Perhaps the most striking thing about the Marshall Plan was the spurt of galvanized enthusiasm with which it was greeted in Western Europe. British and French reactions were so precipitate that the delay and procrastination characteristic of international assemblies since the end of the war were replaced by an absolutely breakneck speed in rushing through at least the preliminary administrative steps necessary for a conference. It did not take more than a week before a standing committee was set up, largely at Bevin’s insistence, for replying to and briefing the State Department, and by the end of another few weeks the sixteen countries that had responded to the hopes generated by the Marshall statement were deep in the by-play of elaborating claims and counterclaims.

The nature of the American response to this, however, makes it seem almost as though the Marshall Plan had been put forth in a fit of offhanded irresponsibility. As soon as the smoke of European eagerness had died down it was clear that the plan under discussion was no plan, but an offer of aid, and that even as an offer of aid nothing was being said about either its volume or, perhaps more important, the delay likely in providing it.

This is, to be sure, far from true with respect to the State Department: there the enthusiasm for the project, evidently generated by political considerations, has been unrestrained. But the uncertainty of Congressional approval appears to have made the entire acceptability of the plan, not to speak of its success, dependent on a sort of publicity campaign conducted by State Department lawyers with an ax to grind. And since it was clear not only that urgency was the keynote of the entire project, but that the essence of the matter lay precisely in the political implications of any material assistance, the discussions were oppressed by a nervous futility which resulted in a majestic anti-climax this September when the report was finished and instantly rejected, in what was then its form, by Mr. Clayton and his advisers.

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While the awareness of the European crisis is now more intense than ever, for the crisis atmosphere itself has grown enormously since the Marshall statement, the practical possibilities once ascribed to the Marshall Plan have become dissipated in an interregnum of American dilatoriness. The United States has been caught somewhat short: in the words, much quoted, of the Washington Post: “We expected them to jump six inches or so. But we never thought they would jump ten feet.”

This is perhaps all the more remarkable since the mere projection of a plan of any kind implies the recognition by leading American circles of the enormous gravity of the European situation. The crisis has become a commonplace for everyone; the briefest of statistical references will recall its outlines. The London Observer put it as concisely as possible when it pointed out (June 22, 1947) that the economic bankruptcy of Europe since the end of the war has been prevented exclusively by American credits amounting to 750 million pounds a year, and indicated that the significant thing about this was that only a fraction of the sum—less than 100 million pounds—was being used for economic reconstruction, the rest being applied principally to the purchase of foodstuffs.

Thus, in a situation in which everyone agrees that the crying need is for the rebuilding of the productive plant, and in which the long-range and essentially farsighted American policy of helping Europe is creating political friction domestically, the funds squeezed out of a balky Congress that could be used for the rebuilding of capital equipment are being fruitlessly dribbled down the bottomless well of European malnutrition, thus continuing a vicious circle that can only be broken by the resumption of production on an adequate scale.

The Observer also gave certain figures for the actual decline in the food production of Continental Europe because of the war. The following emerges from a comparison with 1938: meat: from II.I million metric tons to 6.6 million; milk and dairy products: from 94 million metric tons to 64 million; sugar: from 6.6 million metric tons to 5 million; various oils: from 4 million metric tons to 2.9 million. Coal has gone down from a pre-war monthly average of 46.2 million tons to 37.5 million; and steel from 51.6 million tons annually to 28.6 million.

This catastrophic and apparently irremediable decline has inevitably implied a disproportionate dependence on the United States as the principal surplus supplier in the world. Italy, for instance, now receives 58 per cent of its total imports from the United States, as against 11 per cent before the war; Poland, 44 per cent as against 14 per cent; France, 30 per cent as against 10 per cent; Holland, 25 per cent as against 8 per cent; Belgium, 18 per cent as against 9 per cent; and Great Britain 18 per cent as against 11 per cent.

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Against the background of European inadequacy even the Marshall Plan, which, as suggested above, should more appropriately be called a tentative offer of aid, or an offer of tentative aid, merely constitutes a last-ditch emergency measure. For even if it comes to a matter of supplying the sixteen countries which responded to the Bevin-Bidault appeal with four or five billion dollars a year over a period of four or five years, European economy will at most be restored to its 1938 level—which was, moreover, a very poor year.

The motivation of the Marshall Plan evidently arises out of a profound awareness of European distress, and insofar as it involves the substitution of systematic and comprehensive economic assistance for the mere piecemeal pump-priming of individual countries it must be interpreted politically as a sign of the crystallization of anti-Soviet opinion.

