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SUPPLEMENT TO MAJOR ECONOMIC CHANGES IN 1948

UNITED NATIONS Supplement MAJOR ECONOMIC CHANGES IN 1948

Discussion of the w.orld economic situation

in the Economic and Social Council

at .its eighth session, February and March 1949

Department of Economic Affairs UNITED NATIONS

Lake Success, New York

June 1949 UNITED NATIONS PUBLICATION

Sales No., 1949.II.C.2 FOREWORD

The General Assembly of the United Nations noted with approval at its second regular session that the Economic and Social Council had made arrangements for regular reports to the Council on world economic conditions and trends and recommended that consideration be given by the Council to periodic surveys of the world situation in the light of its responsibility under Article 55 of the Charter, to promote the solution of international economic problems, higher standards of living, full employment and conditions of economic and social progress and development.

As background for its discussion at its eighth session, the Council had before it several reports, including the report of the Department of Economic Affairs on Major Economic Changes in 1948. At the conclusion of its discussion of the world economic situation, the Council adopted a resolution, reproduced on page 118, drawing the attention of Member Gov.emments of the United Nations, the Economic and Employment Commission, the regional economic commissions and the specialized agencies to the views expressed by members of the Council.

The verbatim record of the discussion in the Economic and Social Council from 21 to 25 February 1949 is contained in this volume.

iii

GUIDE TO THE DISCUSSION

Members of the Economic Participants in and Social Council the discussion Page

Mr. THORN 1,97,117,118,119 President

Australia Mr. PLIMSOLL 2

Belgium Mr. VAN LANGENHOVE 41

Brazil Mr.MuNIZ 45

Byelorussian Soviet Socialist Republic

Chile Mr. SANTA CRUZ 7

China

Denmark Mr. IVERSEN 15 Mr. BORBERG 116

France Mr. MENDES-FRANCE 28 Mr. BORIS 105

India Mr. SEN 51

Lebanon Mr. HAKIM 76

New Zealand Mr. SUTCH 19

Peru Mr. FERNANDEZ-STOLL 80

Poland Mr. KATZ-SUCHY 63,109

Turkey Mr.OZGUREL 54

Union of Soviet Socialist Republics Mr. TSARAPKIN 87,115,118

United Kingdom Mr. MAYHEW 57, 100, 118

United States of America Mr. THORP 37,97

Venezuela Mr. STaLK 82

Mr. OWEN 117 Assistant Secretary-General in charge of Economic Affairs

v UNITED NATIONS

ECONOMIC AND SOCIAL COUNCIL

Eighth session, February and March 1949

Lake Success, N ew York

21 FEBRUARY 1949, MORNING MEETING

The PRESIDENT ments which occurred during 1948. He wishes me to point out that it was clearly impossible to pre­ We are now ready to begin the debate on item sent a definitive review of the year 1948 so soon 16 of the agenda: the world economic situation. after the end of the year and that there are there­ When a similar economic debate came to its con­ fore a number of unavoidable gaps in the report. clusion a year ago, the President of the Economic The report is being issued at this time in order to and Social Council, Mr. Malik of Lebanon, found provide the Economic and Social Council with a it possible to say that the debate had been one of useful factual background for discussion of the the finest and most instructive he had attended, current world economic situation. A comprehen­ and he had attended many debates on· this ques­ sive economic survey of the world situation will tion from the days of San Francisco on. After the be issued by the Secretariat towards the middle of debate the Secretary-General, following the wishes 1949. That survey will take account both of the of the Council, arranged to make the verbatim regional economic reports which will become record available in the form of a printed supple­ available during the early months of 1949 from ment to the economic report which had been pre­ the secretariats of the regional economic com­ pared by the Secretariat, so as to give wider cir­ missions of the United Nations in Europe, Latin culation to the factual and policy statements that America and the Far East, and of the economic were made before the Council. I am certain that activities of the specialized agencies. the high standards set a year ago will be main­ tained this year. Another report which you may find useful in connexion with the debate on the world economic May I now call your attention to a number of situation is United Nations document EllUl en­ documents which contain data that you may find titled "National and International Action to helpful in connexion with this debate. There is, Achieve or Maintain Full Employment and Econ­ of course, the printed report by the Secretariat omic Stability". This document contains the re­ entitled Major Economic Changes in 1948. The plies received from twenty-two governments and first part of this report was made available to us three specialized agencies to questions put to them several weeks ago in mimeographed form. I am by the Secretariat in accordance with the Econ­ told by the Secretariat that a few slight revisions omic and Social Council's resolution 104 (VI) on have since been made in that document; you are this problem. therefore urged to use the printed version which was distributed to you several days ago, which Another document which contains data that also incorporates part II of the report, containing you may find useful is the Review of International selected world economic indices. Commodity Problems, 1948 presented by the In­ terimCo-ordinating Committee for International In connexion with this report I also draw your Commodity Agreements, which was created inac­ attention to Mr. David Owen's preface, in which cordance with a resolution adopted by this Coun­ he points out that the purpose of the present pub­ cil. The aim of the review is to set out the nature lication is to make generally available a prelimin­ of international economic problems relating to ary review of the important economic develop- primary commodities, to explain the principles

1 2 Mr. Plimsoll, Australia

that have been accepted by the Committee as a I might say also that this report on major econ­ guide in dealing with these problems and to re­ mic changes in 1948 has attracted a great deal of view the actions taken in this field to date. attention in the Press of my country, Australia, where, I am told, it has been high-lighted and re­ Finally, you will find material bearing on the ported and commented on at some length. It shows world economic situation in United Nations docu­ that the general public believes that in devoting a ment E/1084, which contains the report submitted great deal of attention to a problem of this nature to us by the Food and Agriculture Organization -the whole economic position of the world-the of the United Nations in connexion with item 19 Economic and Social Council is really getting of the agenda, dealing with the world food situa­ down to the main business for which it was cre­ tion. You are, I am sure, also acquainted with the ated. This debate, and the debate on economic de­ United Nations Monthly Bulletin of Statistics, velopment, are the sort of thing for which we were which contains a wealth of economic data. really established. Of course these documents are not, as such, the subject of our debate, but I thought it useful Turning to the report itself, the first major point to bring them to your attention at this time. that emerges from it is the big increase in produc­ tion during the past year-a most encouraging I feel certain that at the conclusion of the de­ trend indeed. Production in the world as a whole bate we are aboutto begin we shall all feel it de­ is now almost up to the pre-war level. But the in­ sirable to have the discussion reproduced as a crease is not uniform. There are some countries supplement to the report before us, Major Econ­ where production is lagging, particularly the de­ omic Changes in 1948. To ensure that this debate feated countries - Germany and Japan - and the will in effect supplement the Secretariat's report, formerly occupied countries. But on the whole, I hope that the participants in the debate will de­ production has recovered. vote their attention primarily to matters not cov­ ered, or not covered in detail, by the report. In particular there is the recovery in food which I therefore hope that the participants will dwell the report rightly singles out as possibly the most on economic conditions within their own coun­ important factor during the past year. The other tries, the effect of those conditions on the world striking feature is the recovery in western Europe. economic situation and the effect of world condi­ Europe is still far behind what we hope it will at­ tions upon the situation in their own countries. tain but nevertheless it is clear that western Eu­ rope is getting back on its feet. For this we all owe Mr. PLIMSOLL, Australia a great debt of gratitude to the United States of America for its loans and other aid-for the re­ The Economic and Social Council and the markable foresight, generosity and understanding United Nations are once again under a debt to it has shown and for the assistance it has given the Secretariat for preparing for us a very good and is continuing to give. report on the world economic position today. Our congratulations are due to Mr. Owen and Mr. Weintraub and the other members of the econ­ The second point-which is giving concern to omic staff of the United Nations for the great care some people, a concern which is uncalled for at and accuracy and power of analysis they have the moment-is the appearance of deflationary shown in this report. trends. Inflationary pressures that have continued since the end of the war are now beginning to These remarks apply, too, to the other econ­ subside. Some of the essential factors of produc­ omic papers that are before us. We should include tion are no longer short. We can get raw materials in our congratulations some of the specialized where perhaps we could not before; capital equip­ agencies, in particular, the Food and Agriculture ment has been restored in many places; goods are Organization of the United Nations, whose report appearing more freely on the market. As a result, on the state of food and agriculture in 1948 is a the pent-up demand that accumulated during the most valuable and well-presented document. war, when we could not get the things we wanted, Mr. Plimsoll, Australia 3

is no longer sustaining some of the industries that increasing technical skills and so on. That means flourished after the war. not merely producing more with our existing re­ sources but also-what is probably the same thing The report itself gives some evidence of the de­ said in a different way-it means reducing costs. flationary trends. An illuminating table on unem­ ployment on page 37 shows unemployment in­ I would like to emphasize that particular point creasing in Europe and in America. Prices are -the need for reducing costs of production and in­ falling in certain countries. The report does not creasing our efficiency generally. We need to pay give a complete picture of this; it is not the fault great attention to costs. I feel that in some of the of the compilers of the report, since some of these discussions in regional commissions and other trends became a little more evident after the bodies, though there is a clear understanding of period for which the report was prepared. In any the need to increase production, sufficient atten­ case it is far too early to say whether they are just tion is not always paid to this question of costs. seasonal trends and trends that have been tem­ The production of a country must be related to the porarily exaggerated by other factors. available resources and to the available capital. The best use of the resources of the world-and In fact, when we look at the world as a whole ultimately the best use of the resources of a par­ today, we are forced to the conclusion that, though ticular region or country-can only be secured if production is now up to the pre-war figure in gen­ we do pay adequate attention to the factor of cost eral, it is still far below what we need. What we or efficiency. need today is still much more production. That The second need in order to increase produc­ applies not only to industrial products and capital tion is, of course, more capital equipment and equipment, but applies, possibly most of all, to more investment. That means, so far as a large food. part of the world is concerned, that more assis­ tance will have to go to under-developed coun­ One of our great needs is still an increase in tries from the countries that can afford to assist the world output of food. As the Food and Agri­ them. As Mr. Evatt said at the last session of this culture Organization made clear in its report and Council, the whole spirit of the United Nations is at its last meeting, the success of the world's food that those who have should help those who have production last year was partly attributable to a less. I am not going to elaborate that point here. very good season. We saw in 1947 the complete havoc that can occur in the economy of a conti­ The third means of increasing production is one nent like Europe by the failure of the harvest or which is of particular concern to Australia and to by a relatively small harvest. The world today is other big primary producing and exporting coun­ still skating along on very thin ice, so far as food tries. It is the necessity for some inducement to is concerned. We need more food production. countries that are able to expand production be­ yond their own needs in order to meet the needs Our big problem in production is not merely to of other consuming countries. By inducements I get back to our pre-war levels and to take account do not mean broad international statements on of increasing populations-and now the popula­ the need for production. We see that need. What tion of the world is increasing at a great rate-but we want is some guarantee of markets for the we must also increase standards of living through­ goods that are produced. out the whole world. To make that possible we have to have increased world production. How The report mentions a number of commodities are we to achieve it? where surpluses are beginning to appear in some countries. Several countries increased their pro­ duction during the war to meet special war-time There are three ways: demands or to make good the shortages that were The first is one which the report itself men­ caused by the inability of certain countries to ex­ tions-by improving our means of production, ra­ port their normal crops. Sugar is a very good tionalizing production, modernizing equipment, example. Sugar is a commodity that shows signs 4 Mr. Plimsoll, Australia

today of having a big surplus. Cotton is another. ter distribution or rising standards of living. In In many foodstuffs there are dangers today that some cases, dislocations caused by political we may not be able to dispose of the production troubles have meant that countries that were in of the whole world. That is a rather paradoxical the past exporting countries are no longer in that position because there is undoubtedly a need for position. There is a most interesting table on page all the food that can be produced. 13 of this report-on food production and exports -which illustrates, among other things, the way The matter was discussed at great length at the in which the Far East has ceased, for the time Food and Agriculture Organization's last meeting. being at any rate, to be a food exporting area and The solution seems to be-and I think this is ac­ is even becoming a food importing area. There is cepted by most of the primary producing and ex­ also the failure of trade and production to recover porting countries-an extension of commodity ar­ uniformly, particularly in Germany and Japan. rangements. Some of these arrangements already All these factors have meant a change in trade exist; some of them are being discussed. A com­ patterns. modity arrangement is a means of bringing the exporting and the importing countries together in The most important factor of all in the change a common programme-a common plan that will of trade patterns is caused by foreign exchange assure the importing countries of their necessary difficulties or, to put it in a more concrete form, supplies and at the same time assure the exporting by the shortage of dollars. The report's description countries of their markets. We are very pleased of the position of Australia applies to many other to see that the Food and Agriculture Organiza­ parts of the world-that is to say, we are today a tion has already established a working party to country with a substantial surplus of our total consider this particular problem and to bring to-' exports over our total imports and at the same gether the importing and exporting countries. time a country with a trade deficit with the United States. This fundamental disequilibrium is still be­ Quite apart from the contributions that these devilling us. Though over the past year we can see arrangements make to the world situation, they such a substantial improvement in world economic also have a contribution to make to any efforts conditions, we still have this basic problem which undertaken to solve problems of the business is very farfrom a solution. The only ultimate solu­ cycle. Long-term commodity arrangements, with tion is, of course, to increase production through­ prices fixed within fairly clearly defined limits, are out the whole world and to increase trade among an assurance to farmers of a steady income over the various States. a period. Farmers' income may, it is true, fluctuate from year to year in accordance with seasonal The shortage of dollars has this further peculiar conditions or other circumstances, but over a consequence: in certain products we are now get­ period the farming community will have an as­ ting surpluses in some countries which the rest of sured income. That does make quite a big con­ the world cannot afford to buy. This is a paradoxi­ tribution to the problem of handling the business cal position, and one to which an immediate solu­ cycle. tionis not readily discernible.

Another clear conclusion that emerges from the It is too early to say whether these new patterns economic report is in the new patterns of inter­ of trade are permanent. Some of them ob­ national trade which are emerging. Partly as a viously are. Where new industries have been estab­ result of war-time developments, new industries lished on an economic basis, they will continue. have been built up in certain countries-for ex­ On the other hand, we do not yet know to what ample, in Australia and Latin America. But I extent Germany and Japan will again take up a notice from the report that, in some of these un­ strong position in the production and trade of the der-developed areas, the industries are not being world. But some of these new patterns have defi­ completely maintained but are beginning to slip nitely come to stay. The report suggests that a back again. In some countries there is also in­ study is necessary of these patterns. The Aus­ creased consumption at home, as a result of bet- tralian delegation agrees with that. I do not know Mr. Plimsoll, Australia 5

to what extent the Secretariat of the United Na­ a useful supplement to other aid. It is a second tions should undertake it and to what extent the line of defence when extraordinary outside aid is International Trade Organization should. But the tapered off. Private investment also has this ad­ two bodies working together should continue to vantage, which does not always appear in govern­ study the situation and keep the Council and the mental lending: private investment is very often members of the whole United Nations informed of directly linked with specific projects from which developments. No doubt, too, the economic re­ a tangible calculated return can be seen or ex­ view presented to the next session of the Council pected. Private investors as a rule do not lend will have a lot to say on that point. their money for general ideas; they want specific undertakings to be carried on. Therefore, private Needless to say, my Government is very anx­ investors play a very useful part in the develop­ ious, and believes very strongly, that world trade ment of a region or a country. Private investment as a whole should be increased. That, together has the further advantage that, together with the with increased production everywhere, is the only import of capital, a certain amount of skill, tech­ way in which rising standards of living can be se­ niques and good will is often acquired too. cured and maintained. Therefore my Government feels very strongly Australia would also pay great attention to in­ that any efforts that can be made to increase pri­ creasing trade in Europe. One of the important vate international investment should be made. I objectives of the plan for the recovery of western understand the International Bank for Recon­ Europe, which we see unfolding before us now, ~ struction and Development is already doing some­ is to increase trade among the Member nations. thing along those lines and we would urge it to Australia has endeavoured to help in that by as­ continue its efforts. Private capital does no harm sisting the United Kingdom in the large burden at all. On the contrary, it does a great deal of which it has shouldered in intra-European trade. good. It must of course observe the laws of the Our latest gift to the United Kingdom was speci­ country to which it goes, but that can be arranged fically allocated for the purpose of easing the by the governments of the countries which are re­ United Kingdom's position in the intra-European ceiving it. But governments that seek private capi­ trade settlements. tal also have certain obligations. They have to We would also like to see an increase in the make their country attractive, and it is essential trade between eastern and western Europe. Es­ at any rate to provide some stability and security sentially, Europe is one continent. All the coun­ for private investors. I would stress once again the tries are bound together, and the failure of east important contribution which we feel private in­ and west to trade together means damage to both. vestment can make to world economic recovery. Both eastern and western Europe suffer by the failure of all the countries to trade together. If the I would like to come back at this stage to a point talks which are now going on in Europe lead to an which I touched on at the beginning of my re­ increase in that trade, it would be a good thing marks, the fact that we have today certain defla­ for the world as a whole. tionary trends. The situation in the United States has been described by Mr. Nourse as "disinfla­ The Secretariat report also pictures the capital tion". I have said before that we should not attach movements that are taking place. It shows the too much importance to this particular problem great assistance that is being given by certain gov­ at present. The evident shortages in, the world to­ ernments to the development and recovery of day mean that we still need more production. others. It shows some assistance being given by specialized agencies. But it also illustrates some­ But the position does illustrate a point which thing that is rather disturbing, the decline in pri­ my Government has emphasized ever since San vate investment. That decline is a steady, percep­ Francisco: the United Nations must exercise its tible process which shows signs of continuing. It responsibilities under the Charter in regard to full would be most regrettable if private investment employment. The United Nations Charter contains is not increased substantially. Private investment is a specific pledge by every country. Under Art- 6 Mr. Plimsoll, Au.stralia

icle 55, "the United Nations shall promote ... do not have the views of a substantial proportion higher standards of living, full employment, and of the Governments of the United Nations. Some conditions of economic and social progress and important regions of the world are almost com­ development". In Article 56 all Members of the pletely unrepresented in these replies, which again United Nations pledge themselves to take joint means a distortion in any conclusions we draw and separate action in co-operation with the or­ from the documents. The Secretariat is going to ganization to achieve those purposes. analyse these replies and will present its analysis, I hope, to the next meeting of the Council. It will I do not think it is exaggerating to say that so be very useful. far, over the past three years, the United Nations contribution to this problem has been negligible. It is not necessary for me here once again to We discussed it at some length at the last meeting stress the need for international action in the field of the Economic and Social Council, and it was of unemployment. Some people feel that Australia agreed that at the next session-that is the ninth is "crying wolf" on this problem. But the last de­ session-the Council should discuss the whole pression was a major crisis with great human loss. question of its work and the organization of its The world today is still suffering from our failure responsibilities in this field so that something more to use all our resources during the years of the can be done. At that meeting we will discuss the depression. The great world shortage of housing responsibilities of the Economic and Employment today, for example, is largely attributable to the Commission and its sub-commissions. fact that for ten years we did not build enough houses when we did have men and materials idle. The fact that one or two signs of unemploy­ Another great world economic depression could ment are appearing-in specific industries at any have important political consequences disturbing rate and perhaps in specific countries-indicates the whole balance of our relations. that we must be prepared sooner or later to exer­ cise some of our functions in this field. That does Therefore we feel that international action not mean that we think there might some day be should be undertaken to guide countries and help a depression. Our ability to avoid a depression de­ countries to follow similar policies instead of com­ pends on the way in which we act now and the peting with one another and perhaps driving one degree of planning we undertake to forestall un­ another's production down by competitive action desirable tendencies. at the wrong time. We feel that the Economic and Social Council can give this guidance to the coun­ In this connexion, we have read with interest tries of the world and that its responsibility under the document prepared by the Secretariat, the Charter is to do that. E/llll, "National and International Action to Achieve or Maintain Full Employment and Econ­ One thing that this report, E/llll, shows very omic Stability". This document consolidates the clearly is that it is on the Economic and Social replies received from Member Governments by Council that the primary responsibility falls. The the Secretariat, which sent out a questionnaire on International Bank for Reconstruction and De­ the whole subject of unemployment policy and on velopment and the International Monetary Fund, the measures being taken by governments to fore­ in their replies to the questionnaire sent out by stall unemployment and to handle such unem­ the Secretariat, both make it clear that they are ployment as they now have. The questionnaire interested in full employment. They regard it as was sent to seventy-three countries. The document one of the objectives, one of the principles, that contains only twenty-two replies. Of the twenty­ should guide them. But they also make it clear­ two, nineteen are Members of the United Nations. and I do not think we can criticize them for this­ That is rather disturbing. And of this Council of that the maintenance of full employment is sub­ eighteen, only nine members replied. That means sidiary to their main objectives. That means that that the Secretariat in its work on this document, the main responsibility comes back to the Econ­ and the Member Governments of the organization, omic and Social Council. Mr. Santa Cruz, Chile 7

Full employment may not seem of primary con­ Mr. SANTA CRUZ~ Chile cern to many countries here, particularly the un­ (translated from Spanish) developed countries that are living on a subsis­ tence economy. The reply of Burma in the report In commencing our study of world economic illustrates that point clearly. The Burmese Gov­ conditions today, in pursuance of resolution 118 ernment says in effect that its population is en­ (II) of the General Assembly, we are not, as on gaged in producing food and so on and that the a similar occasion last year, provided with a com­ question of unemployment internally does not plete report by the Secretary-General. This time arise. But then, as the Burmese reply also points the Department of Economic Affairs has submitted out, though Burma can hardly be a country that to us only tW9 studies, namely, Major Economic will export unemployment and though a depres­ Changes in 1948 and Review of International sion in Burma could hardly affect the rest of the Commodity Problems, 1948. The Secretary-Gen­ world, nevertheless Burma and all other under­ eral, however, has informed the various delega­ developed countries are greatly interested in the tions that it is proposed to submit a full economic occurrence of unemployment in other countries. report, based on the regional and general investi­ Unemployment or depression in other countries gations now being conducted, to the ninth session means a fall in the market for the exports of such of the Economic and Social Council. The studies under-developed countries. And so all countries placed at our disposal by the Secretary-General, today, whether they are highly developed or conceived and executed with the usual technical whether they are under-developed, are concerned efficiency of the Department of Economic Affairs, in maintaining full employment and a general will be of great assistance in the discussion now degree of prosperity in the world as a whole. initiated.

That concludes my general remarks on this re­ General Assembly resolution 118 (II) does not port. It is an excellent report. Some of the de­ limit the Economic and Social Council to study ficiencies in it-there are not many, but such as of the various social and economic problems sub­ they are-are caused partly by the necessity of mitted for its consideration, but recommends that producing the report on time. It was better to it also periodically analyse the general trends of have a timely document for this session than a world economic conditions and provide the direc­ document that was unduly delayed in order to tion and guidance which are its responsibility un­ fill out all the gaps. I think, perhaps, there is a der the United Nations Charter. tendency to give not quite enough attention to eastern Asia and to the Pacific, but that again is Clearly the principal contribution to this task, something that can be remedied in the full report. and therefore to this debate, must come from those countries whose economic power is of de­ Since it is only an interim report, I take it that cisive importance for the welfare of the remainder our main economic debate will not be at this ses­ of the world-from those countries which emerged sion, but at the next session. Therefore I would from the Second World War in a position, solely urge that the Secretariat make every effort so by means of.their own economic policies and that at the next session we all have the full econ­ action, to change human destinies throughout omic report and subsidiary studies, such as the great regions of the globe. Highly important, also, unemployment study, well in advance of the Coun­ is the contribution of the nations whose economic cil meeting, so that we can have the considered experience and technical skill have always had comments of our governments on the report. It their influence on general economic solutions. would be desirable at the next session to begin all This, however, does not excuse the remaining our work with the ,first item on the agenda: the members of the Council from taking part in the discussion of the economic report. For this prob­ discussion. We believe that our participation will lem of world economic conditions and major fluc­ be useful if, besides stating our opinions briefly tuations and other large economic problems are on economic conditions and circumstances in other the main work for which the Economic and Social continents, we dwell particularly on the situation Council was established. in Latin America, the region which we, together 8 Mr. Santa Crm:t Chile

with the members from Brazil, Peru and Vene­ Although the world economic situation, seen zuela, represent in this Council; and if we also out­ as a whole, shows an appreciable improvement line the economic problems which confront our over 1947, considerable divergencies are noted if own country and the policies we are applying to the various areas are examined separately. There solve them. are regions and countries where the economic progress achieved has been insignificant, and there With regard to the relevant aspects of the world are others, such as Latin America, where I ven­ situation, the report Major Economic Changes in ture to say that not only has the improvement been 1948 gives us a cheerful picture in contrast with extremely slight, but there has, in fact, been some the rather sombre one presented by the Secretary­ deterioration. General a year ago. As a result of the good har­ vest of 1948, the supply of foodstuffs has increased The United States of America undoubtedly is appreciably and the acute 1947 shortage of cer­ notable among the countries by virtue of the tre­ tain key industrial raw materials has been con­ mendous progress it has achieved. The level of siderably mitigated. The report states in this con­ industrial production, which was 100 in 1937 and nexion that the rate of industrial production for 85 in 1938, reached 149 in 1947 and 151 in 1948. the world as a whole exceeded that of 1947 by United States industrial production, therefore, is 32 per cent. Excluding the United States, where 50 per cent higher than in the best pre-war year. the increase has been very large, and Japan and The index for the production of grain-the basic Germany, where there have been only minor food product-reached 133 in the period 1947/48 changes, preliminary calculations show that world and 170 in 1948/49, on the base of 100 for the production exceeded the 1937 level by 27 per average level during 1934 to 1938. cent. The Union of Soviet Socialist Republics an­ nounces that its industrial production in 1947 There is therefore good reason for satisfaction. equalled the 1940 level, and in 1948 exceeded it The fact that rates of production have already ex­ by 18 per cent. But the absence of figures for ceeded pre-war levels and that the supply of food­ actual production-the result of the policy of with­ stuffs has appreciably improved appear, in the holding these figures both from the United Na­ Secretary-General's opinion, to indicate that the tions and from the Russian people-makes impos­ effects of the war are disappearing. To quote the sible any evaluation of the real influence of. the text of the report: "The central problem of 1949 production of the Union of Soviet Socialist Re­ continues to be the necessity for expanding the publics on world economy. world supply of goods for the growing world pop­ ulation. As a consequence of the diminishing im­ Western Europe-more correctly, the countries portance of temporary post-war obstacles, the participating in the European Recovery Program problems facing the world in further increasing -has already raised its industrial production to a the production of agricultural, manufacturing and level exceeding the pre-war figures by 17 per cent. mining supplies in 1949 are likely to be of a more These figures exclude western Germany; the in­ protracted and long-term character. Most coun­ crease is only 1 or 2 per cent if that region is tries will find it necessary in the coming year to included. Thus, in spite of the frightful devasta­ pay greater attention to raising productivity by tion suffered during the war, western Europe has rationalization of production, modernization of already exceeded its pre-war level of production. plant and improvement of workers' skills; and to With regard to agricultural products, however, the expansion of plant and equipment by further western Europe still lags behind the 1938 indices, investment in industry and agriculture." although a marked increase may be noted.

Another noteworthy fact is the appearance of This significant improvement of the situation in deflationary trends, reported in the Secretariat's western Europe must be attributed mainly to the study. This tendency can be viewed only with European Recovery Program, now nearing the gratification. close of its first year of operation, and also to the Mr. Santa Cruz, Chile 9

effort~ of all the countries concerned, which-in Although the data provided in the report of the the United Kingdom, for example-have reached Department of Economic Affairs are insufficient exemplary levels. to give a clear picture of the true situation in the countries of eastern Europe, they do show that It is particularly in western Europe that the a considerable increase in agricultural production Secretary-General's statement which I noted pre­ has been achieved, to such an extent that in coun­ viously-namely, that the effects of the war are tries like Poland, Czechoslovakia and Hungary disappearing-is most convincingly demonstrated. pre-war levels have been exceeded. On the other There is every reason to consider these problems hand it appears that industrial production has not from a standpoint other than that of mere econ­ yet equalled the 1938 figures. It is true, for ex­ omic rehabilitation. European problems should ample, that some eastern countries, such as Poland, now be considered in relation to the permanent have apparently exceeded their pre-war industrial factors which give rise to them. It is owing to production, but the report points out that the fig­ these factors that, although pre-war levels are now ures apply to Poland within its present frontiers, being reg2.ined, the peoples of western Europe are i.e., they include a part of the former German faced witfl a crisis of serious proportions, whose State that contains many important industries. origin may be traced to circumstances that pre­ ceded the military conflict. I believe it essential to I feel I should stress the fact that an important draw attention to this fact particularly because, prerequisite for the future economic rehabilitation in recognizing it, we must conclude that if Europe of Europe in general is the restoration of trade requires, and has become dependent on, inter­ between eastern and western Europe, now greatly national co-operation to solve its problems, this is reduced owing to the attitude of the countries not so much because it was the principal victim which have refused to participate in the European of aggressive war, as because it is part of an in­ Recovery Program. Certain bilateral treaties which ternational community now in the toils of a serious have recently been concluded with this end in crisis tlemanding the co-operation of all. Thus the view, and the successes achieved by the sub-com­ Economist, an authoritative British newspaper, mittee of the Economic Commission for Europe, says in its editorial of 8 January 1949, on the pre­ appear to justify an optimistic view of the pros­ liminary report submitted by the Organization for pects in this field. European Economic Co-operation: The Secretariat's report gives us very little in­ "The first comfortable assumption that the re­ formation on the economically under-developed port demolishes is the belief that Europe's eco­ countries and the information which it does con­ nomic plight is a temporary phenomenon brought tain, or which we can assemble from other sources, about by the dislocations of war. If this were all, does not justify the optimism which appears to be the difficulties should have virtually disappeared expressed in some paragraphs of the report. Con­ by now. Europe's standards of production are very ditions in the Far East, for example, do not seem nearly restored to the pre-war level-a process to be exactly favourable. The civil war in China which took seven years after 1918. The truth is has resulted in the total disruption of the economy that the two years have aggravated, but not caused, of this vast region and consequently all interna­ a crisis which has its roots in a general change in tional action has been paralysed. The United States the world's economic relations." has suspended its programme of financial and econ­ omic assistance and the United Nations regional The political leaders of western Europe are commission has been able to do little work in this fully aware of this fact; it has already been an­ area. The report states that Pakistan and India nounced that the measures taken by the eleven have suffered a reduction of their exports while countries - owing to force of circumstances - to their imports, particularly of capital equipment, co-ordinate and integrate their economies will be were high. This temporary unfavourable balance maintained indefinitely after the Marshall plan has of payments will certainly be compensated shortly come to an end. by greater industrial productivity. 10 Mr. Santa Cnu:~ Chile

The Middle East, too, appears to have made no My country stressed this point in pressing for progress during the past year; in any event the the establishment of the Economic Commission information given on the countries of this region for Latin America and expanded on the same sub­ is particularly scant. ject during the Inter-American Conference at Bogota and the first session of the Economic To sum up, the regions comprising the Far East Commission for Latin America. Today, when the and the Middle East continue, with little change, rehabilitation of Europe is a reality, it will be to show their traditional characteristics: an almost understood how just was our insistence on the completely agricultural economy, incipient indus­ necessity for international action in helping to trialization, unprogressive methods of cultivation solve the problems of Latin America. and undiversified production. At the same time The symptoms outlined by the Secretariat, and inflation has reached alarming proportions. others which are public knowledge, show that in­ flationary pressure is still more or less acute and At the outset of these remarks I considered that that in some countries the inflationary upswing the economic situation in Latin America had de­ has been accentuated. Of course each country is teriorated during the year. Certainly it is disap­ influenced by special internal factors, but there pointing if we view it in relation to the hopes pre­ are some elements common to all countries. Dur­ viously held. The life of our continent was not ing the war - and in the period immediately after disturbed by any international conflict; our prob­ the war - the principal cause of the inflationary lems have been recognized and studied by the pressure was excessive exports. Today, however, leaders of most of our countries; we have estab­ the cause is the lack of a sufficient supply of con­ lished international machinery enabling us to act sumer goods - caused mainly by the rise in prices jointly; and, generally speaking, we have held simi­ of imported goods - the shortage of currency for lar views on the nature of the problems and the imports and the insufficiency of national produc­ remedies to be applied. In short, we have enjoyed tion to supply the needs of the population. certain advantages in comparison with other re­ gions that are considered under-developed. We The Secretariat's report states that the general were therefore entitled, in this year of almost uni­ level of industrial production in a number of Latin­ versal recovery, to hope for genuine progress. American countries was upwards of 25 per cent higher than in the pre-war period. It should be The report gives little economic information on noted, however, that this estimate is not based on Latin America. That is understandable, when we very solid foundations. In the second part of the consider the difficulty of collecting data. We are same report, indices of industrial production are confident that when the Economic Commission given for two countries only, namely, Mexico for Latin America meets in its second session in and Chile. An index for Brazil covers only a small May we shall be provided with sufficiently com­ number of industries, and the sole index computed plete information. The Commission's secretariat is in Argentina is that of workers employed in manu­ making great efforts to draw up a report based on facturing. The remaining seventeen Latin-Ameri­ data collected on the spot, and these data are can countries publish no general industrial pro­ being analysed by a body of experts of acknow­ duction indices - in most cases, for the simple but ledged competence. Nevertheless, the few figures important reason that industrial production is given in the present report corroborate the state­ insignificant in relation to general production. ment which I have just made. In Mexico and Chile - the only countries which publish indices - industrjal production, according On many occasions on which economic and to the report, appears to have declined slightly in social conditions in Latin America have been dis­ 1948. It must be concluded, therefore, that even cussed, my delegation has stressed, almost to the in the few Latin-American countries where some point of importunity, the gravity of the problems industrialization has taken place, the situation of of this region and the seriousness of the impact of industry is not very promising. That, I believe, the recent war on its weak and unstable economy. may be attributed to the following causes, among Mr. Santa Cruz, Chile 11

others: the difficulty of replacing machinery worn trend of history rules out a return to the conditions by excessive use, particularly owing to abnormal of former years. This is a fact which is usually for­ war efforts; the difficulty of obtaining raw mate­ gotten when economic problems are being dis­ rials for export and the rise in the prices of such cussed. materials; and the lack of the capital, skilled man­ power and technicians required to expand existing For Latin America, Europe was traditionally industrial plants and to establish necessary new the major supplier of manufactured goods-capital plants. Even if we accepted as applicable to indus­ goods and consumer goods - and at the same time trial production in our region the estimated 25 per the principal market for Latin-American products. cent increase over the pre-war level, the effect of the In 1938 imports from Europe constituted approx­ rise would be cancelled by the increase in popula­ imately 45 per cent of the total and exports to tion, which is estimated at 20 to 25 per cent per Europe were in the neighbourhood of 50 per cent. annum. In other words, per capita industrial pro­ In 1947 Latin America was importing a bare 15 duction, for all practical purposes, remained at the per cent of its total from European countries and 1938 level, and Latin America has not made the exporting to them some 32 per cent. The difference slightest progress in industrialization over a period between this volume and that of 1938 has been of ten years. added to the volume of foreign trade with the United States. The report does not give the figures Information given in the Secretariat's report, for 1948 but if we accept the particulars given by based on the report of the Food and Agriculture the Organization for European Economic Co­ Organization, shows that the index of agricultural operation and the Economic Cooperation Admin­ production in Latin America in 1947/48 was 120 istration we find that imports from Latin America per cent of the 1938 figure. Latin America as a to Europe in the course of 1948, including Mar­ whole is a very important producing region for shall plan purchases, do not exceed $1,000 million, export foodstuffs. The increase in agricultural pro­ the sum also recorded for 1947. This means, on duction applies principally to agriculture for export; the one hand, that the Marshall plan has not led agriculture for internal consumption continues to to an improvement over the former situation in this be carried on by unprogressive methods and the area although we must appreciate that, in the reports of the Food and Agriculture Organization absence of this programme, Europe would have show that there has been no appreciable improve­ been unable to maintain even the 1947 level of ment in the food supplies of the population. Gen­ sales to Latin America. On the other hand, there erally speaking, agriculture in the Latin-American is no evidence for assuming that the recovery of countries is in urgent need of improved techniques, foreign trade with Europe is likely to reach pre­ modern mechanized methods of cultivation and war levels within a short time. the extension of agricultural areas, if they are to produce enough to provide their people with proper If we consider. the problem of Latin-American diet and to export the quantities required by other foreign trade from another point of view, we reach parts of the world. similarly grave conclusions. World economic his­ tory indicates that, with few slight deviations, the The Latin-American countries are among the rate of price increases in manufactured articles has so-called "open" economies and are therefore es­ been incomparably sharper and greater than that sentially dependent on outside forces and are of raw materials and agricultural products. If we particularly vulnerable in the event of world remember that the two latter categories account changes. Foreign trade affects all the branches of for 90 to 95 per cent of Latin-American exports, the economic systems of these countries; hence we reach the conclusion that for every ton ex­ their greater weakness. That is why the destruction ported, Latin America is receiving a steadily de­ of the world network of foreign trade, as it existed creasing quantity of merchandise. This situation before 1938 and has not been reconstituted, has so has become particularly serious in the post-war profoundly affected our countries. It will probably period. The dollar amounts which the Latin-Amer­ never recover its former character because we are ican countries succeeded in accumulating during living in an essentially dynamic world and the the war represented the proceeds of exports on 12 Mr. Santa Cruz~ Chile

the basis of controlled prices barely higher than I need not dwell on the generally accepted fact that peace-time prices. At the end of hostilities coun­ such a change will benefit not only the area but tries having a pent-up demand for articles which the world generally. they were unable to obtain in the earlier years saw their reserves being rapidly dissipated because they The President of Chile, in commenting on the had to acquire large quantities of capital goods economic programme recently outlined by Presi­ and consumer goods at considerably higher prices. dent Truman, said, "for some time Chile has been By the end of 1947 this had resulted in a deficit of advocating concerted action, with a view to trans­ about $2,000 million in Latin America's balance forming the economic structure of Latin America of trade with the United States; in addition, there in such a way as to eliminate the factors which was a substantial decrease in Latin-American im­ account for its weakness and instability. For this ports in 1947. Thus, in 1947, Latin America im­ purpose Chile favours the study and execution of ported to the value of $6,700 million, of which a continental plan for the industrial exploitation $4,225 million came from the United States; in of natural resources and raw materials which will 1948, the comparable figures were about $5,300 avoid duplication of effort and eliminate any idea million, of which $3,000 million was from the of self-sufficiency, since self-sufficiency is per se United States. The gravity of these facts cannot be inconsistent with our ideal of co-operation; on the concealed. The twenty Latin-American republics contrary it causes difficulties and differences among have seen their last year's imports drop by more peoples". These words state two fundamental prin­ than 20 per cent, whilst they were unable to ac­ ciples underlying the possibility of effective econ­ quire the necessary equipment to maintain and omic development in Latin America: first, co­ renovate their industry and agriculture. ordination of national and international efforts towards the development of complementary pro­ This problem of import and export prices has grammes to that end and, secondly, orientation seriously concerned Latin-American statesmen; ofthe process of agricultural and industrial trans­ one of the important resolutions adopted at the formation by exploiting natural resources whilst Santiago session of the Economic Commission for avoiding artificial economic self-sufficiency in any Latin America referred to this problem. In Chile particular country or area. the President of the Republic drew attention to these facts in his 1948 message to Parliament, in which he said that "in 1947 the average value of A programme of economic development for each ton exported by Chile increased 6.3 per cent, Latin America cannot be executed without an whilst the average value of each ton imported in­ ample supply of capital. The Chilean delegation creased 26.3 per cent". had occasion to mention this part of the problem at the Economic and Social Council's last session, From the above outline of the situation in Latin as well as in the discussions of the Economic and America it may be inferred that the main cause Financial Committee of the General Assembly. In of the weakness and instability of Latin America's those meetings the delegation referred to the very economic system is its general dependence on for­ slender capital strength of the countries which are eign trade. We have previously noted the obvious forced to spend more than 90 per cent of their fact that the modem world is face to face with a national income on essential goods; we also stated new economic reality, entirely different from the that some countries, including Chile, had experi­ situation of 1938, and that world exchange cannot enced an intensification ofinfiationary tendencies be reconstructed on the pre-war basis. Hence, it is as a result of the adoption of fiscal measures de­ unthinkable that the solution for this tremendous signed to increase production. We showed that Latin-American problem should be the re-estab­ some of the countries did not remain undeveloped lishment of its former foreign trade. On the con­ on account of lack of effort or sacrifice on the trary, the solution is that Latin America must not part of the population. Moreover, some of the once again become vitally dependent bn foreign nations which now appear as the champions of trade; this can only be accomplished by diversify­ "domestic resources" achieved their industrializa­ ing and developing the Latin-American economy. tion easily with the help of foreign capital. Mr. Santa Cruz, Chile 13

As the report of the Department of Economic resolution. On that occasion we pointed out that Affairs shows, Latin America in the post-war in view of the difficulty of obtaining capital, equip­ period (to 30 November 1948) received only ment and labour, all of which are essential for $686 million in loans and credits of all types. In economic development, there should be no delay the same period Europe received $25,887 million in international action directed towards the impor­ and Asia $3,714 million. The International Bank tant task of technical improvement, so rich with for Reconstruction and Development and the In­ possibilities for the near future. We obtained a ternational Monetary Fund granted $159 million General Assembly resolution instructing the Secre­ and the United States Government $299 million tary-General to grant Member States certain valu­ of the total for Latin America. able technical services directed towards economic development and appropriating funds to finance We believe that the International Bank for Re­ the programme. construction and Development must pursue its new policy of directing its efforts chiefly towards econ­ The Economic Commission for Latin· America omic development - a policy which also has the during its first session likewise instructed the Secre­ backing of the General Assembly - and Latin tary-General to prepare a study of the needs for America must be an important beneficiary of this technical assistance in the area and the possibilities policy. Furthermore, the Govemment of the United of obtaining such assistance, at both governmental States has declared its intention of allocating to and private levels. the United States Export-Import Bank of Wash­ ington the amount of $500 million for loans to Technical assistance will not only lead to more Latin America. advantageous use of existing facilities and resources which are the basis of the future Latin-American In any case it is obvious that these sums are economy, but will also create the conditions under insufficient when related to Latin America's capital which other forms of aid and assistance may needs, and other forms of economic and financial strengthen economic activity. The scientific and help will have to be considered. Admittedly, pri­ technical study of the many aspects of production vate investment of foreign capital may playa large and distribution is bound to attract the interest of partinthe economic development of Latin America capital and to facilitate investment. as it did in the United States during the nineteenth century. The Latin-American countries are on the A development of vital importance seems likely whole prepared to encourage foreign investments. to be added to those which give rise to hopes for The Chilean Government, on its part, has given speedy and effective achievement of the economic clear expression to its wish for such investments; development of Latin America. I am speaking of the President of the Republic, in the statement the plan announced by the President of the United I referred to before, said: "We welcome the entry States to stimulate the economic development of of private capital likely to help the effort which under-developed areas and countries. Even though Chile is making with great sacrifice and we assure he placed special emphasis on questions of tech­ foreign investors of fair treatment, without dis­ nical assistance when he spoke of "making the crimination in comparison with Chilean nationals, benefits of our scientific advances and industrial and a fully democratic system which is a guarantee progress available for the improvement and growth of security and stability." of under-developed areas", it may be gathered from the context of his statement that it is the The Economic and Social Council is aware of purpose of the Government of the United States the fundamental significance attached by my dele­ to plan a system of economic co-operation in all gation to technical assistance as an important fac­ its aspects, with a view to achieving a greater tor in economic development. Chile is still, as dur­ development of backward countries. The fact that ing the last session of the General Assembly, firmly our agenda has the two distinct items "economic determined to support the programme for which development" and "technical assistance", together we then fought, together with Burma, Egypt and with the fact that the United States Government Peru, and which was adopted in the form of a announced that its programme would go forward 14 Mr. Santa Cruz, Chile

so far as practicable through the United Nations­ production of fruit, which again is being exported these circumstances make it possible to hope that to Europe. In any event, between 1937 and 1948, the United States delegation will not allow the industrial production advanced about 58 per cent; present session of the Economic and Social Council wheat, 26 per cent; gross mining production, 18 to pass without giving us the general principles of per cent; and production of coal, 12 per cent. the new programme of economic development. Chile has welcomed President Truman's statement The cost of living index in Chile rose 17 per with intense interest. Our President felt called upon cent in 1948. If we compare this figure with the to make a public statement on its scope and econ­ 34 per cent increase in 1947 we see a slackening in omic aims. He also referred to the emphatic the rate of increase. But in any case, this year's declaration of the President of the United States increase is particularly serious for us because we concerning the democratic and unimperialistic believe we have exhausted all internal methods for orientation of these new efforts of economic de­ halting inflation. Thus, in 1948 Chile began and velopment: this, he said, completely belied the concluded the year with a perfectly balanced and allegations of the Union of Soviet Socialist Re­ financially sound budget; available foreign ex­ publics and its satellites abroad, that the interna­ change has been spent on goods absolutely essen­ tional policy of the United States simply follows tial for consumption and for economic develop­ the dictates of cynical economic imperialism. ment, as part of a technically well-prepared and scrupulously observed budget. Public and private We are anxious to hear the United States dele­ credit has been placed in the service of production gation outline the programme whose announce­ and its use for speculative transactions likely to ment aroused great hopes in Latin America. result in price increases has been avoided. In addi­ tion, prices have been controlled and the fight I shall speak briefly on the subject of the eco­ against speculation vigorously pursued. Hence it nomic situation in Chile and of the measures taken is clear that the continued presence of inflationary in 1948 to deal with its problems. tendencies is due to the external causes to which I also referred a few moments ago. The data in the Secretary-General's report indi­ cate that the index of industrial production in Chile In 1948 the Government supplemented these was 97 in 1938 (based on 1937 equals 100) and methods of fiscal rehabilitation and economic reor­ 145 in the last quarter of 1947, whilst only about ganization by taking steps to cancel a previous 140 in the first nine months of 1948. I believe that deficit of $73 million in respect of unpaid impo~ts the industrial production of the last quarter of last and by resuming payments on the external public year was up to that of the corresponding period debt, which had been suspended some years ago. in 1947, but the mere fact that in Chile, as in Brazil and Mexico, the consistent advance has In the year just past, the export of Chilean prod­ come to a halt is the clearest proof of the existence ucts has received the utmost encouragement and of the external factors to which I referred when I we have endeavoured to overcome other obstacles dealt generally with the problems of Latin America. in the way of increasing foreign trade. An agree­ ment has been concluded with the United Kingdom On the other hand, mining production - chiefly under which pounds may be used in the sterling coal, nitrates, copper and iron - has increased by area, which includes so many countries. We hope more than 10 per cent over 1947, largely on ac­ that the volume of this trade will reach £4 million count of Government action against sabotage by sterling in the first year during which the agree­ the Communist Party. Agricultural production also ment operates. increased appreciably and this year we produced sufficient wheat for the entire domestic consump­ A payments agreement recently concluded with tion, which would have been impossible in former France will, it is hoped, enable us to resume active years; we even succeeded in exporting certain commercial exchange with France, which at pres­ quantities. We were also able to achieve a surplus ent is far below the 1938 figures. Mr. Iversen., Den.mark 15

The ultimate aims of Chile's economic policy given the Council by the Secretary-General in the are, first, to increase and modernize methods of publications placed at our disposal. agricultural production and, secondly, to process the raw materials available in the territory and I should also like to express the hope that the exploit the natural resources which our country Economic and Social Council, in the serious and provides. efficient discharge of its duties under the Charter, will show itself capable of solving the problems of In realizing this policy of economic develop­ which I have spoken. It will have a splendid oppor­ ment, we have to distinguish between what is desir­ tunity for launching effective action when it deals able in theory and what is feasible in practice, with the items of economic development and tech­ in view of the capacity of the nation, from the nical assistance. standpoint of finance and capitalization.

