the Hungarians, as it is to the Rumanians and the Yugoslavs, who have already drawn the logical consequence by opting out of automatic military entanglements. In this respect, Rumania is simply following the French example, with the obvious difference that France is aiming to become a nuclear power. The implications of French military policy for the 1970's are overwhelmingly obvious: they are neutralist. This may be irrelevant from the U.S. viewpoint, but it poses a problem for the British. London does not fancy the idea of a Franco-German military bloc running Europe's future defense policies—not because these policies are likely to be adventurous, but on the contrary, because they look like being isolationist. Behind the drive to “get into Europe” (a misnomer for the attempt to join up with the Six) there lies the belief that Britain cannot afford to be frozen out of future Continental developments: political, technological, military.
This has implications for the projected North Atlantic Free Trade Area (NAFTA for short). There is indeed a link between NAFTA and NATO, although it is not often discussed in public. NAFTA's American and British sponsors tend to place the Anglo-American connection before everything else, and they do so largely for non-economic reasons. To quote an authoritative source: “The core of the NAFTA idea is an English-speaking club, an expanded White Commonwealth to which the EFTA countries [in practice this means the Scandinavians—G.L.] could be admitted as honorary Englishmen, and the Japanese—well, the Japanese, one has to mention them to interest the Australians and New Zealanders, and American exporters frustrated by extensive Japanese non-tariff barriers, but what British NAFTA-ist would break his heart if they said no?” (The Economist, 30 March, 1968.)
Now this scheme has a number of supporters, possibly even beyond those listed by the same journal in these terms: “The Jay family, the Bank of London and South America, the Evening Standard, and a handful of MP's, economists, and Anglo-Canadians.” (It may be worth explaining that Douglas Jay was for a while a member of Mr. Wilson's administration, and that a junior member of the clan supplies the Times with economic expertise.) These people and their friends have always opposed the idea of joining the Common Market, as being economically unsound and in any case liable to deepen the gulf between the U.S. and the British Commonwealth. It is therefore remarkable that the Economist, for all its loyalty to NATO, has been unable to swallow NAFTA. The reason once more is very simply stated: “The strongest single objection is that NAFTA would cut off Britain from the EEC for the foreseeable future. One cannot be very confident that Britain, as it is now, will be admitted to membership by the first post-Gaullist government in France. One can be very confident that a Britain tied into an economic system wholly dominated by the United States would be shut out, and not just by France.” (Ibid., March 30.)
To the more consistent advocates of the scheme, this does not matter: on the contrary, they would welcome it. The Economist dislikes the notion, as being dangerous to Western solidarity: “For many years at least, it would divide the Western world into two economic blocks, and thereby into two political blocks. The United States would be cut off from all but one of its major European allies, and probably from most of its minor ones. This would be a most pleasing result for President de Gaulle; is it one that could please any Atlanticist or—however tattered John Kennedy's ‘grand design’ may now look—any American President?” (Ibid.) Perhaps we shall all know the answer to that last question by November, for there are those who believe that Mr. Johnson at least could not care less about Europe: his mind (it is thought in London) is fixed upon Asia and the coming confrontation with China. Which is why the British decision to evacuate Singapore ahead of schedule was so badly received by his advisers last January. If the British are going to behave like that (one can hear them telling each other) it hardly matters whether they are in Asia or not. It has indeed almost ceased to matter—though mainly for technological reasons. For the rest, a Tory government in the 1970's (now a virtual certainty) is likely to disappoint its American friends in a different sort of way: it will certainly not aim at “Swedish” pacifism and neutrality, but it is quite likely to adopt as large a slice of the Gaullist inheritance as the City bankers can be made to swallow. The Tory leaders who really matter are those closest to the military establishment. These men have had a long look at the recent U.S. record in Asia, and they have not liked what they have seen. If Washington wants to escalate its conflict with China, it will—in Mr. Truman's immortal if ungrammatical phrase—have to “go it alone.”
Postscript: A number of stirring events have taken place since the above was written, but none that affects the basic argument. If anything, Mr. Johnson's virtual admission of defeat in Vietnam has increased the skepticism with which his administration has for many months been viewed by the top-ranking members of the British Establishment, with The Times in the lead. As for his dramatic decision not to stand for reelection, it is perhaps charitable at this stage to say no more than that few people in London are wholly convinced of its finality.
There is also an undercurrent of feeling that whoever becomes President next November will have his hands tied by the growing menace of racial bloodshed at home, and be all the less willing to take new initiatives abroad. If this leads to the long-overdue de-escalation in Vietnam, and perhaps to an improvement in U.S.-Soviet relations, relief will certainly be felt in Western as well as in Eastern Europe. But there will also be a feeling that the U.S. is likely, for some years at least, to go on the defensive internationally and scale down its commitments abroad. This need not result in the dissolution of NATO, any more than the Russians are likely to renounce the Warsaw Pact. It will simply mean that the Big Two may come to regard the status quo as worth preserving, without bothering too much about the interests of their minor allies. Viewed from London, this is going to look like good sense. It will also deepen the conviction that Western Europe must acquire a political identity of its own.