Yet there has been a curious lack of follow-through in the actual implementation of whatever was in the mind of the State Department when it authorized Mr. Marshall’s statement; this is partly a result of the immensely turgid and indeed often incomprehensible instructions of the State Department representatives to the sixteen-power conference, and more basically, of course, a result of the haunting undependability of Congress.

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This lack of follow-through, combined with the larger uncertainty of American political behavior on an international scale (perhaps an inherent defect of the American political system), has naturally led to a general discouragement. This has been exacerbated first by the recent revelation (in the middle of August) of the headlong acceleration of the European collapse, then by the frustration of European middle-class opinion in its euphoric expectation of being dandled safely on Uncle Sam’s knee away from the clutches of the ogre in the East, and finally by the downright statement by Mr. Clayton at the conclusion of the Conference’s labors that, even after all the whittlings down and skimpings which had already largely emasculated the report that was issued, there was little likelihood that Congress would part with the necessary credits.¹

The lack of any articulated and concrete offer on the part of the United States, coupled with the footling impression of nerveless impotence made by the British and French governments, has enormously increased the political tension already hanging like a pall over Western Europe. Walter Lippmann’s assumption, in his last article in the magazine ’47 , that the Europeans are perturbed not about the United States’ remaining in Europe but about its program when it does, seems to me naive: the prospect of European self-determination is so remote that no responsible capitalist group, depressed by the situation in the East and thoroughly harassed by the growth of working-class opinion at home, would dream of welcoming American intervention, with or without commitments, in any shape or form, with anything but relief.

While it may be an exaggeration to say that the whole of Western Europe, whatever its organization, is indefinitely bound to the chariot of American economic superiority, still there can be no doubt that for the period of the next few years at any rate the only thing that can dispel the fear of being ground between the Soviet power on the one hand and domestic social unrest on the other is the lavish award of American credits.

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The paradoxical thing about the diplomatic snags that have beset the formulation of some program in response to the American offer is that it is precisely the American support of some comprehensive scheme of European aid centered on Britain and France that led to an impasse—even though it was only temporary. For, from the French point of view, the catch in the Marshall Plan emerged when it became clear that the basic premise of any such scheme of European upbuilding had to be the salvaging of German industry as the nucleus of a general reconstruction.

Now the French in this matter have an obstinacy and single-mindedness that can only seem irrelevant to outsiders. They are perfectly well aware of the present decisive inferiority of the German economy relative to both the United States and the Soviet Union, and they are also aware that it is now the opposition between these two great states that constitutes the framework for all political activity on a world scale. Nevertheless any proposal whatever to raise the level of German industry founders on French opposition.

This opposition, moreover, seems to be equally intense among all shades of opinion, although one would imagine that since the revival of German industry is generally interpreted as an anti-Soviet American maneuver—tirelessly harped on by the Communist press—this alone would be taken as an adequate guarantee of its merits by a French bourgeoisie hysterically conscious of its political impasse at home. It may be possible to get around this French obsession by some guarantee of security such as Senator Vandenberg’s idea of a Franco-American alliance; but unless there is, there is only the dimmest of prospects for overcoming the strains and stresses involved in any consolidation of European economy. As it is, the general French nationalist phobia now being exploited by the Communists in France is reinforced by the position of the French steel interests, for the figure of twelve million tons of German steel annually, handed down by the British and American authorities as a revision of the Potsdam agreement, in effect prejudged the issue that is of chief concern to the French: namely the expansion of French steel by the import of German coal to France rather than the expansion of German steel by the export of French ore to Germany. Thus, while it might be possible for the French to agree to an increase in German coal production, they insist it must be used only partially for the revival of the German steel industry.

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It is evident that the Marshall Plan, in whatever form it emerges from its present indeterminate and confused state, can only be effectively implemented if its basic intent is realized: this is the establishment of a schedule of economic claims and capacities within an area of agreement broad enough to allow for the formulation of a comprehensive program of production. Nothing piecemeal will do. The report that finally emerged with diffidence from the deliberations of the Paris Conference failed to persuade the State Department consultants that it was the sort of horse the present Congress was likely to bet on. It appears to have been such a disappointment to them that an idea which had received some publicity beforehand, the creation of a Western European customs union, was plumped on as a fruitful or at any rate persuasive way out of the impasse, and the two countries most eager to wag their tails at the lightest of American hints, Italy and France, began pushing the question with impressive energy, to say nothing of the smaller powers, who agreed to “study” the question.