Many industrial projects ought to be launched­ Mr. IVERSEN, Denmark a great many sources of wealth are merely await­ ing the call of capital and labour to become an First of all the Danish delegation wants to asso­ effective part of the nation's industrial patrimony­ ciate itself with the previous speakers in expressing but limited resources make it mandatory to estab­ our sincere gratitude to Mr. Owen and his staff lish a careful order of priorities for projects of for their report, Major Economic Changes in 1948. major importance and for those which are a neces­ In our opinion it forms a far better basis for our sary precedent to others to be undertaken later. discussions than the corresponding document which was on the table of the Council a year ago. It The Government is determined that the country shows an improvement in the work of the Secre­ pursue and accomplish the industrial stage of its tariat which we have noted with the greatest satis­ development, but it is also resolved not to stand faction. aside from a realistic programme which promises to strengthen the basis for a healthy, sound, inde­ As to the proper timing of the publication of the pendent and stable industrial economy in Chile. annual economic surveys - a subject which we dis­ cussed at some length a year ago - we fully realize For this purpose, we have been concentrating that the preparation of a comprehensive review of the resources of our institutions since last year on the world's economic conditions in the past year the execution of certain basic programmes, the must of necessity take considerable time. It is a accomplishment of which will mark a decisive stage happy and excellent idea, therefore, to have this in industrial development. Production of steel, oil, larger study preceded by the present preliminary ore and electricity - these are the four great ob­ account of the JUGlst important economic develop­ jectives which our Government is now fostering ments which occurred in 1948. We think that both in the certainty that in this way it will contribute these publications will serve a very useful purpose, profoundly to the prosperity we desire. the more so since the Secretariat, to our great satisfaction, has included in the present document We hope by 1951 to be producing enough steel a cautious tentative outline of certain of the eco­ and oil to satisfy all our needs and enough electric nomic tendencies likely to make themselves felt power to stimulate industrialization and the mech­ in 1949. We want to compliment the Assistant anization of our agriculture. Secretary-General for the competence and speed I will not on this occasion dwell on the pro­ with which this preliminary report has been pre­ grammes of economic development which we are pared. We feel sure that it will prove to be of great pursuing, nor on our difficulties. I propose to deal help to the Council in the fulfilment of its tasks. with those in more detail when we consider the problems of economic development specifically. As is generally agreed, one of the objects of the present general debate on the world economic situ­ I conclude by joining the tribute paid by my ation should be to provide a background for our Australian colleague to the important assistance later consideration of the reports presented to us 16 Mr. Iversen, Denmark

by commissions or specialized agencies. The judg­ Let me try to indicate more specifically what I ment we pass on the work of these bodies must have in mind. Perhaps I may say in this connexion necessarily be based on our conception of the gen­ that, extremely useful as is the factual background eral economic situation, and it may save time to for our discussion which the Secretariat has pro­ provide that background once and for all, instead vided in this document, I cannot help being afraid of returning to the same general arguments under that some of the facts are presented with a little each specific item. more optimism than is warranted by the situation. A publication like this, of course, registers the ac­ In our opinion, however, this debate should not complishments of the past year. But it is of no less only be concerned with the past, but also - and importance, in my opinion, that it also call our primarily - with the future. We hope that it will attention to the difficulties and shortcomings which result in valuable constructive suggestions and we still have to face. In particular, it appears to impulses, both to individual Member Govern­ me that the lack of balance in the present inter­ ments and to international organs, including, not national economic situation might have been least, our own Secretariat .and commissions. stressed somewhat more. Of course, everyone will share the satisfaction Coming from a small country the economic fate with which the report emphasizes the substantial of which is inextricably bound up with external increase which took place in 1948 in the world economic fluctuations, the Danish delegation will supply of commodities and, more particularly, in listen with the keenest interest to this discussion. the part of the world income devoted to invest­ Just now we are about to finish our national budget ment. Itis worth noting, however, as the Secretariat for the coming year, the estimates of which are itself does, that the most important aspect of. this greatly affected by. the assumptions made regard­ progress was the excellent harvest of 1948. This ing the international situation. And with respect factor obviously is of a seasonal rather than of a to the latter we look forward to the documenta­ permanent character. tion and the deliberations of the Council for intelli­ gent guidance. In the opinion of the Secretariat the central problem of 1949 will still be the necessity for ex­ The degree of economic planning practised by panding the world supply of goods, but we are told the various countries is widely different, of course, that, as a consequence of a gradual overcoming of but whatever means they adopt everyone of them the immediate and temporary post-war obstacles, is confronted with the serious task of readjusting this problem is likely to be of a more protracted its economy to a new and greatly changed world and long-term character - which means, I sup­ economic pattern. They may fairly ask this Council pose, that it is becoming a more difficult problem. for advice as to what sort of world pattern they I agree with that. have to adapt themselves. And they may also hope But as I have already intimated, there is another to get an outline of alternative routes along which problem which I think it is at least equally im­ to do so. portant to tackle in time. The Secretariat itself points out that there are still marked disparities Yet, even with all due respect for the vast econ­ among countries with regard to the development omic competence gathered around this table, it of their production and, with special reference to would hardly be fair to expect that two or three raw materials, it is stated, on page 5, that while days' debate in the Council should result in a de­ total world supply in 1948 seems to have been tailed and clear-cut solution of this huge problem. adequate, on the whole, to meet requirements, the But what the world may expect is that we recog­ main problem now lies in the "difficulties arising nize the paramount importance of this question from the tendency of international trade in certain and request our Secretariat, our commissions and commodities to be directed towards 'hard' cur­ the appropriate specialized agencies to concentrate rency areas". That goes to show, so far as I can their joint efforts on a thorough-going study of its see, that one of the most urgent tasks now before various aspects. us is to investigate the possibilities of restoring Mr. Iversen, Denmark 17

international economic equilibrium, not, of course, By such an attempt to include the problem of understood in a narrow static sense, but in the development in a broader total picture we will, so dynamic sense of balanced progress. I find the far as I can see, act in harmony with the resolution same view expressed indirectly by the Food and of the General Assembly which requests us to give Agriculture Organization of the United Nations further and urgent consideration to the whole in the statement quoted on page 13, according to problem of the economic development of under­ which "maintenance or expansion of high levels of developed countries in all its aspects. production in North America where conditions for technical progress are especially favorable would In this connexion I might just add a word of be universally welcomed provided that satisfactory warning against interpreting the word "develop­ solutions could be found to the international trade ment" as under all circumstances completely syn­ and payment problems which the deficit countries onymous with "industrial development." This,how­ at. present face". This proviso is certainly an im­ ever, is a question to which we will have occasion portant one. to return later in the detailed discussion of the items specifically dealing with development. We have made preparations for a United Na­ tions Scientific Conference on the Conservation If it be admitted that the restoration of a bal­ and Utilization of Resources, and we are to discuss anced international economic system is one of the later in this session the problem of wasting food. major problems today, it should also be apparent However important the different forms of physical that this is a problem particularly fit for study by waste may be - and we agree that they are very international organs. It is their prerogative to be important - it certainly is of no less importance able to adopt a global approach to this question. to avoid the waste resulting from economic malad­ In an admirable way this global point of view was justments and to attempt to utilize our resources applied in the League of Nations publication Net­ to the economic optimum. work of World Trade and I have no doubt that more fruitful work can be done along that line.

We are also going to deal with various prob­ National plans are of necessity limited in scope. lems connected with the development of under­ The difficulties to be encountered in co-ordinating developed countries; no one will deny the extreme a number of national plans are amply demonstrated importance of this question. Yet it would not be in the recent report from Paris on the long-term without danger, it appears to me, if this word programme of the Marshall countries. I have no "development" becomes the catchword of every doubt that the work on which the Organization for economic debate, just as "full employment" has European Economic Co-operation is now en­ been, in recent years, something to be aimed at for gaged would have been facilitated if it could have its own sake and ii tout prix. been based on a clearer conception of the total world pattern to which the national economies As regards employment, there has been a grow­ should adapt themselves. ing recognition that what we desire is not, after all, to inflict as much work as possible on mankind, Moreover, national plans will often tend to be but rather to secure productive work so as to maxi­ carried through by restrictive measures detrimental mize real income. Similarly with regard to develop­ to other countries. The more the global point of ment, it is not necessarily each and every sort of view is kept in mind, on the other hand, the more development that we should welcome. We must obvious becomes the superiority of a solution by try to see the different development projects as expansion, taking full advantage of the interna­ integral parts of the new economic pattern we aim tional division of labour, at creating. If we do not keep that point of view in mind, we run the risk that some of our develop­ Admittedly it is an extremely difficult task to ment schemes may endanger future international envisage this future world economy. The report equilibrium and thus in the end defeat their own before us merely says, on page 21, that "there is purpose. no clear indication of the pattern of trade that will 18 Mr. Iversen, Denmark

emerge after the prevailing strain on international tiations which are to take place in Annecy in April payments has subsided". Yet it appears to me that will result in a further lowering of the tariff walls. we must try to form some idea as to the character But, by and large, I think that we must admit the of this pattern in order to be able to see the na­ correctness of the statement by the International tional plans in their proper perspective and to Monetary Fund, quoted on page 22 in our report, judge whether the progress we have made and that "the fundamental conditions which would the development projects which we contemplate make possible the abandonment of trade and ex­ will carry us towards a new equilibrium or away change restrictions are ... entirely absent today in from it. most of the world".

One of the difficulties of getting a clear idea This being so, in my opinion, we should set out about the character of a future balanced world as soon as possible to establish what these funda­ economy is, of course, that, over and above the mental conditions are and how they may be real­ rather obvious dislocations due to the recent war, ized. It goes without saying that one of the major account must also be taken of structural changes aspects of such a study will be to clarify the role which were under way even before the war, caus­ which an adjustment of exchange rates - includ­ ing a certain lack of balance which, for a time, ing a possible appreciation of the United States was more or less concealed by temporary factors dollar - might play in the restoration of inter­ but which would, sooner or later, have required national equilibrium. Similarly, the possibilities adjustments in the world economy even if there and importance of a revival of an international had been no war. capital market should be contemplated.

But this is not all. If our work is to result in A more specific point which it might perhaps anything but lofty structures built in the air we be useful to discuss here is the role played by the must take a further step. After forming an opinion trend of economic activity in the world in general regarding the nature of the coming international and more particularly in the United States. As we economic order the next and equally difficult ques­ all know, the Havana Charter puts great emphasis tion is how to realize it. on the relation between maintenance of employ­ ment and establishment of a freer international We are told, on page 22 in the report, that the economic system. Indeed, I think that this is one problems facing countries in their efforts to ap­ of the most constructive ideas of the Charter. Cer­ proach equilibrium in their balance of payments tainly, depressions tend to foster restrictions. are "so complex and varying that probably no simple way out of the difficulties can be found". Yet it has been argued recently in Europe that But whether it is simple or not we must try to a depression in the United States might help to find the way and here again I suggest the impor­ restore international economic equilibrium. In my tance of applying the global point of view. opinion this is a rather one-sided contention. It concentrates exclusively on the effect of an Amer­ Studies have already been made in the Secre­ ican depression upon the barter terms of trade. tariat with a view to explain the frictionless func­ True enough, the prices of raw materials would tioning of the multilateral system existing prior probably be exposed in that case to a relative de­ to the First World War. It would seem natural to cline which would be beneficial to many European go on to investigate whether - and how - a similar countries and would tend to diminish the present system may be made to function under present­ dollar scarcity. Besides, a drop in American prices day conditions. might cause expectations of a further decline which in turn might discourage investment, including in­ One might, of course, proceed immediately to vestments in commodity stocks, and thus diminish reinforce the recommendations so often made to the pressure of demand in Europe. It might also individual countries, both before and after thelast weaken the tendencies towards open inflation war, to abolish the various restrictions on trade; through increases in money wages in European let us by all means express the hope that the nego- countries. But at the same time, a falling off in Mr. Sutch, New Zealand 19

demand in the United States would cause a reduc­ them to find their place in a balanced international tion of imports which would diminish the dollar system. Certainly, Marshall aid has facilitated this earnings of other countries and tend to increase adjustment in my country. But it is important that their dollar scarcity. At the moment such a de­ the ultimate goal - the re-establishment of a uni­ velopment might finally influence the attitude in versal economic equilibrium-be constantly kept the United States towards foreign aid programmes. in mind. People reasoning along more old-fashioned tradi­ tional lines would argue that the United States To my own country it is of particular interest could not now afford to give as much support as that the attempts at reviving the trade between before, whereas others, influenced by more modem eastern and western Europe meet with success, thinking, would reason the other way round, that and we hope that the negotiations now in progress larger grants should be given to foreign countries in Geneva in the Committee on the Development in order to maintain economic activity in the of Trade will lead to practical results. But here United States. too it is important, I think, to form an idea of the probable future trade pattern, with due regard to Without attempting to evaluate the relative im­ the structural changes that are taking place in the portance of all these factors I suggest that from countries of eastern Europe. the point of view I have been taking today it is very important that the Secretariat continue to Denmark is also, of course, greatly interested pay close attention to inflationary and deflationary in the future of the German economy, where we tendencies and to the general outlook for economic meet another obvious instance of disequilibrium. activity. To sum up very briefly: the Danish delegation I have stressed several times what I have called suggests that the Secretariat, the Economic and the global approach. In fact, however, some of Employment Commission, the regional com­ the most important steps taken so far in the direc­ missions and the appropriate specialized agencies tion of restoring a balanced economic world have - particularly, of course, the International Mone­ been of a regional character. I am thinking of tary Fund and the International Bank for Recon­ course of such things as the economic co-operation struction and Development - be requested to co­ among cquntries in the Organization for European operate in a study of the problems connected with Economic Co-operation or among the countries the restoration of a balanced international econ­ of eastern Europe. It is worth pointing out, there­ omic system. We would like this co-operation fore, that there is no necessary conflict between to be extended also, if possible, to the independent such regional co-operation and the ultimate goal. regional organizations that are concerned with Moreover, foreign assistance may be a lever with­ that problem, all with a view to avoiding duplica­ out which it would be difficult for several countries tion of work and to utilizing all pertinent know­ to reach such internal recovery as would allow ledge and experience in this important field.

21 FEBRUARY 1949, AFTERNOON MEETING

Mr. SUTCH, New Zealand mals are used - the cow and the sheep. The or­ ganization and methods used in New Zealand in Before discussing certain aspects of the world producing these exports are briefly as follows: economic situation, the New Zealand delegation New Zealand's farms, on the whole, are family would like to give a brief report on recent econ­ farms. They make extensive use of power-driven omic developments in New Zealand. farm machinery, milking machines and shearing machines. In the dairy industry, which produces In describing New Zealand's economy, I should a great volume of butter and cheese, all the dairy explain that New Zealand's chief crop is grass; to factories are co-operatively owned by the farmers. tum this grass into marketable exports, two ani- A dairy commission elected by the farmers buys 20 Mr. Sutch, New Zealand

the butter and cheese from the co-operative fac­ From its farms, in the 1947/48 season, New tories, and stores, ships, and markets it abroad. Zealand produced 151,400 tons of butter, 89,000 In the meat industry, a board elected by the pro­ tons of cheese and 35,000 tons of other milk ducers handles meat exports. In the wool industry, products. The 1948/49 dairy season was excep­ a board functioning under New Zealand legisla­ tionally good in the early months, returns being tion co-operates with similar organizations in the up as much as 20 per cent over the previous season United Kingdom, Australia and South Africa to in the North Island; we expect that 1948/49 handle the annual wool crop. production of dairy products will be a record.

Apart from petrol, the two most important Wool production for 1947/48 was 357 million fuels used in New Zealand are coal and electricity. pounds, which was somewhat short of the record Most of the coal mines are owned and operated of the 1944/45 season. Meat production is from by the State and all the hydro-electricity is pro­ 15 to 20 per cent above the pre-war level. duced by the State and distributed through local authorities elected by the people. Inland transport, In the calendar year 1948 New Zealand's visible including the railway system, is mainly State­ trade, measured in sterling currency, showed ex­ owned. ports of approximately £123 million, with the corresponding figure of £105 million for imports. Long-term finance is provided for farmers, usually by State~owned financial organizations, During 1947 there was a reduction in New and short-term finance is provided by a State­ Zealand's foreign exchange holdings of about owned institution or by a private lending agency. £22.5 million sterling, but half of this reduction From all this, it may be deduced that New Zea­ was due to repayment of loans in the United King~ land's most important economic activity - farm­ dom. At the end of 1947 New Zealand's oversea ing - is highly organized and legislation and State holdings were valued at £56 million sterling. A activity are both directed to making it as efficient year later, that is at the end of 1948, the figure as possible. One result is that today New Zealand was approximately £50 million sterling. This is the largest exporter of butter in the world; it is shows that New Zealand's foreign exchange hold­ also the largest exporter of cheese; it is the second ings had been reduced by about 10 per cent during largest exporter of meat and the third largest the year: but, again, this reduction included the exporter of wool. repayment of a loan of £ 1°million sterling in the United Kingdom. On current account, therefore, New Zealand's foreign exchange position was In order to give the Council some idea of the somewhat better at the end of 1948 than it was state of New Zealand's economic activity, the fol­ at the end of 1947. lowing facts are presented. The above figures show the net position but Although New Zealand was suffering from cer­ do not indicate that 1948 was a good year from tain shortages of man-power and materials, the the point of view of volume of trade. If 1938/39 production of houses reached a new record in the is taken as 100, the volume index of imports in year ending 31 March 1948. Similarly, 1947/48 1945/46 was 67, in 1946/47 it was 90 and in was a record year in the production of timber, 1947/48 it was 124. It can be seen, therefore, and present indications are that the present year ­ that the 1948 year was one of heavy imports for 1948/49 - will show an increase over last. New Zealand. I should add that the volume index for exports in 1947/48 was 122. I have given the Manufacturers in New Zealand are mainly for figures for production years, rather than calendar the domestic market; even so, between 1938/39 years, because the growing season ends in the and 1946/47, the number of factory workers in­ middle of the calendar year. creased by 20 per cent and the value of the goods produced was almost doubled; this, of course, Turning now to our living standards: experts does not allow for price changes. in national income have recently written that New Mr. Sutch, New Zealand 21

Zealand has the highest standard of living in the income of the majority of our farmers. The guar­ world, but whether New Zealand or Canada or anteed price also applies in other fields. As with. Sweden has the highest standard of living is not State housing, the financing is done by New Zea­ the important point. What is important is whether land's Reserve Bank and, as I mentioned earlier, this average standard of living is an average of the marketing is done by boards appointed by high incomes and low incomes, or whether the the producers. Part of this plan for ensuring average is really typical of the country. I think stability to farmers is the making of contracts with that in New Zealand we can say that the average the United Kingdom for the sale of our produce is typical. at an agreed price, and the operation of com­ modity pools to maintain reasonable internal At the last census, held in 1945, it was shown prices. Thus, in 1948, an agreement was made that over the previous ten years the number of with the United Kingdom to take all of New Zea­ houses owned without mortgage by New Zea­ land's butter and cheese for a period of seven landers had gone up by over 30 per cent. These years. A similar contract was arranged for our figures are interesting as indicating the spread of meat exports; under both contracts the prices to home ownership in our country. The 1945 census be paid are subject to annual negotiation, but a showed that 25 per cent of our houses were owned limit of 7.5 per cent is set on the price movement free of mortgage, that 32 per cent were owned up or down in anyone year. The stability that this subject to mortgage and that 6 per cent were gives to New Zealand can be appreciated. houses which were given free with the job; that is, only 37 per cent of New Zealand's houses are New Zealand's other main export is wool; in rented. this field we work with Australia, South Africa and the United Kingdom to ensure that not only There is still a housing shortage in New Zea­ are surpluses accumulated in the past marketed land, but this is a relative matter. We have found in an orderly way, but also that the present that there is a change in the number of occupants season's crop is sold under the same system. A to each house; for example, in the 1936 census floor is put under the price of wool so that the there were 3.9 persons to every house and in the farmer knows he will receive a certain minimum 1945 census the figure was 3.6. income. It also means that this commodity is handled on a world basis and that three of the Another criterion for measuring the spread principal suppliers of the world market are assist­ through the community of contemporary living ing international trade by stabilizing one of the facilities is the number of dwellings served with commodities affecting that trade. electricity. In New Zealand, including the moun­ tainous areas and remote valleys, 93 houses out To return to New Zealand, wages of workers of every 100 houses are served with electricity. are fixed by arbitration courts, the minimum being adjusted to correspond with changes in the retail Techniques for maintaining living standards are price index; above this minimum, higher rates are varied. New Zealand's economic and social policy fixed for the various grades of more arduous, is aimed at giving each family a reasonable stand­ skilled or responsible occupations. ard of living - this standard to cover, at its mini­ mum, the essentials of food, clothing, shelter, To achieve internal price stability, New Zealand education and medical care. This involves assur­ for some years has worked with a stabilization ing to the farmers a guaranteed income and to the commission which is now permanently part of wage workers full employment and a. wage level New Zealand's social economy. Its field covers which will give them a share of the national in­ the stabilization, control and adjustment of prices come comparable with that received by the of goods and services, rents and other costs; and farmers. rates of wages, salaries and other incomes. Its powers also extend to marketing. In addition to Every season a guaranteed price is fixed for this commission there is a price tribunal, also butter fat and this in itself fixes the basis of the permanently part of New Zealand's social econ- 22 Mr. Sutch, New Zealand

omy, whose work is to fix, control and supervise Zealand is, I think, sufficiently well known not the individual prices of goods and services. to need any further elaboration, except to mention that our free medical, hospital and pharmaceutical The New Zealand Government's main economic benefits scheme is of great assistance in ensuring and social tool is full employment. Its success in the well-being of our community. Of the total using it can be gauged from the fact that the private income of New Zealand, 13.2 per cent is number of unemployed registered in New Zealand spent on social services. The redistribution of at the present time is one in over ten thousand of income which this brings about helps to make sure the labour force. In recent years there has had to that the greatest number of people get a fair share be a curtailment of certain development and in­ of the available national income. I would add that dustrial projects owing to the shortage of labour. in the financial year 1947/48 the share of total private income absorbed by taxation was 27 per New Zealand's policy of full employment and cent, and that about 50 per cent of this taxation guaranteed prices for farmers has certain reper­ is spent on social services. cussions on the demand for imports. Naturally the' demand for consumer goods and services is main­ May I now make a brief comment on our dollar tained at a high level and New Zealand's manu­ exchange position. New Zealand has the good facturing industry has a steady demand for ma­ fortune to be part of the sterling 'area and is there­ chinery and raw materials, a good deal of which fore able to trade over a large part of the globe, must be imported. Furthermore, New Zealand has without being limited in its purchases from any no heavy industry to speak of. The concomitant, other sterling country by its ability to export to therefore, of the full employment policy and the that country. In addition, membership in the control of foreign exchange is the selection of im­ sterling area permits New Zealand to draw upon ports, because New Zealand's demand for imports the dollar reserves kept by the United Kingdom tends to be somewhat greater than the foreign for the area as a whole. Since almost all of New exchange available. Since 1938, New Zealand has Zealand's meat and dairy produce and a sub­ consistently developed this policy of import selec­ stantial proportion of our wool are sold to the tion. In this way we can be sure of importing the United Kingdom, we have a dollar deficit in our goods which are economically and socially neces­ trade with the United States. The additional dollars sary and, at the same time, ensuring that every­ we require are obtained by our membership of the body in our country has a reasonable income. sterling area. New Zealand, of course, has played New Zealand feels that import and exchange con­ its part in keeping down dollar expenditure and trols must be the counterpart of the policy of full in co-operating with the United Kingdom and employment and economic stability. We have also, other members of the sterling area to make ad­ of course, internal controls which assist the Gov­ justments to the dollar shortage. For example, ernment in its policy. One of these is control of New Zealand endeavours to limit its payments for credit by the Reserve Bank and the operation of imports and other oversea transactions to its current a commercial bank and long-term lending agencies receipts of foreign exchange from exports and by the Government. As with other countries, we other sources. This means that New Zealand will have used subsidies for stabilizing prices of certain not draw on its sterling reserves of foreign ex­ essential goods. There is also control of capital change for imports. works programmes and limitation by the banks of the possibility of using bank advances for the The Secretariat report mentions the recent ap­ acquisition of permanent assets. preciation of New Zealand's currency. I should like to give the Council some details of this opera­ An integral part of New Zealand's socio-econ­ tion. During the depression years of the early omic system is social security, whereby the un­ 1930's, the prices of farm products dropped so employed can receive a resonable wage and per­ low as to bring insolvency to 50 per cent of New sons incapacitated or subject to any of the usual Zealand's dairy farmers. In order to increase farm social hazards of life can have an income during income the Government, on 20 January 1933, such periods. The social security system of New fixed the foreign exchange value of New Zealand Mr. Sutch, New Zealand 23

currency at the depreciated rate of £NZ125 to ceipts without appropriating funds accumulated £100 sterling. This rate remained fixed until 20 in pool accounts which, for both industries, are August 1948. substantial. In fact, the pools have actually con­ tinued to increase. The point here is that in future As I have mentioned earlier, New Zealand, if there are possible reductions of export income during and after the war, has operated a price the guaranteed price can be sustained out of these stabilization policy which has met with a reason­ pools. The market increases in wool prices have able measure of success, but internal stability has more than covered the exchange adjustment so far been constantly threatened by rising import prices. as wool producers are concerned. The increase in import prices was particularly noticeable in the early months of 1948 and it be­ The report of the Secretariat suggests that there came obvious that subsidies and other internal has been some loss to exporters in New Zealand­ tools of control were no longer practicable in pre­ that is, to our farmers - because of the apprecia­ venting a considerable distortion of the price tion of the New Zealand pound. My remarks will structure. This distortion, if continued, would not make it quite clear that this in fact has not only have threatened New Zealand's internal econ­ occurred. omic stability, but when reflected in farming output for export, would have had important May I also draw attention at this stage to the repercussions on the well-being of the countries remark in the report that New Zealand's reduction dependent on the foodstuffs we supply. in its dollar deficit in 1948 was due to restrictions on imports rather than to market conditions. This In addition, in the first half of 1948, the :New sentence is misleading. The facts are that while Zealand Government negotiated with the United there were restrictions of imports from dollar areas Kingdom a renewal of its long-term produce con­ in 1947 and that these restrictions were tightened tracts. The prices to be received for butter and somewhat in 1948, the essential reason for the cheese were increased by about 15 per cent over decline in the dollar deficit in 1948 was an im­ the previous season's prices and export meat provement in supplies from other areas. prices were increased by 18 per cent. Wool, New Zealand's other main export, was also realizing I should like to refer to another misinterpreta­ good prices. It will be evident therefore, that an tion of New Zealand's position in the report. In appreciation of New Zealand currency at such a the section dealing with "Inflationary and Defla­ time need not have adverse repercussions on farm­ tionary Developments in 1948", there is a refer­ ing income, especially in view of the existing ma­ ence to New Zealand's butter and petrol rationing. chinery for guaranteed prices for farmers. These are not rationed as part of any anti-infla­ tionary policy, but for special reasons of increasing The Government therefore decided to appre­ supplies of butter to the United Kingdom and of ciate the value of New Zealand currency by 25 decreasing expenditure of hard currency on petrol. per cent so that the New Zealand pound is now equal in value with sterling. This action has a Somewhat reluctantly we have mentioned errors stabilizing effect in New Zealand. in detail and interpretation in paragraphs relating to New Zealand's position in 1948. It may be that The prices of a long list of imported goods have it would be preferable not to mention particular come down, increases in the cost of living have countries in an interim report if only a glancing been avoided and the cost of New Zealand's over­ reference can be made to them. The Department sea services, in terms of New Zealand currency, of Economic Affairs, which has produced this re­ has been reduced. We have had no reports of any port, has done a rush job under trying conditions. adverse effect on New Zealand's economy from We feel that this department is overworked and the change. The guaranteed prices in dairy produce cannot devote all the time necessary to research and the stabilized price for meat, both of which and to digesting and presenting the facts. I have are agreed by producers' representatives each mentioned that this report, Major Economic season, were maintained from current export re- Changes in 1948, is an interim report and we all 24 Mr. Sutch, New Zealand

know that it was prepared during a period when menon, "the increasing degree of political inde­ many members of the Secretariat had to be in pendence, especially in many low-income coun­ Europe to attend the sessions of the Economic tries of the Far East. The new authorities naturally and Social Council and of the General Assembly express impatience with existing living standards there. The major report will be made in June. We and make efforts to begin improving them". And therefore did not expect this one to be other than generally, they add, "people in most exporting a series of statements on the world supply of com­ countries are retaining a larger share for their own modities, somewhat similar to the pictorial, statis­ use". The deduction from this is that domestic tical report received at the last session of the food production will be less available than in the Council. However, there have been several addi­ past for export to other countries. But the Far tions which we feel are of value. We would par­ East is, in any case, a deficit food area, and several ticularly like to emphasize the table dealing with of the countries in this part of the world have short­ post-war international grants and credits by Gov­ and long-term plans for improving their food pro­ ernments. The tables relating to the financial work duction; however, the FAO doubts whether these of the International Bank for Reconstruction and plans will increase the food supply much more Development and the International Monetary than to keep pace with population growth. Fund, and the tables on merchandise trade, build­ ing and construction, manufacturing activity and On the world nutrition situation generally, let unemployment are also valuable. me quote from page 7 of the 1948 survey of the Food and Agriculture Organization: it says that In discussing the world economic outlook, I apart from Argentina, Australia, Canada, New would like now to turn to the Food and Agricul­ Zealand, the United States and a few European ture Organization's publication The State of Food countries, the food supply of any single country and Agriculture-1948, which says that millions would be nutritionally inadequate even if dis­ of people are hungry, that in the Far East, where tributed evenly throughout the population. As it live half the world's population, the income per is, the inequality in distribution results in certain person is very low - according to some authori­ sections of the population faring much worse than ties, well under US $100 per year. the national average suggests.

"To meet minimum food needs in the worst fed The conclusions are obvious. The world is not countries," says the FAO, "there should be an supplying itself with its needs of food or of cloth­ increase in food supplies for these regions of about ing-and if we refer to the report of the FAO again, 40 per cent. If population increase is to be taken we shall see that the world is not providing itself into account, it would be necessary to expand food with its minimum needs of shelter. supplies over the next twenty-five years by 100 per cent to reach the minimum standards of the FAO." In 1948 there was a considerable increase over previous years in the production of bread grains; Similarly, the FAO calculates that if by 1960 world production of fats and oils was at about the the world consumption of such clothing fibres as pre-war level, but distribution was worse than cotton, wool and rayon were to be raised to the pre-war. For Europe especially the position was pre-war level of Italy, world output of these fibres bad. In livestock the European position is also would have to be increased by 60 per cent over much below even pre-war standards. pre-war; if world output by 1960 had to reach a level of consumption based on 50 per cent of the There are, indeed, signs of progress. The good pre-war United States consumption, the increase weather of 1948 produced a good grain harvest. would need to be 130 per cent. There was more of other foods in 1948 than in 1947, and in Europe and elsewhere the incr,ease The FAO further points out that there is not may continue. But the good harvest does not in in some countries the same tendency to export itself mean permanent recovery. On the other food as there used to be; there is a new pheno- hand, undernourishment is widespread. Mr. Sutch, New Zealand 25

There is a new note creeping into discussions ports of butter, cheese and meat to the United on food. Asia is exporting sugar, European sugar Kingdom for a period of seven years. Somewhat production is recovering and there is high produc­ similar arrangements were made between the tion in the Caribbean. Already international finan­ United Kingdom and Australia, Canada and other cial problems are preventing the best international countries. We find this advantageous to us, and distribution of the world's sugar supply. I hear we think it advantageous to the United Kingdom. that there is also a fear that there might be a wheat I note that the Organization for European Econ­ surplus, which, of course, could only be a surplus omic Co-operation has reported, in referring to because of dollar difficulties. stable markets, that "bilateral negotiations afford the most effective present method of implementing For several decades North America has been a policy of guaranteed markets". The OEEC also increasing its production of food and even pro­ reports that "A study of the methods employed ducing a greater proportion of the world's food. to guarantee agricultural markets and prices, both This means that the world food situation has be­ internally in the participating countries and inter­ come even more unstable. As the report of the nationally for the supplies entering international FAO says, there is a danger of deficit countries trade, is under consideration". We hope that this depending heavily on food supplies from areas study by the OEEC, and similar studies, may go where the weather may occasion violent fluctua­ forward. tions in production; in addition, as I have just suggested, to buy food in North America, the I wish now to spend a few minutes discussing world needs dollars. Leaving aside for the moment the general economic situation, with particular the dollar difficulty, a partial solution is to in­ reference to western Europe. The Secretariat's crease greatly the domestic production of food in report shows that in 1948 the highest levels of many areas. This needs an increase in living output in relation to pre-war days were in coun­ standards, changes in farm tenures and farm tries outside the active theatre of war. The lowest techniques, prevention of erosion, supply of fer­ level of output was in the occupied countries­ tilizers and of farm equipment, better transport, Austria, Germany and Japan-and, to quote the more electricity-in short, it means greater indus­ report, in "such countries as China and Greece, trialization and more imports of machinery and which were affected by civil disturbances". equipment. But compared with 1947, the increase in world We would like to suggest that further considera­ production was accounted for mainly by produc­ tion be given to marketing techniques. I have tion in Europe, particularly in the devastated already referred to the Joint Wool Organization countries. The most noteworthy increases over which sells a high proportion of the wool entering 1947 occurred in Finland, France, the Netherlands, into international trade. This Joint Wool Organi­ Poland, the United Kingdom and the Union of zation not only markets the wool that was stored Soviet Socialist Republics. up during the war and was not sold, but it also sells each year's crop. Here we have an example All will agree that this recovery from the effects of orderly marketing which produces stability of war in Europe is a matter for congratulation. where formerly there was instability. It may be After the First World War it took Europe seven possible to extend the principle of this organiza­ years to reach the same stage-namely, a level of tion to other fields, so that producers would not industrial production equal to that prevailing be­ fear financial ruin by producing more than the fore the war began. market will take at ruling prices. In this connexion perhaps it might be advisable to re-examine the I should like to emphasize one of the points concept of buffer stocks. made in the Secretariat's survey-that the central problem in 1949 continues to be the necessity of Another technique to examine may be the long­ expanding the world supply of goods. And the term food contract. I have already referred to the survey adds that the problems of increasing pro­ arrangements whereby New Zealand sells its ex- duction in 1949 are likely to be of a protracted 26 Mr. Sutch, New Zealand

and long-term character. One reason for this is all remember the balance of payment difficulties that in the industrialized countries not damaged of the 1930's. In pre-war days, the balance of by war, existing plant and man-power resources payments with North America was maintained were operated at near capacity in 1948, and there­ only by the flow of gold from central bank reserves fore we cannot immediately expect rapid increases and from gold production in oversea territories in production in these countries. Bearing this in associated with Europe. mind, let us examine the possibilities in one of the other industrially productive areas in the world, The last war accentuated the existing tenden­ western Europe, or, more exactly, the nineteen cies; it wiped out the investment income which countries belonging to the Organization for Euro­ paid for one-fifth of western Europe's imports in pean Economic Co-operation. the thirties. This represents a loss of more than $1,000 million a year. Today, western Europe can The OEEC document published in Paris at the pay for only half its imports from the outside end of 1948 is an interim report on the European world. Recovery Program. This report is one of the most The European Recovery Program is being as­ important documents published in recent years on sisted by grants and loans from the United States the maladjustments of world trade; it shows why and from certain credits granted mainly by the it has been difficult to increase production in United Kingdom and Belgium. The nineteen coun­ western Europe. Here are some of the facts given tries co-operating in this programme have put by the report. Western Europe, which is half the forward plans by which they are trying to balance size of the United States, and has twice the popu­ their payments with the outside world by 1952. lation, was, at the beginning of this century, sup­ The governments concerned have made estimates plying 90 per cent of the world's exports of which show that even on the most optimistic cal­ manufactures. Receiving countries were paying culations western Europe will still have, in 1952, for these manufl;lctures in food and raw materials. a trading deficit with North America of $1,000 Throughout the nineteenth century and in the million. To reduce the deficit to this figure the early part of this century, western Europe was also estimates included an increase of exports to Latin supplying capital to much of the rest of the world. America by $1,000 million and an increase to the Some of its imports, therefore, were payments for United States of over $500 million. Of course, all interest and other debt charges. In fact, one of the these calculations are based on existing prices and characteristics of western Europe is its depend­ tendencies, and the plans clash within themselves. ence on imports. This area imports most of its However, it is certain, first, that the productive non-ferrous ores and metals, nearly all of its oil, effort needed today is very great indeed; and up to 90 per cent of its textile materials, 30 per secondly, if western Europe is to find markets in cent of its timber and 20 per cent of its food the Western Hemisphere without ousting others supplies. from those markets, there would need to be a sub­ stantial increase in living standards in the receiv­ Until 1913 this area was a great exporter of ing countries. An economic recession in this area capital; after 1918 its ability to invest abroad was would, of course, be disastrous. reduced until, by 1938, western Europe provided no net investment at all. It is thus clear that the The report of the Organization for European problems of western Europe are not merely prob­ Economic Co-operation recognizes the optimism lems brought about by wars. They have been of the estimates; the trade deficit in 1952 will accentuated by wars, but they are part of a long­ probably be more like $3,000 million than $1,000 term trend. In 1913 only one-fifth of the world's million; even this figure involves an increase in manufacturing output came from outside Europe. exports from western Europe of 40 per cent. This In 1938, one-half came from outside and today does not mean that the problem is absolutely in­ the proportion is much higher. The rest of the soluble. It means that it cannot be solved in the world has increasingly been making its own manu­ short time of four years. The long-term changes factured goods and Europe has been finding it from which western Europe has been suffering more and more difficult to pay for its imports. We will need long-term cures. Mr. Sutch, New Zealand 27

There are several methods of approaching the mated gross outflow of private long-tenn capital of persistent problem of the great dollar deficit. One only $386 million, compared with $779 million of them is to develop areas of the world where in the first half of 1947. Outside the United States, dollars are not needed for payment for raw ma­ the traditional type of long-tenn lending has also terials or other goods. This, in itself, links in with been very small. Perhaps this is another basic the need for development of the world outside of change in the economic situation-a diminution of Europe and North America. In Latin America, the role of private capital investment on an inter­ the Middle East and Asia, there are more than national scale. half the world's population in need of capital equipment, machinery and technical advice. The Itis true that during and since the war the world process of assisting these countries can also assist has seen unprecedented methods of international Europe, which is a repository of experience, assistance. During the last war, several of the knOWledge and technical skill perhapsnot equalled allies contributed war materials and civilian goods in any other area. This is one very important rea­ to a common pool without any attempt to suggest son why western Europe should be restored to that the receiver should pay the bill. The contribu­ economic health. tions of the United Kingdom, the United States and Canada to this mutual aid are well known. The emphasis I have placed on western Europe Other countries also did their share; Australia is not meant to exclude from our consideration and New Zealand contributed substantial amounts the enonnous needs of Asia and the other areas to what we called reverse lend-lease-supplies for of the world I have mentioned. I have emphasized the United States forces in the Pacific. Lend-lease western Europe to show how great the world econ­ was, of course, most spectacular on the United omic problem is; to show that developed coun­ States side but, nevertheless, it was a co-operative tries, as well as under-developed countries, have endeavour whereby most of the allied participants immediate and long-term problems which we must were giving what they could to a common pool. face. Since the war, we have seen similar mutual aid with the United Nations Relief and Rehabilitation Obviously, one general aim of the world must Administration through which many governments be the maximizing of production and the full em­ contributed for the relief and rehabilitation of ployment of labour and resources-I mean in­ devastated areas. Indeed, this same method is now creasing international trade to the utmost. I recall being used on a reduced scale in the International that a report in 1948 by the Economic Commis­ Children's Emergency Fund, by which govern­ sion for Europe stressed the necessity for trade be­ ments and peoples are contributing money to as­ tween eastern and western Europe, not only to sist women and children in devastated countries increase the well-being of Europe but to assist the and in other areas needing relief. world as a whole. At the present time in Geneva a committee is sitting to study this same question. In the Secretariat report there is a table show­ But even with the maximum amount of trade be­ ing post-war international grants and credits by tween various areas of the world-between eastern governments. Listed are the ~ountries which have and western Europe and between the Eastern and received such credits and the governments which Western Hemispheres - and with a high level of have extended such grants and credits. Here are employment in the United States and elsewhere, some of the figures: The United States has, since there is still the problem of the deficits in balance the end of the war, contributed $19,531 million; of payments. the United Kingdom $2,659 million; Canada $1,844 million; and other countries have also con­ Can these deficits be met by international lend­ tributed substantial sums. The International Bank ing of the nineteenth century kind? The report of for Reconstruction and Development has since its the Secretariat shows that private international inception lent a total amount of $509 million and investment in the United States in 1947 and 1948 the International Monetary Fund has sold the was on a very small scale. In fact, the report says equivalent of $649 million. However, notwith­ that in the first half of 1948 there was an esti- standing the generosity of the governments listed, 28 Mr. Mendes-France, France

it does seem evident that, including grants and expressed their desire to receive the Secretariat's credits and private investment, the world is not report at an earlier date, so that governments may receiving sufficient assistance to maintain its living be able to study it thoroughly in advance and give standards and to develop its potentialities. delegations the necessary instructions, thus giving the discussion its full bearing. Actually, we re­ This is a problem which will not be solved this ceived the report only two weeks ago, that is, too year or next year, and it can be solved only by late to enable us to study it with all the care which painstaking efforts and further international co­ it demands. operation. In the past we have had mutual aid in war-time, including lend-lease. Since then we have It is difficult, of course, to ask the Secretariat operated new methods of international aid; these to prepare a study of the year-1948 for example methods can no doubt be further developed. And -when the year is not yet ended or when it has we hope that the discussion in this Council will only just ended. The present method is not satis­ help towards this further devolpment. factory from this standpoint. The report is mis­ leading in appearing to cover the whole year 1948 although numerous statistics relating to the last Mr. MENDES-FRANCE, France quarter are lacking; this lack inevitably detracts (translated from French) from the general conclusions and the forecasts.