But since one of the principal reasons for the superficial character of the Paris Conference Report was precisely the reluctance to surrender sovereignty to any central authority, even a purely supervisory one, any customs union project at present seems Utopian, despite the obvious necessity of some such step to make Western Europe a viable unit. The attraction of the idea is of course immense, aside from its great appeal to the imagination of the broad masses of people. If it could ever be implemented practically it is obvious that a unified Europe would represent a potentially enormous economic power. The sixteen governments involved in the Marshall Plan discussion represent 212 million people, among the most highly trained and efficient workers in Europe and the world. Five of these governments have great colonial possessions with over 237 million inhabitants (excluding India) and have control of immense resources in raw materials. Culturally, of course, despite a long history of fratricidal bickerings, they are much closer together than any other comparable assemblage of states. But however imperative the surrender of some portion of national sovereignty may seem to outsiders, it nevertheless seems to entail too great a subjective sacrifice; only extreme and continuing distress, aided by a peremptory stimulus from outside, will be able to impose such a solution on the dwarf-states helplessly ensnared between America and Russia.

Mr. Clayton’s disappointment at the report finally handed down by the Conference was all the more striking in view of the immense zeal shown in trying to meet the American demands for a maximum of niggardliness. About ten billion dollars were struck off the final list on the basis of thinking universally admitted to be wishful and understandable only as a feat of press-agentry. The reasons given for excising these ten billion dollars—the assumption of a massive American import movement, and the assumption of a radical shift in world prices against America—are so obviously unfounded that the pathetic attempt to contrive a tasty and economical dish for Congress entails the probability that the assistance needed by Europe will be provided only to the degree of enabling it to stagger along from crisis to crisis, with the assurance of ultimate collapse. Apparently even this ruthlessly pared-down schedule of needs was considered to be inadequate, that is to say, excessive from the point of view of Congress: and if one considers that the real difficulty vis-à-vis Congress is not in persuading it merely to swallow the Marshall Plan in the first place, but to endorse the allocation of dollar credits to European countries for purchases outside the United States—the fact that about two-thirds of the requests are for foodstuffs immediately brings in Argentina and Canada—it must be said that at present the outlook is still gloomy.

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Although it can hardly be doubted that something concrete will eventually be done for Western Europe, up to now the most dramatic effect of the announcement of the Marshall Plan has been in Eastern Europe. The Plan was generally taken to be not only a recognition of European economic distress but, politically speaking, a reaction to the systematic campaign of bloc-building in the Soviet orbit, and the process of action and reaction has in fact culminated, in the absence of any clear-cut and positive Western program, in the stimulation of Soviet isolation.

The past summer has seen a great increase in the efforts made to reinforce the commercial ties between the countries in the Soviet orbit. The touring season in Eastern Europe has been in full bloom: politicians and economic advisers of all eight Soviet satellites have been whipping back and forth to each other’s capitals, as well as to Moscow and the Soviet Zone of Germany, spinning a complex web of bilateral trade pacts, economic accords, quota arrangements, etc. The Russians, having seen to it that the countries within their sphere rejected the possibilities of the Marshall Plan, felt it incumbent on themselves to offer some sort of compensation, even to the extent of imposing further sacrifices on their own people, as in the waiving of Rumanian and Bulgarian reparations on behalf of all eight countries; and there are also the levies to be made on the meager stocks of the Soviet Union itself and on its own current production. All of this is to take place within the framework of economic treaties now pouring into the chancelleries of the satellite states.

It requires no great insight to see that the obvious and indeed the unconcealed aim of all this hectic activity is the creation of an immense economic bloc as self-sufficient as its resources will allow. For the first time in modern history the Balkans and the entire Danube area may be welded together in a single economic organism that may smother the ancient social and political tensions and bring the 120 million people who have come into the sphere of Moscow since the end of the war into a fruitful economic unit no longer enfeebled by the necessity of maintaining armies, customs barriers, etc. This is evidently of fateful consequence for Europe and the world.

It is true that the Russians recorded their rejection of the Marshall Plan in a highly disingenuous way—for them to come out as the champions of small countries and of the rights of petty nationalism, after trumpeting the paramount privileges of the Big Powers at every international conference since the defeat of Germany, takes a bit of swallowing—but granted the facts of their economic situation, there was really hardly any reason to have expected them to behave otherwise.

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The sharpened political schism this implies, which is certainly unwarranted by the actual economic interests of Europe, has naturally had a direct and indeed overwhelming effect on economic reconstruction. There have been some hopeful voices talking enthusiastically about the invigorating prospects of a brisk trade between the Western European countries and the Soviet Union and/or the countries of the Eastern bloc, but these hopes seem illusory, though there is no doubt that under a different order they would be an organic necessity arising out of the actual complementary needs of both areas.

The reason for the unlikelihood of any really massive trade between Eastern Europe and the West must be sought in the economic situation of the Soviet Union itself. It is often thought that the principal reason for Russian isolationism, mistrustfulness, etc., is simply a fanatical phobia directed at the great power of the United States. There may be something in this, but what is far more important is that the organic requirements of planned economy as such constitute in fact an autarchizing factor of first-class importance leading to economic self-sufficiency.

The Soviet Union would have nothing in principle against a continuation of Lend Lease (which amounted to nine billion dollars) in one form or another: this is the significance of Molotov’s agreement in principle to a European conference which would limit itself to drawing up for the United States a catalogue of credits desired by individual European countries and a corresponding schedule of priorities. But since the Marshall offer of aid for reconstruction is based on a quite different theory it is evidently impossible for the Soviet Union to agree to it without disturbing the development of her foreign trade, based as that is on the exigencies of planned economy.

It must be remembered that the foreign trade of the Soviet Union in the last pre-war year was actually smaller than that of Switzerland, and has been declining steadily in terms of percentage of world trade. In 1913 Russian trade constituted 4.2 per cent of world trade; in 1931, 2.2 per cent; and in 1936 and 1937, it amounted to 1.3 per cent. The resumption by the Soviet Union of an extreme form of its autarchic policy, begun in force after the 1929 depression, is a reflection of the great difficulties involved at this moment in a planned economy. The control of the immense territory of the Soviet Union in the framework of a planned economy requires a maximum of stability in the data taken as the basis of planning. The throttling of her foreign trade means for the Soviet Union the reduction of all external factors of disturbance to a minimum; this is all the more welcome in view of the purely internal difficulties involved in planning. For all these reasons the autarchic tendencies of socialist planning seem unavoidable.

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The real significance of the construction of the so-called Eastern European economic and political bloc from an economic point of view is that, by imposing a dense network of economic relationships on its satellite states, the Soviet Union is able to take maximum advantage of the different national labor skills and specialties while simultaneously insulating itself against the fluctuations in the world market. As a result of the manifold forms of control exercised by the Soviet Union on its satellite states, principally of course by its combination of military power and the mass movements of the Communist parties, the Kremlin can compel the satisfaction of its own economic needs by adapting forcibly, if need be, the various national economies of its satellites to Soviet planning.

It is for these reasons that Molotov’s brusque refusal to participate in the European conference now going on cannot help but have fateful consequences for international trade. For the creation of this autarchic bloc in the East is bound to disturb the previously natural relationship of the industrial West with the agricultural East by sharply limiting the flow of industrial products eastwards and agricultural products westwards. In other words, the countries that accepted the Marshall Plan will perforce turn westwards for trading connections to a much greater degree than before.

It is true that the degree of isolation of this would-be Eastern European autarchic bloc must not be exaggerated. It represents an innovation in terms not only of immediately past history but also in terms of the actual degree of dovetailing of the economic capacities of members of the bloc. The fact is that the eight countries now commonly considered to be Soviet satellites did not have much trade with each other before the war: Czechoslovakia, the most heavily industrialized country of the “bloc,” got only 14.6 per cent of its imports from the Danubian area and exported to it only 19.3 per cent of its exports. The other countries of the bloc, including Russia, had only 5.5 per cent of Czech foreign trade. Western Europe (France, Great Britain, Netherlands, Belgium, Switzerland) together furnished about 21.3 per cent of Czechoslovakia’s imports and consumed 22.9 per cent of her exports. This situation is roughly characteristic of the whole area with the exception of Austria and Hungary: Poland, for instance, got 12 per cent of its imports from the Eastern bloc, 16.2 per cent from Germany, and 26.2 per cent from Western Europe, and exported only one-sixth of its exports to those countries, the same fraction to Germany, and much more than one-third to Western Europe.

Accordingly, it seems difficult not to see something imposed or factitious, i.e., political, in the whole arrangement. Of course there’s no doubt about the potentially enormous resources of the Eastern bloc, outside the Soviet Union, or that its potential economic strength will be a tremendous asset to the foreign trade balance of the Soviet Union as a whole. Rumania, for instance, is still the largest European oil producer, with Austria next and then Hungary; the area as a whole produces more than a third of all European food-stuffs, which will play a large role when the famine now prevailing there is overcome.