The debate on the world economic situation We feel that some solution is required and inaugurated at our last session on the initiative of should like to submit the following for the con­ our colleagues, the representatives of Poland and sideration of the Economic and Social Council. of Australia, marked an epoch in the history of If, as the French delegation believes desirable, the Economic and Social Council. this debate is maintained as a regular feature of our annual February session, we might ask the In becoming a regular feature, this debate will Secretariat to prepare two main documents in­ not only increase the interest of our meetings but stead of one: first, an annual report covering the may lead to important and beneficial results; it period between the two preceding harvests, to be provides the necessary basis for the fulfilment of distributed in October, for example; and second, our task as defined in Article 55 of the Charter, a supplement covering the subsequent period, to for our own several activities and for the general be distributed later, say in January. The first of policies of the specialized agencies. these reports would, of course, be the essential and fundamental document. Its importance would For the purposes of this debate the Secretariat be so much the greater in that the economic year has provided us with very valuable documentation; does not, in fact, correspond to the calendar year, the French delegation wishes, in its turn, to convey a completely arbitrary period; the basic economic its warm congratulations to the members of the period is constituted, properly speaking, by the Secretariat who took part in preparing these period during which one harvest is being consumed studies-and particularly to Mr. Owen and Mr. and the next prepared. If the Secretariat accepted Weintraub, who were mainly responsible. our suggestion we should receive its studies early enough to study them with the attention they de­ The French delegation has given these docu­ serve, while supplements drafted on the eve of ments the careful study which they deserve and, our February session would give a full account of as was done last year, will make observations and more recent events. suggestions of varying degrees of importance, both on the form and content of the documents be­ The second observation I should like to make fore us. concerns the French translation of the document submitted for our use. Actually, on this score, I The first observation on the question of form is should first thank the Secretariat. Last year we the following. Several representatives have already had to base our discussion on a report which we Mr. Mendes.France, France 29

had not received in French. This year, on the of hard currencies; and it was precisely these other hand, the basic report has been translated; common misfortunes which held a great lesson fOf but I would like to point out that the quality of our Council and for public opinion. the translation is rather poor and several passages are obscure; in the future we should be provided The picture for 1948 and, even more, that which with a more correctly drafted document. might be painted now, at the beginning of the spring of 1949, does not show the same homo­ geneity. Another lack is due to the absence-despite their importance-of certain data. Thus, it is highly important for the delegations particularly in­ In some countries the economic curve for 1948 terested in the reconstruction of Europe to be follows more or less the same trend as in 1947: better informed on the development of German inflation continues its course, sometimes with even economy. I should like, in this connexion, to refer greater impetus, while in some countries it has to the interesting observations of the representative been partially overcome or slowed down. In other of Denmark, who described the position which countries, on the contrary, deflationary trends, at Germany occupies in the European economy. By least to some extent, are beginning to appear or Germany, I mean, of course, not merely one or are gaining ground. This diversity of conditions another of the zones created as the result of recent from country to country, and in some cases even circumstances, but Germany as a whole. The re­ within a single country, gives the Secretariat's port does not give us these data, though they are analyses rather less clarity and makes its forecasts of great value. Similarly, the information which less certain; but this is not at all surprising, since the report contains on the Union of Soviet Socialist it is caused by the very nature of the evolutionary Republics, a country of such great economic im­ process. portance, is still incomplete, though better than that provided last year. We are convinced that the Our discussions, we believe, should consist of Secretariat is not responsible for these lacks but, an examination and interpretation of this body of if the Council's activities are to be effective in the information rather than any corrections which we sense of Article 55 of the Charter, they clearly' might be tempted to make in the details of the require that complete and comparable data be various parts of the report. submitted to the United Nations by all of its Members, without exception. That is why the French delegation feels that it need not draw the Council's attention to the pas­ sages of the report dealing with France, with a The last preliminary observation I should like view to supplementing or correcting them, al­ to make is the following. When we compare the though this forbearance does not mean that we reports for 1947 and 1948 we at once become fully agree with everything the report says on that aware of a fundamental contrast. Last year we subject. were all impressed by the essential similarity characterizing the world's economic difficulties. In studying the situation of the various countries we Before examining the apparently divergent, or found in all of them traces of one or more mala­ even contradictory, problems to which I have just dies which were common to all. The report dealt referred, may I point out that, although the situa­ with modem industrialized countries and under­ tions vary, the general tone of the report is, I am developed countries; with countries devastated by glad to say, one of satisfaction. the War and countries apparently spared by that catastrophe; with countries attached to orthodox Last year the general view taken of the world traditions, countries of guided or planned economy situation was summed up in the Secretariat's re­ and collectivist or socialist countries. They were port in a phrase which most of us repeated in our all suffering from the same evils: inflation, high speeches to the Council: 1947, the year of frus­ prices, great shortages of food, lack of coal, need trated hopes. Today-partly, perhaps, because pre- 30 Mr. Mendes·France, France

vious disappointments have tempered our ambi­ taken and disorganized by successive price ad­ tions and hopes, but largely because of the positive vances; stability of the prices of essential com­ and indisputable results achieved-it may be said modities gradually revives confidence in the cur­ that 1948 was the year which baffled pessimism. rency-a confidence which is almost unconscious The year 1947 was worse than had been foreseen; at first, but is soon reflected in reality by the usual the year 1948 was better. reactions and manifestations.

Since food supplies are so important, we may As a matter of fact, it would not have been fair congratulate ourselves on the events of 1948, but to blame the inadequacy of human efforts for the we should at the same time bear in mind the un­ disappointments of 1947. On the contrary-as we certainty in the results achieved, in so far as they have just been reminded and as the work of the are due-apart from the factor of human effort, Department of Economic Affairs and of the Econ­ which should not be underestimated-to weather omic Commission for Europe has shown-recon­ conditions beyond our control, and the recurrence struction, and particularly industrial reconstruc­ of which we cannot guarantee. It is true that in tion, has been relatively more rapid after the 1949 certain enduring factors contributed towards Second than after the First World War. But the improvements in agriculture, in particular, mech­ recovery gathered strength in 1948. anization, better fertilizer supply and-an element of very great importance, at least in my own coun­ The chief feature of this year-and the one try-increasing interest by farmers in moderniza­ which completely changed the picture as com­ tion. The salutary effects of these permanent fac­ pared with last year-was an excellent harvest, tors of improvement will be felt on a constantly coming at long last after so many middling, bad increasing scale; but they would be nullified if we or even disastrous ones. The progress of industrial were to indulge in the illusions which the French production in 1948, though satisfactory, was not delegation denounced last year in this Council, or quite so marked. In most countries the gain was if we were to overlook the very important facts under 10 per cent. In some cases, as in France, of which the New Zealand representative has just it was more; but, except in a few very special so aptly reminded us. cases, it did not go beyond 25 per cent. This was not the case with agriculture. To give one example About two years ago the Food and Agriculture only, harvests of bread grains in Europe showed Organization forecast that for a limited time there increases from the one year to the next, of more might be a relatively abundant food supply and than 25 per cent everywhere-and even rose as that surpluses might occur and might even ac­ high as 170 per cent. cumulate-not absolute surpluses, but surpluses in relation to the purchasing power of the population, In last year's debate the French delegation which would continue to suffer shortages and even stressed at great length the close connexion be­ hunger. The danger would then arise that, dis­ tween the food situation and the inflationary couraged by the fall in prices and the losses in­ danger-a connexion to which too little attention curred in the sale of products, countries would was formerly paid. The events of 1948 confirm reduce their production; we should find ourselves this view. On the basis of our experience in France back in our original situation, still further ag­ we can say that, while food shortages in post-war gravated by demographic factors, i.e., by increases years proved to have an almost irresistible infla­ in the population largely owing to advances in tionary effect, it can now be seen that the return hygiene and medicine, which are saving lives and to a relative abundance of food supplies and the prolonging human existence. halt in the rise in commodity prices reacts imme­ diately on all the material and psychological forces One of the first conclusions that the French which lead to inflationary pressure. In these circum­ delegation draws from a study of the world situa­ stances the means of action, particularly fiscal tion is, therefore,. the following. Action to con­ measures, required to combat inflation have time solidate the progress achieved in regard to food to take effect, instead of being constantly over- supplies remains essential today; it should include Mr. Mendes-France, France 31

education to forewarn public opinion against the tion, with a true deflationary movement. The pos­ illusion of over-production-which would be mere­ sibility that the deflationary trend will, however, ly momentary and incidental-and the direct effect be strengthened gives particular interest to United of such over-production-a Malthusian policy on Nations document EllUl, which contains the the part of producers. Market organization and replies to the questionnaire sent by the Secretariat reasonable price stability are indispensable guar­ to a large number of Member and non-member antees which must be achieved, and promptly. countries, on the measures they propose to take in order to maintain full employment and econ­ Further measures will clearly be necessary to omic stability. In this connexion I should like, combat the inflationary danger, not only in the before dealing with the replies received, to con­ monetary field 'and in industrial production, but gratulate the Secretariat on the excellence, per­ also in the general economy of the countries spicacity and clarity of the questionnaire thus threatened and, particularly, the countries where circulated. reconstruction needs are superimposed on the normal needs of the population. The International Several of the most important replies indicate Monetary Fund and the International Bank for that governments fully realize the part they may Reconstruction and Development may be of great have to play and the steps they will have to take assistance in these efforts, particularly if they take in due course. Yet these replies reflect very di­ due account of the necessary objectives of the verse points of view and refer to very different situation in each of the countries concerned. It local situations. Some of their authors contem­ must not be forgotten, however, that in all these plate the eventuality of a deflationary crisis and matters the main responsibility rests with govern­ the necessity of preventing any recurrence of un­ ments. It is they and they alone who can apply employment, which has been practically non­ the appropriate monetary, budgetary, fiscal and existent for many years. Others, on the contrary, economic policies, ensure price and wage stability seem, at least for the present, to have no mis­ - who can, in a word, prevent the hardships and givings on this point. Some proclaim their attach­ sufferings which inevitably accompany inflation. ment to traditional and orthodox principles. Others take the more modem view that governments But consideration of the difficulties which are should iron out, by so-called compensatory action, being experienced by countries like mine must not any excessive fluctuations in the economic situa­ make us lose sight of other difficulties which create tion. different problems in other countries. In one of the chapters, which corresponds to one of the It is striking to note that, though they are based best studies submitted to us last year and, to some on widely different premises, both in fact and in extent, amplifies that study, the Secretariat report theory, the practical conclusions arrived at by the examines inflationary and deflationary trends in governments concerned are very much alike. For 1948. It notes a feature already pointed out by example, the replies given by the United Kingdom some representatives, namely, that side by side and Australia-both countries where the Keynes­ with the maintenance of inflationary pressure in ian theories are generally accepted-naturally re­ some parts of the world, there appear in .other flect very closely related ideas, which were illus­ regions-and in some cases in one and the same trated very clearly a moment ago by the New region-deflationary symptoms, for the first time Zealand representative. But the United States, too, since the war. If the report had covered a more where the principles of free enterprise and laissez­ recent period these latter symptoms would cer­ faire are still powerful and vigorous, proposes, tainly have been even further emphasized. according to its reply, to adopt the same forms of action and intervention in case of a crisis. We should not, however, exaggerate the im­ Further, the Governments of the Netherlands and portance of some of the facts reported by the Switzerland, after first avowing their laissez-faire Press, which sometimes tends to confuse healthful views, state that, if circumstances require it, they symptoms of recovery or, so to speak, disintoxica- will take action by similar methods to fight econ- 32 Mr. Mendes-France, France

omic depressions, price and wage declines and dilemma-not merely a technical dilemma, but a unemployment. These replies do not even seem psychological and human one: can the western to differ very greatly from that submitted by the world, by intelligent and-what will almost cer­ Czechoslovak Government, if we study it closely. tainly have to be-bold planning, avoid the totali­ Within the framework of a totally planned econ­ tarian solutions which some claim are the only omy the Czechoslovak Government also follows effective solutions in the twentieth century? methods designed to compensate tendencies to­ wards excess at any given time, by regulatory I am well aware that the pessimists have found action involving transfers of man-power and for­ at least a provisional reply to this dilemma. In eign trade. their view there is a solution-the solution of war. War, they claim, is the only solution capable of It is at present universally recognized that gov­ avoiding both a profound crisis and grave social ernments have no right to turn their backs on upheavals. Very well, then; the modern world economic evolution and to rely on automatic ad­ must take up this challenge and show that it can justment. This impressive development is largely repudiate a remedy which would obviously be due to the increasing influence of the school of worse than the disease. thought founded by Lord Keynes. If faced with the threat of a deflationary crisis, governments It must be noted, of course, that for many would lack neither the means to combat the crisis countries-particularly the devastated countries­ nor the will to use them. The worst that can be the possibility of a deflationary crisis is remote, said, after reading their replies, is that, generally and any related questions are irrelevant. Countries speaking, they do not foresee or envisage a de­ which have undertaken a major programme of flationary movement in the nearfuture and in most reconstruction that must inevitably extend over cases have not taken steps to be able to apply many years, are still threatened principally by the promptly the measures they have in view. inflationary danger. The French Government's reply to the Secretariat questionnaire will show Should the dangers of deflation become more that in a country such as ours any dangers of in­ definite and more widespread, we shall be faced flation could speedily be counteracted by relaxing with a crucial test. There have apparently been the measures now rendered necessary by inflation, important theoretical discussions among eminent and by accelerating the programme of reconstruc­ Soviet authorities as to whether the economies of tion and modernization. the western countries could withstand a reversal of the inflationary trend of the last few years. Some This programme, as is known, covers not only have maintained that a deflationary crisis would metropolitan France but also the oversea terri­ evoke acute difficulties and violent upheavals. This tories which constitute, together with metropolitan prospect might come true, to some extent, if gov­ France, a single monetary and economic unit. ernments, economists and public opinion itself Here once more we may note the great econ­ still relied, as in former days, on the spontaneous omic similarity between reconstruction pro­ and automatic adjustment of the economic system. grammes and development programmes. As the It is true that such spontaneous adjustment did Chilean representative pointed out very well this take place in the past but the effects of crises in morning, a demand for capital investment designed the nineteenth century were, after all, limited in to increase a country's productive potential which comparison with those now feared; in 1949, one has been reduced by war devastation is similar in can hardly expect an automatic return to equili­ its economic effects to.a demand for capital in­ brium unless one is prepared for greater suffering vestment designed to raise the productive potential than modern civilizations can accept. of a country not yet industrialized.

Any marked increase of the deflationary trend And this leads me to dwell for a moment on would therefore confront us with a really great the close relation between the type of action to Mr. Mendes-France, France 33

which I have just briefly referred and the problem own reconstruction-the assistance to be given to of assistance to under-developed countries. The the under-developed countries will fonn part of observations I am about to make concern the war­ the collective effort needed at present to remedy devastated countries as well as the other indus­ the common difficulties which the world is ex­ trialized nations. During the last century the periencing. Here again, as the representative of advances achieved in production have made it Denmark reminded us, the crisis, for all its di­ possible, at one and the same time, to improve versity, is general, and recovery must therefore be standards of living in the older countries and to achieved by parallel, co-ordinated and common equip the new countries. It was the older countries efforts. In one of our coming discussions the which industrialized young nations such as the French delegation will take the opportunity of United States, Germany, Canada and Australia, giving its views on this important matter in more which in a few decades made up for their late start detail. All we wish to do today is to indicate the and took their places among the most modern, spirit in which France will join in any collective productive and progressive countries of the world. effort to raise levels of production everywhere­ And, be it said in passing, the assistance received and thereby, ultimately, levels of consumption as by these new countries, far from jeopardizing their well. liberty, enabled them, on the contrary, gradually to strengthen their economic and political inde­ It may perhaps be asked whether difficulties pendence. would not arise from the fact that I just mentioned, namely, that the problems vary from country to And this is not all. This programme of modern­ country; in some, the danger of inflation persists, ization was also energetically developed by the while in others, a deflationary trend is the chief industrialized countries in the oversea zones of source of anxiety. The existence of such con­ expansion.under their direct rule. The countries tradictory conditions in different parts of the world which carried out programmes of colonial ex­ is due largely to the barriers between the various pansion in the nineteenth century have often been economies, numerous examples of which are given attacked (with more political passion than scientific in the chapter of the Secretariat's report entitled objectivity). Without forgetting the errors they may "International Trade and Finance". This chapter have committed or the occasionally selfish ends of makes it abundantly clear that anything which certain business or interest groups, it is only fair helps to abolish these barriers manifestly con­ to point out here that these countries, as they tributes to world economic recovery and stability. developed, allocated large funds from their cur­ rent production and their national income, and In the past, whenever a crisis threatened or, with these funds they equipped and developed rather, when its first effects had already been felt, their oversea territories, fought the calamities governments were often disposed to protect their which ravaged them and raised their economic and national production by erecting customs barriers cultural standards. This is a striking manifestation, and by commercial and monetary intervention. indeed, of the essential unity of interest between Today, however, without such crisis, the obstacles industrialized States and under-developed terri­ to international trade already seem to be almost tories. insuperable. Before any crisis has occurred, econ­ omic barriers are stricter than at any time for It is not surpnsmg, therefore, that at a time many decades. when new productive successes are being achieved and world levels of production are breaking old What would happen if the definite emergence of records, the problem of the development of certain a deflationary trend-an accentuation or aggrava­ parts of the world is assuming a particular and tion, for example, of the various obstacles now very urgent importance. hindering international trade-were to result in efforts to achieve self-sufficiency, which would Far from being harmful to other countries­ prove much more destructive than those from for example those mainly preoccupied with their which the pre-war world suffered? Inflation would 34 Mr. Mendes·France, France

bring havoc to one place and deflation to another. operation Administration. When it was first de­ Unemployment would prevail in one country vised, the Marshall plan constituted intercession while, in another, undertakings of the greatest which was especially commendable and daring national or even world importance would lack the because at the time the United States was still machinery and tools which the unemployed could suffering from a marked maladjustment between manufacture from the raw materials that accumu­ supply and demand, as evidenced by the very late but are unsalable in a third neighbouring definite rise in prices. The more American exports country. Similarly, the resources made available helped to diminish European inflation, the more by technical progress would not be applied to in­ they increased the domestic difficulties of the creasing the agricultural production, while vast :United States. Fortunately, the situation is dif­ areas would suffer from poverty and hunger. ferent today. It is difficult, however, to imagine the situation of a whole part of the world, par­ This, of course, brings up the problem of inter­ ticularly the part affected by the war, if it had not national trade and payments which has now be­ received substantial quantities of basic products come the most important and, at the same time, from the United States. These supplies consisted the most difficult immediate problem. of foodstuffs which tided us over a very critical period, of raw materials which primed industry anew and of tools and equipment which helped In 1946-47, the world economy was mainly to restore general production. Thanks to this characterized by a number of basic shortages and assistance grave dangers have been avoided and by the bottle-necks which have been discussed much progress has been made. This will not be here so often. During 1947-48, the food problem forgotten by my country-which has been enabled at first caused the greatest anxiety. The chief char­ by this assistance to carry out a considerable part acteristics of the period now beginning are the of its recovery during the year which has just difficulties attaching to international trade, its ended; our production indices are rising regularly continued weakness and the delay experienced in and steadily, if we disregard accidental and transi­ devising means for its revival. tory factors. Marshall plan aid has therefore borne fruit and the French economy provides convincing The reader of the printed edition of the Secre­ proof of this. tariat's report-that which contains a notable col­ lection of statistics-will notice everywhere indices of over, often very much over, 100, as compared We know, however, that this aid is, and can with pre-war years. When he reaches the section only be, temporary. The aim of the European on foreign trade, however, he will find figures economic co-operation plan-its purpose, as its which are always below 100-a very significant text states and as we conceive it-is to allow comparison. The figures for recent years, however, the participating countries of Europe to become reveal a considerable expansion of the foreign independent of all outside economic assistance as trade of the United States as compared with the quickly as possible. To achieve this the French years from 1935 to 1939. It would be easy to delegation considers it essential to develop inter­ calculate the comparative foreign trade indices of national trade so that each country may obtain all countries, excluding their trade with the United through normal foreign trade channels what it is States, and this would give an even more striking now receiving as gifts. picture. Incidentally, trading relations between the United States and all, or nearly all, other countries The report clearly analyses the obstacles to be have a special character of their own because overcome-which are, in fact, the causes of the there are difficulties in compensating or financing present difficulties. The exhaustion of gold reserves them. and hard currencies and the liquidation of foreign assets make it impossible to buy anything except Substantial, if only temporary, relief has re­ in return for goods; they encourage barter agree­ cently been afforded by the generous assistance ments and prevent the recovery of large-scale given to Europe by the American Economic Co- multilateral trade. These and other causes make Mr. Mendes-France, France 35

currencies inconvertible so that it is impossible to The report also notes the recent establishment by have uniform and truly comparable prices or to a number of eastern European countries of a body engage in the arbitrage transactions which used for mutual economic assistance. We have very to be the basis of international trade. little information about it but it seems that its aim, also, is to promote exchange of raw materials, Immediately after the war it was hoped that foodstuffs, machinery and equipment. the traditional means to re-establish equilibrium would begin to operate shortly after hostilities Finally, last week in Geneva the ad hoc Com­ ended. Today it can be seen that the hopes en­ mittee on Industrial Development and Trade of tertained at Bretton Woods will not be realized the Economic Commission for Europe, which as quickly as was expected. The latest report of brings together the countries of western and east­ the International Monetary Fund, for example, ern Europe, began a study of the means for pro­ states that further devaluation would not avail moting, otherwise than by purely bilateral negotia­ today to re-establish the equilibrium which has tions, exchanges between the two parts of Europe been so drastically upset. Furthermore, the total which have always been considered, and have not volume of unsatisfied needs bears no relation ceased to be, complementary to one another. The to what private capital is prepared to supply. The French delegation is highly gratified that scarcely figures given in the Secretariat's report, which forty-eight hours ago unanimous agreement was clearly show the decline in private investment, finally reached at these conversations in Geneva. and the actual experience of the International Bank for Reconstruction and Development in the These are still only small-scale efforts, and past three years unfortunately confirm this. Final­ there is at times considerable scepticism regard­ ly, when fifty nations met at Havana to join in ing them. Nevertheless, efforts of this kind are drafting a charter of international trade, they had vital for the recovery of Europe and, possibly, of to agree to innumerable safeguards, exceptions the world, because the only other method apart and precautions; some still consider these inade­ from these attempts is that of strict bilateralism, quate, while others now consider the final draft the consequences of which are now well known. convention a travesty of the basic principles pro­ It is everywhere agreed, of course, that in cer­ claimed when the conference opened. tain circumstances the bilateral method cannot be avoided and it may offer immediate, sometimes All that has happened, therefore, proves that very valuable, advantages. At a later stage, how­ traditional methods no longer suffice to restore to ever, barriers are encountered which rapidly be­ the principal countries the essential external equili­ come insuperable; in the case of a particular agree­ brium which must, nevertheless, be fe-established. ment, they derive from the limited capacity of As it is, governments are issuing import restric­ the partner with the lesser potentialities. Hence tions and relaxing them only within the framework there is. a tendency towards a levelling down of of bilateral agreements. The report lists the coun­ international trade; not only is bilateralism unable tries which have been reduced to this extremity to promote an expansion of trade, but there is and, alas, it is a long list. danger that little by little it will lead to a real re­ striction of trade. Fortunately, efforts are being made on a broader plane, on the multilateral plane-the only one Therefore-and it is to this point that I would which, in the long run, can provide a lasting solu­ draw the Council's attention-we must at this criti­ tion. But for these efforts, the present position cal time choose between the two conceivable ways would be still graver. First of all, parallel with the of achieving equilibrium: expansion and contrac­ Geneva and Havana negotiations, creditor coun­ tion. There can be no doubt as to what choice tries have lowered their custom tariffs, though not should be made. When the difficulties of achiev­ yet sufficiently, in our opinion. There is the so­ ing a balance of trade are carefully analysed, called "conditional aid" system which aims at the rqot cause is always found to be insufficient promoting inter-European commercial exchange. production. It is an obvious and yet often forgotten 36 Mr. Mendes-France, France

truth that, when a country or group of countries whose situation was described to us a short time is obliged to cut down imports, it is always be~ ago. cause it does not produce enough of the food­ stuffs or commodities which other countries re­ I have spoken of international agreements. quire. Thus the problem of restoring equilibrium These will have to be envisaged in the light of in the balance of payments is also connected with past experience, with a view to avoiding the repeti­ the problem of development and reconstruction. tion of past errors. It is not a matter of reintroduc­ ing the old cartel agreements which aimed at selling at the highest price, cutting down sales if Take, for example, the case of the European necessary. On the contrary, the idea would be countries which have to cut down their dollar im­ to offer larger quantities of goods at successively ports. Unless they reduce their standard of living cheaper prices, to the greatest possible advantage to a dangerously low level, they must substitute of both the producers of the goods and those who purchases made in other currencies or in other need them. They are agreements of the kind monetary zones for part of these dollar imports. recommended by the Food and Agriculture Or­ This makes it essential to develop in these other ganization or as described by our New Zealand zones the resources-raw materials, in particular­ colleague when he gave us some examples of which are essential to western Europe, for ex­ what his country has done in collaboration with ample. The French delegation has consistently Great Britain. Our views do not, therefore, con­ maintained this view in the Economic Commis­ flict either with economic collaboration in the sion for Europe. If this view is accepted, the coun­ sense of development and expansion, or with the tries supplying western Europe will have to co-ordination of the export policies which we receive in exchange manufactured goods at nor­ regard as essential. mal prices, not only the essential products which are most sought after today, but all the commodi­ ties and goods needed for improving the standard By following the same line of action, it is our view that ill-regulated competition among Euro­ of living. pean products on the American market should be avoided. Such competition will, however, arise In order to achieve this, western Europe will if the various national plans which have been nave to lower its costs and raise the productivity promulgated are put into effect without adjust­ of its industries. It will achieve this, as our Danish ments in the true spirit of intra-European col­ colleague has just pointed out, by specialization laboration, not only on European markets but on of production and by organizing the division of all markets. labour, within the framework of certain interna­ tional agreements, for example. I repeat, the solution must always be sought in the direction of expanding production and trade. It is with the utmost conviction that we condemn In. short, the problem is to organize the Euro­ the alternative of contraction, of self-sufficiency, pean market, both as regards imports.,....in respect of autarky. It has often been said that the result of the supply of raw materials, for example-and of adopting deflationary measures is to export exports. From the latter point of view the Euro­ unemployment; similarly, any system of contrac­ pean market would be comparable to the Ameri­ tion, restriction or autarky means, ultimately, that can market. Such policies would provide the best a country exports its difficulties without, however, justification for the capital investment in Europe entirely getting rid of them itself. envisaged in the various programmes drawn up by a number of countries. And this is how the Whatever may be the temporary and sometimes French delegations to various United Nations quite understandable temptations which the suffer­ bodies have always conceived economic co-opera­ ings of the world bring with them, progress can tion between eastern and western Europe, for never follow from a selfish or short-sighted policy; example, or between Europe and Latin America, progress can result only from expansion-from Mr. Thorp, United States of America

the opening up of ever greater possibilities for ground as it moves on to consider those practical nations and men who have suffered so sorely and measures which might lead to constructive action. so long. This meeting in February 1949, less than four Inflation? Inflation will finally be overcome only years from the end of the war, is no time for us to by increasing production. devote much of our energy to rejoicing over the signs of economic improvement which are before Deflation? Deflation will be avoided if the de­ us. These are not the days to sit back and recount mand for labour is sustained by flexible and com­ the gains which have been made, satisfying though bined action. they may be in many respects. We must not for one minute forget the fundamental tasks which still lie Reconstruction? Reconstruction cannot merely ahead. These must be days of realistic appraisal mean reconstructing exactly what used to exist. and careful consideration of how to consolidate Its aim must be to do more and to do better than and extend our gains. before. That is why my country has based its re­ construction on a vast plan of modernization and It is all too easy to become involved in the economic and social progress. clouds of abstract economic terminology. Often this serves a useful purpose in furthering some necessary analysis and, particularly, in removing Fundamental equilibrium? This can be restored it from the levels where concern over the trees only by a steady increase in the volume of trade. makes it impossible to consider the forest. But the general terms which we use, like production and The French delegation believes that, whatever investment and balance of payments, must never we may encounter on a path which has been and lead us away from the fact that we are really still remains hard and winding, this conviction, if dealing with stark realities: food on the table, shared by all, will ensure the success of our com­ roofs over people's heads and machines to pro­ mon action for the reconstruction of the world and duce more goods. In such concrete terms, the the improvement of the condition of man. world's progress is slow indeed; we have a com­ mon goal which should permit us to drop many of Mr. THORP, United States of America our differences and to think together as to ways and means for improving the world economic situ­ The Economic and Social Council's annual re­ ation. Probably this is our most important job in view of the world economic situation, which was the Economic and Social Council, and the people begun on a systematic basis last year in response of the world have a right to demand that we take to the resolution of the General Assembly, pro­ this responsibility seriously. vides each one of us with an opportunity and a responsibility. Our discussion of the world economic situation is of course greatly facilitated by the reports pre­ We can of course take advantage of this agenda pared by the United Nations Secretariat. It is my item to boast in glowing terms of our individual understanding that the full report, comparable to national achievements. At the other extreme, we that prepared last year, will be presented to us at might use this forum to attack violently the econ­ our next session in July and that the report pres­ omic programmes and policies of other countries. ently before us should be regarded as an interim report only. I am sure that this explains why the However, I am sure that the General Assembly report is so largely factual and fails to provide any wanted something more from us than either of considerable depth ofanalysis of the world's pres­ these approaches would provide. It wished the ent economic problems. Economic and Social Council to take a broad view of world economic conditions, to consider It is always helpful to have a factual, descrip­ thoughtfully the problems underlying the current tive report. The records of individual countries situation and to use its conclusions as a back- and of particular economic functions are a neces- 38 Mr. Thorp, United States of America

sary basis for any analytical work. Under the cir­ making available to all members of the Council. cumstances, I do not wish to be regarded as criti­ I refer to The Economic Report of the President, cizing the Secretariat for the shortcomings of this together with the Annual Economic Review, Janu­ report, but rather as emphasizing our expectations ary 1949, as prepared and presented by the United with respect to the "full report" to be prepared States Council of Economic Advisers. It deals with for the ninth session of the Council. both our progress and our problems. I should not wish to imply that this report is the last word in Facts are only the beginning of understanding. national economic reports, but I believe the work The economic life of the world may not be a sys­ of the Secretariat and of the Economic and Social tem in any neat mechanical sense, but it is inter­ Council would be greatly simplified if similar na­ dependent, both by countries and by function. The tional reports were available regularly from other various economic measurements are important not Members of the United Nations. merely in their own right, but in their relation­ ships to each other. Balance can be disturbed by In considering what might be the most helpful too rapid advance in some economic field as well contribution that I could make to this discussion as by deterioration or lag in some other. In our today, it seemed to me that there were three pos­ efforts to appraise the situation, we need the bene­ sible subjects. One was to speak with respect to fit of impartial economic analysis which will indi­ the United States economy, but, having put the cate the interlocking and interdependent behaviour printed report at your disposal, that no longer of the individual indices. I very much hope, there­ seemed necessary. I might discuss at length, as I fore, that the full report to be prepared for the did last year, the basic objectives which countries ninth session will be not only an extensive factual should seek-increased production, financial sta­ compendium, but also a penetrating analysis of bility and expanded trade. I am glad that I did not the world economic situation. select that approach because it already has been done so ably by other speakers. In fact, the first At the present, I should like to repeat briefly speech this morning by the representative of Ans­ one of the main points which I made last year: tralia said, I am sure, even more than I would that is, that the annual world economic report have been able to say with respect to this subject; should be as comprehensive as possible, both from much progress has been made under these various the point of view of the number of countries in­ heads and there are serious problems which still cluded and from the point of view of the aspects remain. But today I wish to stress particularly the of economic· life covered. I believe the Council problem of interrelationships in economic life. In would be interested in knowing what the response a sense this has become related to the problem of of the various governments has been to the Secre­ recovery because of the many questions which tariat's requests for information for the annual have been raised: what is meant by European re­ report and what difficulties, if any, have been en­ covery and when will European recovery be countered in obtaining information. I should be achieved. It is interesting to note that the answer interested in such a report before we finish with which has been given both by the European coun­ this subject. If we are to make a serious effort to tries and by the United States is not that European analyse the world economic situation in the fu­ recovery would be reached when some particular ture, even more extensive factual information, or­ level had been achieved, either in the standards of ganized within comparable categories, must be living or in the rates of production, but when a cer­ available to the Secretariat. When there are gaps tain harmonious relationship had been achieved, in the available information-and the report itself when the extraordinary financial assistance was no indicates this to be the case-I hope that the Sec­ longer necessary and one has, in a sense, estab­ retariat will have no hesitation in making a specific lished the concept that recovery-economic pro­ and definite request of the country concerned. I gress-is perhaps to be considered not merely in can pledge the full co-operation of the United terms of levels, but in terms of the health of the States Government in this respect. relationships on which it rests. In this connexion, I should like to mention the The world economy, like any national econ­ report on the United States economy which I am omy, consists of a number of parts which are in Mr. Thorp, United States of America 39

relationship to each other, and the economic health keep the post-war economic situation under Con­ of the economy depends upon the strength and the trol. The great drop in production in the war­ harmony of these relationships. In the strictly in­ devastated areas and the effort to achieve an ternational sphere, in the limited sense, the econ­ equitable distribution of products from other areas omic relations among the parts are brought to­ led to rationing by individuals and also by COUn­ gether largely in the balance of payment situation, tries. Trade controls, exchange controls, grants which provides a summary of the transactions and subsidies on a large scale-all were necessary among countries. However, national conditions in­ to keep the parts of the various economies in some fluence conditions in other countries even beyond sort of balance. the stage of actual international transactions, for prices can be affected by even a potential flow of Now prqduction is getting back to levels where foods, and money rates can ease or tighten for the the situation is not so critical. Many of the artificial same type of reason. props, or controls or balancing techniques are less necessary. Rationing has disappeared or has been Furthermore, the nature and extent of inter­ greatly reduced. In the Union of Soviet Socialist national transactions are themselves affected by Republics, it is reported that subsidies to indus­ domestic conditions and policies in the various tries are being reduced or eliminated. In the countries, for example, by the types of goods United States, the gap in the balance of trade has available for sale and desired for purchase. There­ greatly narrowed·and this, coupled with the im­ fore, one cannot draw a sharp line between the proving world supply situation, reduces the neces­ national and international aspects of economic sity for as extensive controls as have been required life, although the emphasis may be someWhat to assure the equitable international distribution shifted according to the nature of the problem. of commodities in short supply.

As the production picture improves, two types The relationships which are involved are nu­ of problem take on new meaning. I can only sug­ merous: production and consumption, agricultural gest the types; they could be developed at almost prices and industrial prices, consumption and in­ any length. The first is that, as we get away from vestment, savings and investment, government the situation of extreme shortages, countries and income and government outgo, exports and im­ individuals have mOre choices. More decisions can ports, wages and cost of living and many others. and must be made by the various countries. The In the never-existing so-called normal situation, poor man has to spend his money for food; the which represents perfect economic health, these wealthy man has the choice of many ways in elements would be in adjustment in a series of which to spend his money. Similarly, the country interrelated equilibria. And the ideal society would which is operating at a subsistence level has little be one in which these elements would move ahead choice as to what to do with its economy, com­ towards higher and higher standards of living with­ pared with the range of possibilities as the country out the development of serious imbalances or grows, as it moves ahead to higher levels. When disequilibria. the shortages are severe, every energy is required to meet the essentials. Before the war, the relationships which under­ lay the world's economic situation were certainly But now the choices are beginning to be less not healthy. Various artificial means and controls academic: to plan for self-sufficiency or for ex­ were employed to keep the parts in balance, with panded trade; to emphasize investment and in­ production well below capa~ity and many coun­ creased capacity or to increase living standards tries with unusual levels of unemployment. Inter­ now; to shift from agriculture to industry, to de­ national trade and foreign exchange were both sub­ velop both or to concentrate on agriculture; to ject to an increasing variety of restrictions. look towards expansion with the aid of foreign capital, or to depend upon national savings. There The war was a great disruptive influence and all are other choices which must be made, of course, sorts of further measures have been necessary to but this list is illustrative. I merely wish to em- 40 Mr. Thorp, United States of America

phasize that they have more reality in 1949 than Although the International Monetary Fund was they had in 1947 or 1948. From our particular pessimistic last year about the possible advantages point of view here in the Council, the basic choice of exchange rate adjustments, it is gratifying to which all must make is that between international note the progress that has been made towards economic co-operation and independent efforts at strengthening some currencies during the past year. self-sufficiency. However, the number of countries with rigid ex­ change and trade controls has not yet begun to To say this in reverse, I might say that re­ shrink. These controls will have to be considerably covery, or development or improvement in an relaxed and removed before we can have a economy does not eliminate problems. To a con­ smoothly functioning international economic sys­ siderable degree it actually increases the number tem, even with an International Trade Organiza­ of choices which are before the country. In view of tion in operation. It is important that we seize the fact that these decisions themselves are peb­ every opportunity to thaw out these rigidities and bles in the pool, causing ripples that go on to do not permit the procedures which were neces­ great distances, the decisions have implications, sary as protections in the period of shortage to not only for the various elements in these econ­ continue as restrictions any longer than is neces­ omies, but for other economies as well. I think this sary. leads to a very natural conclusion: the increasing importance of common discussion and of common To consider another problem in the field of consideration of these problems, so that in the relationships, important changes are occurring in midst of the different choices which the various the price and income pattern with the changes in nations may make, there need not be disruptive, the production pattern. The terms of trade, that is, but there can be co-operative and cumulative, the ratio of prices paid to prices received, for vari­ effects arising from them. ous countries and various economic groups, are undergoing changes. Most countries have been The second group of problems which is created acutely aware of their terms of trade in connexion by the improved production picture rises from the with their balance of payment difficulties, and series of abnormal steps which have been neces­ all have hoped that they could buy more cheaply sary in the post-war period. Rationing is usually and sell more dearly, quite aside from the quan­ unpopular, and one can assume that the problem tities they expected to buy or sell. Agricultural faced by most governments has been to maintain groups are keenly aware of the possible shift in it long enough, rather than to get rid of it. But terms of trade to their disadvantage, after a decade many types of control seem to persist because of or more of shifts in their favour. The terms of inertia, the interest in them of a vested group who trade in 1948 favour agricultural commodities by administer them or who profit from them and a 10 to 20 per cent, compared with 1937/38, and real fear that possibly the removal of such controls are about on a par as compared with the period may lead to unexpected consequences. Since the just prior to the First World War. international controls usually tend to reduce trade in the interest of balancing imports and exports to whichever is lower, it is important that. a real It is important to keep the point in mind that effort be made to free the situation as rapidly as it often is the relationship among various parts of circumstances permit. the price structure which really matters. If goods exported from the United States drop in price, the The report of the Secretariat describes well the effect, so far as the balance of trade is concerned, state of international trade and finance, and that depends on the extent to which there are corre­ state is still far from satisfactory. Nearly all coun­ sponding drops in the prices of imported goods. tries have strict exchange and quantitative restric­ Reduced prices for wheat exports from the United tions in effect. Currencies are over-valued in many States, for example, cannot be isolated from other instances. Bilateral balancing of accounts, with its price trends and cannot be regarded as reducing well-known economic sacrifices, continues on a the trade payment problem by the amount of the large scale. reduction in price. In fact, the effect of lower com- Mr. van Langenhove, Belgium 41

modity prices 00. trade payment balances is one of Finally, I cannot complete my statement without the more difficult problems to analyse. at least mentioning the importance of political fac­ tors in their relation to economic progress. Ob­ I should like to say a few words about the viously, civil disorder causes economic idleness United States economy. First, let me say that I and destruction. It makes international relation­ am not a business forecaster. I shall not attempt ships difficult, if not impossible. But less tangible to predict the course of economic events. Second, it than actual disorder is the disturbing element of is apparent to all that the United States economy political uncertainty and fear. Threatened aggres­ has been functioning quite well, not perfectly, by sion may be against governments or against indi­ any means, but quite well-for a number of years. viduals. In the case of governments, it leads to In fact, we have operated for a considerable period increased non-economic expenditures for arma­ at more than usual capacity, more than our plant ments. In the case of individuals, it destroys econ­ in such fields as electric power, for example, was omic incentive. Security of person and security of designed to carry. Much has been made of the fact property are bases upon which economic progress that unemployment has increased more than sea­ in the world can best be built. sonably in the last several weeks (from 1,940,000 in mid-December to 2,664,000 in mid-January, The spirit of confidence in the future is most which is 300,000 to 400,000 more than would important to economic advance. There is no index normally be expected). In an economy as active which measures confidence, but there are signs and as dynamic as ours, unemployment rarely goes that it is clearly on the increase in many areas of below 4 per cent of the labour force, and in cer­ the world where the post-war picture was indeed tain seasons it grows higher. The January 1949 dark. It is the hope of my Government that this figure is 4.3 per cent. It would be a bad error of spirit will steadily grow in the world, that we can judgment to take a relatively small decline in em­ approach that great goal of freedom from fear ployment, or even a sizable decline in a few prices, which is so fundamental to the achievement of as an indication that the United States economy is freedom from want. going into a depression. Mr. van LANGENHOVE, Belgium In fact, it is an encouraging sign that inflationary (translated fr01n French) pressures in the United States are abating. The In order to judge the world economic situation more important developments are discussed in The of today, we must take a point of comparison. Economic Report of the President. One clear ele­ ment in this move towards a condition of equili­ The previous report submitted to the Economic brium is in the international economic field. In and Social Council stated that the year 1947 must 1947, our total visible and invisible exports were be regarded as one of frustrated hopes. It pointed $19,700 million, imports were $8,500 million and to the shortage of foodstuffs and basic commodi­ the surplus of exports was $11,300 million. In ties, such as coal, steel and timber, and to the 1948, exports were lower by $3,000 million, im­ inadequate production of industrial power as the ports were greater by $1,800 million and the sur­ main causes of the slowing down of economic plus of exports was cut to $6,500 million. This is progress. an extraordinary readjustment in one year-from $11,300 million to $6,500 million. The widest gap The report on the changes in 1948, which is appeared in the second quarter of 1947. Imports now before us, indicates an appreciable improve­ into the United States have steadily increased year ment in this respect. by year since the end of the war. , It states: "As a result of substantially larger This is clear evidence of progress towards world harvests in the summer of 1948, the supply of economic recovery, but it does not mean that the foodstuffs during 1949 will be increased consider­ extraordinary steps in the form of financial as­ ably. This is perhaps the most important economic sistance which have been taken by the United development during the past year and, for that States Government can be quickly reduced. matter, since the end of the war. 42 Mr. van Langenhove, Belgium

"In industry", the report continues, "the short­ been definite improvement and progress. On the ages of certain key commodities were consider­ other hand, in spite of this improvement and pro­ ably mitigated during 1948. By the autumn of gress, it must be recognized that the state of trade 1948, industrial output in most war-devastated remains unsatisfactory and in some respects has countries was approaching or had already ex­ even deteriorated. In fact, in the latest report on ceeded pre-war levels ..." the economic situation, we read that the quantum of world exports during the first half of 1948 was Other encouraging facts may be noted: unde­ somewhat below the levels of both the first and niable progress has been made in the implemen­ second halves of 1947. It is true that this drop is tation of plans for regional economic co-operation. mainly due to the decline in United States exports This is particularly true of the Organization for since mid-1947 and that the exports of other coun­ European Economic Co-operation, the success of tries as a whole have continued to increase in which is of such importance to the whole world. 1948, though at a slower rate than in the two pre­ In a similar connexion, the increasing attention vious years. now being given to the development of backward areas, and the initiation of a co-ordinated· policy In addition, the restrictions on international in this respect, should also be mentioned. The trade remain considerable and are tending to in­ agenda of the present session of the Economic and crease. Instead of making progress towards multi­ Social Council contains a special item on this sub­ lateralism, methods of bilateral settlement, clear­ ject. Finally, there have been important achieve­ ing and barter are on the increase. ments in the realm of trade. It is with this aspect of the world economic By dint of persistent efforts, a charter setting situation that I should like particUlarly to deal; up an International Trade Organization and for­ the tendencies in this direction may have serious mulating a code for international economic rela­ consequences and perhaps have not received suffi­ tions was elaborated at the beginning of last year. cient attention. Several of its most important provisions on com­ mercial policy have been embodied in a General Agreement on Tariffs and Trade and put into No one will deny that the restrictions in trade operation with the latter. Moreover, steps have are largely determined by the disequilibrium in been taken with a view to widening the agreement the balance of payments, often maintained by in­ in the near future. appropriate monetary parities, and that this con­ stitutes one of the main difficulties in present-day Within the framework of the Organization for world economy. The evil is most apparent in the European Economic Co-operation, systematic relations between the United States and other studies have been undertaken with a view to the countries, but it also seriously affects the rela­ formation of a customs union to include all the tions of these countries with each other. countries belonging to the Organization. The cus­ toms union of the Benelux countries came into As the report on the economic situation notes, force more than a year ago, and methodical ef­ the majority of countries have had large import forts are in progress to convert it into a full econ­ surpluses and have suffered from increasing pres­ omic union. At the same time negotiations for the sure on their balances of payments. To a consider­ conclusion of an economic union between France able extent, these difficulties were inherited from and Italy are proceeding. All these converging those prevailing during the period from 1930 to activities are tending to facilitate trade by widen­ 1940. But the war has caused further dislocations: ing markets. exhaustion of stocks of goods, destruction of pro­ ductive power, strong inflationary pressure and Thus, in several fields, whether in remedying changes in international financial relationships. In the shortage of foodstuffs and essential commodi­ certain countries there was pressure on the balance ties or in promoting closer economic co-operation, of payments as a whole, while in others surpluses particUlarly in regard to customs policy, there has earned in transactions with some areas could not Mr. van Langenhove, Belgium 43

be employed to offset deficits with other areas, disequilibrium which would inevitably occur during particularly the Western Hemisphere. the recovery period. However, instead of evolving towards a more satisfactory system, the opera­ What methods have these deficit countries em­ tion of these agreements has recently been jeop­ ployed in the effort to regain their equilibrium? ardized. In fact, the disequilibrium among coun­ tries has not diminished, but increased. The limits They have filled the gaps in their balance of have been exceeded more and more frequently, payments in part through the liquidation of their necessitating increasingly large gold settlements. gold and dollar assets and in part through credits The payment agreements, which until then had from governments and inter-governmental agen­ facilitated trade, lost much of their usefulness. cies. Several of these countries, 'however, were Thus - to give but one example - at the end of threatened with the rapid exhaustion of their re­ last year, France being unable to cope with the sources, in spite of their efforts to increase pro­ overdrawings of its credits with Belgium, was duction and stimulate exports. After the abortive compelled to suspend completely the granting of attempt to restore the free convertibility of sterling, import licences in favour of Belgian goods, with a severe deterioration occurred in the international the result that a considerable volume of economic payment situation of many countries. They felt commitments were momentarily blocked. obliged to reduce their imports further, and to restrict themselves to a strictly bilateral trading In the event of a decrease in the demand on system. They accordingly tightened their exchange foreign markets and a fall in the price of export controls and import restrictions. goods, it is to be feared that the policy of correct­ ing the disequilibrium in the balance of payments A relatively satisfactory system for international by a reduction of imports would become general. payments had been introduced at the end of the Restrictions in one country lead to restrictions in war. On the lines of an agreement reached between others. Such increased restrictions could not fail Belgium and the Netherlands in October 1943, to produce the most unfortunate results; countries bilateral conventions had been concluded and were which applied restrictions would have to curtail soon extended to include a large part of Europe the standard of living of their population; coun­ and South American countries. Under these agree­ tries which had succeeded in regaining their sta­ ments, the central banks of each of the contracting bility would lose the reward of their efforts. countries buy currency of the other in exchange Countries like Belgium, with an economy largely for its own, up to the amount required to cover dependent on foreign trade, would be particularly current mutual payments. The accounts are peri­ affected. In general the strangling of trade would odically cleared and the balance carried forward. hamper the improvement of living standards, full This balance, however, may not exceed the limit employment and the economic and social progress fixed in the agreement, namely, the maximum and development which the United Nations is credit which each country places at the other's dis­ pledged to promote. posal to cover the temporary discrepancies which inevitably occur in reciprocal settlements. Sums Would these restrictive policies at least suc­ which exceed that limit must be settled either in ceed in restoring the position of the deficit coun-, gold or in a currency accepted by the creditor. tries? Their complete efficacy is doubtful, espe­ cially if the countries applying them tolerate the By 1948 Belgium had concluded twenty-four persistence of the inflationary pressures by which such agreements; the credits available therefrom their economic systems are affected in varying amounted to a total of over 15,000 million of degrees. Belgian francs, equivalent to about one-fifth of the total value of Belgium's exports. A thorough study of the problem of inflation was made last year and was submitted to the These agreements have rendered genuine serv­ Economic and Employment Commission. Inflation ice. At the time they were negotiated, they were is a heritage of the war; it originated from the looked upon as a temporary means of meeting the enormous volume of money without economic 44 Mr. van Langenhove, Belgium

counterpart which was created during that period relations as a whole. Furthermore, though they and from the relaxation of certain credit policies primarily affect the counfries which suffered directly which was also rendered unavoidable by the war. from the war, they also have an influence upon So long as hostilities last, inflation is an inevitable the younger countries, whose development they evil, held in check to a certain extent by an effi­ may hamper. cient system of controls which is possible in time of war. Excessive generalizations should be avoided, for conditions vary considerably from one country But those who have had that experience tend to another. In some countries economic recovery to think that if controls are maintained after peace has been considerable; in others there has been a has returned, inflationary pressures can be allowed sharp decrease in the price of agricultural produce, to continue with impunity. In spite of the barriers unemployment has reappeared and the fear of erected to keep them in check, however, the first depression tends to neutralize the fear of the ef­ internal result of inflationary pressures is to cause fects of inflation. Nevertheless, generally speak­ purely wasteful expenditure, so that the country's ing, the effects of inflation continue to be the most limited productive resources are used for non­ dangerous at present; they are still apparent in essential purposes and part of its already inade­ important economic fields where there has as yet quate supply of labour and raw materials is been no contraction of demand. diverted from the production of essential goods. In any case the principal guarantee of stability The shortage of consumer goods weakens the lies in eliminating the factors which caused dis­ profit incentive. The presence of surplus buying equilibrium, whatever they may be. Perhaps the power which cannot be used legally leads to the countries which suffered most from the war have evasion of controls and unavoidably encourages shown an understandable but excessive haste in black market dealings. The effect of inflationary their efforts towards reconstruction, re-equipment pressure is equally apparent in international and improvement of their living standards. Per­ relations. haps, in relation to the resources at their disposal, they have been too ambitious in the goals they In one way or another, as the report of the have set themselves and in the time limits they Sub-Commission on Employment and Economic have fixed for reaching them. Increased production Stability indicates, domestic inflationary conditions and the elimination of shortages of important tend to aggravate the balance of payment diffi­ products and commodities - which fortunately are culties of the deficit countries. These difficulties now apparent - unquestionably tend to reduce in­ have occurred even in countries where controls flationary pressure. But they do not suffice to have prevented an abnormally rapid rise in costs eliminate it where buying power appreciably and prices. The large domestic demand tends to greater than the available resources continues to divert valuable resources from production for exist. Artificial increases of exports and, espe­ export. cially, restrictions on the import of consumer goods have similar effects. Since liberation, Belgium took radical measures to eliminate the potential buying power accumn­ The effect of inflationary pressure should be lated during the preceding years and later pursued considered from still another point of view. An a severe credit policy. Other countries, in varying unprecedented effort in international co-operation degrees, have done the same. While it is the is being made, with a view to restoring the balance business of each country to take such measures as upset by the war. Whether its object, like that of it deems necessary to improve the state of its the European Recovery Program, is temporarily economy, it should be emphasized that individual to make up the deficits existing in trade relations effort, if isolated, is unlikely to be fully effective. with the dollar area, or to provide for the inter­ convertibility of European currencies, it cannot In reality the problems raised by present infla­ produce the desired results until the economy of tionary tendencies are of concern to· international the deficit countries has been sufficiently restored. Mr. Muniz, Brazil 45

What is the good of giving blood transfusions to a today in most of the world." On the other hand, wounded man who is still bleeding? it may be said that if a sufficient effort were made to improve the economic situation by eliminating This is true both of the Organization for Euro­ the most dangerous inflationary pressures, prices pean Economic Co-operation and of other inter­ and the true exchange value of currencies would national agencies for economic co-operation, act­ become stabilized; black markets in foreign cur­ ing on a limited regional basis like Benelux, or rencies would disappear; assets kept abroad by on a world basis like the United Nations itself. lack of confidence at home would spontaneously Such was the tenor of the statement made by the return; movements of capital would become nor­ ministers representing the three Benelux coun­ mal; exchange controls could be relaxed and tries at the close of their conference at Luxem­ reduced to a minimum; international co-operation bourg early last year, when they announced that would be fully effective; and the balance of pay­ measures had been agreed upon to re-establish ments would gradually return to a satisfactory equilibrium in the balance of trade. level. An important step forward would have been Domestic measures for economic recovery are taken. equally necessary in connexion with the applica­ tion of the rules adopted at Bretton Woods, or with The practical conclusion I should like to draw the more recent policy regarding trade agreements from these remarks is that, in spite of the fact reached by the Havana conference and the Gen­ that prices have fallen and a limited amount of eral Agreement on Tariffs and Trade. unemployment has reappeared, the inflationary tendencies which persist in many countries should As the International Monetary Fund said in its continue to receive the closest attention and be recent report: "The fundamental conditions which made the subject of a thorough study from the would make possible the abandonment of trade point of view of their relationship to international and exchange restrictions are ... entirely absent trade and economic stability.

23 FEBRUARY 1949, MORNING MEETING

Mr. MUNIZ, Brazil well to note that, in contrast with the pessimistic The report of the Secretariat on the economic tone of the report on 1947, characterized as the conditions of the world constitutes, once again, the year "of frustrated hopes", we have before us a most important economic item of our agenda and, picture full of optimistic overtones. The year 1948 as such, it has deserved the most careful attention might thus be called the "year of dispelled pessi­ on the part of the Brazilian delegation. mism", as suggested byMr. Mendes-France, orper­ haps "theyear of fruitful endeavour". TheBrazilian The fact that we are dealing with an interim re­ delegation feels a certain pride in declaring that, port can be regarded as an excellent opportunity to a great extent, the good results obtained in for us to bring our contribution to the work of the 1948 have been, in its opinion, the result of the Secretariat, since the comments of the Council will constructive efforts of the Economic and Social be of considerable help to the Secretariat in the Council, the specialized agencies and, especially, preparation of the final text. Taking into consider­ the Economic Commission for Europe. ation the fact that we are dealing with a provisional document, we must recognize that it brings out The Council will certainly remember that last very interesting facts and permits quite a few year the report, after giving us a thorough descrip­ conclusions. Although much more descriptive than tion of the world eC02 c;':nic situation, went on to analytical, it is a valuable contribution to our summarize the obstacles to tel"~ work of reconstruc­ knowledge of the world economic situation. tion and development, and that these obstacles were appropriately defined by our colleague from Before commenting on those points of the re­ the United Kingdom as falling in two categories: port which drew our attention the most, it may be physical and financial. 46 Mr. Muniz, Brazil

The physical obstacles represented a series of less likely to occur because during 1948 agricul­ bottle-necks in certain basic sectors of world pro­ tural re-equipment showed considerable progress, duction; they were formed by acute shortages in mainly in Europe, the great deficit area. Europe food, power and steeL The prospects of overcom­ produced almost all the agricultural implements ing these bottle-necks were relatively optimistic, so manufactured outside the United States and far as the power situation was concerned, but quite Canada; besides that, with the financial help of pessimistic as regards the steel and the food situa­ the European Recovery Program, it seems to have tions. The Food and Agriculture Organization absorbed the bulk of the exportable British and went to the extent of predicting that, with decreas­ American surpluses. Since the United States and ing intensity, the food shortage would last for the United Kingdom are the great world producers many years. of tractors and since their exportable surpluses in 1948 were about 33 per cent above 1947, it is The obstacles of a financial nature were of two clear that European agricultural equipment im­ kinds: first, the very heavy inflationary pressure proved considerably during the year under review. which had arisen throughout the world, bringing Such improvement will undoubtedly reflect itself in its wake to every country all the inconveniences in the next crop even if weather conditions are not and distortions in economic life that are charac­ as favourable as they were last year. teristic of that phenomenon; and second, the great dislocation of the world economy brought about Production and distribution of power, which by destruction or obsolescence of capital equip­ was reportedly one of last year's major bottle­ ment almost everywhere, in contrast with the ex­ necks, seems to be approaching solution. It is re­ traordinary development of the productive capa­ grettable, however, that the report, while summariz­ city of the United States. ing the progress made in the world production of power, does not make clear the extent to which The consequence of this situation, the so-called the present supply has met the increasing de­ "dollar shortage", added all sorts of international mand, especially in the under-developed areas difficulties and maladjustments to the economic which are undergoing a process of industrializa­ problems with which the different countries had tion. to struggle in their efforts towards national recon­ struction and development. Finally, in the field of heavy industry, it seems that, despite substantial increases, production did Some of those problems, which appeared to us not meet the existing high requirements for in­ last year as being capable of solution only in the vestment goods. It is to be noted thatthe increases long run, seem to have evolved in a satisfactory took place mostly in Europe, whose steel produc­ way during the year 1948. The most significant of tion reached 45 million tons, i.e., 11 million tons the physical bottle-necks were overcome to a great more than in 1947. extent-including the world food shortage, the field in which the greatest degree of success was ob­ The successful coping with the European pro­ tained. In fact, the Secretariat's report conveys the duction bottle-necks brought about in all European impression that the outstanding economic feature countries, except Germany and Italy, a level of in 1948 is the appreciable improvement registered industrial output during the first nine months of in the production' of food and agricultural staples 1948 which exceeded the pre-war level by 15 per as a whole. The report itself, however, points out cent. This in itself would indicate that the immedi­ that the improvement in the food situation was the ate phase of reconstruction has ended. Further in­ result of unusually large crops in the major pro­ creases in production in the majority of European ducing areas, rather than of permanent improve­ war-devastated countries are now largely depend­ ment of agricultural productivity. This fact does ent upon development of new capital facilities-a not warrant any over-optimism, since less favour­ significant part of which must be imported-rather able weather conditions may yet vindicate earlier than on reconstruction of existing ones. It appears grim forecasts of the Food and Agriculture Or­ moreover that, owing in large measure to the ganization. Serious food shortages, however, are financing of imports through the European Re- Mr. Muniz, Brazil 47

covery Program, the industrial areas of Europe It is important to register one favourable, have been able to carry out substantial develop­ though perhaps impermanent, factor affecting the ment and modernization of plant while, on the international payment situation. I refer to the re­ other hand, as noted in the Secretariat's report, cent decline in the United States export surplus "The inability of the under-developed countries to which took the form of a reduction between 1947 obtain adequate imports of machinery and equip­ and 1948 of $3,000 million in export of goods and ment from countries which export capital goods services and a rise of $1,800 million in imports. continued ... to retard their programmes for replacing equipment and expanding plants." Thus, the dollar volume of merchandise imports rose between 1947 and 1948 by 20 per cent, while merchandise exports fell by 18 per cent. Since the I shall now tum from the physical bottle-necks solution of the dollar crisis and the reduction of to a consideration of the financial and monetary international indebtedness to the United States obstacles to restoration of equilibrium, namely in­ depends ultimately on the ability and willingness flationary pressures and the dollar shortage. Here of the United States market to absorb greatly in­ the outlook is much less favourable and the trend creased imports of goods and services, it is en­ uncertain. couraging to note this favourable development, even though it may represent a purely temporary Heavy inflationary pressures persisted through­ phenomenon rather than the long-awaited United out 1948 in the great majority of countries, al­ States conversion from the trade psychology of a though improvement of the food and supply situa­ debtor to that of a creditor nation. tion and other factors brought about a certain One disquieting factor in the international amount of dis-inflation in a few countries. In the financial picture, to which reference has been made United States, for instance, a sharp break in com­ by our Australian and Chilean colleagues, is the modity prices and more than seasonal increase in continued failure of private investment to. revive in unemployment, variously described as "dis-infla­ the post-war period. Net direct private investments tion", or "levelling off of the boom", has recently abroad from dollar sources totalled only $666 taken place. Attention has already been called to million in 1947, of which 70 per cent represents this by several representatives. Owing to the investment in the petroleum industry, confined to enormous impact of the American economy upon limited geographical areas. The gross outflow from the world situation, this price break and decline the United States of private capital of all types, in employment-which, it is hoped, will be con­ including flotation of securities for foreign account fined to a normal readjustment in over-inflated or for account of international agencies, amounted sectors of the economy-will undoubtedly be to only $386 million in the first half of 1948, com­ closely watched by governments and economists pared with $779 million in the first half of 1947. everywhere. Should these readjustments develop Apart from the speculative movements of sterling into a deflationary movement, serious international capital within the sterling area, exports of foreign repercussions cannot be averted. Countries export­ capital from other sources have been negligible. ing primary products to the United States would immediately suffer from a declining demand for In sharp contrast to the stagnant condition of their exports and from rapidly deteriorating terms private investment-which originally was expected of trade. Prospects of restoration of equilibrium in to be the main source of funds for development European-United States payments, which ulti­ operations-stands the prominent role played by mately will require a very substantial increase in direct government finance. The bulk of the dollar the United States demand for goods and services, flow from government finance was channelled to would be hopelessly impaired. It is reassuring to Europe through the European Recovery Program, know that these international implications are fully where it played an important role not only for. realized by the United States Government and that reconstruction but also for development. Total al­ its economic policies are designed to maintain high lotments under the Marshall plan amounted to levels of employment and activity and to avoid the $4,630.6 million by 15 November 1948, a sum production and exportation of depressions. which dwarfs by comparison any private invest- 48 Mr. MUM, Brazil

ment or international loan directed to extra-Euro­ of income and wealth throughout the world will pean countries. be narrowed. Former raw material areas, now in process of industrialization, will not accept a return It was initially expected that "off-shore" pur­ to the old pattern of international division of chase under the European Recovery Program production. might significantly contribute to redistribute dollar funds and facilitate restoration of the triangular While standards of living of high income areas, pattern of trade among Europe, Latin America and in relation to pre-war levels, have already been other areas. This expectation failed to materialize. reinstated for the most part, we are still faced with By 15 November 1948 not more than $216.5 mil­ the stark fact that great masses of people in under­ lion, or 4.6 per cent of total European Recovery developed countries still toil under inhuman con­ Program allotment and 6.9 per cent of total pro­ ditions in order to earn a meagre subsistence. curement authorizations, was set aside for off-shore purchases in all Latin-American countries and When we realize that the majority of under­ $155.1 million, or 3.3 per cent of total Marshall developed countries in Latin America and Asia plan aid, for purchases in all other non-European have a yearly per capita income under $100 countries outside Canada. against per capita incomes averaging $500 in western Europe and over $1,200 in the United While ERP finance enabled the benefited coun­ States, the tremendous challenge which civilization tries to maintain substantial imports of capital and must meet becomes apparent. consumer goods from the United States market, with the secondary consequence of bidding up Fortunately, the United States Government, prices still further out of the reach of other eager upon which the great responsibility of leadership potential buyers, the shortage of dollars caused has devolved, is ever more aware of the necessity many of the under-developed countries to restrict of building a more balanced structure for our civi­ severely their purchases despite their urgent need lization, in which the evils and injustices of the for capital goods for re-equipment and new plant past shall have no place. construction. The need for a universal approach to the prob­ The channelling of the bulk of government dol­ lem of world economic equilibrium was given lar financing to Europe, coupled with the low level recognition in President Truman's noble and in­ of private capital exports, caused the flow of dol­ spiring inaugural address, which carried a warning lars, already insufficient in amount, to be unbal­ that the stagnant and primitive life of more than anced in direction also. Thus, while physical half the people of the earth is a grave handicap to bottle-necks to production have been broken, the world prosperity. , international financial situation showed no sign of improvement during 1948. On the technological side, the co-operation of the United States is ready for the supply of indus­ The time is perhaps ripe at this juncture to trial and scientific techniques to help under­ examine whether the continuation of the prefer­ developed areas. On the financial side, it appears ential treatment given to the needs of European that reliance is to be placed on private capital in­ reconstruction and development, in the face of the vestment, which is expected to play in develop­ needs of other areas, does not involve the risk of mental operations the energizing role played in the perpetuating, rather than correcting, the existing European Recovery Program by governmental disequilibrium in the international distribution of loans and grants. income and industrial power. My delegation welcomes this important declara­ The problem is not one of restoration of the tion and expects that further elaboration of the old equilibrium but rather that of the creation of President's programme will demonstrate that it a new balance in which the disparities in the levels really aims at something bold and something new. Mr. Muniz, Brazil 49

As was noted before, one of the disappointing nations, capital investment in areas needing de­ features of the post-war period was the failure of velopment. private investment to revive. If the bulk of de­ I now propose in keeping with the President's velopmental operations is to be financed by private recommendation at the opening of our debate, to capital investment-supplementing of course the dwell upon the economic condition and prospects internal savings of under-developed countries­ of my country in their relationship to the world new measures must be contrived to promote the economic situation. flow of capital. A climate of confidence must be created, since, as was pointed out by the dis­ The year 1948 was one of intense productive tinguished delegate of the United States, the same effort in my country, as can be seen from the sickness of fear and political instability that causes following percentages of increase in volume of governments to waste substance for military ex­ production, compared with 1947. penditures, strangles the economic incentive of Heavy industries increased production by 15.7 individuals. Capital-deficit countries, interested in per cent in the first three quarters of 1948; the securing capital imports for economic develop­ textile industry, which ranks first in the number ment, are undoubtedly prepared to recognize the of workmen employed, produced 37.4 per cent need of legitimate incentives for investment and of more than in the preceding year; consumption of legal guarantees to property and profits, to the electrical energy increased 12.1 per' cent; while extent consistent with their economic and national industrial production in general increased 36.1 security interests. But here a vicious circle occurs. per cent during the first three quarters of 1948. For unilateral legal guarantees by recipient coun­ Brazil, which has always ranked among the tries often cannot be translated into economic heaviest importers of wheat in the world, intensi­ reality, since in many countries attainment of sta­ fied wheat growing in 1948 to the extent of being bility depends on structural and income changes able to reduce imports of this cereal almost by which, in turn, cannot be carried out without the half. This was a notable achievement, since it help of foreign investment. Economic stability in involved the development of seed strains adapted fact often follows rather than precedes investment to the relatively unfavourable soil environment. operations. In private banking the best way to get Other sectors of agricultural production, such as a loan is to prove that you do not need it. If the cotton and coffee, suffered serious setbacks, how­ same psychology is to prevail in the current pri­ ever, owing to unfavourable weather conditions vate market, the prospects of financing develop­ and plant diseases. In general, the level of agri­ ment operations by private investment are any­ cultural productivity continued low because of the thing but bright. lack of fertilizers and agricultural machinery, the latter .of which has to be imported from hard cur­ This paradox can only be solved by evolving rency areas. new forms of co-operation in which stimulus to In the industrial sector, the past year witnessed private investment and attenuation of its risks is full· utilization of the capacity of the new steel attempted through joint action by governments of industry, which more than doubled its production. capital-exporting and capital-importing countries. The results obtained from the plant at Volta The proper solution seems to be the joint guar­ Redonda were so promising that the National Steel antee of transferability of yields and repayments Company has entered into negotiations to pur­ of principal of direct private investment, rather chase new equipment in the United States to ex­ than unilateral guarantee by recipient countries; pand its operations. Brazil's incipient steel indus­ this, of course, in addition to fiscal measures dt;:­ try which, prior to the establishment. of the Volta signed to prevent double taxation and to stimulate Redonda' plant, was merely sufficient for the reinvestment of profits. We are anxious to hear domestic supply of certain types of sheet products, further elaboration of the ways and means by is now in a position to fulfil the need for a number which the United States Government intends to of other types, including rolled stock and rails, carry out its purpose, as enunciated by President thus facilitating the installation of new industries Truman, to foster, in co-operation with other and the manufacture of machinery. 50 Mr. Muniz, Brazil

The operation of the Volta Redonda plant natur­ tinue to be strong despite the achievement in 1947 ally required a greater consumption of iron ore of a sizable budgetary surplus, a drastic contrac­ and coal; the latter is being procured in substantial tion of consumers' credit and the curbing of the quantities in the country itself. In addition to fur­ speculative building boom. The balance of mer­ nishing raw materials for a number of basic chem­ chandise trade - which is ordinarily our largest ical products on which Brazilian industry has al­ surplus item in the balance of payments - closed ways depended, Volta Redonda has facilitated the at the end of 1947 with a deficit of 134 million construction of a new cement plant employing cruzeiros. The usual surplus in the trade with the by-products of the mill. The increase in the pro­ United States turned into a deficit of $200 million. duction of iron ore for domestic consumption has This is particularly serious in view of the deple­ been followed by an intensification of construction tion of dollar reserves and the need of dollar ex­ on the Rio Dace Valley railway, which will permit change to finance imports of equipment and to the export of substantial quantities of high-grade meet charges for services and capital account. ore. In the far north, in the Amazon region, new Drastic exchange and import control measures had manganese deposits have been discovered, placing to be instituted in May 1948. Through a careful Brazil in a still more enviable position as to pos­ rationing of purchases from the dollar area, the session of this mineral of high strategic importance. bilateral trade balance with the United States was brought into equilibrium at the end of 1948, de­ In regard to electric power, work was started spite an unfavourable trend in the terms of trade on the harnessing of the Paulo Afonso falls, with which, incidentally, is worthy of note. During a view to developing the rich region lying along 1948 the volume of exported products increased the valley of the Sao Francisco River, heretofore more than 20 per centbut the unit value decreased untouched because of the lack of power and irri­ approximately 14 per cent, while the volume of gation. The Brazilian Government arranged in imports fell about 12 per cent, but the unit value 1948 for the acquisition of three petroleum refin­ rose 6 per cent. eries, which will permit great savings in exchange for purchase of refined products, in addition to We view with concern this unfavourable turn facilitating a considerable step towards self-suffi­ of the terms of trade, because of the long and ciency in fuel as soon as domestic oil production painful experience which we have with depressed is begun. It is interesting to note that the National prices of raw material exports. It is true that a Engine Factory, set up during the war for the pro­ substantial improvement of our terms of trade duction of aeroplane engines, began in 1948 to occurred during the war and immediate post-war be converted to the production of truck engines period. In a sense, however, this was only a respite and bodies and a type of tractor specially adapted from a long era of unfavourable export-import to the physical conditions of the country. Highway price ratios, which dates from the start of the and railway construction was intensified during great depression or even earlier, since, except for the past year; a special feature of the latter was the late 1920's, our terms of trade never quite the electrification of the Central and Sorocabana recovered from the price slump of the commodity railways, and others. crisis that followed in the wake of the First World The system of foreign trade licences which War. Brazil was forced to adopt in 1948 has permitted the Government to orient its purchases abroad These are the remarks which I wish to bring to within certain limits, with a view to industrial re­ the attention of the Council during the discussion equipment of the country. Special attention has of the world economic survey. Despite many been given to the cotton textile industry. The shortcomings and despite the fact that peace has manufacture of electrical equipment and supplies not yet been fully attained, there are hopeful indi­ also received considerable impetus in 1948. cations that world economy will come out of this period of great changes more unified and pervaded These energetic efforts towards industrial equip­ with a greater spirit of justice and solidarity. The ment and expansion were carried out in the face United Nations can become an important factor in of serious difficulties. Inflationary pressures con- the realization of this objective. Mr. Sen, India 51

Mr. SEN, India a more balanced basis and unless the old ideas of exploitation of undeveloped countries, by what­ The report of the Secretary-General, Major ever name they are called - colonialism or im­ Economic Changes in 1948, brings out certain perialism - are completely discarded. This impor­ important issues to which the Council must give tant fact finds recognition in the United Nations careful consideration. The report does not purport Charter. In Article 55 the Charter states that by to be a comprehensive economic survey of the promoting higher standards of living, full employ­ world, but gives a review of the important econ­ ment and conditions of economy and social pro­ omic developments during the year. gress and development, we create conditions of stability and well-being which are necessary for In reading through the report one notices the peaceful and friendly relations among nations. almost negligible place that the Asian countries occupy in the picture of post-war development and Since the end of the war much attention has rehabilitation. In the industrial field, apart from been devoted to the rehabilitation of the European the United States and such relatively industrial­ countries. We do not for a moment grudge the ized countries as Canada, Sweden and Switzerland, European countries the help they are receiving in which show a very highly increased output over the restoration of their war-damaged economy. pre-war production, most marked progress is in The reason which is advanced for concentrating Australia and a few of the Latin-American coun­ practically all available resources on the rehabili­ tries. In Asia the only country which finds occa­ tation of the European countries, in priority over sional mention is Japan, to show how greatly its the rest of the world, is that if Europe returns to production has suffered, while countries like China the pre-war level of production, particularly in the and India, which between them contain nearly field of industry, it will be able to accelerate the half the population of the world, are either made rehabilitation of the rest of the world, which before to hide their identity among "other countries" or the war had largely depended on European pro­ are "excluded" for lack of information. duction. There is, no doubt, much force in this argument. But if it reflects any desire on the part For this treatment of the Asian countries we of any of the European countries that this assist­ do not attach any blame to the Secretary-General, ance should be taken advantage of to maintain the though it should have been possible for the Sta­ pre-war exploitation of colonial territories, we tistical Office of the Secretariat to be a little more must clearly warn such countries that such a posi­ enterprising and to collect some of the more im­ tion is in conflict with the aspirations and plans of portant statistics, where available, relating to the the Asian countries, both those which have just Asian countries. emerged into freedom and those which are still struggling to attain it. We hope, however, that the unimportant place which the Asian countries occupy in this report is The most outstanding feature of 1948, accord­ not a reflection of the attitude that we observe ing to the Secretary-General's report, is that in among some of the advanced countries in the certain fields, notably certain cereals, sugar and world - particularly in the west - which wish the perhaps cotton, the current level of production is pattern of world economy to continue as before the tending to be in equilibrium or even in excess of war - that the eastern countries continue to play current effective demand. In the past such a situa­ the subordinate role of suppliers of raw materials, tion has been met by deliberate restriction of pro­ while the western countries maintain their highly duction or has ended in a disastrous slump. We industrialized economy, with a higher standard of are now reaching a stage when we must take deci­ living. sions on which will depend the future stability of the world. The basic question, in our view, is how Such an attitude, I need hardly say, is entirely the high level of production of agricultural and out of date. The last two devastating wars have industrial goods attained in North America is to be shown that there will be no peace in the world un­ maintained, consistent with the steady recovery less the economy of all countries is developed on and expansion of output in Europe and Asia, with- 52 Mr. Sen, India

out precipitating a serious slump or depression. the world. It is common experience that producers The national and international actions that will and traders get accustomed to war-time levels of be taken in dealing with particular commodity prices based on scarcity of supplies and any down­ situations that are arising will have a most vital ward adjustment of prices meets with resistance. bearing upon the ultimate objectives of raising the Failure to bring about a regulated adjustment of standards of production, consumption and nutri­ price levels has in the past resulted in burdensome tion all the world over. Our considered view is that surpluses, followed by a sudden drop in prices, it is to the interest of producers and consumers which in its tum has brought about depression all alike that production should be expanded and around. maintained at a high level, rather than that pro­ duction should be restricted to meet surplus com­ As a major agricultural country with large and modity situations. In countries where mechaniza­ far-reaching programmes for industrial develop­ tion has made rapid progress it is hardly necessary ment, we fully appreciate the importance of main­ to point out that a higher level of production, even taining stable and remunerative minimum prices at lower levels of prices, would secure to the pro­ in agricultural products in the interest of the pro­ ducers the benefits of lower cost and higher effi­ ducers. This however, does not persuade us in ciency per unit of output and a larger total income. supporting a policy of artificially maintaining prices at levels based on scarcity conditions. Most The key to the problem of maintenance of high countries in the world today are faced with the levels of production, in our view, lies in conscious problems of unbalanced budgets, disequilibrium attempts to maintain and expand markets to ab­ in the balance of payments and shortages of for­ sorb the larger volume of production, and in this eign exchange. On the prices of basic food grains Asia can play an important part. One of the most the whole superstructure of costs and prices is urgent problems to which the liberated nations of built. We consider that the Council should invite Asia are at present addressing themselves is the the attention of Member countries and specialized task of mobilizing their economic resources and agencies concerned to the importance of pro­ creating a larger volume of production, employ­ grammes (a) to provide stability at fair minimum ment and trade with a view to raising the standard prices for agricultural products, on the one hand, of living of millions of their peoples who for long and (b) to devise international measures to bring centuries have existed on a bare margin of sub­ down prices in a regulated way, subject to a fair sistence. In order to raise the standard of living fixed minimum. of these millions of people, they will have not only to increase the efficiency of their agriculture-and We also wish in this connexion to draw the agriculture must continue to be the basic industry attention of the Council to a proposal which we of the peoples of this region-but also to develop have been pressing for some time past before the such industries as are necessary for the mainte­ Food and Agriculture Organization of the United nance of their national security and for placing Nations. If and when the current output of cereals, their over-all economy on a more stable basis. and food grains in particular, is not balanced by Such a development need not necessarily upset the current effective demand, we consider that it the economy of the more industrialized countries would be far preferable that the surplus be sold of the west. It is known that an increase in the at concession prices to areas where people suffer levels of production, employment and trade, re­ from under-nutrition, rather than that products sulting from such industrialization, creates a should be restricted to keep up prices. As I have higher purchasing power and a greater demand already explained, lower cost and higher efficiency for varying types of capital and consumer goods. per unit of output will give the producer a larger income than restriction of production. One major problem to which we wish to invite the attention of the Economic and Social Council While on the subject of under-developed coun­ in this context is the problem of the adjustment of tries, I would like to refer to the inaugural address inflated war-time prices to levels more in accord of the President of the United States, delivered on with the long-term supply and demand position in 20 January 1949. In this address, while outlining Mr. Sen, India 53

his programme to assist the maintenance of peace technical advice, necessary in the preparation of and freedom in the world, the President of the development projects as well as in their efficient United States stressed the importance of embark­ execution. This important factor in dealing with ing on a bold programme for making the benefits the problem of the undeveloped countries has, as of the scientific advances and industrial progress I have pointed out, been given due recognition in of the United States available for the improvement the scheme announced by the President of the and growth of under-developed areas. While this United States. To what extent the activities of statement emphasizes the importance of assistance the Bank in providing assistance in industrial and by providing industrial and scientific techniques, scientific techniques should be linked with the it also speaks of the importance of fostering capital President's scheme is a matter which we are not investment in co-operation with other nations. He in a position to discuss at this stage. All I need observes that this should be a co-operative enter­ say is that India, particularly, will welcome such prise in which all nations should work together assistance in view of the many industrial projects through the United Nations and its specialized which we have already planned and which we agencies wherever practicable. The scheme dis­ have been unable to carry into effect for lack of closes a breadth of vision which we deeply appre­ capital equipment and technical personnel. . ciate. We hope that the United States delegation will be in a position to make the implications of The primary purpose of the Bank, however, is the scheme fuller and clearer so that we can all to encourage the flow of private capital which, help to place the scheme on a sound and practical under a system of private enterprise, remains the basis. mainspring of any large-scale effort towards proper economic development. While the greatest em­ In the Secretary-General's report we have a phasis must be placed on the development of those chapter on international loans and grants. In this basic public enterprises and sources of power, field the agency created by the United Nations, where the scope of private enterprise and, there­ namely, the International Bank for Reconstruc­ fore necessarily of private international capital, tion and Development, does not yet appear to must be limited, a considerable part of the flow have played any conspicuous or decisive part. The of international investment and its complement in most encouraging feature, however, so far as we technical skills must come through private chan­ are concerned, is the recognition by the Bank of nels. The experience of the private investor during the importance of the problem of development of the iriter-war years undermined confidence in in­ large areas of the world; many of them are rich ternational investment and dried up the steady in natural resources; some of them have a popula­ stream of capital, which over the long course of tion with a long tradition of skill, but are unde­ modem economic development spread the fruits veloped in modem techniques; and all of them of economic advance and technical progress from suffer from a lack of capital and accordingly re­ one region of the world to the other. If the Inter­ main economically undeveloped despite their great national Bank for Reconstruction and Develop­ potentialities for development. ment can help to stimulate the resumption of private international investment, it will have done There are also reassuring indications in the a signal service, especially to the people of the recent pronouncement of the Bank that shortage undeveloped countries of the world. of funds is not a factor holding up a more rapid I now summarize the points I have sought to advance in this direction, but rather a shortage of make in my statement: eligible projects-carefully planned and worked out, with a full knowledge of their productive (a) The importance of Asia in the post-war possibilities, and closely related to the economy world economy must be fully recognized and all of the country. If this represents the true state of plans and programmes of the United Nations must affairs, we would like to suggest that one of the adequately provide for a balanced development immediate tasks to which the Bank must address of the resources of Asia. The old conception of the itself is the building up of an adequate organiza­ role of Asia as a supplier of raw materials for the tion of technical staff for the purpose of furnishing west must be rejected; 54 Mr. Ozgurel, Turkey