Nevertheless the Soviet Union is handicapped at the moment by the fact that it is incapable, and will remain so for several years, of supplying these countries with the consumers’ goods and the technical equipment they need so desperately, or of absorbing what was approximately the 80 per cent of their products that went to Germany and Western Europe before the war. It is simply impossible for the Soviet Union to cut the commercial bonds between many of its satellites and the West: this alone effectively prevents the emergence of a homogeneous East European economic pattern. In 1946 the Russians provided only 9 per cent of Czechoslovakia’s imports and took only 12 per cent of her exports. The Western European countries now discussing the Marshall Plan accounted for 42 per cent of Czech imports and 54 per cent of Czech exports; if the United States is added, the proportions are 50 per cent and 62 per cent. Finland’s trade with Western Europe and the United States amounted to 70 per cent of both her imports and exports; in 1946 Great Britain was Finland’s biggest customer, buying 27 per cent of her exports and sending in 21 per cent of her imports, as against a Russian share of 20 per cent of Finnish exports and 21 per cent of imports.

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These few figures are sufficient to illustrate both the tendency toward the reorientation of European trade and the difficulties in the way of its realization. For some time to come the Soviet Union will doubtless be unable to fulfill adequately its role as the counterpart of the United States in its Eastern Marshall Plan: while its political hold on its eight satellites may remain unchallenged, it is clear, from the suppressed signs of resentment that were aroused even in these countries by the Russian-imposed veto on participation in the Marshall Plan discussions, that some compensations and freedom of action will have to be allowed them, if only because of the devastated condition of the Soviet Union, and the general and decisive present inferiority of the bloc as a whole compared with the inexhaustible economic power of the United States.

This compensation can only take the form of a general rationalizing of the area and development of its resources. In the interim, until the region is sufficiently industrialized and provided with enough technical skill and equipment to satisfy its own needs, it will be necessary for the Kremlin, while insisting on the priority of its own economic interests, to allow the countries of Eastern and Southeastern Europe most intimately bound to European economy as a whole to retain a certain latitude in their trade connections with Western countries. Perhaps it will also prove advisable for the Soviet Union to coordinate these economic buffer states into its own commercial arrangements with Western countries, in order to protect itself from the uncertainties arising from the general evolution of the world market and keep them from affecting its own planning. But this priority of the trade interests of the Soviet Union implies a complete dependence on the principle of bilateralism in its trade accords with the non-Soviet world, if only because of the necessity of insuring against any of the conjunctural risks involved in trading with countries subject to the flux of the market. And, since the United States stands firmly on the principle of “free” or multilateral trading, a direct consequence of its overwhelmingly powerful economic position, the trade policy of the Soviet Union is inevitably diametrically opposed to the American theory and its reflection in the Marshall Plan.

This is of course an inverted way of describing the necessities which engendered the Marshall Plan, and also, in passing, the problem involved in the insatiable “dollar hunger” which has become such a common phenomenon abroad since the end of the war. It is true that the causes and symptoms of the present-day dollar shortage are essentially nothing more than a reflection of the difficulties of the immediate postwar period, and hence may be temporary. But at the same time the exhaustion of war, coupled with the social unrest, has created conditions that make it impossible for the readjustment mechanisms of a market economy to give an adequate solution of the problem of renewed production. Accordingly, in order to save European economy from being forced to depend entirely on state controls and a stifling of private enterprise, that is to say, in order to insure a modicum of success to the conference recently in session in Geneva for the creation of a constitution for world trade—world trade, that is, based on American free-trade concepts—what is needed is American credits, not so much to counteract the shortage of dollars as to eliminate the shortage of goods underlying it.

This, to my mind, is the perspective from which to view the Marshall Plan. Europe has been hit so hard by the war, and its industrial heart, Germany and the Ruhr Valley, so throttled by the stupid repressive policies of the occupying powers, that it has lapsed into a spiral of cumulative depression, from which it cannot recover in time—i.e., before the Soviet Union grows too strong—without substantial external aid. And without American dollars—that is, without the surplus products of American industry—no free-trade system in the immediate future would be conceivable.

It is this radical difference of structure between the Soviet area and Western society that lies at the root of the present threatened division into “two worlds,” and it is this problem of social structure which must be solved if the unprecedented potentialities of modern technique are ever to be directed into a wholesome path.

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¹ A further revision of the report, in which the United States was to be asked for credits of nineteen billion dollars over a period of five years, on the assumption that three billion more, to be spent for capital equipment, would be available from the International Bank for Reconstruction and Development, was found acceptable by Mr. Clayton on September 16, and this plan has been officially presented to the United States.