(b) The Secretary-General in his future review further, so that there will be no delay in giving it should attempt a more balanced picture of major practical effect; developments in world economy by collecting more comprehensive statistics, particularly relat­ (g) The part played by the International Bank ing to the Asian, Latin-American and Middle for Reconstruction and Development in providing Eastern countries; financial and technical assistance is still incon­ spicuous, especially so far as the Asian countries (c) International assistance has so far been very are concerned. If this assistance is being held up largely concentrated on the rehabilitation of for lack of carefully worked· out projects, one of Europe. There is much force in the argument the tasks to which the Bank should immediately that an early rehabilitation of the industrial capa­ address itself is provision of technical assistance city of Europe would accelerate the recovery of to the countries needing it; and the other parts of the world, but any idea that the restoration of European economy should be (h) There is yet much scope for stimulating re­ utilized to perpetuate the pre-war pattern of the sumption of private international investments for world economy is in conflict with the plans and the development of the undeveloped countries of programmes of Asian countries, whether they be the world and if the Bank can help in this matter those which have just attained their freedom or it will have done a great service. those which are still struggling for it;

(d) The most outstanding feature of the year Mr. OZGUREL, Turkey (translated from french) is the tendency for the current level of production in certain agricultural products to be in equilibrium The Turkish delegation is of the opinion that or even in excess of the current effective demand. the second report on the world economic situa­ The tendency should be met, not by restricting tion prepared by the Secretariat is no less a production as in the past, but by a deliberate credit to that body than last year's report. These policy of maintaining expanding markets. Re­ first documents are not perhaps quite perfect and habilitation and development of Asian economy contain a few gaps, which, however, are caused will provide unlimited possibilities of an expand­ in some cases by the absence of statistics for ing market on the basis of mutual exchange of certain countries. But this decreases neither the suitable types of capital and consumer goods and value nor the usefulness of these documents for services. The Council should recommend high the study of the world economic situation. priority to the allocation of finance and capital goods and equipment to Asian countries to enable According to the documents submitted to us them to speed up their development; by the Secretariat and certain specialized agen­ cies, the results of the past year show an appre­ (e) The Council should invite the attention of ciable improvement in the world economic situa­ the Member Governments and the specialized tion in comparison with the preceding period. agencies to the importance of fixing fair minimum Indeed, for the first time since the end of the war prices for agricultural produce and to the need we can notice a well-marked increase in the pro­ for bringing down inflated war-time prices to duction of foodstuffs, owing largely to the year's levels justified on long-term trends of supply and exceptional harvests. Furthermore, considerable demand; progress has been made in industrial production, so that certain countries have even reached a point (f) President Truman's scheme for making where they can use their available means of pro­ available industrial and scientific techniques of duction to the limits of their capacity. As for in­ the west to undeveloped countries and for foster­ flation, it is already possible to note a few healthy ing capital investment in these areas in co-opera­ -I repeat, healthy-symptoms of deflation. tion with other countries is warmly welcomed. It is hoped that the United States delegation will These are satisfactory signs and can only be be able to explain the implications of the scheme matters for rejoicing. Mr. Ozgurel, Turkey 55

However, difficult problems remain to be solved. As regards a general increase in production, we Despite a general increase in production, the think that countries classified as under-developed world, considered as a whole, is still suffering could, by economic and social rehabilitation, con­ from a shortage of both foodstuffs and manufac­ tribute to a large extent to the improvement of tured products, owing to the continued increase world economy. As sources of raw material and in world population. This means that in a large foodstuffs, and as markets for a large amount of number of countries the standards of living are manufactured goods, these countries are capable still seriously affected. Thus it is necessary first of playing a decisive part in the increase of world of all to find adequate measures for dealing with production. this situation. The question of the economic and social re­ In addition, the complex problems of world habilitation of under-developed countries has al­ distribution and associated questions of interna­ ready been placed upon our agenda as a separate tional trade and its financing are, more and more, item, to which we shall return. It seems to us becoming particularly important. The change necessary, however, at this stage, to explain some which has come about in the past few years in the essential aspects of this question, since in our direction and composition of international trade view it is closely identified in present circumstances now makes it necessary for us to study world with the problem of the general increase in pro­ economic relations from an entirely different angle. duction. It is true that the increase in world production in 1948 was accompanied by a parallel increase in As has been emphasized in the various reports the volume of international trade. On the other submitted to the Economic and Social Council, hand, several countries, faced with chaotic changes under-developed countries are at present short of in their external trading relationships, which might machinery and mechanical equipment, both in­ have brought about further deterioration in their dustrial and agricultural, of technical experts balance of payments or total exhaustion of their capable of using such appliances, of means of gold or foreign currency reserves, were obliged transport and communication, of ports and so on. during that period to tighten their restrictions on What they lack above all, however, is capital and imports, thus creating fresh obstacles to inter­ foreign currency to obtain these materials. This national commerce. means that in the great majority of under-de­ veloped areas the soil and the subsoil are inade­ This is another problem to which we must strive quately cultivated in relation to the production to find a solution; it is closely linked with the potential which they possess. To give a single former problem, that of increasing production. example, only about 4 per cent of the total area Indeed it is not sufficient merely to increase pro­ of the Near East region is at present under cul­ duction. In addition production surpluses must tivation. The figures for annual average per capita be exported and sold in the world markets to avoid revenue in the under-developed regions are even crises of over-production. What is known as a more significant. Thus, while the per capita crisis of over-production is indeed the result of revenue of the United States, Britain and western producing too much and obtaining a surplus; it Europe is $1,300, $700 and $500, respectively, is not, however, a surplus in relation to the needs in the under-developed regions the figure is only of mankind, but in relation to purchasing power. about $100. Therefore it is urgently necessary to When a crisis of this type arises, the trouble is provide these countries with the means of obtain­ not always that the goods are not needed, but that ing the equipment necessary for their economic not enough people are able to purchase them. and social development. In this connexion, it is Owing to a badly-organized system of world dis­ true that the International Bank for Reconstruc­ tribution, the production surplus obtained in cer­ tion and Development promised not long ago to tain regions of the world cannot find purchasers help under-developed countries. The funds which elsewhere. the Bank has available for loans are, however, relatively limited, so it is necessary to seek other How can these problems be solved? sources. 56 Mr. OzguriH, Turkey

We think that private international investments, The main factors responsible for the present which are at the moment quite inconsiderable, chaotic condition, which began to make them­ might be of assistance here. The movement of selves felt as early as the 1930's, are many: a large private capital towards the under-developed coun­ number of countries have been unable to pay for tries might be stimulated by the fact that economic their imports, which have increased since the end development in these new countries would ensure of the war; a change has occurred in the direction to international investors much higher rates of and composition of international trade; and the interest than are obtainable elsewhere. However, instability of exchange has resulted in an unsatis­ in present circumstances, in order to inspire con­ factory trend in international trade relations, etc. fidence in both future debtors and future creditors, These factors as a whole have recently led various the intervention of an international organization governments to strengthen their controls on appears necessary, to guarantee loan operations foreign trade and their exchange restrictions. and to take measures to safeguard the interests of Amongst these factors, however, it is chiefly the both parties. This seems particularly necessary incapacity of countries to pay for their increased because in the past some countries, whether lend­ imports-or, to call it by its proper name, the ers or borrowers, have had unpleasant experiences dollar shortage-which has forced the majority of with international loans. countries to take new measures of control and to impose new restrictions. To sum up, international private investment seems to us essential at the present time, to solve What does the dollar shortage really mean in the problems both of developing under-developed present circumstances? countries and of increasing production generally. The International Monetary Fund gives an ex­ These problems must be considered with the cellent definition; it states that: "What is often care their importance warrants when, in con­ described in financial terms as a 'dollar shortage' formity with the General Assembly resolution on is in reality a symptom of the present inadequacy under-developed countries, we reach decisions in of production in many parts of the world, in rela­ connexion with their economic and social rehabili­ tion to the continuing great need for goods result­ tation. Our task may be considered already light­ ing from the war". Indeed, it is the inadequacy of ened by the encouraging statement made in this present production in certain areas, whose needs connexion by the President of the United States, have mounted for various reasons, which lies at a statement which shows once again that this great the root of the dollar problem. If some countries country is fully aware of its international responsi­ are constantly turning to restrictive measures to bilities. lighten the deficits of their trade balance or balance of payments, it is because their present production expressed in hard currency-or dollars, which· is I should like now t6 make some remarks much the same thing at present-cannot pay for on the problem of international trade and its their increased demand. Therefore, only when the financing. problem of a general increase in production, and consequently that of the economic and social re­ The Secretariat's report reveals that world eco­ habilitation of under-developed countries, has been nomic relations are in an extremely disorderly solved, will it be possible to avoid to a large extent state at the present time. The International Mone­ the difficulties arising from a dollar shortage­ tary Fund in its most recent report, dated 30 April difficulties which now, as before, constitute the 1948, is equally pessimistic on the subject. In­ most serious obstacle to the development of world ternational trade continues to give reason for economic relations. anxiety. It is still in a very chaotic state, despite an increase in the quantum of exports for most Furthermore, fresh efforts-I stress fresh efforts countries in 1948 and despite a certain relaxation -must also be made to revive international trade, during thatyear in the hitherto noticeable pressure in order that production surpluses occurring in on international payments. various parts of the world may reach world Mr. Mayhew, United Kingdom 57

markets. The examination of this latter point has first speech of all, by the Australian delegate, already become a matter of urgency, since certain covered in a most admirable fashion, if I may primary commodities already show a production say so, many points which we in the United King­ surplus. In fact, the report on international prob­ dom delegation intended to make ourselves. lems relating to primary commodities states that at the present time there is an improvement in the The debate presents some marked contrasts production of most of these commodities; it is also compared with the similar debate we held at this possible that special difficulties of the type en­ time last year. On that occasion, delegates showed visaged in article 55 of the Havana charter, Le., particular anxiety over the disequilibrium in the difficulties jeopardizing the "general policy of balance of payments of the dollar countries with economic expansion", may shortly arise in respect the rest of the world; over the current level of of certain products. world production; and over the dangers of con­ tinued inflation. What new effort can be made in this direction? To put it in another way, is it possible to find im­ At this session, while these anxieties remain, mediate specific remedies for the present situation the emphasis appears to be shifting. We have of international trade and its financing? We do not heard a good deal more about the problem of think so. As has been emphasized in the Secre­ establishing a fresh equilibrium pattern of world tariat's report, world economic relations at present trade; about an apparent tendency for increases are such "that probably no simple way out of the in output to "level off", especially in countries difficulties can be found". It therefore seems neces­ which have now reached or passed their pre-war sary to study the problem more closely. The prob­ output figures; while the inelegant word "disin­ lem of world production might also be included in flation" has crept into the Council's vocabulary this study, since the two are, as we have said and reference has been made to United Nations before, closely linked. document E/1111, "National and International Action to Achieve or Maintain Full Employment , It seems to us that work in this direction might and Economic Stability" before us and to the be based on the report of the Food and Agriculture problems associated with the maintenance of full Organization. It might be possible to adopt a plan employment. This shift of emphasis is, I think, of work somewhat similar to that suggested by fully justified by the facts presented to us in the that organization at the conclusion of its report. interim report and is a tribute to the realistic way The working plan suggested by the FAO includes, in which the Economic and Social Council is ap­ as we know, the study of the following points: proaching the world's economic problems. (a) improvement in the supply of requisites for agricultural production; (b) study of international Before I consider these questions in more de­ financing of development; (c) analysis of trends tail, may I make some general comments on the in the pattern of world trade; and (d) improve­ Secretariat's paper? ment in marketing and distribution facilities.

These are the general remarks which the I note that the report is intended as a prelim­ Turkish delegation wishes to make on the world inary review of events in 1948 and that a com­ economic situation. prehensive survey will be issued towards the middle of the year after the reports of the re­ gional commissions and the specialized agencies Mr. MAYHEW, United Kingdom have been received. We thoroughly approve the Secretariat's intentions and agree that it is impos­ The high level of the debate so far has made sible to produce a satisfactory world economic steadily more difficult the task of subsequent survey before the material produced by the re­ speakers. Many of the comments we intended to gional commissions and specialized agencies is make on this interim report of the Secretariat available. We would suggest that, if other dele­ have already been so ably presented by previous gations agree, the Economic and Social Council speakers as to make repetition wearisome. The might in future aim at holding the main debate 58 Mr. Mayhew. United Kingdom

on the world economic situation at the summer These points are put forward ina purely con­ session, when discussion can be based on the structive spirit and must not be taken as any dis­ more comprehensive survey. If this is agreed, we paragement of the great value of the interim re­ would hope that the Secretariat would continue port before us. to prepare for meetings of the Council interim surveys on the lines of the present report con­ The year 1948 has, in general, been a year of taining the most up-to-date information avail­ further recovery from the dislocation and devas­ able. We suggest, however, that these surveys tation caused by the wars. The world can con­ should be provided as background information gratulate itself on a hard, and generally successful, and should not be placed on the agenda for dis­ year's work. Certain areas and certain countries, cussion-except at the summer sessions-unless notably in the Far East, still have tremendous and any delegation makes a specific request for a dis­ urgent problems to be faced. But the recovery in cussion of the world economic situation. production and the progress made in many coun­ tries in fighting inflation and restoring a reason­ As regards the report now before the Council, able degree of stability to their internal economies we congratulate the Secretariat on once again has been very encouraging. But conditions are not producing a very up-to-date survey of world con­ yet in any sense "normal", and it is not possible ditions. Perhaps because of the efforts that have to see at all clearly what the future normal pat­ obviously been made to include the latest data tern of the world economy will be. Less progress available, the report shows some signs of hurried has been made towards establishing a new equi­ composition. One is also conscious of some omis­ librium pattern of world trade; the dislocation in sions which might be remedied in the mid-year world trading relationships which still persists is survey. now threatening to prevent the world's benefiting in full from the increases in production that have In particular, there is no general discussion of been achieved. It is broadly true that the greater prices and, at a time when shortages of certain the recovery in production, the greater the rela­ commodities are being progressively overcome tive importance of ensuring efficient international and large-scale adjustments in patterns of pro­ trading. duction and trade·are taking place, price move­ ments are particularly interesting. We would like As the report points out, one of the salient fea­ to see some discussion of price movements gen­ tures of the world economic situation in 1948 has erally during 1948 and of trends of prices of the been the improvement in food supplies and the main groups of commodities-food, raw materials, improved prospects for 1949. My country re­ manufactured goods, etc. gards this as a matter of outstanding importance. But world food supplies are not yet nearly ade­ Secondly, there is no discussion in the report quate. Efforts to expand them must not be re­ laxed. In part, the improvement in· the past year of the general experience of particular countries or groups of countries in 1948, with the excep­ has been due to the extremely good harvests and tion of a short discussion of the balance of pay­ high yields in 1948 and we cannot rely on these ments position of the sterling area. This will no continuing. But, in addition, consumption of food doubt be included in the mid-year survey when per head in Europe and the Far East in 1948 was the regional commissions have reported. still far below the pre-war level, although in North and South America there has been an improve­ ment on pre-war standards. It is to be expected Finally, we hope to see in the mid-year survey that all countries will try to achieve at least pre­ more discussion of the work of the Organization war standards of consumption and that many for European Economic Co-operation and of the countries where pre-war standards were very low progress of the European Recovery Program. The will attempt to improve upon them. It is to be recent publication of the interim report on the expected that, with increasing economic develop­ long-term programme of OEEC has provided ment and rising incomes in the less developed more data on this subject. areas of the world, demand for food will increase. Mr. Mayhew, United Kingdom 59

There is already evidence that· certain countries commodities, such as·· particular types of textiles, that have traditionally been large exporters of and this may be expected to spread as inflationary food are retaining a larger share of their total pressures weaken: Certain countries are·also find­ production for their own use. In these circum­ ing the demand for the products of some of their stances we must emphasize the importance of traditional export industries affected by the re­ continued efforts to expand food production and strictions imposed by other countries which :find the importance of countries' taking this into ac­ themselves in balance of payments difficulties. If count in their plans for economic development. output is to contmue to increase, therefore, it Food, and still more food, remains one of the will become more necessary in the future for the world's crying needs. Industrial structure of· the various countries to be adapted to produce the things that are really His Majesty's Government in the United King­ wanted in the'post-war world. The period of dom is itself taking action to. encourage increased general shortage, when increased output of any food production in the United Kingdom, in the kind would be disposed of though increases .were Non-Sell-Governing Territories and elsewhere. more urgently necessary in some directions than in' others, has now come to an end. The recovery of world industrial production to 32 per cent above the 1937 level in the first nine , My third reason for the levelling off tendency months of 1948 is a remarkable achievement. But, is that shortage of certain raw materials is .still as an index of the world's economic capacity, it hindering expansion of output. It is true, of is a somewhat misleading figure. It conceals the course, that "bottle-necks" are less noticeable spectacular contribution to world production of than they were a year ago. But the extractive the United States of America; and takes no ac­ industries have lagged behind manufacturing in­ count of the fact that most of the progress was dustry .and further expansion of output of many made during 1947. Although output in the first materials is necessary. Non-ferrous metals, certain nine months of 1948 was 11 per cent above the fertilizers (particularly nitrogen and potash) and estimated volume in the corresponding period of coal are still obvious shortages. 1947-when output in many countries,including the United Kingdom, was affected by fuel short­ Though we emphasize· the need for increasing age-it was only 4 per cent above the level of further the output of food, capital goods and raw the last quarter of that year. I suggest that we materials in 1949, it is probably true that the must pay careful attention to this tendency for problems of production are becoming of less im­ the rate of increase of industrial production to mediate importance than the problems of ex­ slow down. change, i.e., of trade and payments. I submit that it is due to three factors. I turn now to the problem of equilibrium in First, certain branches of industry in some balance of payments. In spite of the advent of countries are now producing up to the limit of the European Recovery Program and of very the existing capacity. Further expansion will de­ generous financial assistance by the United States, pend on increasing the amount of capital equip­ the dollar problem still haunts many countries of ment or on re-equipment and replacement of exist­ the world. It now threatens not merely to check ing plant. In the United Kingdom we are very the rise in the level of world trade, but also to conscious of this. Weare breaking all records in some extent to frustrate the effects of the continu­ the output of capital goods, and, in addition to ing improvements in world supplies. One of the re-equipping our own industry, are exporting conclusions that emerges from the present report roughly one-third of our total production. is that there is now serious danger of surpluses and shortages of the same goods existing together A second reason for some levelling off of pro­ in different parts of the world because of the dis­ duction in certain countries is, we believe, a equilibrium in world balances of payments. Stocks reduction in effective demand. There are signs of of cotton are accumulating in the United States; a buyers' market having developed for certain there are some fears of a surplus of sugar; and 60 Mr. Mayhew, United Kingdom

it is possible that stocks of grain in the United balance at a high level of trade rather than by States in the middle of this year will be greater continued restriction by other countries of im­ than in any previous post-war year. This threat­ ports from the United States. Some such restric­ ened concentration of surpluses in the dollar area tion continues, however, to be necessary. is due more to lack of dollars than to any general lack of effective demand in the rest of the world. Further progress was also made towards re­ It would be a confession of failure if we allowed storing over-all balances of payments of the in­ diminished production, rather than increased con­ dividual countries in 1948. The qver-all position sumption, to result. In general, world production of most western European countries has improved has not yet reached levels where producers need and so has that of most of the sterling area coun­ fear "burdensome surpluses" but it is becoming tries, with the exception of the Union of South increasingly important to expand and restore Africa. Exports from the Far Eastern countries, equilibrium to world trade, so that the full benefits other than China, have also recovered noticeably of increased production can be realized. during 1948.

It seems possible that the crisis of the world's With regard to the expansion of world trade, dollar problem was reached in 1948. Most of the the report gives a clear account of the difficulties countries which had been in serious balance of in present currency conditions of preventing the payments difficulties during 1947 reached the end undue restriction of international trade. Several of their safely expendable gold and dollar reserves; speakers have already laid very proper emphasis and the "surplus" countries of 1947, such as on the reduced rate of expansion of the export Argentina, Canada, Sweden and Belgium, found trade of many countries in 1948 and the failure increasing difficulty in converting into dollars sur­ of the quantum of world trade to expand in spite pluses earned in non-dollar areas. They were of the continuing rise in output. There are grave themselves obliged to restrict imports from the warnings of the dangers of the present situation. dollar area and, in the interests of internal stability, also reduced the amount of credit that they had The United Kingdom, like other countries, has been giving to other countries, with further re­ concluded a large number of bilateral agreements strictive effects on international trade. which aim at balancing trade at the highest pos'" sible level and allow for multilateral transfers of Aid· under the European Recovery Program currency within the framework of the agreements began arriving in the middle of 1948. It arrived wherever possible. just in time to save western Europe from a truly desperate position. It gave us a breathing space in Although we have not been able to restore free which to renew our efforts to solve the dollar convertibility of sterling, an attempt has also been problem by expanding exports to the Western made to allow the maximum possible transfer­ Hemisphere and by increasing dollar-impart-sav­ ability of sterling. This has been done by establish­ ing production in the countries of western Europe ing categories of sterling accounts within which and in other countries outside the dollar area. transfers from one account to another are per", United States lending to other countries, though mitted with the maximum possible degree of on a smaller scale, continues to assist them to meet freedom and by providing, where possible, for their needs for dollar supplies. transfers between the different categories. Within the sterling area trade is conducted on a multi­ The extent to which the world moved towards lateral basis with almost complete freedom of dollar balance in 1948 is shown by United States transfer of sterling between members of the area. balance of payments figures, quoted by our United The existence of the sterling area also permits States colleague in his speech. The increase of multilateral trade between members of the area imports into the United States between the second and any other country. Sterling earned from one half of 1947 and the first half of 1948 is a most member of the sterling area can be llsed freely in encouraging sign for many hard-pressed countries. any other part of the area. In addition, the "trans­ It is a move in the direction of restoring the ferable account area" has been bllilt up and its Mr. Mayhew,United Kingdom 61

scope extended since the autUTIln of 1947. Trans­ of the OEEC countries has revealed possibilities fers of sterling are freely permitted between one of conflicts of interest and mutual inconsistencies "transferable account" and another and the in countries' estimates of their future position. volume of these transactions has greatly increased Possibilities of continuing shortages of certain ma­ during the past year. Even where transfers cannot terials, such as non-ferrous metals and wool, of be freely allowed between countries or groups of undue optimism about prospects of exporting­ countries, some transfers may be allowed with the at present prices-to non-European markets, about sanction of the United Kingdom exchange control, the possible demand for certain products, such as and such transfers do take place on a considerable textiles, and of excessive programmes of invest­ scale. ment in certain industries have been revealed. It will now be the task of the participating countries The United Kingdom has also co-operated with to reconsider their programmes, to study the pos­ the other countries in the Organization for Euro­ sibilities of adaptation to avoid the dangers that pean Economic Co-operation in establishing the have been revealed and to increase their chances ifltra-European payments agreement for 1948-49. of achieving balance of payment equilibrium and This provides for credits to be given by the creditor reasonable standards of living by 1952-53. to the debtor countries which will enable the latter to obtain the essential imports which the creditor The main prerequisites of further recovery, not countries can supply and which will help to ex­ only for the OEEC countries, but for many others pand trade between the OEEC countries. It also also, were well summarized by Mr. Hoffman in his provides for an increasingly multilateral system statement to the United States Congress on 8 Feb­ of payments between the member countries ruary. These are the checking of inflation, in­ through the offsetting of credit and debit balances creased efforts to expand exports by increasing acquired under the scheme. productivity and improving marketing techniques, increased development of non-dollar sources of No review of world economic conditions in supply of imports, greater efforts to develop mutual 1948 would be complete without mention of the trade, exchange of information on investment European Recovery Program. The financial as­ plans and needs and continued economy in im­ pects of this are covered in the Secretariat's report, ports. It is the intention of the United Kingdom but no reference is made to the Organization for Government to co-operate fully on these lines European Economic Co-operation as an organiza­ with other members of the OEEC and to make the tion of countries attempting by mutual consulta­ maximum possible contribution to general world tion and concerted action to solve their common recovery. It is, however, already possible to de­ problems with a minimum of wasted effort. The scribe the work of the OEEe as a magnificent organization has so far succeeded in drawing up example of free international collaboration. a programme for 1948-49 which apportioned on agreed principles the assistance provided by the May I say how supremely important aid under United States for that year. It has also produced the European Recovery Program has been in an estimate of the needs of its members in 1949-50 assisting the great economic advances being made which is now being considered by the United by my own country. It is true that the volume of States Government. goods shipped to us this year represents only: 3 per cent of the total value of goods and services The long-term programme, the interim report available to Britain this year, but this 3 per cent on which has recently been produced, is likely, is the critical marginal quantity that enables us however, to be of still greater importance to to continue production at our current high levels. Europe and to the world. The work that has so Without these goods, we should have to tum more far been done has been directed principally to of our production over to home consumption and revealing the problems which the countries in the export and would thus be quite unable to con­ OEEC have to face over the next four years and tinue our great capital investment programme. their individual plans for dealing with these prob­ Without this aid, our factories would not all be lems. The analysis of the individual programmes able to run constantly in high gear, and unem- 62 Mr. Mayhew, Un.ited Kingdom

ployment would develop. To describe aid from provement of our export position. Thanks to care­ the United States, as some try to do, as enslaving ful economic planning and the voluntary co­ is thus ridiculous. It has precisely the opposite operation of labour and industry, our exports were effect. It is enabling us to win our way back, 36 per cent greater by volume in 1948 than in through high production, to complete economic 1938. In January this year they rose still further independence. to a level of no less than 60 per cent above 1938. But perhaps the most important figure of Britain's Let me emphasize this point, which some may economic recovery is one which has not yet been not have fully understood. The purpose of Mar­ published, but which can at least be foreshadowed. shall aid is to set us free from dependence on the In 1947, Britain's deficit in the balance of pay­ United States. We have not the slightest intention ments amounted to £630 million. In the first half of modifying our economic, our social or our of 1948 this was reduced to an annual rate of political plans in order to qualify for aid. On the £240 million. I cannot give you exact figures for contrary we are using aid, as it comes to us, to the second half of 1948, but I can say that we forward those plans on which we know our par­ are now definitely within sight of balancing our ticular future depends. This means concentration total overseas payments. There is a disturbing on capital investment, increasing productivity, in­ dollar deficit within this, but it is a truly remark­ tegration with Europe, strengthening the sterling able and decisive fact that Britain is approaching area and liberalization of our trade with the whole an over-all balance at last. world. All these aims are described for anyone to read in our long-term programme. In our view, In capital investment, Britain is currently de­ the United States does not want a dependent voting one-fifth of the gross national production Britain but wants us to have a healthy, inde­ to the re-equipment and modernization of produc­ pendent economy, standing on its own feet. Cer­ tion resources. This is an investment of some tainly we have a great deal to learn from the £2,000 million, or $8,000 million, of which about United States in some production fields, but half represents repair and maintenance and just equally we believe that, as our economy develops under one-half is new investment. More than 700 by the use of our own British methods, the United new factories have been completed since the end States· will have a great deal to learn from us. of the war. Our new investment covers vast coal As we see it, the aim is for us to stand freely side modernization plans, huge steel and electric power by side with the United States, learning freely plans and very considerable developments in agri­ from each other, and ready to defend, if need be, culture. those human ideals of personal freedom and in­ tegrity that we hold in common. Our reduced foreign deficit and our increased investment would not have been possible if the Perhaps in conclusion I may be allowed to British people had not shown striking self-re­ make a brief statement on the social and eco­ straint in refraining from pressure for increased nomic advances and problems of my own country. incomes or increased consumption. The restraint, Our total industrial output in 1948 was already which forms part of an over-all financial and about 20 per cent higher than before. the war. economic programme, has been exercised in thrfJe Our total agricultural output was 25 per cent ways. First, in February 1948, the Government higher. In view of the devastation and dislocation issued an appeal to everyone concerned in the which we suffered in the war, I think these are fixing of personal incomes to exercise voluntary remarkable figures. I would, however, draw the restraint in the national interest. Both employers Council's attention particularly to the success we and workers responded well to this appeal. The have achieved in directing these increases in out­ vast majority of firms declaring dividends in 1948 put towards reduction of our foreign deficit and gave no increase on the previous year; in almost towards increased capital investment. all of the small proportion of cases where in­ creases were granted, there were good reasons The outstanding feature in our balance of pay­ for departure. On the other side, the index of ment position has been the really remarkable im- weekly wage rates, thanks to the co-operation of Mr. Katz-Suchy, Poland 63

workers, rose by only two points between March true of our insurance plan which has removed andDecember last year, from 105 to 107. Second­ forever the spectre of destitution from our peo­ ly, in our successful battle to curb inflation, British ple. Equally one must look, in our nationaliza­ citizens have accepted a heavy weight of taxation tion projects, not only for the increased output so as to achieve a very large budget surplus. Third­ that modernization and intense capital investment ly, we have maintained rationing and price con­ will make possible over a period of years, but also trols on essential goods still in scarce supply. This for the new spirit of partnership that these de­ has not only helped us to combat inflation, but velopments are already giving to the workers in has also ensured fair shares for everyone and these industries. These are long-term concepts helped to maintain the sense of national unity that have hardly begun to have their full effect, without which our general policy of austerity but it is not too early to see the growth of new would not have been possible. Fortunately, I am patterns of labour-management consultation and glad to say, it is becoming possible gradually to co-operation in these industries, with the chance reduce the number of these restrictions. of ridding us forever of those clashes of interests and opinions between owners and workers that A major element in the success which Britain have been the most baleful heritance of the Indus­ has been able to achieve has been the great weight trial Revolution. we have given in all our planning to what we may call human welfare and social progress. The years Here are facts that cannot be denied. Our since the war have seen a great ferment of ideas health as a nation is better than it ever was. Our and social experiment in Britain. We have set in children are sturdier than they have ever been, train a great expansion of education, including and have before them the chance to rise to any technical education; a unique system of national position in our country. We have no unemploy­ insurance, linked with a comprehensive system of ment problem. Our industrial workers have freely industrial injury insurance and a complete na­ identified themselves with the need for full pro­ tional health service; great plans for town and ductivity. The loss in working time through in­ country planning; and a reorganization of our key dustrial disputes has been negligible. We regard industries and services under public ownership. social welfare and socialist experiment as an Some have asked if we can afford all this. They integral part of our successful production drive. have missed the point that these developments are an integral part of our great economic expansion. From what I have said, it is clearly time to cease talking of the "recovery" of Britain. We To take a few examples only, it is surely obvious have long passed that stage. For us, the social and that a quick increase in our standards of health economic standards of the pre-war years are not and education, coupled with the special emphasis things to be recovered but rather things to be that we place on free milk and nutritional foods repudiated. Big problems still face us but we are for children in schools, will payoff quickly in no longer interested in "recovery" but in breaking economic dividends, quite apart from the hap­ fresh ground, in terms of new social and economic piness and welfare that they bring. The same is experiments.

23 FEBRUARY 1949, AFTERNOON MEETING

Mr. KATZ-SUCHY, Poland stuffs and raw materials and of the restoration of production in many countries. It also notes the The report of the United Nations Department tendency for production to level off in 1948 in a of Economic Affairs, Major Economic Changes number of countries and the urgent necessity for in 1948, presents many valuable facts and draws expanding foreign trade as a condition for the certain limited conclusions from these facts. expansion of production in some places. It sets, as a central problem facing the world, the neces­ It takes note of the improved supply of food- sity. for expanding the world supply of goods for 64 Mr. Katz-Suchy, Poland

the growing world population and notes that the Poland industrial production increased by 26 per difficulties in the way of achieving this aim are of cent between 1947 and 1948. By the end of 1948, a protracted long-term and structural character. industrial production exceeded that of 1937 by 60 per cent. If we examine in detail the development of world economy during the past year, certain con­ A whole series of products never before made clusions become apparent. What are the main in Poland are now being produced in significant points of importance in the economic development quantities or are planned for mass production, of the past year? including trucks and machine tools, tractors and harvesters, carbon electrodes and industrial chemi­ I. First, the year 1948 was a year of relatively cals. Industrial production per inhabitant in 1948 advanced economic reconstruction in Europe. The was twice as great as in 1937 and agricultural speed of this recovery, however, was of an uneven production per inhabitant was 10 per cent more character. There was a sharp differentiation of than the pre-war level. These gains have been development in the capitalist countries, on the achieved despite the terrible war destruction of one hand, and in the countries of socialism and property and the population loss which totalled planned economy, on the other. six million. These results have been achieved without any substantial aid from the United States, This differentiation is marked in the field of apart from the help of the United Nations Relief industrial production. In the United States the rate and Rehabilitation Administration in the early of production in December 1948, was no higher period after the war. Moreover, they have been than in December 1947. In Great Britain there achieved in the face of arbitrary interference by was little increase in production during the year. the United States with the development of normal In Italy production declined and in Belgium pro~ trade relations. duction in the consumer goods industries tended downwards after the middle of 1948. French pro­ In the capitalist countries the majority of the duction at the end of 1948 was perhaps 15 per population and, in particular, the working class cent more than at the end of 1947. In general, did not benefit from the increase in production the capitalist countries of western Europe regained during the year 1948. The improved supply posi­ their pre-war level of industrial production and tion did not stop the rise in the cost of living in then stood still or started to decline. Moreover, most of western Europe or in the United States. when it is considered th:it the population has in­ Real wages continued to decline. Thus in France creased in these countries, it becomes clear that real wages of Paris metal workers fell 22 per cent the per capita production in western Europe is during the first nine months of 1948, while the even lower than in the year 1937, the last pre-war real wages of all industrial workers fell 9 per cent. year of reasonably high production. The year 1949 was marked in these countries by· an increasing class struggle aimed at improving In the countries of planned economy, with living conditions; the governments of these coun­ progressive socialist organization of industry, the tries in a number of cases have intervened to break results were quite different. In these countries strikes by force. there was a sharp increase in production through­ out 1948 and the pre-war production records Besides high living costs, increasing unemploy­ were substantially exceeded. ment became for the first time after the war a real problem in a number of countries during 1948 In the Union of Soviet Socialist Republics, ac­ and further reduced the average living standard cording to the United Nations Monthly Bulletin of the working class in a number of countries, of Statistics, production in 1948 exceeded the especially in Italy where more than two million 1940 level by 18 per cent. In Czechoslovakia in­ people were unemployed. In all western European dustrial production exceeded the 1937 level by countries, the index of employment either re­ 10 percent in October 1948. New records in steel mained unchanged or declined slightly. The or­ production were made by these countries. In ganization of the Marshall plan countries reports Mr. Katz-Suchy, Poland 65

that living standards in these countries show a There is no current unemployment in Poland and decrease of ·20 per cent compared with the year the structural under-employment of the peasant 1938, a year of relatively low economic activity. population-a product of the pre-war economic In addition, there is an increasing tendency to­ structure of Poland-is gradually disappearing. In wards an unequal distribution of income. It is well September 1948 employment in Poland was 27 known that wealthier groups live at a relatively per cent higher than in 1946 and in the autumn high level in a number of the Marshall plan coun­ of 1948, the number of persons employed outside tries. agriculture reached 3.7 million, a level never be­ fore attained in the history ofPoland. In the countries of planned socialist economy, on the other hand, the purpose of increased pro­ The Second World War has made the problem duction is precisely to improve the living standards of food especially acute, The Food and Agricul­ of the working class, of white-collar and profes­ ture Organization reports that only seven nations, sional workers, of peasants and artisans. Despite excluding the Union of Soviet Socialist Republics the fact that the main efforts are still directed at and the new democracies, raise enough food to reconstruction and the development of industry, meet their own needs. These are Australia, Can­ there were significant gains in these countries in ada, Denmark, New Zealand, Norway, Switzer­ the living standards of the workers. The rise in land and the United States of America. The other the cost of living was stopped in both Poland and Member States have food shortages, with per Czechoslovakia. In the Union of Soviet Socialist capita supplies of food and fibres far below pre­ Republics, the currency reform at the end of 1947 war levels. This report lists drawbacks to increase resulted in a great increase in the supply of con­ world food production, which include fear by the sumer goods at lower prices and substantially in­ food-exporting countries of future unmarketable creased the standards of living. In Poland there surpluses, loss of soil fertility and erosion prob­ was an increase in the consumption of bread, from lems, lack of improved seeds and fertilizers, short­ 206kilogrammes per capita in 1938 to 216 kilo­ age of livestock and farm machinery, etc. The grammes per capita in 1948, and of sugar, from sober fact which looms to haunt humanity is that 12 kilogrammes per capita in 1938 to 14 kilo­ if present destructive practices continue, world grammes in 1948. In the same manner there was hunger can reach the acute state within three gen­ an increase in the consumption of meat and of in­ erations. Confronted with this problem, capitalist dustrial goods-in particular, leather, cotton and and socialist states are reacting to it, each in its woollen goods. There was a considerable increase characteristic way. While in the capitalist coun­ in the number of schools in all grades of teaching, tries there is permanent fear of the disaster of a an improvement in the housing situation and an good harvest, sociaHst countries are planning an increase in the number of hospitals and health increase in their food production and in the pro­ resorts. ductivity of the land. The Soviet Union's fifteen­ In Poland it)s the policy to increase the wages year plan for agriculture will increase production, of the working class in acCordance with increases remove the menace of drought and conserve the in productivity. Thus between June 1946 and June soil. Last summer Poland harvested nearly 40 per 1948 wages in currency were increased, on the cent more than in the 1947 harvest, and 15 million average, by 165 per cent, and total wages, includ­ acres are now ploughed up for the winter. The ing value of payments in kind, by 72 per cent. By Polish six-year plan, ending in 1955, provides for the end of 1948 in Poland, the most ravaged of an increase of agricultural production by 35 to 45 all countries, the purchasing power of the average per cent. workman was 10 per cent higher than before the war. The recent abolition of· rationing and the II. The second main feature of economic de­ wage reform resulted in another 10 per cent in­ velopment in 1948 was the success of socialist crease in real wages. planning and international co-operation amongst the people's democracies on the one hand, and the Unemployment is unknown in the Union of absence of genuine planning and international co­ Soviet Socialist Republics or in Czechoslovakia. operation amongst the capitalist countries, on the 66 Mr. Katz-Suchy, Poland

other. These factors were the main explanation of The year 1948 was the first year of practical the contrasting trends of production and inflation­ operation of the Marshall plan. Our position ary tendencies that have been noted. towards the Marshall plan has been made com­ pletely clear. The Marshall plan was never con­ It has become fashionable throughout the world ceived as a real economic aid programme; it was to speak about planning. But there are different preponderantly a political programme operating kinds of planning. In Great Britain, the Govern­ with economic elements. It has a three-fold pur­ ment has a plan for expanding steel production; pose: political, strategic and economic. It cannot but the steel magnates who still control the fac­ therefore be examined in economic terms alone tories have quite a different plan. In France, there or in isolation from the over-all political interna­ is the ambitious Monnet plan fbr the development tional scene. of industry, but the opposition of French capital­ ists .prevents the plan from being put into aCtion. The war has had differing results in various Even the President of the United States has re­ parts of the world. The amount of loss and destruc­ cently proclaimed himself as a very strong advo­ tion and the results of war operations varied from cate of planning. country to country. Furthermore, in some coun­ tries, instead of loss there was an increase of the economic potentiality, compared with the pre-war This kind of planning has nothing in common situation. It was therefore an elementary require­ with the genuine socialist planning practised in ment of a general economic nature to turn special the countries of eastern Europe. Planning in Po­ attention to those countries which, as the result land, for example, is based on the solid founda­ of Nazi occupation, suffered the greatest destruc­ tion of socialist ownership of 94 per cent of in­ tion. This should have given them priority over the dustry and the full participation of labour in the . countries whose losses were smaller, not to speak formulation and carrying out of the plans. Cor­ of those which came out of the war enriched. Al­ rection and improvement of the plans by workers though the logic of such an approach was unan­ in the factories are the means for speeding the swerable and met with general acceptance, after a construction of new plants, improving the quality short period of scarcely calculated relief, political of goods and reducing costs of raw materials. The elements superseded economic or even humani­ success of the plans is guaranteed by the move­ tarian considerations and resulted in the present ment of labour to increase efficiency and produc­ plans and programmes. tion which is sweeping the mines and the factories. Our present.criticism of the Marshall plan is In 1947, the first year of the three-year plan for based not only on our approach to its aims but the reconstruction of industry, the plan was ex­ also on the analysis of the first nine months of its ceeded by 3.4 per cent. The much higher goals for practical operation. Certain consequences of the 1948 were exceeded by 10 per cent. It is now cer­ Marshall plan to the countries of western Europe tain that the three-year plan will be completed .. are clear beyond doubt. I shall speak of them considerably ahead of schedule. briefly.

While the three-year plan includes many The United States has not helped to develop branches of industry, it is primarily a plan for European industry as promised but, on the con­ reconstruction. It will be followed by the six-year trary, has hampered the growth of European in­ plan for the development of the Polish economy, dustry. During the latter part of 1948, under the during which industrial production will rise 85 to Marshall plan, the monthly export of capital goods 95 per cent above the levels of 1949. This plan from the United States to France was reduced by will see the transformation of Poland, which be­ two-thirds, compared with 1947. The same figure fore the war was predominantly an agrarian coun­ applies to Italy. In general, out of the grand total try with a low standard of living, to an industrial of $4,044.8 million, only $398.9 million was used country with a higher standard of living than that for machinery, while $1,384.3 million was used which prevailed in western Europe before the war. for food and fertilizers and $106.4 million for Mr. Katz-Suchy, Poland 67

tobacco. The sums used within these figures for the America. Instead, they are being forced to buy subsidy for military equipment and war materials from Latin America with Marshall plan dollars, are not disclosed. According to the seventh re­ and are hence deprived of the opportunity of com­ port of the Public Advisory Board of the Econ­ peting with American farm products for the mar­ omic Cooperation Administration, published on kets of these countries. At the same time non­ 19 January 1949, the procurement within the participating countries-in particular Argentina grand total was as follows: $2,294.4 million was and Brazil-are once more protesting against their spent in the United States of America, $593.4 exclusion. Clearly this is not genuine international million was spent in Canada and Newfoundland, co-operation but dictation by one country to many $353.3 million was spent in Latin America and weaker countries to the advantage of certain only $245.0 million was spent in the participating monopolistic groups and to the disadvantage of the countries. Both the commodities and their coun­ peoples concerned. tries of origin show clearly that the plan was not designed to meet the requirements of European The Soviet Union and the eastern and central economy or the needs of reconstruction, but was European countries with planned economies have conceived to harmonize with the needs of the declined to participate in the Marshall plan; their American economy and to overcome difficulties main argument is that such "aid" will interfere which some European countries were experiencing with the political and economic sovereignty of the in their balance of payments on current account. participating countries. Since the plan has been in operation, the discussions concerning the differ­ At the same time, the Marshall plan countries ences arising between the participating countries were deprived by the United States of reparations and the United States, as well as the differences from Germany, which could have made a real con­ among the participants themselves, have shown tribution to an increase in their industrial capacity. that the foresight of those who declined to par­ ticipate has been fully borne out. It was not long By dumping certain goods in Europe under the before the countries realized what price they were MarshaR plan and by the imposition of "free en­ paying for American "aid". terprise" policies by Washington, the position of various European industries has been seriously In one way or another each participating nation undermined-for example, the automobile indus­ has experienced the control the United States try and the aviation industry in Italy, the motion exercised through the Marshall plan. In Austria, picture industry in France and the shipbuilding for instance, the financial policy of the Economic industry in Great Britain. Cooperation Administration in releasing blocked schillings from sales of relief goods could drive The American oil trusts are gaining monopoly the country into catastrophic inflation; Austrian rights in western Europe through markets guaran­ truck production was cut to half of the 1937 out­ teed by the Marshall plan and through buying put while Austria was scheduled to receive 20,000 European companies and building installations in United States trucks. The Swiss Government has Europe, while refusing to sell petroleum equip­ refused to sign a bilateral trade agreement with the ment to the Marshall plan countries for their own United States. The Turkish newly-born third ma­ use. jor political group is very critical of the bilateral Turkish-United States trade agreement and con­ The devaluation of the franc was dictated from siders that it will "bring ruin to Turkish farmers Washington as part of the Marshall plan. Trade and exports". The United States bilateral trade among the Marshall plan countries was curtailed agreement with France provides the most favoured by the imposition of the dollar standard, which treatment clause, not only for the United States, has driven virtually most of the currencies of wes­ but for the United States occupation zones in tern Europe out of international circulation. The Germany, Japan and Korea as well. The United Marshall plan countries have been deprived of the States control of the counterpart funds had become opportunity of free bargaining on a bilateral basis a major issue in France, and on 10 December 1948 with natural trading partners in, for example, Latin the Economic Cooperation Administration re- 68 Mr. Katz-Suchy, Poland

jected a French proposal anticipating the avail­ tries whicq tied their economies to that of the ability "of more than $1,000 million of franc United States are now pressed to follow this policy, counterpart funds desired to avoid new taxation open their markets, not only for consumption and a possible political crisis". goods but for armaments as well, and take the risks and results the United States policy may The experience of the ECA since the beginning bring in the political, military and economic fields. of practical operations is filled with examples of exorbitant procurement prices, favouritism to big III. Another feature of the year 1948 was the business, dumping and other wasteful practices, policy retarding the development of the under­ placing high profits above European recovery. developed areas. American policy is concentrated Let us give one example: according to the sev­ at present on directing the main flow of credits to enth report of the ECA ocean freight from 3 April western Europe and Germany, on the one hand, to 31 December 1948 was procured at the cost of and more and more to Japan, on the other. The $336.7 million, United States shippers are being latest policy of technical assistance advanced in paid high rates for carrying European Recovery point four of the inauguration speech of the Presi­ Program cargo. The differential is as high as $4.50 dent of the United States has been interpreted by a ton, in the case of coal cargos to France, in fa­ the members of the United States Government and vour of United States flagships. The ECA paid leading industrial circles in a manner showing 270 per cent above the United States Maritime that technical assistance is a first step wh1ch will Commission rates for the charter of a shipment be followed by the expansion investments of pri­ of Middle East oil to France. vate capital. The United States News and World Report describes it as follows: "Truman plan for What is the prospect of the countries fonowing world development turns up as an old idea in new the road of the Marshall plan? It is evident that words. Projects, once put aside, are dusted off." the first experiences of the ECA were accompanied That shows that the United States Government by certain difficulties and disappointments both in has no intention of rendering credits on a large domestic and in international affairs, and no one scale for the purpose of economic development claimed outstanding successes. No one country of under-developed areas. It is an attempt to ar­ claimed outstanding successes in western Europe. range for investors· to have suitable places for in­ It must be so because at the very basis of the vestments· abroad. It is proposed to guarantee a whole plan lies the economic idea that European market for the products resulting from capital in­ industry should be in a state of dependency with vestment abroad. Another type of guarantee will regard to United States economy in American im­ have to be found, for example, against expropria­ perialistic plans. The prospects of western Euro­ tion by foreign nations. The United States News pean nations, according to their own reports, are and World Report concludes that: "..• with the such that by the end of the Marshall plan the liv­ aid of such guarantees, private capital could be ing standards in these countries will be from 10 attracted back into the foreign field". to 15 per cent below pre-war levels (they will owe the banks of Wall Street a tribute of $400 million Many of the countries mainly concerned, name­ per year) and they will have a large trade deficit ly the countries of Latin America and south-east in dollars of several thousand million per year. Asia, have a long experience of colonial policy and colonial rule. Therefore, the new form of aid to Since the inauguration of the ECA the charac­ be accepted has to be built rather in the form of ter of United States foreign policy has been il­ inter-government or, preferably, international luminated by other developments. Among these credits. There is no willingness to use the United are the expansion of oversea military, naval and Nations as an agent for international credits; only air bases, increased military expenditures, the es­ vague promises to use it as a tool of United States tablishment of a western German state, the en­ technical assistance have recently been made. couragement of the western alliance, a start towards rapprochement with Franco Spain and the The long record of United States investments pressure for the North Atlantic pact. The coun- in the under-developed areas proves that it has Mr. Katz-Suchy, Polaud 69

drawn super-profits for itself in preventing in­ and will more than double the industry of this area dustrialization, has monopolized raw materials in the next twelve years. International co-opera;" and has swamped these areas with United States tion on such a scale was unheard of in capitalist manufactured goods. In accordance with these countries. traditions, the United States delegation during the meetings of the Economic Commission for Asia Before the war, tnide among the countries of and the Far East has underlined the necessity for eastern Europe was limited by the one-sided na­ developing agriculture and raw materials, while ture of the economy of most of them, which made avoiding reference to industrialization and actively them predominantly exporters of raw materials ?Pposing the establishment by the ECAFE of a and importers of finished goods. The policy of Committee of Industrial Development. It was an­ cordon sanitaire dictated by the west reduced other attempt to keep those countries as a base for trade between the Union of Soviet Socialist Re­ expansion of United States private capital, in an­ publics and such countries as Poland, Romania ticipation of the future needs for expansion. in and Hungary to negligible proportions. Today this direction. It should be added that this policy these countries are linked by a network of trade leads to an aggravation of the contradictions be­ agreements, so that while trade among the wes­ tween the United States and countries presently tern European countries is lower than before the in control of colonies; the UnitedStates plan shows war, trade among the Union of Soviet Socialist once more a determination to break through the Republics and the peoples' democracies is many closed door of the British colonies in spite of the times higher than before the war. resistance of Great Britain. In this attempt to gain mastery of the under-developed areas, the United States will have to come in conflict with its part­ Relations between the Union of Soviet Socialist ners in various pacts and blocs. Republics and, let us say, Poland are quite differ­ ent from those between the United States of It is fully recognized that the stability and de­ America and the Marshall plan countries. Thanks velopment of the world economy requires indus­ to the Union of Soviet Socialist Republics, Poland trialization of the under-developed areas. This in­ received indispensable raw materials immediately dustrialization must be planned by the countries after the liberation, and wheat after the drought, on the basis of their needs and must lead to a rise on favourable terms of payment. The task of in­ in the standard of living of the local population; dustrializing Poland had been tremendously eased in other words, it must benefit the countries con­ by the agreement, concluded early in 1948, where­ cerned and not private foreign investments. by the Union of Soviet Socialist Republics will supply $450 million of capital goods, including IV. The fact that the European situation, in a rolling mill with a capacity of 1.5 million tons spite of the lack of equilibrium, can still be reme­ of steel annually. Similar assistance was given by died and that United States policy need not result the Union of Soviet Socialist Republics to other in war, is derived from the increase of the econ­ peoples' democracies. The economic potential of omic strength of eastern Europe. This part of the the Union of Soviet Socialist Republics, creditor world, which before the war played an unimpor­ to such a great part of the world, in supplying tant role in the world economy and was patterned credits of an immediate character like grain and to ship agricultural products and raw materials to capital goods, is a milestone in the recovery of western Europe, has become an important inde­ the Union of Soviet Socialist Republics, which pendent economic factor which partly balances the through gigantic efforts, is rising from the unpre­ lack of co-ordination and the failures caused in cedented destruction it suffered to make victory western Europe by the Marshall plan. The .co­ possible. The efforts of those who have won the operation among these countries is of an entirely victory and who now have rebuilt Soviet industry different character. Consider, for example, the contribute directly to, and make possible the re­ Polish-Czechoslovak development of the Silesian­ covery and industrialization of, eastern and cen­ Moravian industrial area, which embraces all tral Europe and at the same time help the world phases of heavy industry, power and transport economy. 70 Mr. Katz-Suchy, Poland

The recent fonnation of the Council of Eco­ country of Europe by a wide margin and, at the nomic Mutual Aid gives assurance that this co­ same time, very large profits are being derived operation between the Soviet Union and other from Gennany. Incredible quantities of surplus peoples' democracies will be extended and raised products are dumped there. Gennan steel scrap to new levels of effectiveness, resulting in the which could increase the production of European strengthening of their sovereignty, the systematic industry is flowing into the United States at a rate increase of their national economy and the rise which has already reached 150,000 tons per in the prosperity of their peoples. The Council is month and is still increasing. built on the principle of equal representation and its task is the mutual exchange of economic ex­ The Economic Cooperation Act provided spe­ periences, technical aid, aid in raw materials, food, cifically for the inclusion of western Gennany in machinery, technical equipment, etc. The Council the plan. The total first-year allocation from funds of Mutual Economic Aid is an organization open of the Economic Cooperation Administration to to all European countries which are prepared to Bizonia and the French zone was approximately participate in the broad economic co-operation $500 million. In comparison with other partici­ prevailing in the Council. The Council has stated pating countries, this sum is not as large as that that "The governments of the United States, Great received by Great Britain and France, buHt should Britain and some other European countries are be noted that this figure excludes aid to Gennany virtually boycotting economic .relations with the provided under the Anny civilian occupation pro­ Union of Soviet Socialist Republics and other gramme. From January to October 1948 exports countries of the peoples' democracies because under the Army civilian supply programme aver­ these countries do not deem it fit to subordinate aged $38.1 million monthly. During the first ten their economic interests, their economic sover­ months of 1948 Germany headed the list of coun­ eignty, to the dictation of the Marshall plan", but tries with United States imports, and from January that the countries of the peoples' democracies are to October 1948 Gennany received $737.8 million, nevertheless prepared to maintain and develop which is more than one-fifth of the total exports economic relations with the capitalist countries, of the Economic Cooperation Administration to provided that they are based on equal rights and Europe. During the first quarter of operations, ap­ mutual advantages. The ever-growing economic propriations under the programme for western potential of the Union of Soviet Socialist Repub­ Germany were 100 per cent in the form of grants. lics and the other countries of the peoples' demo­ The pretence of breaking up cartels was aban­ cracies, the great resources at their disposal, the doned. The old Nazi industrialists were put back dynamism of their development and their great into the management of Ruhr industry and into perspectives for the future, constitute a guarantee the puppet government of Bizonia. They are being that in spite of the attempts to divide Europe and permitted to run it in tenns of finance and foreign to isolate one of its parts from the other, Euro­ trade, with certain limitations only. Reparations pean economy will not break down. Finally, the have been reduced with the excuse that the Mar­ western European countries will have to rely on shall plan has required Gennan assistance to other the exchange between east and west and the in­ European countries. creased trade and economic relations with eastern Europe. Thus, the economic growth of eastern The British and French Governments have pro­ Europe develops a potential guarantee of pros­ tested against the suspension of reparations under perity to the whole of Europe. section 15 F of the Economic Cooperation Act, because of considerations of security in relation v. Another feature of economic development to German industrial potential and their own need during 1948 was the clear emergence of the at­ for the plant capacity in question. By October tempt to rebuild western Germany as a centre of they finally agreed to delay removal of machinery economic power in Europe. Under the Marshall as reparations until a United States survey would plan, the United States poured huge quantities of determine whether reparations were "entirely con­ goods into Bizonia. During 1948 United States ex­ sistent with the objectives of the European Re­ ports to Germany exceeded those to any other covery Program". Mr. Katz-Suchy, Poland 71

United States policy towards rebuilding the reparations and of the dismantling of plants gives Rubr was even more alarming to western Europe the British and the French governments an oppor­ and, particularly, to France. When the American tunity strongly to resist the request presented initially by Mr. Hoffman. The divergence of views and British military governors issued an order that has arisen in this connexion between Wash­ placing the Ruhr industries in the hands of Ger­ ington and London constituted the most serious man trustees, the French National Assembly storm in Anglo-American relations encountered asked the Government to inform Britain and the by the administration of Bizonia. British opinion United States that "the French unanimously reject now is still very much concerned-as shown by re­ peated warnings in the Press - about the ten­ this policy". dency existing in the United States to encourage the raising of the authorized level of German Among the nineteen Marshall Plan countries in heavy industries above the yearly maximum of Europe, western Germany alone shows a steady 10.7 million tons fixed last November. This level increase in production based on United States -as commented upon in London-corresponds exactly to the figure for 1936, i.e., to the year grants, the exploitation of the German working when German rearmament was already in full class and the artificial monetary reform. By the swing." end of 1948, German production of coa: was 80 per cent higher than in 1946, while the increase Of course, the above-described tendency has in steel production was threefold. The general nothing in common with the reconstruction of index of production for western Germany in Oc­ German economy as a part of the reconstruction tober 1948 was 83 per cent higher than in the of Europe, nor with the needs of other countries; previous year, while in the other Marshall plan it is not accompanied by political and social re­ countries the increase was only 14 per cent. That forms which would guarantee the peaceful char­ shows that our assertion that the Marshall plan is acter of future Germany. The real menace is not aimed, among others, at ,reconstructing Germany so much the revival of German industry, which at high cost to other European nations, is entirely could be a constructive programme if it were used justified. for the benefit of the people of Europe as a whole. What we are witnessing today is an attempt by The concentration of industrial productive the United States to create in the centre of Europe power in Germany, in addition to its economic an economic base which could be used as an in­ implications, has far-reaching political conse­ strument for the economic dictatorship of the quences. The insistence upon full restoration of United States over Europe. The real danger lies industrial capacity, coupled with discriminatory in United States control of the German economy, economic policy, is therefore fraught with danger. of German industry, of the war reservoir-the Reconstruction in that area cannot be regarded Ruhr. as a purely economic programme. It involves many other considerations and, in particular, that of Behind the powerful installations of the Krupp the future security of Germany's neighbours. The munitions works, still intact, stands the shadow of decision taken at Potsdam that priority should be the Wall Street financiers who wish to run Ger­ given to war-devastated countries was not only to many for their own profit, their own war plans. redress the uneven economic development in pre­ The Chase National Bank has opened two war Europe, but also to prevent the rise of a branches in Bizonia. Officials of General Motors situation similar to that in 1914, and in 1939. have resumed control of the Adam Opel works. No wonder that United States action in Germany Ford has resumed operations in Cologne. Ameri­ caused considerable concern in the western Euro­ can and British oil refineries are back in the hands pean countries. The Paris right-wing newspaper of their masters. American owners of the Hugo Le Figaro said on 5. November 1948, Stinnes industries are planning to increase their share of the Rubr coal. Thus Bizonia is bemg "Does not western policy aimed at German made into an American island in Europe, a van­ reconstruction in the framework of the Marshall tage point from which Wall Street can exercise plan contain serious danger? ...'It is no longer a secret that the agreement in principle which was economic and military domination over western reached last week on the delicate problem of Europe. 72 Mr. Katz-Suchy, Poland

VI. The year 1948 was marked by the appli­ with the military security of the United States or cation of a unilateral embargo by the United of any other country. It is a policy of hampering States on exports to the Union of Soviet Socialist the economic progress of one part of the world Republics and other peoples' democracies. This and using economic means as a weapon of sub­ is the culmination of the economic warfare against jugation. socialism conducted by the United States since the end of the Second World War. This policy of economic aggression is a clear violation of the Charter of the United Nations It was not enough that the United States forced which speaks of friendly relations among nations the termination of the United Nations Relief and and, in particular, about economic relations Rehabilitation Administration before its task of among them. The Charter stresses the fact that post-war relief was completed, nor that the these relations should be based on the principle American bankers in charge of the International of equality of rights and self-determination of Bank for Reconstruction and Development braz­ peoples. In addition, it is a violation of the Gen­ enly flouted the agreed purposes of that institu­ eral Assembly's resolution concerning the use of tion to give priority in aid to countries most relief supplies as a political weapon. The economic ravaged by war and occupation and bluntly re­ policy of the United States is even a violation of fused loans to Poland and Czechoslovakia. article I of the General Agreement on Tariffs and Trade of 1947 which the United States has With increasing fervour the United States Gov­ strongly advocated. ernment has been refusing export licences for goods ordered, and in many cases ah'eady paid for, by Poland and Czechoslovakia. At first the The United States Government is not content lame excuse was given that these goods were in with the introduction of its own licensing system short supply and had to be saved for friends of and tries obstinately to extend these discrimina­ the United States. But as more and more types of tory measures to other countries which have nor­ goods became surplus in the United States, this mal trade relations with eastern and central excuse became ludicrous. A new excuse, there­ Europe, as signatories to duly concluded bilateral fore, was invented, that these countries repre­ trade agreements. The provisions of section 117, sented a military threat to the United States and paragraph d of the Economic Cooperation Act of that the embargo was designed to prevent goods 1948, which constitutt <; the basis of the so-called of military value from reaching eastern Europe. "European", so-called "Recovery Program", gives These allegations were made in spite of the fact the administrator of the Marshall plan the right that Czechoslovakia, Poland and the Union of to prevent exports of raw materials and. semi­ Soviet Socialist Republics have reduced their mili­ manufactured products to any of the participating tary budgets while. the United States and, under countries if the finished product is likely to be pressure by the United States, certain Marshall exported to any European non-participating coun­ plan countries have increased their military bud­ try. This provision makes it possible for the United gets to record peace-time levels. States to put a participating country under the obligation of following the pattern of United States The embargo practised by those advocates of export policy regarding eastern Europe. Further­ free enterprise has extended to virtually every more, to increase the pressure, the United States is commodity. You will find on the list of refusals entering into additional agreements which would such commodities as streptomycin, penicillin, cot­ have discriminatory effects on some parts of ton linters, synthetic resin, tubes for condensers, Europe. . radio lamps, needles for the textile industry, gramophone disks for recordings, and spare parts Special attention should be given in this respect for trucks supplied by UNRRA. Poland and to the report of the discussion in the United States Czechoslovakia were refused a steel rolling mill Senate Banking Committee on 3 February 1949, which had been paid for. It has become clear to concerning export controls. Replying to a ques­ everybody that this embargo has nothing to do tion by Senator Glen H. Taylor of Idaho, the Mr. Katz-Suchy, Poland 73

Director of the Industrial Division, Samuel An­ Monetary Fund that "fundamental conditions derson, stated that there exists "a list called 1 A which would make possible the abandonment of list-it is top secret-and the export of any product trade and exchange restrictions are ... entirely on it behind the iron curtain is prohibited". Mr. absent today in most of the world". As a conclusion, Anderson did not identify the products on this the report lacks an analysis of internationaltrade in list but indicated that they would be equipment the framework of the bilateral agreements, as well and materials of military importance. Replying as an analysis of the tendencies of the flow of most to the next question of Senator Taylor, as to important goods. A similar analysis which was con­ whether Great Britain, France and Italy were not tained in the report of the Economic Commission exporting such products, Mr. Anderson replied for Europe last year had a practical result in the that "negotiations have been very successful in creation of the Committee on the Development of getting cooperation of western European nations Trade of the ECE. The next session of the Econ­ to ban such shipments". omic and Social Council should have at its dis­ posal a special report concerning international The answer given by Mr. Anderson is not only trade because, without such a report, a full discus­ an additional proof that pressure is being used to sion of the world economic situation is impossible. prevent east-west trade, but it disclos~s another side of the Marshall plan. The so-called "ECA It is worth noting that while the United States agreement" concluded between the United Stiltes Government uses its control of western German and the participating countries, in the General transport facilities to hamper trade between Po­ Undertakings, article II, defines the aims of the land and Czechoslovakia, on the one hand, and the agreement as follows: Marshall plan countries, on the other-the Mar­ shall plan countries being pressed not to export "d. To cooperate with other participating coun­ goods to countries of eastern Europe-the volume tries in facilitating and stimulating an increasing of trade between eastern Europe and western interchange of goods and services among the par­ Europe is steadily increasing. Poland, Czecho­ . ticipating countries and with other countries, and in reducing public and private values to trade slovakia and the Union of Soviet Socialist Re­ amongst themselves, and with other countries." publics have concluded a series of trade agree­ ments with such countries as Sweden, the United Mr. Anderson in answer makes it clear that Kingdom and the Netherlands. Poland is main­ apart from the official text of the agreement, there taining economic relations with forty-two coun­ are some secret protocols to it concerning clauses tries and has recently concluded several new trade contrary to the official text. These secret clauses agreements, including the five-year trade agree­ not only limit the sovereignty of the Marshall plan ment with Great Britain. Polish coal is fast re­ countries, but are aimed at retarding the de­ placing high-priced United States coal in western velopment of international trade. European markets and more than 60 per cent of Poland's foreign trade is with the capitalist coun­ Poland has introduced the programme to the tries. The policy of preventing this trade was United Nations General Assembly and has raised doomed to failure by the economic logic it tried the problem because of the concern over its in­ to contravene. fluence on trade in general, and on general re­ covery-because the policy of discrimination It is only by expanding trade with eastern Eu­ against the countries of eastern Europe, while in­ rope thai the countries of western Europe can effective in eastern Europe-the best proof of obtain independence of the dollar and can adjust which can be found in our production indices-is their national economy to the requirements and harmful to Europe as a whole and is retarding needs of their countries. This tendency was world trade. strongly shown in the resolutions of the Committee on Development of Trade of the Economic Com­ The report of the Department of Economic mission for Europe now meeting in Geneva. The Affairs does not give a full picture of this situation effort to find support for the discriminatory policy in trade. It quotes the report of the International was rejected and a resolution fostering the de- 74 Mr. Katz-Suchy, Poland

velopment of east-west trade was adopted as a Despite the fact that production in the United victory of the sound European mind. States is above the pre-war level, the character­ istic feature of the present economic situation in The European economic reporter of The New the United States is instability. Every day, signs York Times, Mr. M. L. Hoffman, in a recent of economic decline multiply in the United States. dispatch from Geneva, marvelled at the extent of An increasing trend in unemployment in effect the assistance given western European recovery since October 1948 attained important dimensions by the exports from Czechoslovakia, Hungary, in January 1949. According to the United States Poland and the Soviet Union. He commented that Census Bureau report of January 1949 (table 3) if an observer from another planet observed these there are now 2,600,064 unemployed, compared trade relations without reading political speeches, with 1,642,000 in October 1948. The Commis­ he would conclude that the eastern European sioner of Labor, Ewan Clague, was reported as countries "had a great interest in seeing the Mar­ estimating the current unemployment at 3 million shall plan succeed". Mr. Hoffman fails to realize persons. During the past few months the number that eastern European export to western Europe of workers receiving unemployment insurance has and eastern European opposition to the Marshall increased about 50 per cent. In addition, many plan are fully consistent. The countries of social­ workers have been placed on part time. In Janu­ ist planned economy, which have a vital interest ary 1949, 5 million people worked from 15 to in European and world recovery, know that that 34 hours; 1.8 million worked 1 to 14 hours a recovery requires the increased exchange between week; and 1.9 million were holding jobs, but not western and eastern Europe which is being ham­ working. pered. by the Marshall plan. Such trade is ob­ viously of benefit to eastern and western Europe, Industrial production began to decline in De­ but it cannot be one-sided. There is a limit beyond cember and was no higher in that month than in which eastern European countries may not be the same month in 1947. According to an article able to continue to export to western Europe with­ in TheNew York Times of 30 January 1949, Eu­ out obtaining fair access to the supplies of west­ gene Grace, Chairman of the Bethlehem Steel ern European countries. Corporation, said: "There isn't any question but that there is a softening in many lines for steel. The attempt to enforce an embargo against the The household goods lines are filled to the gun­ Union of Soviet Socialist Republics, after the wales. There have even been some important can­ First World War, ended in failure. The attempts cellations of steel orders recently in both the capi­ to enforce an embargo against the Union of Soviet tal goods and the consumer goods fields." The Socialist Republics and other peoples' democra­ Journal of Commerce of 15 February 1949, notes cies after the Second World War will fail even that: "Commercial and industrial failures rose faster and more completely, and the main losers 32.4 per cent to 192 in the week ended February will be those who put this embargo in practice. 10, reaching the highest level since June 1942, Dun and Bradstreet, Inc., reported yesterday. For VII. Another main feature of economic de­ the comparable weeks in 1948 and 1947 they velopment during 1948 was the maturing of a new totaled respectively 128 and 45." The Federal economic crisis in the capitalist world. This is Reserve Board notes a declining tendency in trade only indirectly noted, and only in terms of certain as indicated by department store sales which for symptoms, in the report of the E90nomic Depart­ the four weeks ending 12 February were 2 per ment of the United Nations. The report mentions cent lower than in the corresponding period a the "levelling off" and the "greater than normal year ago. The index of construction contracts seasonal" decline of production in the third quar­ awarded, with 1923-25 as 100, has declined from ter of 1948. In general, the economy of the capi­ 197 in December 1947 and 205 in July 1948, to talist countries at present is characterized.by gen­ 183 in December 1948. eral instability, more acute inequality of develop­ ment and profound economic differences among The export boom we witnessed after the war the various countries. reflected the abnormal trade relationship growing Mr. Katz-Suchy, Poland 75

out of the Second WorId War and the lagging In addition, Government war spending does not post-war revival of production in Great Britain result in the creation of real social values, but rep­ and western Europe. The huge backlog of demand resents a drain on the economy. Through this built up during the war was seen as an economic spending an increased proportion of the national reservoir offvring the promise of long-sustained product is withdrawn from social usefulness and prosperity. The removal of two main competitors, therefore cannot be considered an increase of the Germany and Japan, has served to increase the national income. Post-war prosperity manoeuvres exports of the United States. It has not, however, on a tight-rope between economic depression and prevented the culmination of the elements of total war production. crisis. It is conceivable, perhaps, that such drastic It is not yet certain whether the fluctuations are measures can keep the economy of the United merely a temporary adjustment, a readjustment, a States functioning after a fashionbut at the same recession, a disinflation or the beginning of a time it reflects upon the capitalist system and is an serious decline. In United States business circles, admission that the system is losing its social reason however, recent trends are regarded as a sign of for existence. the vulnerability of the United States economy and, at least, as a portent of a severe economic Any decline in business in the United States, crisis in the future. The remedies which are being whether one calls it a crisis Or a depression or a considered are in the restoration of war economy. readjustment, would have repercussions on the economy of the countries of the Marshal plan. This A large section of the United States national already has been noted in last year's report which economy is already devoted to war production and stated, on page 3, that "it is feared ... that any growing war economy is hastening the concentra-' serious declines of production, employment and tion of monopoly power towards a level that could income in the United States may have devastating only be found previously in a totalitarian garrison deflationary effects on the economies of other parts state. In the fiscal year from 1 July 1947 to 30 of the world". For comparison, we may recall'the June 1948, over $14,000 million, or 34 per cent situation in 1920 after the First World War. At of the Federal budget, was allocated for military that time, while the countries of western Europe spending, not counting veteran benefits and other were not yet fully recovered from the physical obligations growing out of the Second World War. disruption of the war, the crisis of over-production Current budget expenditures are running at about which broke out in the United States caused a the same rate. In the coming year, direct military decline of 22 per cent in the industrial production spending is expected to reach $15,000 million and, of ten leading capitalist countries of Europe. together with other expenditure of a military na­ ture, will reach $20,000 million to $25,000 Today the physical after-effects of the Second million. World War are almost completely overcome in the countries of western Europe; these countries are These military expenditures and exports nour­ tied to the United States by the Marshall plan with ished by Government grants, which together now financial and economic bonds much stronger than form more than 15 per cent of the national in­ those which existed in 1920. Any economic crisis come, have served to sustain the post-war boom in the United States, therefore, may strike with temporarily. War economy, however, cannot as­ full force those countries which are bound to the sure lasting prosperity. One of the factors is the American economy. The effects of such a crisis on extremely high productive capacity already in ex­ the countries of the people's democracies will be istence as well as the huge mass of armaments on secondary in character; the main course of dy­ hand or being produced. The basis of the new war namic industrial and agricultural growth will not economy of "remobilization" is not like it was in be affected. 1940 and 1941, when productive capacity was half of what it is now and entire industries had to These are some of the salient problems of world be built or equipped. economy today. It is not possible, in such a brief 76 Mr. Hakim, Lebanon

analysis, to cover all the important problems or of the Economic and Social Council as an instru­ even to cover exhaustively the problems touched ment for raising the living standards of the peoples upon. The report shows clearly that there are two of the world. alternatives before the world and especially before western Europe, because it is Europe which de­ termines world economic problems. Mr. HAKIM, Lebanon I wish first of all to congratulate the Secretary­ There is the alternative to counter the economic General and his staff on the excellent report which difficulties with more armaments, with more mili­ they have presented to the Council under the title tary alliances, with the North Atlantic Pact, with Major Economic Changes in 1948. The critical attacks against colonies, with more concessions to remarks which I am going to make about it are not foreign capital, with the breaking off of economic meant to detract from its value and accomplish­ relations with eastern Europe and intensified war ments. For one thing, as Mr. Owen tells us in the threats. The other alternative is to take the road preface, the report is only meant to give us a pre­ of independent economic development. This liminary review of the important economic de­ means freedom to determine the economic policy velopments ~hich occurred in 1948. I recognize of a country according to its own national needs; also that it is still perhaps too early, since the first it means freedom from the practices of monopoly report issued by the Secretariat, to give a full capitalism; freedom from being affected by econ­ review of the world economic situation. However, omic declines or repercussions in other countries; and in spite of my full appreciation of the facts freedom to carry out historically and socially and analyses which are presented to us, I wish to necessary reforms. Experience shows that even make the following critical observations regarding military aid falls short of arresting historically the report before us. necessary reforms or of keeping outlived systems working. This alternative involves co-operation First it lacks a general interpretation of the within Europe, a vast expansion of trade between changes and trends that are taking place in the eastern and western Europe, reasonable repara­ world economic situation. I heartily agree with the tions from Germany, reduced military budgets and distinguished representative of the United States higher living standards for the working people of on the need for a more thorough interpretation of Europe. This alternative means a Europe with a the complex figures, facts and analyses contained balanced economy which will beneficially influence in the report. the economy of other parts of the world and, in particular, the under-developed areas and will Secondly, the report is not truly world-wide in secure a peaceful development towards a higher scope. Its main emphasis is on developments in standard of living. A realistic approach to world North America and western Europe. Less atten­ problems directs one to differentiate between sound tion is given to the changes taking place in eastern and unsound political and economic phenomena; Europe, Latin America, Asia and Africa, and the the sound ones are in a position to develop while problems to which they are giving rise. The most the unsound ones,created artificially to serve the important reference made to the Middle East re­ benefit of certain countries or classes, will finally lates to the production of petroleum which, how­ disappear. We look towards the future with great ever, is of basic importance to western Europe and optimism. is, except for its location in the Middle East, an American and west European industry. It is true The course of independent economic develop­ that the developments taking place in western ment will make possible genuine large-scale co­ Europe and in North America are great in magni­ operation, embracing socialist and capitalist coun­ tude and importance, but this should not make us tries for their mutual benefit. It will help to forget that the economic problem is .a world promote programmes of economic assistance con­ problem and the relations of Europe and North ducted through the United Natidns and to elim­ America with the continents where three-fourths inate political conditions for both aid and military of the world population live is of great significance, subsidies. It will permit the effective functioning not only to those continents but also to Europe Mr. Hakim, Lebanon

and North America themselves. The pattern of I shall begin by stating two propositions which economic exchange between the advanced indus­ I shall not have time to elaborate, but which are trialized countries and the under-developed coun­ basic in my analysis. tries is of vast importance to world economic stability and progress. First, viewing the economic problem as a world Third and last, the point of view of the report problem, I believe it to be true that the application is definitely that of production arid not of con­ of a given quantity of labour or capital to the sumption and the satisfaction of human wants. virgin natural resources of the under-developed The needs of the world millions, which are the countries will yield in most areas a greater return object and justification of the economic process, do than in the developed countries. The relative not constitute in the report we have before us the abundance of capital in the industrialized coun­ standpoint from which the economic picture of the tries in proportion to other factors of production world today is viewed. The report deals with the causes its productivity to be less, other things state of world business and not with the economic being equal, than its productivity in the under­ state of the peoples of the world. This may be in developed countries. Consequently, it may be said the nature of a report such as this, which has to in general that the flow of capital from the de­ deal with the realities of the world economic situa­ veloped to the under-developed countries would tion-with things as they are and not as they increase world production. should be. But I was so cheered by Mr. Thorp's reference to "food on the table, roofs over people's The second proposition is that effective demand heads" as to hope that the Economic and Social in the under-developed countries is one of the Council would give its full attention to the needs basic long-term problems of economic stability and . of the growing world population in fulfilment of progress in the advanced industrialized countries. its responsibilities under Article 55 of the Charter In other words, if the needs of the masses of of the United Nations. humanity in the under-developed countries could be transformed into effective demand, or purchas­ In my consideration of the Secretariat report, I ing power, the problem of unemployment of labour shall examine the\world economic situation which and capital in the industrialized countries would it portrays, from the point of view of three-fourths be largely solved. The pattern of the relationship of the world population who inhabit the under­ between the developed and the under-developed developed areas of the globe. We, of the Lebanese countries is therefore of great importance to econ­ delegation, have consistently taken this point of omic progress, not only in the latter but also in view and it is natural that I should add. my voice the former group of countries. to the eloquent yoices which have preceded me, particularly, those of the distinguished delegates of Chile, Brazil, Turkey and India, on behalf of the Having made these two propositions, I will now under-developed countries of the world. In con­ tum to the report to examine what the basic formity with the subject now before the Council, economic situation in the developed and under­ my approach will be analytical and not now con­ developed countries has been in 1948, and what cerned with proposals for action which properly relation has developed and is expected to develop fall under items 17 and 18 of the agenda. I shall between them. concentrate mainly on the relation between the industrialized, developed countries and the under­ In the industrialized countries-in the United developed countries as one aspect and part of a States, in Canada and in Europe-industrial pro­ balanced world economy, the conception of which duction has been on a very high level, compared was so brilliantly presented to us by the distin­ to pre-war years. The report says, on page 3, guished representative of Denmark on the first day "According to preliminary estimates, the rate of of this debate. I agree fully with him that this industrial production for the world as a whole dur­ objective should be considered in the dynamic ing the first nine months of 1948 reached a level sense of balanced progress towards international equal to about 132 per cent of that of 1937. This economic equilibrium. level represented an increase of 11 per cent over 78 M.r. Hakim, Lebanon

the corresponding period of 1947." In the United The advance in western industrial production, States and Europe, industrial activity and em­ however, remains the most remarkable feature of ployment reached a record peak in 1948. If we the world economic situation in 1948. It is abun­ distinguish between investment goods industries dantly clear from the facts and statistics given in and consumer goods industries, we find that the the report, not only that industrial reconstruction main gains were made in investment goods indus­ in Europe is well under way, but also that indus­ tries. The report states, on page 5, "Production trial power in both Europe and America is much of investment goods industries during 1948, rela­ greater than it was before the war. It is true that tive to pre-war output, ... continued at a level there has been a definite shift of this power to the considerably above that of general industrial ac­ United States but, taking the developed countries tivity", and further,"Consumer goods industries, together, their industrial capacity has grown to on the other l;tand, tended to operate at a level con­ such extent that they will be able, not only to siderably below the average of industry as a whole meet a greater demand for consumer goods in in most countries..." their own countries, but also to export in future years a vastly greater quantity of manufactured Moreover, the report tells us that "Emphasis consumer goods to the under-developed countries during 1948 continued to be placed on the produc­ of the world. tion of heavy industries, in order to meet the high requirements for investment goods." Iron and How has this remarkable growth of western in­ steel production more than doubled in the United dustrial power been achieved? It has been achieved States and Canada, compared to pre-war years, by greater capital accumulation and investment, and it was higher than pre-war in all other coun­ in most cases at the expense of consumption. In tries except Germany, Italy and Japan. The same the United States, in spite of increased consump­ is generally true of the engineering and chemical tion, a greater part of national income was spent industries. On page 6, the report says, "The record on fixed investment. In spite of the high level of 1948 output of machinery in the United States investment in the United States in 1946 and 1947, was 2.77 times the pie-war rate." it was still higher in 1948, even excluding the investment made possible in western Europe under the European Recovery Program. The high level Even in agricultural production, the advanced of effective demand for consumer goods after the western countries have made important advances. war ended, together with the high rate of invest­ The production of foodstuffs in the United States ment, have enabled the United States economy in and Canada rose from 18 per cent of the world 1948 to achieve the highest records of production total in the years 1934 to 1938 to 25 per cent in it has ever reached. 1947/48 and their exports rose from 18 per cent to 46 per cent. The share of Europe (excluding Now let us look at the situation in the under­ the Union of Soviet Socialist Republics) in world developed countries. In spite of the lack of facts food production dropped from a pre-war 33 per and statistics about them in the report, certain cent to 25 per cent in 1947/48 and its production conclusions emerge clearly. Although a higher in the latter year was 26 per cent below pre-war. level of industrial production was maintained, compared to pre-war years, we are told on page 4 The use of tractors and farm machinery in that "in several of these [under-developed] coun­ European agriculture is being expanded. The pro­ tries, there is recent evidence of some slackening duction of tractors, both in the United States and of industrial activity since the peak of building in the United Kingdom, has been greatly increased activity was reached". We are also told that this and their exports will go mainly to western Eu­ relatively limited industrial production was the rope. The report states, on page 12, "It appears result of an expansion of output to meet war-time that exports of tractors in 1948 may be nearly requirements. In most cases this was done with one-third higher than in 1947; the largest share the intensive use of old equipment, which now of these exports is likely to go to western European needs replacement and modernization. But the re­ countries under the European Recovery Program." port tells us that this cannot be done. I quote from Mr. HaIcim, Lebanon 79

page 6: "The inability of the under-developed tivity and low standards of living of their rural countries to obtain adequate imports of machinery populations? The industrialized countries, by great and equipment from countries which export capital efforts and frequently with great sacrifices, have goods continued, however, to retard their pro­ been not only reconstructing. their war-damaged grammes for replacing equipment and expanding industries but also building up an expanding and plants." powerful industrial economy. They have been able to do this by maintaining a high rate of capital In agriculture, the situation of the under­ accumulation and investment. But how will they developed countries seems to be relatively worse maintain this high rate after their reconstruction is than before the war. The share of the Far East in completed and the needs of their consumers met? world exports of food dropped from 18 per cent in the pre-war period, 1934 to 1938, to only 4 In the nineteenth century an expanding indus­ per cent in 1947/48. The under-developed coun­ trial economy in western Europe maintained its tries have not been able to improve their methods growth by the progressive development and indus­ of cultivation nor to increase agricultural produc­ trialization, first of backward regions in their own tivity by mechanization and improved agricultural countries, and later of other European countries techniques. They have not been able to import and oversea territories, as the distinguished dele­ tractors and farm machinery from the industrial­ gate of France so eloquently explained to us the ized countries to any large extent. other day. Mr. Mendez-France showed us how an It seems clear that the under-developed coun­ expanding economy was made possible by the pro­ tries are back in the inferior and weak position in gressive industrialization of Europe and North which they were before the war. In facttheir rela­ America and even by a certain development of tive situation compared to the industrialized coun­ colonial or semi-colonial territories. tries is worse than it was before the war. The manufacturing industries which they developed on I submit that the maintenance of a high level of a small scale during the war are threatened by investment cannot be achieved solely by a high the greater competitive efficiency of the advanced level of effective demand in the industrialized countries, which are already intensifying their drive countries themselves but must also be aided by for exports of manufactured consumer goods. In raising the standards of living in the under­ agriculture, the under-developed countries are still developed countries and by increasing the effec­ hampered by archaic methods of cultivation and tive demand of their peoples. This increase in are losing even their comparative advantage in effective demand must depend in the coming years foreign trade to the mechanized agriculture of the on the large-scale movement of capital to, and its advanced countries. investment in, the under-developed countries of the world, in order to develop their resources and What picture of world economy and world econ­ their productivity. Such capital investment must omic relations do we get from this brief survey be made, not only in agriculture, but also in of recent post-war developments in the advanced manufacturing industry, in transportation and in countries, on the one hand, and in the under­ all the other elements of a balanced modern econ­ developed countries, on the other? Are we going omy. Finally, such investments cannot be made to return to the pre-war pattern of relations be­ by private capital alone without the participation tween the industrialized countries on the one hand and assistance of governments on a substantial and the under-developed countries on the other, scale. a pattern which the distinguished delegate of Chile so clearly exposed to us? Are we going to return The basic question which faces the world today to a system of world economic exchange in which is whether an expanding world economy can be the industrialized countries of North America and maintained by the progressive development and western Europe supply the countries of Latin industrialization of the under-developed countries America, Asia and Africa with manufactured con­ of the world. This requires the conception and sumption goods in exchange for raw materials and fulfilment of a new pattern of balanced world foodstuffs produced on the basis of low produc- economy, based on mutual confidence and co- 80 Mr. Fernandez-Stoll, Pern

operation, which would meet the menace of severe operation. To meet this challenge "boldness" of periodic depressions in the industrialized coun­ design is certainly required but also, and above tries at the same time as it gradually does away all, thorough planning and large-scale action. Will with the permanent age-old depression which the Economic and Social Council show the way paralyses the under-developed countries. This con­ and give the lead so that action may not be too stitutes a great challenge to the industrialized little and too late? That is the question to which countries and to the spirit of world economic co- an anxious and troubled world expects the answer.

24 FEBRUARY 1949, MORNING MEETING

Mr. FERNANDEZ-STOLL, Pern Peru, for example, is making strenuous efforts (translated from Spanish) to produce iron and steel, in order to set up one of the largest electric power stations in the South The Peruvian delegation is very glad indeed to Pacific area, to expand manufacturing industry and take part in debates of this kind, for which the to exploit the country's great natural wealth; This Economic and Social Council exists; they are much task has the same historical, social and economic more important than any ill-starred political dis­ importance for us as the opening up of the Far cussions. West had for the United States, or the nationaliza­ tion of the coal mines may have for the United The United Kingdom representative has made Kingdom. A considerable part of this work has the excellent suggestion that half-way through this been done in the past few years, but this progress year we should make a fresh survey of the world has not been reflected in the statistics compiled by economic situation in 1948. The Secretariat has the Secretariat, whose standards are designed for done an excellent job, which deserves praise and assessing countries of mature growth. Since what congratulations and which certainly will be even is true for us applies to many other countries as better next July. By that time it will have been well, it is also desirable to study countries with able to fill certain gaps which have already been respect to the qualitative importance of their de­ pointed out by other representatives. We have, in­ velopment and to inquire into the real meaning of deed, missed an attempt to interpret the phe­ the growth of these young, or new, economic sys­ nomena described in the report, to indicate their tems, which may in the future play an important direction or to predict their results. We must not part in the world economy. forget that the Council's chief duty is preventive, as distinct from that of the other principal organs of the United Nations. Moreover, it would be From the same point of view, the report hails better to have more and better descriptive docu­ with satisfaction the appearance of the first signs mentary matter, covering more countries and of "disinflation", and so gives the impression that wider experience, in order to maintain the world­ we are leaving the danger of inflation behind us. wide scope of the Council's action. Data on im­ In some circumstances inflation takes characteris­ portant areas are missing and we lack the basis tic forms which have not been studied. In many for judging the historical process in these areas. Latin-American countries the means of payment are not nearly so extensive as they should be, con­ The Peruvian delegation notes that the report sidering the size of the population, a large part of has been prepared from the point of view of coun­ which is economically inactive. The inflation of tries with a surplus economy. It gives information currency and of prices is chiefly concentrated in on countries in various stages of development, but the cities, where it causes serious maladjustments, it ignores the fact that these stages may not always while the rest of the country remains unaffected. be represented by simple quantitative production This kind of national inflation is very different curves; and in many cases there are essential differ­ from that suffered by countries with a surplus ences of economic quality which cannot be as­ economy. We should like to see such distinctions sessed from one and the same standpoint. considered in any future report. Mr. Fernandez~Stoll, Peru 81

Various other, factors of the same kind are How can our balance of payments be judged worthy of serious consideration. It is an indis­ by the same standards as that of other countries? putable principle that the effects of economic and The equilibrium in our balance of payments and social conditions are closely related and that they trade balances can be established only at the cost should therefore be considered together. Any at­ of a large and sustained effort, and not by a tem­ tempt to consider them in isolation leads to absurd porary ef):ort or an adaptation to circumstances, and highly dangerous conclusions. Thus, the which are the conventional methods of readjust­ simple fact of social progress may appear to give ment. rise to serious economic drawbacks if care is not taken to keep in mind the logical connexion be­ We in Peru are proud to proclaim that we are tween the two concepts. The achievement of fun­ adhering tenaciously to this hard way, with results damental social benefits at this moment represents, that are ever more substantial and fruitful, thanks entirely to our own efforts. My country, during the in countries like mine, a substantial historical past twenty years,has not received any financial change for considerable masses of the population. help from the outside, except the very meagre Such forward steps may actually transform their amount shown in the report. Nevertheless, Peru standard of living,' which may show a rise in a is able and willing to resume payments on the very few decades, such as in other countries has foreign debt on satisfactory terms and is providing taken several centuries. Man has certain minimum foreign concerns with the necessary currency to requirements for civilized existence, such as suffi­ pay both dividends and capital amounts outside cient food, healthful housing, medical care, edu­ the country. This heavy task could have been made cation and a variety of consumer goods to meet lighter, this slow development hastened, by timely industrial needs. These necessities are not tem­ and sufficient help from international financial porary phenomena, nor symptoms of a transitory bodies. We hope that they will treat us more under­ crisis of want or shortage; in our case, they con­ standingly and efficaciously in the future. stitute the essence of the normal development of the people o~ young countries-in fact, their very We cannot hope for economic miracles in Peru, existence. nor can we skip over historic eras. We have to Of course, for mos,t of the span of our genera­ follow step by step, as quicldy as possible, the tion these necessities of life will have to be met successive stages of social evolution. The deficit by imports, unless industrialization takes place in our national life can be offset-the needs for quickly. It would be inhuman and anti-social to our growth can be met-only by invested capital deny the masses of the population the right to a and by supplementary assistance in the form of minimum standard of civilized life. No one would credits. consider that possibility, even though a nation We are therefore greatly interested in the plans were unable to increase its production immediately which the President of the United States has an­ and drastically in order to export raw materials on nounced for new forms of economic aid to other a scale which would restore the balance of inter­ countries, and in such plans for this purpose which national trade. I need hardly add that, in any the United States delegation may disclose in the case, a substantial increase in primary production Council. Presumably these will be especially fa­ can come only from a radical improvement in vourable toLatin America, in view of the strength antiquated ways of life and work. of the tradition of the "Good Neighbour" policy. In countries of this land, social and economic We are sincerely grateful in advance. We hope equilibria still depend to a large extent on foreign that the plans will not be limited to the operations trade. The proceeds of such trade, as well as foreign of the existing specialized international agencies, credits and currency, in most cases in Latin but will take new forms; and that practical regional America, play the part which investments and sav­ machinery, more direct and more efficient, will be ings play in surplus economies. The whole fabric set up. This may well be combined with existing of economics and finance, from the procuring of machinery, but should ensure that the almost com­ food to fiscal policies, is in fact woven of the plete lack of help which has been the lot of Peru threads of foreign trade. in the past will not be continued. 82 Me. Stolk, Venezuela

At the same time, it would be well to study of the sort gratuitously attributed by the Polish more thoroughly the unfettered trends of private representative. It is not too much to say that investment which might go to under-developed groundless statements of this kind not only areas with complete liberty of action and within diminish the international prestige to which our the principle of absolute freedom of enterprise. people are entitled, since their sovereignty is un­ This is the kind of co-operation which we most impaired in every case, but may do serious harm appreciate; to this we have opened our doors with to the prospects of investment in our countries by a well-founded hope in our prospects and in the describing them, for purposes of political propa- ~ ability of the average investor to develop a new ganda, as regions divided among foreign mono­ country. polies into which, if the Polish representative's statements were correct, it would be impossible The repeated references to Latin America which to enter. the Polish representative made yesterday compel me to speak a little longer. Some of his words The Peruvian delegation is glad to learn, from lend themselves to misunderstandings, which I the Secretariat's report, and from what has been feel bound to clear up. There is nothing, either said in this debate by the representatives of Bel­ express or implied, to prevent the European coun­ gium, Denmark, France and the United Kingdom, tries within the Marshall plan-or the countries of that European reconstruction is making rapid Latin America-from entering into bilateral trade progress. The delegation is happy to think that treaties for their mutual convenience, to the ex­ the ancient and valuable ties of trade between clusion of every other consideration, as the large Europe and the countries of Latin America can majority of the governments represented here are be restored. At the same time, the delegation well aware. Any government that does not know favours and supports many of the ideas of the this may see proof in the fact that a Peruvian representatives of Brazil, Chile, India, Lebanon mission is on its way to London to conclude one and Turkey, as well as the precise opinions of of such trade treaties-which have been called the representatives of Australia and New Zealand. impracticable-with the United Kingdom. It renews its warm acknowledgment of its old national friendship with the United States of I cannot tell in which phase of the rigid horo­ America, and believes that this debate will enable scope drawn by the Polish representative my the admirable efforts of that great nation, for the country's fate is to be found. I can, however, peace, prosperity and restoration of the world, assure him that there does not exist in Peru a to be crowned with success. single foreign monopoly, no matter how powerful the concern in question nor how great the profits which our land holds out. We have three large Mr. STOLK, Venezuela (translated from Spanish) petroleum companies in world competition with one another; this very competition made it pos­ The Economic and Social Council is again sible for us to amend our laws on the extraction considering the world economic situation in the of petroleum, before opening up the immense oil light of the studies and information supplied by reserves of Sechura, without having our decisions the Department of Economic Affairs of the Secre­ improperly influenced in any way. Copper pro­ tariat. The assistance given to us in our work by vides another interesting example. :Two· months this department deserves our full appreciation, ago the Supreme Court decided a case, to the owing both to the quality of the report submitted value of a hundred million dollars, between two for consideration by this Council and the wealth great United States concerns, concerning the own­ of information it contains. We therefore wish to ership of one of the largest deposits in the world. join the other representatives who, in their In the field of transport, United States capital, in speeches, have encouraged the United Nations association with Peruvian capital, is operating a experts to carry this assistance even further,' so great Peruvian international aviation concern in as to provide the Council with an adequate tech­ sharp competition with others of the same kind, nical basis for the solution of world economic without experiencing any monopolistic pressure problems. Mr. Stolk, Ven.ezuela 83

It is well to point out, however, as the report Thus the material now at the Council's disposal itself does, that this report describes only the for a discussion of the world economic situation principal factors in the major economic changes is limited. The comments that have been made or that took place in 1948 in the world supply of may later be made by members regarding the in­ foodstuffs and manufactured goods, the general formation supplied by the Secretariat, and the inflationary situation and international trade and concrete information they may produce regarding finance. economic development in their respective coun..:. tries, will provide further elements to guide the Thus, for obvious reasons, the documentation Secretariat :in its work and will amplify the ma­ prepared on this occasion by the United. Nations terial available for carrying out its studies. experts does not cover as wide a field as last year. A deep and careful analysis of the characteristics In .these circumstances, it must be recognized of the present economic situation has not been that the Economic and Social Council will be able made, but study of the situation by the Depart­ to make very little progress at this session in the ment of Economic Affairs will certainly be more proper evaluation of economic phenomena to pro­ valuable and complete if the information at its vide a basis for the co.:.ordinated action that· is disposal is ampler and more detailed. The world essential for increasing the world supply of goods economies, as has been pointed out by one of our and expanding world trade through national plans distinguished colleagues, are made up of closely and practical international measures. In view of interrelated parts. The balances and stability of the foregoing observations, our delegation gives the parts make it impossible to.separate national its full support to the suggestion made only yester­ and international aspects of economic life, and day by the distinguished representative of the urgently demand co-ordinated means for attaining United Kingdom, to the effect that the Council the conditions of well-being that are desired by in the future should postpone the substantive dis­ every nation. It follows that the collaboration of cussion on the world economic situation until its the greatest possible number of countries is essen­ session towards the middle of the year. tial, not only in order to reconcile self-determina­ tion with the highest interests of the community, Since we are nearing the end of the debate, I but also in order to provide all the necessary in­ do not wish to enter into detailed consideration formation that is a prerequisite for studying of the major economic changes that occurred in various econo1,l1ic and social factors and for enter­ 1948. That has been done most successfully, and ing on the stage of concerted general planning. with more authority than I possess, by various It is therefore desirable that many of our govern­ delegations here present. Nevertheless, I should ments should increase their co-operation with the like to mention with satisfaction the general im­ Secretariat, in order to facilitate the preparatory provement in the world economic situation during task to which I refer. The Department of Econ­ the past year, and especially the favourable omic Affairs would then be in possession of fuller changes observed in the production of foodstuffs, material for the study of the world economic situa­ owing to the large harvests during the period in tion which it is to submit to us towards the middle question. The changes revealed by the report give of this year. Moreover, the reports of the regional cause for optimism, but that is no reason for be­ economic commissions, and those relating to the lieving that the signs of prosperity are certain to economic activities of the specialized agencies, increase in the future. The high levels of produc­ will provide a mass of data that will help to make tion that have been reached must be maintained the conclusions of this study as complete as pos­ and surpassed, but it is also essential to consider sible. the necessity for attaining higher levels of con­ In addition to the report, we now have replies sumption. The demand for foodstuffs and manu­ from the International Labour Organisation and factured goods tends to increase with the growth from various governments and specialized agencies of population and the increase of purchasing regarding the national and international action power. Moreover, the Economic and Social Coun­ required to attain conditions of full employment cil should, through its regional commissions and and economic stability. through the various specialized agencies, give 84 Mr. Stalk, Venezuela

direct and preferential attention to finding means devastated areas. I must likewise offer our con­ for the adequate conservation of surplus produc­ gratulations for the results obtained in Europe tion, in order that such surpluses may not threaten by other international agreements for the promo­ production itself, with resultant depression and tion of trade among various European countries. unemployment, but may somehow be used to Trade between the east and the west in the old satisfy the needs of the markets which, through world has been the subject of many comments, lack of foreign exchange, transport difficulties or since it represents a firm foundation for obtaining other special economic circumstances, are unable economic improvement and for discrediting poli­ to acquire them at reasonable prices. tical attitudes that prevent the resurgence of the mutual confidence which is an essential basis for It should also be noted that the disequilibrium international co-operation and which will ensure in the balance of payments in many countries and the peace and security we all desire. The agree­ the general persistence of excessive inflation in ment recently reached among the members of vast areas are still obstructing progress towards the Economic Commission for Europe regarding economic stability. The signs of a return to nor­ the preparation of lists of.surplus manufactured mality which have recently been observed in goods and raw materials, with a view to studying various countries are not sufficient ground for the best means of exchanging them in accordance believing that the maladjustments due to these with respective economic needs, is further cause prejudicial factors are on the way to being elimi­ for satisfaction. nated. At the same time, as we have heard during these discussions, such symptoms do not appear The incomplete replacement of machinery and to be signs of depression. industrial equipment worn out during the war; the fundamental lack of economic development; Like other representatives who spoke previously the prolonged inflation brought about by the de­ -and especially the representative of France-our mand for consumer goods and investments of all delegation is inclined to believe that it is essen­ kinds; the loss of certain markets; the decrease or tially on a basis of expansion rather than contrac­ exhaustion of reserves of foreign currency; the tion· that the world economy should develop in cessation of imports of European capital which the future. We must not, of course, lose sight of has been only partly compensated by an increase the special position of .certain under-developed in loans granted by the Export-Import Bank, the countries which are obliged to resort to systems United States Government and private institutions; of protection in order to safeguard the existence the small part played in the processing and indus­ and development of their budding industries. trialization of its raw materials-;such are some of the predominating factors which operate in the majority of Latin-American countries to hamper There can be no doubt that progress towards the implementation of their plans for achieving expansion was made in 1948. A proof of this is the degree of development and economic inde­ the present economic situation in Europe, many pendence they desire. If to this be added the aspects of which are favourable when compared urgent need to improve the social condition of with 1947. The beneficial influence of the work the population and to encourage immigration, a of the Economic Cooperation Administration of general idea will be gained as to why our coun­ the United States has made itself felt, and my tries are demanding appropriate international delegation wishes to express its special satisfaction action in accordance with the principle of econ­ at the success which is crowning this great work of omic interdependence upon which modern policies assistance and reconstruction. Nevertheless, it is must be based. regrettable that in planning this work account was not taken of the position of many under-developed Latin-American countries, with a view to co­ With regard to my country in particular, ordinating its purposes with the economic im­ taking into account the special characteristics of provement of these countries and effectively our economy, we haa a fair degree of success in incorporating them in the task of restoring war- the battle to increase production in 1948. Mr. Stolk, Venezuela 85

As you know, our chief product is petroleum. need this raw material, but which are obliged to Venezuela's economic structure is at present based restrict its use by rationing and the limitation of upon this commodity. Production has been in­ imports. This phenomenon appears to be closely creasing steadily in the past few years; 323 million linked, as in the case of other countries which barrels were produced in 1945, 388 million in have not succeeded in increasing production, with 1946, 435 million in 1947 and 475 million in the lack of equilibrium in international balances 1948. But if we compare these figures with the of payment. low levels still obtaining in coffee and cocoa pro­ duction, and if we take into account the small There is another aspect of the petroleum in­ output of other goods, we must conclude that ours dustry to which I should like to refer. The enter­ is a single-product economy. Revenue from petro­ prises in this industry, although to a large extent leum, including income tax, accounted for about financed by foreign investments, operate in our 50 per cent of the total Venezuelan budget by country subject to our laws, employ Venezuelan the middle of 1948. The amount of foreign cur­ labour and have a full consciousness of their re­ rency earned by the petroleum industry has risen sponsibilities to the public. Hence the relations in proportion to its development and the State's between these undertakings and the Government increased share in its operation, until it reached have been developed on the basis of mutual re­ $442.5 million in 1947. But this situation, in tum, spect for the rights of each and with full recogni­ has a direct influence on the cost of domestic tion of the importance of their relations to the production, because it means that our currency problems and needs of the country. The country's commands a high rate of exchange. Thisconsti­ participation in these industries has now reached tutes a serious obstacle to the export of agricultural the level of 50 per cent of the profits. products. The dominating position of the petro­ With a view to making better use of the re­ leum industry has also resulted in a general rise sources of the petroleum industry, the Venezuelan in domestic prices, which has meant a falling off Development Corporation has been operating for in various branches of agricultural production for some time-has made important studies and has domestic and foreign consumption, and has trans­ engaged in large-scale projects in this connexion. formed Venezuela from a country which exports It has also granted credits to producers of various cattle and other products to one which imports commodities, such as rice, maize, oil-seeds, fruit frozen meat and other articles to meet the needs sugars, meat, milk, fish, textiles, building mate­ of the population. rials and So on. It has also made direct investments in the production of these commodities, particu­ From these general data it is evident that the larly in the sugar and fishing industries. The basic problem confronting my country is that of State's contribution to the Corporation's budget diversifying its economy to avoid dependence upon amounted to 90 million bolivares in 1948. The a mineral product which may become exhausted, activities of the National Economic Council, the replaced by some other source of energy or be Agricultural and Livestock Bank and the Produc­ exploited in smaller quantities. In the latter con­ tion Development Board; the improvement in nexion it may be observed, in relation to the living conditions of workers by the construction general economic situation, that Venezuela, de­ of suitable dwellings, which is being carried out spite its interest in increasing petroleum produc­ by the Workers' Bank; and the help given in tion to bring about the diversification to which I appropriate fields by the Industrial Bank-these have referred and to attain a higher standard of clearly show my country's determination to living·for the population, has recently witnessed achieve a higher level of economic activity. a decline in production to a degree which has not seriously affected Venezuelan economy, but One industry which seems to have a brilliant which indicates that there is some maladjustment future in Venezuela is the iron industry. The date in the international economic situation. This de­ that the Iron Mines Company had fixed in its cline cannot be attributed to a falling off in the development programme, to begin exports, had demand for the commodity, for it would be easy to be deferred, but it is hoped that by the second to make a long list of countries which urgently half of the present year, exports of ore to the blast 26 Mr. Stalk, Venezuela

furnaces of Espaus Point, near Baltimore, will be international co-operation which, although limited started. The possibility of producing 3 million in area, has considerable importance. The "Grand tons of ore per year in Venezuela is being studied. Colombian" countries have in the past few years Special attention is also being paid in my country reached a new stage which goes beyond the mere to the possibility of establishing an iron-smelting signing of trade or navigation agreements. Com­ industry. The quality of our iron ore and our mercial undertakings, financed with joint capital, enormous production of petroleum gases, together have been established and the prospects for these with the favourable location of these sources of new types of joint activity appear excellent. A supply, open up hopeful prospects for this type conference held at Quito early in 1948 established of industry, once we have mastered the problem a basis for even closer collaboration among the of procuring metal for the working equipment. three countries; varied and far-reaching projects are now under consideration, amongst which the Since 1946 a change for the better has also most practicable appear to be a fleet of aircraft, been taking place in the production and consump­ a reinsurance institution and a publishing com­ tion of electricity; the same may be said of the pany, all operated by the three countries in col­ building industry, as I have already remarked in laboration. Recently the Governments of Vene­ reference to one of its aspects. The country is still, zuela and Colombia appointed a joint commission however, suffering from a considerable housing of engineers to study co-ordination of communica­ shortage; unfortunately, it is. still difficult to ac­ tions between the two countries. quire the necessary mechanical equipment to improve the building methods employed in the Another factor which renders our economic industry. The improvement in the production of expansion difficult, in· agricultural production and fish deserves special mention, The figures show in many industries, is the lack of skilled labour. that the rate of production has quadrupled, com­ This has been remedied to a certain extent by pared with 1938. The progress made in the fish immigration, of which there is a steady flow into canning industry has contributed to this; this in­ the country. More than 12,000 persons entered dustry has developed very rapidly owing to the Venezuela during the past year, but there was a advantages offered by canned goods in a country decr~ase towards the .end of that period, due, in as large as ours in relation to the size of the part, to the immediate need of finding steady population. employment in industry and agriculture for various groups of immigrants whose assimilation into the Our country is also carefully studying the prob­ population had been retarded and, in part, to the lem of high freight rates which are making im­ Government's desire to establish selective systems ports, even of the most essential commodities, so better adapted to the needs of the country. costly and difficult. For this reason the Govern­ ment has recently increased the fleet of the Vene­ The shortage of machinery for the mechaniza­ zuelan Navigation Company in order to allow that tion and development of agriculture, the wearing company to increase its coastwise trade and to out of existing equipment and the impossibility of operate services to other countries. Venezuela has replacing it or increasing it to the degree which also continued its efforts to develop the Grand the country needs, even when paying extraordi­ Colombian Merchant Marine in collaboration with narily high prices, is another factor which is hav­ Colombia and Ecuador, the other two partners. ing a serious effect on agricultural production.

As a result of this shipping policy, Venezuela Another problem which I consider important­ is hoping to develop its foreign trade and to and which makes the internal economic develop­ counteract the effect upon the economy of the ment of many countries and international co­ discriminatory practices applied by some shipping operation difficult-is the shortage of specialized combines. personnel. This is noticeable both in the higher administrative posts and in the lower grades. It Economic co-operation among neighbouring should be emphasized that at the present time, countries with common interests is an aspect of with Governments compelled to engage in many Mr. Tsarapkin, Union of Soviet Socialist Republics 87

new and in wider spheres of activity, it is impos­ In conclusion I should like to say once more, sible to separate economic from technical progress in the name of the Venezuelan delegation, how or even from merely administrative progress. For much we appreciate the work of the Department this reason I attach special importance to the of Economic Affairs of the Secretariat, and par­ continued active study by the Secretariat of pos­ ticularly that of its director, Mr. David Owen, sibilities for the early establishment of an inter­ who has honoured these discussions with his national institute of public administration, such as presence. At the same time I should like to express was approved by this Council in its resolution of our sincere wish that the Economic and Social 24 February 1948. My delegation was very pleased Council may continue effectively to carry out the to note that many other delegations were agreed important duties conferred upon it by the Charter, upon this point during the General Assembly's and may finally find an adequate way to achieve, session in Paris, and that they insisted that the through international co-operation, better stand­ United Nations should take decisive action on this ards of life and economic independence and matter. stability in all places and for all men.

24 FEBRUARY 1949, AFTERNOON MEETING Mr. TSARAPKIN, Union of Soviet Socialist The report not only gives an incorrect grouping Republics (translated from Russian) of countries with different conditions and different levels of economic development, but directly mis­ The review of the world economic situation in represents information about the Soviet Union. 1948 prepared by the Department of Economic It may be pointed out in confirmation of this that Affairs of the United Nations Secretariat contains in the table on page 4 the Union of Soviet Socialist certain information which is worthy of note. Republics is·included in the group of countries whose output in the first nine months of 1948 in­ In considering this review the delegation of the creased from 10 per cent to 25 per cent over the Union of Soviet Socialist Republics deems it es­ corresponding period of 1947. Official figures sential, first and foremost, to draw the Economic published in the Union of Soviet Socialist Re­ and Social Council's attention to the following publics, however, show thatboth for the first nine fact: the report gives an incorrect grouping of months and for the whole of 1948, the gross in­ countries and takes no account of the different dustrial production of the Soviet Union was 27 per conditions and levels of economic development, cent higher than that of 1947. thus distorting the real picture of the world econ­ omic situation. This can be seen, .above all, in Another great defect of the report is that it the fact that the economic indices collated to fails to analyse the real origins of the serious provide a description of the world economic situa­ economic difficulties facing a number of countries tion in 1948 are so presented that data relating -in particular the countries receiving "aid" under to the Union of Soviet Socialist Republics and the Marshall plan-or the causes which hinder the peoples' democracies and data relating to the industrial development in those countries. In this capitalist countries, including the defeated and connexion it is essential to point out the policy neutral countries, are all massed together. More­ of the United States of America, which is having over, information regarding countries which have a ruinous influence on the world economic situa­ attained or surpassed the pre-war level of produc­ tion by hindering normal economic relations, econ­ tion is combined with information regarding coun­ omic rehabilitation and development in the coun­ tries with stationary or retrograde economies and tries which found themselves dependent upon the with information relating to the defeated countries United States. -Germany, Japan and Italy-whose industrial pro­ duction is even lower because of the policy of Furthermore, the report does not throw ade­ certain occupying countries which are endeavour­ quate light on such problems as the deterioration ing to increase their own production at the ex­ in the material conditions of the workers (the pense of the defeated countries. existence of unemployment and its increase, and 88 Mr. Tsarapkin, Union of Soviet Socialist Republics

the fall in real wages) and, side by side with this, tional economy of the Union of Soviet Socialist the colossal increase in wealth of a small group Republics. The 1948 target for gross industrial of capitalist monopolies. production in the Union of Soviet Socialist Re­ publics was surpassed by 6 per cent in 1948; The conclusion to be drawn from all this is that output was 27 per cent higher last year than in the report contains serious deficiencies and gives 1947. a distorted picture of the world economic situation. A characteristic feature of the tremendous de­ In order to present the world economic situa­ velopment of Soviet industry is the tempo at which tion in its true light, it is necessary to analyse the production is being stepped up. In 1946 industrial fundamental differences between the economic output was 20 per cent higher than in 1945; in development of the Union of Soviet Socialist Re­ 1947 it was 22 per cent higher than in 1946; and publics and the peoples' democracies, and the in 1948 it was 27 per cent higher than in 1947. capitalist countries, taking account of the specific features and conditions of their development. I Owing to the rapid development of industrial shall dwell primarily on the· economic develop­ production the pre-war level of industrial output ment of the Union of Soviet Socialist Republics was reached in the Union of Soviet Socialist Re­ in 1948. publics by the end of 1947, and in 1948 the 1940 level of industrial output was surpassed by 18 per In discussing the further economic development cent. Thus, despite the great destruction caused of the Union of Soviet Socialist Republics in 1948, our country by the war, the Soviet people have I shall first point out that in 1948 the peoples succeeded in the three post-war years in not only of the Soviet Union achieved great successes in reaching but surpassing the pre-war level of in­ fulfilling the post-war five-year plan for the re­ dustrial output. storation and development of the economy of the Union of Soviet Socialist Republics for 194.6 to The advance in industry is being accompanied 1950. by a rapid development of all types of transport. Freight carried by the railways in 1948 increased The head of the Soviet Government, I. V. Stalin, 27 per cent and surpassed the pre-war level. has defined the objectives of the post-war five­ year plan as follows: "The essential aims of the Building has developed on a tremendous scale new five-year plan are to reconstruct the devas­ in our country; in the past three years of the five­ tated areas of the country, to restore the pre-war year plan, some 4,000 State industrial undertak­ level of industry and· agriculture and then to ings have been built, reconstructed and put into surpass that level in greater or lesser degree". operation. Further considerable successes were achieved The year 1948 was of decisive .importance in in the agriculture of the Union of Soviet Socialist the fulfilment of the post-war five-year plan. Republics in 1948. Despite unfavourable weather Thanks to the enthusiastic efforts of the Soviet conditions in most Volga districts, the gross har­ people and the wide development of socialist com­ vest of grain, and grain crops generally, in the petition, the State plan for 1948 was over-fulfilled. Union of Soviet Socialist Republics amounted to The final figures showing the execution of the more than 7,000 million poods and thus fell just State plan for the restoration and development of short in 1948 of the pre-war 1940 level, while the economy of the Union of Soviet Socialist Re­ the average grain yield per hectare exceeded the publics in 1948 prove that the year marked a pre-war level. The area under crops during the further fresh advance in the development of the 1948 season increased by 13.8 million hectares national economy of the Soviet Union, constitut­ over 1947; ten million hectar\'ls of this was in ing a great victory for the Soviet people. grain crops. The increased grain production is leadiJIg to an advance in stockbreeding. In 1948 Last year was remarkable for particularly out­ the collective farms speeded up the progress of standing successes in the development of socialist stockbreeding; the number of cattle increased con­ industry-the mighty foundation of the whole na- siderably and there was a substantial improve- Mr. Tsarapkin, Union of Soviet Socialist Republics 89

ment in the output of livestock. By 1 January 1949 to a total of 20,000 million roubles were carried the numbers of livestock on collective farms, as out in these areas, without taking into account compared with 1 January 1948, had increased non-centralized capital investments. Industry is by 23 per cent in respect of cattle, by 75 per cent rapidly being built up again. Whereas industrial in respect of pigs, by 16 per cent in respect of output in these areas increased 28 per cent in sheep and goats and by 15 per cent in respect of 1946 and 33 per cent in 1947, it increased 41 horses. The number of cattle at the free disposal per cent in 1948. The production of pig-iron in­ of collective farmers, workers and employees also creased 41 per cent, of steel 66 per cent and of increased. sheet metal 65 per cent; the output of electricity increased 31 per cent, of cement 49 per cent and Agriculture in the Union of Soviet Socialist Re­ of sugar 75 per cent. publics is being increasingly equipped with modem appliances: in 1948 agriculture received from the In 1948 the pre-war level of development of State three times as many tractors, twice as many the Soviet economy was reached and.passed as motor vehicles and twice as many agricultural the result of the successful fulfilment of the na­ machines as in the pre-war year 1940. The State tional economic plan. is constantly taking fresh steps to improve the technical equipment of agriculture in every way, While industry is being vastly expanded the to facilitate the work of collective farmers and to number of workers and employees in the national make it more productive. economy is constantly rising; in 1948 they were 2 million more than in 1947, an increase over In 1948 Soviet peasantry made tremendous 1940 of 10 per cent. In the past three years the efforts to carry out the gigantic State plan to number of workers and employees has increased transform the nature of the land, to protect the by 6.2 million. fields with wooded plantations and to introduce rotation of grass crops, thereby ensuring good A tremendous task which the Soviet State has and stable harvests. Protective wooded belts, to successfully solved since the war was the training a total area of 199,000 hectares, were planted of qualified workers on a gigantic scale. In 1948 last year in the steppe and wooded-steppe areas alone, a million young qualified workers were of European Russia, and 270,000 hectares were trained at technical and railway schools and fac­ prepared for such planting in 1949; 1,869 million tory apprenticeship centres.. Moreover, 2.3 million saplings were planted in nurseries and more than new qualified workers were trained in 1948 by 2,800 dams and reservoirs were constructed by individual tuition, working parties and instruc­ the collective farms. tional courses, and the qualifications of 3.8 million workers in industry were raised. These figures The implementation of this tremendous State show the great interest taken by the Soviet State plan, the adoption of which meant a declaration in raising the qualifications of workers. of war against drought and bad harvests in the steppe and wooded-steppe areas of European The tremendous advance in industry and agri­ Russia, will contribute directly towards good and culture enabled the Soviet State, as early as the stable harvests, will make the work of the col­ end of 1947, to carry out monetary reform and to lective farmers highly productive and will greatly abolish the rationing of foodstuffs and industrial increase the economic might of the Soviet Union. products. The implementation of these measures No other country is able to carry out so tre­ was of great importance in strengthening the mendous a plan for the transformation of· nature. Soviet economy and in raising the material well­ Only a socialist State can execute such a scheme. being of the people. The improvement in the well­ being of the workers in the Union of Soviet Social­ The Soviet State is paying special attention to ist Republics which has latterly been achieved the restoration of the economy in the areas which can clearly be seen in the rise in real wages of suffered German occupation and is giving ample workers and employees. In 1948 the total wages assistance to these areas. In 1948 capital projects earned by workers and employees increased 10 90 Mr. Tsarapkin, Union of Soviet Socialist Republics

per cent, compared with 1947. As a result of the tion of industrial costs amounted to more than considerable drop in the general price level, the 6,000 million roubles. in 1948. purchasing power of the Soviet rouble has doubled. Together with the increase in nominal wages, this These are the results of the fulfilment of the has more than doubled the real wages of workers State plan for the restoration and development· of and employees in 1948 in comparison with 1947. the national economy of the Union of Soviet These successes in raising the standard of living Socialist Republics in 1948. They clearly show of the Soviet people clearly indicate the superiority the superiority·of the socialist social system, in of the socialist economic system, one of the aims which human toil, freed from capitalist exploita~ of which is constantly to increase the well-being tion, performs miracles. of the people and at the same time to expand the country's productive forces. Progress is the dominant feature ofthe economy of the peoples' democracies in 1948. The economic· A vast amount of work has been done in regard successes of these countries are based on progres" to housing construction. In the three years of the sive democratic reforms by the new democratic post-war five-year plan, some 51 million square authority with the support of the popular masses. metres of housing accommodation have been built In the peoples' democracies, heavy industry and and reconstructed. More than 1,600,000 houses the banks have been nationalized; agrarian re­ have been· built and reconstructed in rural areas forms have put an end to the tenure of land by in these three years. The network of educational, large proprietors and have given the soil to health, scientific and cultural institutions has been peasants with little or no land. The economic considerably enlarged and their work has been achievements of the peoples' democracies are improved. Much also has been done to improve based upon the internal resources and the labour the planning of towns, workers' settlements and of their peoples, upon the strengthening of friend­ villages. All this clearly manifests Soviet society's ly co-operation and mutual assistance among the profound concern for the individual human being, democratic States and upon the friendly assistance for raising his material well-being and satisfying of the Soviet Union. his growing cultural requirements. As a result of the successful implementation of The development of the Soviet economy is its industrial production plans, Czechoslovakia based entirely on the internal resources, efforts reached nearly 110 per cent of the pre-war in­ and toil of the Soviet people. dustrial production level in the fourth quarter of 1948 and Poland reached 165 per cent. The high The economic and cultural achievements of the rates of improvement in industrial production are Soviet land derive from the heroic efforts of characteristic of the economic development of the workers, peasants and intellectuals. The economic peoples' democracies. As is stated on page 6 of and cultural achievements, the over-fulfilment of the report, the general index for heavy industry the economic plans and the constant increase in in the first nine months of 1948 reached 202 in labour productivity-all derive from the free crea­ Poland, compared with 1938, and 157 in Czecho­ tive work of the Soviet people, who do not know slovakia, compared with 1937; this index includes hired capitalist slavery. Socialist competition has engineering production, for which the index for penetrated to the widest sections of the workers Czechoslovakia was 194 and for Poland was 236. and has become a truly national movement. The index for iron and steel for Czechoslovakia Was 107 and for Poland, 121; for chemicals, Czechoslovakia 121 and Poland 206. The output of means of production-notably, the construction of machines-is increasing at a high rate; the inter­ relation of industry to agriculture is changing, and this contributes to the gradual conversion of a number of rural areas into industrially developed regions. The two-year plan for the economic Mr. Tsarapkin, Union of Soviet Socialist Republics 91

reconstruction of Czechoslovakia has been ac­ Hence it would appear that the rate of increase complished as a whole to the extent of 101.5 per in world industrial production slowed down in cent; the pre-war industrial production level has 1948. The inclusion of data on the Union of been achieved and the living conditions of the Soviet Socialist Republics in the general index Czechoslovak people have been improved. of world production, however-we have seen that the production level in the Union of Soviet Social­ Industry in Bulgaria and Hungary is developing ist Republics is constantly rising; it rose by 27 at a high rate. per cent in nine months of 1948 and in 1948 as a whole-conceals a considerably greater slowing The agriculture of the peoples' democracies, down, or even a halt or a decline. which suffered exceptionally heavy losses from As may be seen from the Secretariat's report the German occupation, is rapidly being re-estab­ for nine months of 1948, the general index of lished. The grain harvest has far exceeded that of industrial production in relation to the last quarter 1947 and this has caused considerable improve­ of 1947 has fallen off somewhat in such countries ment in the population's food supply. as the United States of America and Italy, and has barely risen in such countries as the United Thus a general and constant improvement is Kingdom and Canada, where prbduction has in­ taking place in the Soviet Union and the peoples' creased by less than one per cent. Moreover, it democracies. This cannot be said of capitalistic may be seen from the data given that the drop countries, although they have either not suffered in industrial production in the third quarter of at all from the war or have suffered from it much 1948 in many capitalistic countries is greater than less than the Union of Soviet Socialist Republics a normal seasonal decline. and the new democratic States. The United States of America is the only capi­ The economic position of capitalistic countries talistic country which emerged from the war not in 1948 is characterized by uneven economic de­ only unweakened but considerably strengthened velopment and economic instability. This may be economically. United States monopolists made seen from the stagnation, falling off or slowing large profits out of the war. For the United States down in the industrial development of many coun­ the war served as a stimulus towards a wide de­ tries, from the low production levels in the de­ velopment of industrial production and towards feated countries-a result of the policy of certain a definite increase in exports, mainly to Europe. occupying Powers-and from the growth of in­ Capitalistic monopolies are endeavouring to main­ flation and unemployment, increased taxation and tain their profits at the high war-time level. lower standards of living for large sections of the population, accompanied by an enormous increase The United States has not, however, succeeded in the profits of a small group of monopolies. in maintaining its industrial production on the war-time level. Industry in the United States today is at less than 80 per cent of the level in 1943, It may be noted from the Secretariat's report when it reached its peak owing to enormous mili­ that the world industrial production level was 11 tary orders. During the first nine months of 1948 per cent higher in nine months of 1948 than it the general industrial production level (1937 = was in the corresponding period of 1947; but the 100) was 169, compared with 170 in the fourth report goes on to say: quarter of 1947. In spite of enormous military orders the general industrial production index for "The rate of industrial output during the first 1948 is not rising, but is even declining in a nine months of 1948 was, however, only four per number of industries, such as the engineering, cent above that of the last quarter of 1947. transport engineering, non-ferrous metallurgy, Greater than normal seasonal declines, which footwear, rubber and textile industries. occurred in the third quarter of 1948 in many countries, appear to reflect some tendency of It is especially noteworthy that the report of production to level off." (page 3). the United Nations Secretariat not only contains 92 Mr. Tsarapkin, Union of Soviet Socialist Republics

no analysis of the harmful influence of the arma­ dependent upon the capitalistic monopolies which ment drive and the economic foreign policy of reign in the United States of America and upon the United States of America on. the world econ­ their aggressive designs, in disregard of the na­ omic situation in 1948, but also attempts to gloss tional interests of European countries. over the present position of the United States by dissertations on its high level of production and This plan is advertised as a charitable act for employment. the post-war reconstruction of Eu~opean economy. Neverthless, the United States dollars which flowed What is the 1948 position of economic develop­ into the pockets of European capitalists in 1948 ment in the capitalistic countries of Europe, where in accordance with the United States credit plan everything is built on the expectation of receiving have not stimulated industry in the countries of United States credits? capitalistic Europe. They cannot provide such a stimulus, since United States credit is intended, In many western European countries, especially not to restore or build up the industry of Euro­ in Belgium, Greece and Italy, the pre-war level pean States in competition with the United States, of industrial production has not yet been reached. but to ensure a wider market for American goods in Europe in the interests of the monopolies of the United States of America. As may be seen from the report, industrial pro­ duction in Belgium for 1948 was 7 per cent below The data supplied by the administration of the 1937 level; the production decline began in the Marshall plan shows this very eloquently. April. Belgian newspapers comment on a serious According to the figures for 29 December 1948, deterioration in the country's economic position. $399 million, or only 9 per cent of the total sum Apart from the textile, leather footwear, glass, granted to Marshallized countries, was allocated woodworking and sewing industries, in which a to industrial equipment. It is the low figure of the serious decline has been observed for seven allocations for industrial equipment that unmasks months, a production decline has begun in such the real nature of the "aid", which is far from industries as machine construction, metallurgy, being intended for the reconstruction, and still shipbuilding and diamonds. In January 1949 the less for the development, of industrial production newspaper Quote Libre-an organ of industrial in the countries of western Europe. and financial circles in Belgium-admitted that "the decline in orders in Belgian industry is due The danger of the enslaving results of the to the Marshall plan". , Marshall plan is being more and more widely realized in the countries of western Europe. France's industrial production for the first nine Monnet, the author of the well-known plan for months of 1948 reached only 99 per cent of the the reconstruction and technical equipment of 1937 level; steel smelting reached 91 per cent; France, admits in his report for 1948 that "the iron smelting, 82 per cent; textiles, 97 per cent; position which has arisen out of the Marshall plan and light automobile construction, 91 per cent. is an artificial one and cannot fail to be dangerous". Such important branches of French industry as locomotive building, shipbuilding, construction, Western European organs of the Press also the automobile industry and others are confronted admit the loss of economic independence in with serious difficulties. The competition of United Marshallized countries. Thus the weekly paper States consumer goods is undermining France's Truth wrote as follows in December 1948: national industries. "The man who pays the piper calls the tune. Many western European countries recelvmg European nations may dislike the dance of na­ "aid" under the Marshall plan are facing serious tional renunciation dictated to them by America, economic difficulties. This is understandable, since but the music has blared forth at the signal of the pitiless baton of the Washington conductor, the Marshall plan aims at making the countries and they are obliged to strike the correct attitudes. of western Europe economically and politically Even if we do not try to guess what the rulers of Mr. Tsarapkin, Union of Soviet Socialist Republics 93

America hope to gain from the destruction of the the Italian Government's capitulation before the national sovereignty of European countries, we onslaughts of United States monopolies. As a re­ can understand that that is their purpose and that sult of the subjection of Italian industries to the they will not be satisfied until they attain it". control of United States monopolies, enterprises In February this year.an article appeared in in a number of industries have begun to close the Netherlands newspaper De Nederlander ex­ dow~. pressing dissatisfaction with the policy of the United States of America towards western Euro­ According to the Secretariat's report, the in­ peancountries. The editor·· of that newspaper dustrial production level in Italy in 1948, rep­ wrote as follows: "The double-faced policy of resents only 78 per cent of the pre-war level. Most the United States of America is fraught with great enterprises are working betwe.en 45 and SOper danger for our country ... this danger consists, cent of capacity. The metallurgic industry in 1948 first of all, in the fact that we are becoming fully remains at the level-abont 80 per cent of the dependent upon America in the financial and pre-war output-reached in the. middle of 1947. economic sense". He goes on to say that the The .extractive industry reached its highest level Marshall plan has placed the Netherlands in a in July 1947-85 percent of the pre~war rate­ very difficult position since, whenever the plans but the index for 1948 fluctuates between 70 and of the United States of America diverge from 80 per cent of the pre-war level. The shipping, those of the Netherlands, the United States machine-building, textile, woodworking and paper threatens the latter with harsh economic sanc­ industries are in the most difficult position. Al­ tions, "thus there is every prospect that we may though the production level of the textile industry be changed from an independent country into a reached 92 per cent in the middle of 1947, it had country of slaves, and from an independent State fallen to 62 per cent by the middle of 1948. Only into a satellite State". four of the fifteen shipyards in Italy are working, and at approximately 35 per cent of capacity. The Pref/s of western European countries is full Owing to the absence of orders, a number of ship­ of reports of the increase of unemployment in building enterprises have been closed; those which these countries. Thus, for instance, in such a are working are in constant danger of being closed. relatively small country as Belgium, according to At the same time the Italian Government has Mr. Spaak's statement, the number of unem­ bought 105 "Liberty" ships from the United States ployed persons has reached 300,000. of America. In accordance with the agreement made under the Marshall plan, half the freight is Is it not clear that the increase of unemploy­ sent in United States ships. ment in western European countries is one of the results of the Marshall plan and of the policy of The grievous position of Italian industry, which the ruling cliques in European countries which has caused an immense increase of unemployment are supporting that plan? in the country, is being used by United States monopolies to buy up Italian enterprises for paltry The United Kingdom, which received large sums. United States capital has seized oil re­ credits from the United States of America and fineries, a large part of the machine-building and Canada after the war and which is receiving the automobile works, etc. Such are the fatal results largest sums under the Marshall plan, exceeded of the Marshall plan for Italy's economy, which its pre-war industrial level by 9 per cent in 1948. is being increasingly subjected to the control of Nevertheless, the 1937 level has not yet been United States monopolies. reached in such industries as coal and textiles, which are vital to the United Kingdom. Germany's industrial production level is also The level of industrial production in the de­ low. feated countries is still very low. The policy of the Anglo-American occupation The process of industrial reconstruction in Italy authorities consists in bringing coal, scrap-iron came to a standstill in the autumn of 1947, after and timber out of Germany and in slowing down 94 Mr. Tsarapkin, Union of Soviet Socialist Republics

the development of peace-time industries; that is certain increase in the grain harvest in 1948. The the cause of the low level of industrial production grain harvest in a number of western European in Germany. The re-establishment of industrial countries is at an even lower level than before production in the United Kingdom and United the war. The production level of other foodstuffs States occupation zones of Germany, which are is also low. The United States "aid" programme controlled by United States monopolies, is di­ is not directed towards the reconstruction of the rected towards the restoration of a military indus­ productive forces of agriculture in countries re­ trial potential, whereas peace-time industries are ceiving that "aid", but is aimed at retaining a being throttled in the interests of Anglo-American European market for American foodstuffs. It is capital. In order to eliminate the possible com­ enough to state that of the total allocations under petition of German goods on the world market, the Marshall plan, amounting to $1,666 million United States monopolies are destroying rival on 29 September 1948, the allocations for agricul­ German enterprises. This suppression of peace­ tural machinery and equipment amounted only to time enterprises may be illustrated by the follow­ $6 million, or 0.3 per cent. ing example. In the beginning of 1948 two tool factories, the only ones in Germany manufacturing After visiting Europe in November 1948, Mr. spiral drills, were hastily dismantled. The haste Frazer, the American automobile manufacturer, and purpose of this dismantling are absolutely stated that the Marshall plan "helps to feed Euro­ clear if we recall that the railway authorities of peans but does not help them to begin to feed Bizonia had not long before been given a credit themselves". for obtaining spiral drills. As a result of the dis­ mantling of these factories a $4 million order for The further increase in inflation in 1948, which drills was given to a United States firm (Rhein has lowered the standard of living of the popula­ Neckar Zeitung, 12 February 1948). tion in these countries, indicates the instability of Industrial production in American-occupied the economic position in the capitalist 'States. Japan stands at a still lower level. The industrial production index for nine months of 1948 rep­ In the United States of America the cost of resented only 31 per cent of the pre-war level. living rose during 1948. The upswing of prices of food and other consumer products left the rise Thus the low production level in the defeated in wages behind and caused a fall in real wages. countries is the result of the policy of certain The rise in the cost of living led, to a decrease in occupying Powers, which are seeking to increase consumption by wide sections of the population. their own production at the expense of the de­ The Economic Report of the President of the feated countries. United States to the Congress cites facts demon­ strating that the inflation caused a decrease in It may be seen from the above that the indus­ per capita consumption. These data show that trial production of capitalistic countries is char­ there was a decline in per capita consumption in acterized by extreme unevenness, both in the the United States of meat, milk products, fresh levels reached and in the changes which took fruits, vegetables and other products. The inflation place in 1948. The differences in the respective in the United States injures other countries which condition of industrial production in countries buy American goods, and has a harmful effect on which did not suffer from the war, in countries the economies of the countries dependent on the which were occupied and in countries which were United States. defeated, show the artificial way in which these countries are grouped in the report on the world economic position, which thus distorts the real The Secretariat's report notes a rise of 7 per picture of the economic position of these countries cent in the cost of living in the United Kingdom in 1948. in 1948. The United Kingdom representative said in his statement on this subject that from March In a number of capitalistic countries there is to December 1948 the index of weekly wages rose still an acute shortage of foodstuffs, in spite of a by only 2 per cent. A comparison of these two Mr. Tsarapkin, Union of Soviet Socialist Republics 95

indices will show that the real wages of British The importance of the problem of providing workers have declined. employment may be seen from the fact that even the data given in the report, which include only a The rise in the cost of living in 1948 was par­ small number of countries, show the total of ticularly significant in France, where, according officially registered unemployed persons to be to official figures, it rose by 57 per cent from the 6.5 million. The true extent of unemployment in third quarter of 1947 to the third quarter of 1948. the capitalist countries is, of course, considerably Even Le Monde, an organ of French business greater. The enormous army of semi-employed circl~s, was obliged to admit, albeit reservedly, the persons must also be taken into consideration. negative influence of the Marshall plan on the purchasing power of the French working classes. The New York Times for 19 February 1949 In its issue of 16 October this newspaper stated, reports that in the United States of America the "The Marshall plan has actually been in force for number of unemployed persons amounts.to three eight months, but the purchasing power of gain­ million. To estimate the actual extent of unem­ fully employed persons has declined". A marked ployment in the United States the various forms increase in the cost of living may also be observed of concealed unemployment must be taken into in Belgium and other European countries. consideration, particularly the number of semi­ employed persons working incomplete work­ The Marshall plan has not halted the process weeks. Data published by the Department of Com­ of inflation. Revealing in this connexion is the merce show that in January 1949 the number of rate of increase of wholesale prices, as quoted in persons working fewer than 35 hours per week the recently published second quarterly report of reached 9.5 million, including 2.3 million persons the United States Marshall plan administration. working fewer than 15 hours per week. The report shows (page 137) that prices in France rose in the two post-war years 1946 and 1947 by In Italy, according to incomplete data, there are 80 per cent, and in the first ten months of 1948 two million unemployed, and in Germany about by almost 72 per cent, while in England prices one million. Unemployment is also considerable, rose by 10 per cent in 1946 and 1947 and by and still growing, in a number of other western almost 11 per cent in the first ten months of 1948. European countries. As has been shown, unem­ ployment has risen sharply in Belgium. The ex­ While this inflationary reduction in the stand­ istence of an army of unemployed in the capitalist ardsof living of the working people takes place, countries provides a reserve of man-power en­ the profits of the capitalist monopolies are grow­ abling employers to dictate conditions of work ing. Although industrial production in the United and wage rates to their workers under threat of States is lower than in 1943, the profits of United dismissal. The existence of unemployment lowers States monopolies are constantly rising. Accord­ the standards of living of all working people. ing to data cited in The Economic Report of the President to Congress for 1948, profits reached a The frenzied armament drive in the United figure of $34,000 million, compared with $24,500 States and several other capitalist countries, and million in 1943 and $6,200 million in 1937. their establishment of aggressive blocs, hinders the normal economic development of the various The enrichment of the monopolies in the Mar­ countries and at the same time unsettles inter­ shallized countries is on a tremendous scale. national economic relations. The armament drive increases the tax burdens borne by the working One of the most serious problems, without classes and even further reduces their standards reference to which it is impossible to throw light of living, while it enables the monopolists to en­ on the world economic situation, is unemploy­ rich themselves by war preparations. ment. It must be noted, however, that in the Secre­ tariat's report on the world economic situation While militarization and the armament drive in 1948, unemployment is not given sufficient proceed in the United States, the United Kingdom attention. and France, expenditure on the armed forces in 96 Mr. Tsarapkin, Union of Soviet Socialist Republics

the Union of Soviet Socialist Republics has been The delegations of the Union of Soviet Socialist reduced from year to year and appropriations for Republics and other countries have already cited social and cultural measures :fise every year. facts demonstrating the pressure exerted by the United States on the trade policies of the western As a result of the armament drive in the United European countries. At yesterday's meeting the States, the United Kingdom and France, great representative of Poland quoted a number of con­ material resources are being wasted for non-pro­ vincing facts in this connexion. ductive purposes, international relations are strained and the foundations of international The policy conducted by the United States con­ economic co-operation are undermined. flicts with the tasks and objectives of the develop­ ment of international economic co-operation. The The Economic and Social Council cannot ignore true foundation for any expansion of international this waste of enormous material resources on the economic co-operation must be the development preparation for war, which renders difficult the of trade among countries on conditions equally economic development of the various countries profitable to all, without discrimination or inter­ and leads to a deterioration in the standards of ference in the internal affairs of other countries. living of all peoples. In examining the world economic situation, the In considering the world economic situation Economic and Social Council must not ignore due attention must be paid to the development of the discriminatory foreign trade policies conducted international trade. The development of interna­ by the United States, which hinder the develop­ tional trade, referred to here by the representatives ment of trade and economic co-operation among _ of the United States and other countries as a the Members of the United Nations and prevent means of improving the world economic situation any improvement of the world economic situation. and economic relations among countries, is being hindered by the policy of discrimination conducted In conclusion: the world economic situation in by the United States in relation to a number of 1948 was characterized by a radical divergence Members of the United Nations. This policy not between the economic development of the Union only clearly contradicts the principles of the United of Soviet Socialist Republics and the peoples' Nations Charter, but is also a violation of the democracies, on the one hand, and the capitalist obligations undertaken by the United States under States, on the other. trade agreements with other countries. (a) The economic development of the Union While in words it defends the principle of of Soviet Socialist Republics in 1948 was char­ developing foreign trade, the United States, by acterized by the further steady rise in the entire establishing a discriminatory system, hinders the national economy, which exceeded the levels development of international trade and co-opera­ achieved in the pre-war year 1940. Particularly tion. Not only does the United States Government important successes were secured in industry, the itself follow this policy of discrimination in trade output of which considerably exceeded the 1940 relations with a particular group of countries, but figures. At the same time, industry in the Union it forces the same policy on other countries. One of Soviet Socialist Republics during the post-war section of the United States Foreign Assistance period has been developing at an accelerated rate. Act of 1948 openly provides for pressure to be The rise in the national economy of the Soviet exerted on the foreign trade relationships of the Union was accompanied in 1948 by an appre­ Marshall countries. The section includes a direct ciable improvement in the welfare of the popu1a­ threat to these countries that deliveries will be tion. terminated unless they conduct the same policy in relation to the countries not participating in the (b) In 1948 the peoples' democracies, having Marshall plan as does the United States. The carried out progressive reforms, achieved a steady United States foreign trade policy is designed to rise in the output of industry-which exceeded pre­ subject the trade of the western European coun­ war production-and secured improvement in the tries to the interests of the United States. welfare of their peoples. The President Mr. Thorp, United States of America 97

(c) The economic condition of the capitalist Europe who have similarly been involved with countries in 1948 is characterized by uneven de­ respect to the charges. velopment and an unstable economic situation, reflected in the slowing down of industrial de­ I wish that I felt that I could rest entirely upon velopment in some countries and its stagnation or the replies which have been made in the past. decline in others, by the growth of inflation, by They obviously have not been effective, because an increase in unemployment and by a fall in the the same mis-statements of fact, the same mis­ living standards of the working people, accom­ interpretations of motives which have appeared panied by a marked rise in the profits of the in the past have appeared again. capitalist monopolies. Today, rather than to repeat in terms of Ameri­ (d)' The policy of the United States aimed at can policy the controversies which we have had the economic and political subjection of other in the past, I should like merely to call to the countries, the discriminatory foreign trade and attention of the Council some replies and some credit policy, the armaments drive-all this is confusing statements which have been made in undermining normal international economic co­ connexion with these charges. It may be that the operation. replies which have come from the same people who made the charges may have more effect than The Union of Soviet Socialist Republics delega­ my feeble efforts have had in the past. tion trusts that these observations will be given due consideration in the preparation of the final For example, we were told yesterday that the report and in subsequent reports on the world countries of western Europe have food shortages economic situation. deriving in part from lack of seeds and fertilizer. We were told that the European Recovery Pro­ The PRESIDENT gram was designed to meet the needs of the American economy. However, as evidence of the Of the eighteen members of the Economic and pernicious form of American aid, Dr. Katz-Suchy Social Council, sixteen have already taken part denounced the fact that "... out of the grand total in this debate. I have been informed that it is not of $4,044 million ... $1,384.3 million was used the intention of the Chinese delegation and of the for food and fertilizers ..." This would seem to be Byelorussian delegation to participate; therefore, an answer to the charge. so far as first contributions to this discussion are concerned, they have been completed. But I We were also told that an inadequate amount understand that two or three other delegations of machinery had gone to western Europe. I might wish to make some further remarks. remind the representative from eastern Europe­ and on this they certainly have experience-that it takes much longer to provide machinery than it Mr. THORP, United States of America does to provide immediate items such as food. I know that they would be greatly relieved in their I must apologize to the members of the Econ­ concern to know that the programme of the Econ­ omic and Social Council for taking the floor omic Cooperation Administration for the next again but the policies of the United States have year includes substantially higher percentages of been subject to comment for some three hours machinery and capital goods than did that of last during this debate and I do feel that it is necessary year. for me to make a few remarks. The charges which have been made with respect Dr. Katz-Suchy said, "The United States has to the United States have been made before. They hampered the growth of European industry" and have been made in this Council. They have been he also said, "Today the physical after-effects of made in the meetings of the General Assembly. the Second World War are almost completely over­ They have been replied to by the United States come in the countries of western Europe". Dr. and by other countries, particularly those in Katz-Suchy said, "The Second World War has 98 Mr. Thorp, United States of America

made the problem of food especially acute. The of trade in eastern and western Europe is steadily Food and Agriculture Organization reports that increasing. only seven nations, excluding the Union of Soviet Socialist Republics and the new democracies, We are told "Another feature of economic de­ raised enough food to meet their own needs", and velopment during 1948 was the clear emergence at another point, he described the consumption of of the attempt to rebuild western Germany as bread, sugar and meat in Poland as exceeding pre..: a centre of economic power in Europe." But we war foods. At almost exactly the same moment, are also told, "The removal of two main competi­ the Polish representative in the International tors, Germany and Japan, has served to increase Children's Emergency Fund told a rather dif­ the exports of the United States." ferent story as he urged that Poland should re­ ceive the largest aggregate assistance of any single We are told, "Very large profits are being de­ country from that fund. rived from Germany" by the United States. We are also told capitalists are deriving profits from We are told that the United States is dumping Germany. And then, at the same time, we are told its products in countries in the Organization for "... from January to October 1948 Germany European Economic Co-operation-that it wants a received $737.8 million, which is more than one­ wider market. At the same time, we are told that fifth of the total Economic Cooperation Adminis­ "... devaluation of the franc was dictated from tJ.;ation exports to Europe. During the first quar­ Washington as part of the Marshall plan". I sug­ ter of operations, appropriations under the pro­ gest that someone might check the dates, as a gramme for western Germany were 100 per cent matter of fact, if these two things are to be put in the form of grants." This is a wonderful tech­ together. I deny the actual fact that is here al­ nique for deriving profits from a country! leged, but even accepting it, it would be a new form of dumping-to make American products more expensive in France and French products We are told that the United States is not carry­ cheaper in the United States. ing out reparations and we are told of the tragic dismantling of two instrument plants in connexion As to counterpart funds, we are damned if we with the reparations programme. Weare told do and we are damned if we don't. "In Austria "... Bizonia is being made into an American ... the Economic Cooperation Administration's island ..." At the same time there is objection to financial policy of releasing blocked schillings from United States assistance in the form of grants; sales of relief goods would drive the country into there is objection to establishing German trustees catastrophic inflation", but, "The Economic Co­ in the Ruhr; there is. objection to the return of operation Administration rejected a French pro­ certain former United States owners into Germany; posal anticipating the availability of more than and there is no mention of the new project for the $1,000 million of franc counterpart funds desired control of the Ruhr by the Ruhr Control Au­ to avoid new taxation...." thority.

We have a repetition of the debate in the Gen­ We are told, and this is certainly information eral Assembly with respect to American export which required some sort of psychological insight, policy. We are told (l) United States policy is that American owners of the Hugo Stinnes indus­ directed at establishing an embargo against east­ tries are planning to increase their share of the ern Europe, and (2) the United States controls Ruhr coal. Yet the fact is that the reorganization the export policies of the countries in western of the Ruhr coal industry into a number of Europe. (Incidentally, that is not in any bilateral medium-sized enterprises specifically includes the agreement, as was stated before.) We are told, you Stinnes properties in accordance with the decon­ see, that United States policy is directed at estab­ centration policy. Of course, the fact is that the lishing an embargo and that the United States con­ only increase in foreign ownership in all of Ger­ trols the export policies of the countries in west­ many-and that has been tremendous-is the in­ ern Europe, but then again we are told the volume crease of Russian ownership in the Russian zone. Mr. Thorp, United States of America 99

We are told that the American post-war policy account the degree to which the benefits of an includes the forcing of exports in order to stave economy are obtained through burden upon the off the impending crisis and the Katz-Suchy poll labouring forces. of American business opinion concludes that such a crisis may now be imminent. If this statement of There have been some comparisons merely policy is true and the results of his poll are cor­ limited to 1948 over 1947 or over 1946. This is rect, then the logical conclusion would be that the an even more unsatisfactory basis of judging the export gap in the United States balance of pay­ performance of economies. In fact, if one uses ments would be rapidly increasing. The fact is that this basis-and I certainly am not endorsing that it is rapidly decreasing. idea-the ideal economy in the world must be the economy of Germany-and the desirable thing is I am particularly interested in the suggestions to submit oneself to an occupying force because which have been made by two of the speakers that is the area in which according to the state­ with respect to comparisons of the operations ments which we have heard-and it is true-the of economies. These comparisons have been percentage of increase during this period has primarily in terms of what might be called the been most extraordinary. production tests and the increase in percentage of production. Anyone knows that increases can be spectacular when they start from a low level. Any Actually, in comparing economies, there are anyone knows that as a country becomes more many different elements which must be taken into mature and more developed the production test is account. I am sure if one were making an objective no longer an adequate test of the capacity and review, one could not disregard the achievements character of its economy. Consider, for instance, of the United States economy and the levels which whether it would be a correct comparison to say its population has reached in its standard of living. that the United States economy is not effective We are very prou.d of the United States economy. because it has not increased its production 27 per We are not distressed by the fact that our pro­ cent as compared with last year. As a matter of duction is no longer increasing 27 per cent each fact, we would regard that as a most unfortunate year. The United States economy is a free econ­ test to apply to our economy. We have, Jor ex­ omy. It is one which has the full opportunity for ample, 35 million of the world's 45 million auto­ initiative, for invention, for imagination, to ex­ mobiles in the United States. I suspect all of us press themselves. would live even more in the fear of our lives if we moved ahead with the process of a greatly ex­ In the short run, it may well be true that an panded production of automobiles. The tests in a authoritarian economy, a totalitarian economy, mature economy are not only production. There may be able to make the greatest advances, but in are tests with respect to continually improved qual­ the long run we are quite prepared to pin our ity and there are tests with respect to continually faith on a free society in which all individuals have reduced costs. In the United States economy we a full chance to express themselves and to make give great emphasis to the continued production their fullest possible contribution to the develop­ of goods with less and less burden upon our ment of that society. So far as the United States is labouring group. concerned, we are working most happily in what we regard as a thoroughly constructive relation­ There has been mention of the high levels of ship with other free societies. That brings me to the United States economy in its production of one quotation from a speech with which I can 1943. I think all of us around the table should thoroughly agree, as follows: regard that as a most fortunate fact. It is a demon­ stration of the ability of the American economy to expand when necessary. However, that produc­ "Relations between the Union of Soviet Socialist tion was done on the basis of much longer hours Republics and, let us say, Poland are quite differ­ of work, a much greater burden on the labouring ent from those between the United States of population; in our judgment, one has to take into America and Marshall plan countries." 100 Mr. Mayhew, United Kingdom

Mr. MAYHEW, United Kingdom tion if they are not willing to do so. Let us make that quite clear immediately. I think none of us Like our United States colleague, I am reluctant will doubt, however, the usefulness of having the to speak again, and yet in this debate, as in a simi­ information. I think we can say also that when lar debate last year, the high level and constructive the achievements of the Soviet Union are used in tone of the debate has been somewhat marred by order to disparage the efforts of the countries of two speeches from delegates of communist coun­ western democracy, then there is a certain moral tries, in which a number of tendentious charges obligation on those who used the alleged achieve­ were made against a number of countries, includ­ ments of the Soviet Union, which may indeed have ing my own. Some of the true facts relative to these great substance. When they use it as a means of charges have been referred to by our United attacking socialist democratic countries such as States colleague, but I would like, if I may, to mine, or capitalist countries such as the United make some comment on the speeches we have States, then there is a certain moral obligation on heard from the representatives of Poland and the those people to produce the facts and figures to Soviet Union. substantiate what they are saying.

Before I come to the precise criticisms and The speech we heard from the Soviet repre­ charges which they made, I would like to draw sentative, o~ course, quote a large number of the Council's attention to a fact which has already figures. He quoted, regarding output, prices and been referred to, notably by our colleague from wages, twenty-eight separate figures. Of these fig­ France and our colleague from the United States­ ures, however, twenty-five were percentage figures, the absence from the survey before us of basic without any base figure on which to base the figures of economic statistics of the Soviet Union. percentages. We were told, for example, that coal Oyer and over again in these tables, we find world output had increased by such and such percentage, figures "excluding USSR", world averages "ex­ but no information was given about the coal out­ cluding USSR". put of the Soviet Union. The only three absolute figures that were given related to grain, to trees I raised this matter at the last session-at the and to some lakes. latest debate of this kind at the Economic and Social Council-and, indeed, at that time the Soviet representative himself admitted the truth of what I feel that this is a matter of some importance. I was saying. As the summary record notes, Mr. The publication of concrete economic, demo­ Arutiunian said that the series of reports pre­ graphic and other statistics has virtually ceased pared by the Secretariat were an important con­ in the Soviet Union. The only statistical material tribution to the study of the problems of economic released is either fragmentary, for a particular development. They did not, strictly speaking, con­ unit or region, or percentages of an unknown base. stitute a survey of world economic trends, since Very few statistics are related to each other. No they failecl to include a description of the post­ statistical abstract is produced, and I would like war development of the national economy of the to give the Council a list of the statistics which, to Union of Soviet Socialist Republics. Mr. Arutiu­ the best of our information, are not available. nian repeated that he spoke at some length be­ cause the Secretariat's reports had not included First, basic production statistics. Apart from sufficient information about the Union of Soviet percentages, no figures are available either in the Socialist Republics. reports of the United Nations, or elsewhere in the western world, for basic items, such as the output This year, again, we are faced with the same of coal, the output of electric power, the output problem, namely, the lack of information about of non-ferrous metals, the output of oil, the output the Soviet Union in the report before us. of pig-iron, the output of steel, the output of synthetic rubber or the output of chemicals. No It is true, of course, that there is no obligation statistics have been produced for many years for at all on Member nations to produce this informa- foodstuffs and many basic consumer goods. Mr. Mayhew, United Kingdom 101

No regular statistics of consumption have been Wednesday, he is counted as unemployed if the published since the last issue of Socialist Con­ day of the count is on Tuesday. This means that struction in the Union of Soviet Socialist Republics if any worker changes his job, he is in effect, liable which was last issued in 1936. No references are to be counted for a short period of time as un­ made to per capita consumption of goods or to employed,and in a large economy with a large total consumption, except for these vague refer­ turnover of labour, unemployment is absolutely ences to over-all consumption which are to be inevitable. We know that in the Soviet Union found in a report on the fourth year of the five­ there is an enormous turnover of labour, of hun­ year plan. dreds of thousands of workers every year; the question I want to ask our Soviet delegate is, No basic statistics, apart from plan figures, are when these workers or a proportion of them suffer provided for the average space per head of the transitional unemployment, are they counted or population in housing, or for the average in large are they not? If they are counted, what is the industrial centres, such as Moscow or Leningrad, figure for unemployment in the Soviet Union? where it is well known that workers' housing con­ If they are not counted, what is the definition of ditions are among the worst in Europe. unemployment, when we are told there is no un­ employment in the Soviet Union? And before he Until 1927 not only were total statistics of complains about the lack of statistics on this point health published, but also detailed statistics on in the report before us, I submit that unemploy­ such subjects as abortions, infantile mortality in ment statistics in the Soviet Union should be sub­ backward areas and incidence of highly infectious mitted along with the rest. diseases. These are no longer given. No material statistics affecting health have been published since I need not say, too, that no statistics on the 1927. No figures are given for the incidence of cost of living have been issued in the Soviet Union venereal disease, typhus, leprosy, bubonic plague, since 1926. Further important fields of develop­ beriberi, chicken pox, scarlet fever and other dis­ ment on which no statistics are published and of eases of that kind. The Soviet Union no longer which no public mention is made include the pro­ furnishes the International Drug Control with duction of gold and other precious metals, indus­ statistics or any other assistance. trial activities of the MVD, particularly at Dal­ stroy, man~power in the armed forces, forced No population statistics have been published labour and the cost of a large number of non­ since the results of the 1939 census were given. ministerial bodies directly controlled by the Soviet There are no figures for present population, war of Ministers. We are bound to ask ourselves-why casualties or civilian casualties. this secrecy? If, as we have been told, in effect, this afternoon, the Soviet Union is pre-eminent in I would mention too, the question of unemploy­ social and economic progress, if it is, in fact, a ment to which our Soviet colleague made refer­ form of worker's paradise, why are we not allowed ence. He complained that there were insufficient to know the fact? Maybe we shall be told it is a figures in the report before us on the subject of matter of military security. Yet it is hard to think unemployment, or concealed unemployment, as that figures on the cost of living are a matter of he said. Of course we know the official party line military security, or that housing space or that is that no unemployment exists in the Soviet Union. the number of abortions in a year are a matter of I would reply, if that is so, I would like to know military security. Or else we shall be told that the the definition of unemployment which is used in economy of the Soviet Union is so different that this context by Soviet spokesmen. For example, it is impossible to reconcile the figures we use with I will give the Council the method of calculation the figures of the so-called capitalist world, as ex­ and definition of unemployment which is used in pressed in the Secretariat's report. Again it is hard the United Kingdom. We include in our figures to believe that a basic figure like the output of of unemployment a large proportion of transi­ coal, even if it is being hewed under communist tional unemployment. That is to say, if a man loses conditions, cannot be reconciled with the output his job on a Monday and finds another job on of coal in a country like social democratic Britain. 102 Mr. Mayhew, United Kingdom

It is hard to believe that it is impossible to re­ Soviet statistics, but I will just quote an authori­ concile the figures of infantile mortality in the tative comparison which was made, not by the Soviet Union with the figures of infantile mortality British Government, but by an authoritative in the British Commonwealth, especially when we British publication, the Economist-a comparison remember that these figures were published up to which bears out the information at the disposal 1927, even in the communist state of Soviet of the British Government. Russia. Indeed, there are other "communist coun­ tries which publish more figures than the figures The best contrast that can be made is to com­ published by the Soviet Union. The reason for this pare how many hours or minutes of work the secrecy is, I am afraid, quite clear. It is because average male worker would need in the Soviet the Soviet Union considers that it must keep alive Union, on the one hand, and in the United King­ the communist propaganda myth-of the Soviet dom, on the other hand, in order to earn certain Union as pre-eminent in democratic and progres­ staple conSlilllers' goods. It takes an adult male sive advance. The myth that the Soviet Union, worker in the United Kingdom some seven min­ which has just about the lowest workers' standards utes' work to earn a pound of bread. In the Soviet in Europe, has, in fact, just about the highest; that Union, it takes the Soviet worker 70 minutes. It the Soviet Union which is just about the most takes the United Kingdom worker 37lh minutes totalitarian country in Europe is, in fact, the most to earn a pound of butter; it takes the Soviet democratic. This myth is essential to the Soviet worker 315 minutes. It takes the British worker Union in its campaign of political warfare against 22lh minutes to earn a pint of beer; it takes the the western democracies. Soviet worker 171 minutes. It takes the British worker 450 minutes to earn a cotton dress; it In his speech, the Soviet representative also takes the Soviet worker 1,911 minutes. And referred to the standard of living of British work­ finally, it takes the British worker 2,700 minutes, ers. He.quoted a figure I gave yesterday about the and the Soviet worker no less than 34,515 min­ increase in the money wages of British workers utes to earn a man's woollen suit. I have explained and related it to an increase in the cost of living the reasons which have prompted me to make this in Britain. As a matter of fact, the period to which comparison. I repeat that that is an estimate which I was referring was different from the period to has been worked out by an authoritative British which he was referring, but I will let that pass. newspaper and which bears out the information If, however, this is to be held against the United at the disposal of the United Kingdom Govern­ Kingdom, I must clearly make some statement ment. about the relation between the standard of living of the British workers and the standard of living I come now to some of the other attacks that of the Soviet workers. have been made by the communist delegates in the course of this debate. We heard the familiar I would not do this if I had not been directly attacks about the imperialism of the Marshall plan. criticized for my own country's standards in this Let me say that the Marshall plan has been and matter. The Soviet Union started in the days of continues to be vital to the economic recovery of the Czar as a great backward State and has only western Europe. As I stressed in my speech yester­ recently fought a tremendous war, gallantly and day, my country could not do without it. How­ at great sacrifice, and I would be only too willing ever, we have had the usual attacks upon the plan. to say that all my sympathies were with the Soviet The hypothesis that the Marshall plan is United Government in its drive to increase the living States imperialism is one of those hypotheses, standards of its workers. If, however, the living bearing no relation to the facts which the Soviet standards of Soviet workers are used in order to Union considers politically advantageous. attack the workers in my country I feel I am justified in making some comparisons. There are a number of these hypotheses: that Marshall aid is United States imperialism; that I will not go into this in detail. It is a task made Marshall aid involves a boycott of east-west trade; difficult, as I have explained, by the absence of that Marshall aid hinders recovery in western Mr. Mayhew, United Kingdom 103

Europe; and that the capitalist west is on the western European countries. These contradictions verge of collapse. These theories bear no relation are, I know, painfully evident to members of the to the facts but assist the Soviet Union in its cam­ Council. I would say this: I have listened to com­ paign of political warfare to undermine western munist propaganda for a large number of years, democracy. Having chosen these hypotheses, then but the reality of western Europe's recovery, the -and only then-the search for facts to support reality of the success of the Marshall plan, is them begins. Authoritative statistics of the United making their hypotheses more and more wild and Nations Secretariat, British White Papers, the extravagant; it is compelling them to search further public statements of responsible political leaders and further afield for the unrepresentative facts in the west-these are usually brushed aside, or with which to substantiate them. It is notable to else facts are picked from them. Instead, the news­ compare the sources of information which are papers of the world are ransacked. The same news­ used by communist propagandists today with the papers which in other contexts are described as sources which they were able to use before the "the capitalist press", "inaccurate" and "hysteri­ war-and did use to a large extent and with greater cal" are quoted at this Council in order to prove effect. these hypotheses. The less responsible utterances of the less representative public figures are quoted I do not wish to detain the Council for long, at length. Even the circulating libraries are not but I must refer to the question of trade discrimi­ overlooked; where facts are not obtainable, they nation, about which criticisms were made by the are invented. communist delegates, and to the question of al­ leged United States imperialism in western Europe. However, almost any facts can be made use of, Reference was made to article 117d of the United somehow, in supporting these hypotheses. If the States Foreign Assistance Act. This provision output of an industry in western Europe falls, merely prevents the United States Economic Co­ that fact is quoted; British coal output and British operation Administration from assigning products textile output were quoted by our Soviet colleague. of the Organization for European Economic Co­ But if the output of industries in western Europe operation which are used to manufacture certain rises, that fact is ignored. If the price level rises, war-like supplies for sale to other European coun­ the effect on workers' wages is duly noted; if the tries which the United States would refuse to sell price level falls, a depression is forecast. If German direct for security reasbns~ It is not included in production rises, as our Polish colleague alleged bilateral agreements despite the report of the yesterday, quite truthfully, then it shows that the Secretariat on this point. I notice that on page 24 Marshall plan is building up Germany against the of this report the Secretariat states that this pro­ Soviet Union. But if western European production vision is written into the bilateral agreements also rises, then it is in spite of the Marshall plan which the United States has with countries of the which is hampering the recovery of western Europe. OEEC. That is not true, and I understand the If two capitalist countries agree, they are ganging Secretariat regrets the mistake. Of course, this up; if they disagree, they illustrate the eternal hypothesis of the trade boycott could much more struggle and friction in the nature of capitalist readily be maintained if it was not perfectly clear systems. to everyone that since the Marshall plan began, trade 'between eastern Europe and western Europe A number of these contradictions have already has steadily increased. been referred to by our United States colleague. Clearly, I could continue this list indefinitely. I Quite recently the United Kingdom signed a happen to remember that in the first part of his trade agreement with Poland providing for a total speech .our Soviet colleague complained that trade turnover of not less than £260 million for United States consumer goods under the Marshall five years. That is the extent of our boycott of plan were causing serious competition with similar trade with Poland. The Polish prime minister in products in western Europe. I also heard him, at his speech on 10 January this year makes specific the end of his speech, stating that the effect of the reference to Poland's economic relations with Marshall plan was to raise the cost of living in the Sweden, France and Great Britain. 104 Mr. Mayhew, United Kingdom

Last year, too, the United Kingdom took first has been signed reducing mutual exchange of place in the foreign trade of Hungary. Our trade goods in 1949 to one-eighth of 1948". The War­ in the first ten months of last year with the Union saw paper Tribuna Lidu said on 20 January this of Soviet Socialist Republics was £31,113,000; year in explaining the cut in Polish trade, "The with Poland, £16,340,000; with Hungary, £6 mil­ answer is to be found in Yugoslavia'S breaking lion; and with Czechoslovakia, £12,074,000. away from the solidarity of these countries." These countries, of course, also trade profitably Perhaps, again since our Polish colleague has with other countries of western Europe, including raised this question, I may read an extract from France. a Yugoslav paper. On 9 February, the Yugoslav paper Borba published a long article on discrimina­ If the Marshall plan is intended as a boycott of tion in trade. The article stated that: trade between the east and west, it seems to be totally unsupported by the results. On the con­ "During the recent trade talks, the Polish dele­ trary, we know that right from the begi1111ing it gation, clearly in accordance with a directive, at­ has been regarded as an essential part of the tempted to cause the greatest possible harm to Yugoslavia by buying up its most precious prod­ European Recovery Program-an essential factor ucts, thus preventing Yugoslavia's using them to in its success-that trade should expand between buy what was essential for Yugoslav industry in the east and west of Europe. other countries, and at the same time refusing to sell to Yugoslavia valuable goods in return. The For a few more minutes, I would like to detain conditions demanded by the. Polish delegation the Council to talk about the reality of trade dis­ were far more severe than those demanded by them from other countries, including the capitalist crimination which does in fact exist in Europe lands with which Poland traded. Thus the Polish today. Not the propaganda myth-the communist delegation demanded an impossible increase in propaganda myth-but the reality. I would like to Yugoslav exports of lead, zinc and copper, but begin by·drawing attention to the trade relations refused to increase its own' exports of coke and between the Soviet Union, on the one hand, and rolled metal, even though Yugoslavia had in the new agreement increased its exports so far. as Yugoslavia, on the other, and between the trade possible to meet Polish demands. At the same relations of Poland, on the one hand, and Yugo­ time, the Poles refused to import such articles as slavia, on the other. I want to make clear that I maize, chrome, wine and consumer goods of am not entering into this quarrel-the rights and which it was clear that Poland stood in need. The wrongs are no affair of the United Kingdom Polish attitude was perhaps best shown by the stubborn demand of the leader of their delegation Government-but I wish to make some comment that all clauses expressing the desire of the two to the Council since the question of trade dis­ parties to· increase their mutual trade be struck crimination has been raised by the Polish delegate out of the new agreement." and has been alleged against countries in the west. The article continued by declaring that: In its recent trade agreement with Yugoslavia, the Soviet Union cut its trade to one-eighth .for "Even before the Cominform resolution, Yugo­ 1949, compared with what it was in 1948. On slavia's allies had shown themselves opposed to Yugoslav plans for industrializing their country, 27 December last year Marshall Tito spoke " of and had begun talking of the nationalism allegedly concrete economic pressure ...", and " of displayed by the Yugoslav five-year plan which crude violation of various agreements and obliga­ they declared to be a sign of the Yugoslav desire tions... ". "Such practices", he said, "have been for autarky. Such criticism could only be ex­ uncommon even in the capitalist world." He goes plained by their critics' desire that Yugoslavia should remain a backward producer of raw ma­ on, "Our plans for industrialization did not suit terials for the use of other more industrialized many States which had expected Yugoslavia to countries which lack sufficient raw materials." remain a source of raw materials for their in­ dustry." The official Moscow radio and Press an­ I will not continue with this article except to nouncement of 31 December 1948 stated, "In say that it makes questionable the moral right of view of the unfriendly policy of the Yugoslav our Polish colleague to come forward with his Government towards the Soviet Union, a protocol quite unfoup.ded accusations of trade discrimina- Mr. Boris, France 105

tion against the countries of the west. I will re­ Several delegations presented a picture of their frain from carrying this argument to too great own countries' position and this picture has often length and thus wearying the Council. I have been very instructive. The French delegation does here a number of facts and figures regarding the not complain about the possible lengthening of economic penetration of eastern Europe by the the discussions on this account. Soviet Union. Perhaps the most interesting evi­ dence of the technique of Soviet economic im­ Some delegations have seen fit to refer to the perialism is given in the now public and official situation in other countries. Whilst they were en­ statement of Yugoslav leaders on the technique tirely within their rights in doing so, it allows us of exploitation from which Yugoslavia suffered to make certain necessary adjustments to state­ before leaving the Cominform. There is, of course, ments which have been made concerning us. The no reason whatever to suppose that the same representatives of Poland and of the Union of technique is not being practised on those members Soviet Socialist Republics, in particular, have in of the Cominform who remained within the Com­ their speeches made a certain number of remarks inform. Indeed, as the United Kingdom repre­ about my country to which I must refer. sentative to the General Assembly last year showed, there was a great deal of evidence to The distinguished representative of Poland has show that the same technique was at work. Thus, made several statements· which, I am obliged to we can contrast the reality of economic imperi­ inform him, are incorrect and has interpreted facts alism with the communist propaganda myth about in a way which I must describe as biased. I shall the Marshall plan; I am sure that no country of give a few brief examples of his inaccuracies. western Europe would tolerate, for one moment, one small part of the economic exploitation pub­ For example, Mr. Katz-Suchy stated that the licly and officially stated to have been suffered devaluation of the franc-a subject mentioned a by Yugoslavia at the hands of the Soviet Union. short while ago by the United States representative -which took place at the beginning of 1948 had I have managed in considerable space of time been forced on our country by Washington. I to answer only a small part of the charges that should have thought it only fair to recognize the have been made against the countries of the west. fact that the devaluation of the franc was forced I hope I have done enough to show, however, upon us by circumstances: the franc had lost a that these charges are not based on a careful and large part of its purchasing power and if we objective survey of the available facts drawn from wanted to restore our trade balance,. which had authoritative. sources, but are in fact slogans of been endangered by the rise in prices expressed in political warfare to which the facts are attached francs and if we wished, consequently, to render afterwards by a process of selection, distortion French economy independent-and this is our and invention. aim-we had to correct the price levels for our export commodities~ Mr. BORIS, France (translated from French) Further, the Polish delegate might have realized, The French delegation would like, first of all, from the smiles with which the audience greeted to pay tribute to the high standard of this discus­ his statement, that he was not being very convinc­ sion or, at least, of the greater part of. this dis­ ing. Indeed, nobody has forgotten that when cussion on the world economic situation. Without France decided to devalue the currency, the meas­ exception, all the delegations have submitted ures which were decided upon and were taken general opinions of the highest interest and, in aroused controversies and objections in Wash­ particular, many of them are agreed on some ington itself, the echoes of which must surely have principles which deserve special attention. Equili­ reached the ears of the Polish representative, who brium, they said, must be sought upwards, that is usually so well informed, and who does not fail is, on the basis of a higher rate of production. It to read our newspapers and even to quote them would be dangerous to. admit a decrease either when the opportunity offers. I will say no more in production or in trade. on this point. 106 Mr. Boris, France

Another inaccurate statement, to which refer­ Application of the percentage method to other ence has already been made, is this: it was alleged countries is naturally· useful for propaganda, but that the United States refused to release the franc has nothing to do with objectivity. This is also counterpart of our imports under the American true of any attempt to deduce anything from the aid plan. This again is untrue. The sums were increase in German production in 1948 as com­ released when the French Government so re­ pared with the increase in other countries in quested. western Europe. It would, however, be legitimate to define the basis for 'comparison. A third example: the bilateral French-American agreement was said to contain clauses forbidding When the Polish representative says that the France to make certain exports to eastern Europe. increase in German production in 1948 was con­ An error on this subject in the Secretariat's report siderable in comparison with the increase in pro­ has already been pointed out. The French delega­ duction in other countries of western Europe, it tion, during a long discussion in the Economic would be only fair to indicate that this production and Financial Committee of the General Assem­ was much lower at the end of 1947, hence much bly, made a formal denial of such allegations. easier to step up-and quite natural for it to be developed further. What in fact happened was The bilateral agreement may be read; it has that in 1948 Germany went through a stage been published. It contains no such clauses. The through which other nations had already passed Polish representative must be aware of the fact; in 1946. that is why he goes so far as to say that some secret protocol must surely be annexed to the I must note in passing a discrepancy between bilateral agreement. That is entirely untrue. There the remarks of the representatives of Poland and are no secret clauses; there is no secret protocol of the Union of Soviet Socialist Republics. Where­ supplementing the bilateral agreement. as the Polish representative complained about the rapid increase in German production, the rep­ I shall now deal with certain biased interpreta­ resentative of the Union of Soviet Socialist Re­ tions. publics complained that the recovery of ex-enemy countries was being hindered; he gave examples to The Polish representative juggled percentages. show that the western' Powers were deliberately The method of using percentages as a basis for hampering the development of German industry. argument without giving concrete figures is well known; it is a well-tried method for proving what­ I now come to certain statements on events in ever one wishes to prove and obtaining any result France, concerning which a biased interpretation one desires. has been made.

I should not like what I am going to say to be The outstanding fact, as regards France in the interpreted as in any way implying a desire to year 1948, was the very bad harvest of 1947, minimize Poland's efforts to increase production. which had disastrous results on our position. The I have had an opportunity of admiring, on the representatives of Poland and the Union of Soviet spot, the efforts of the Polish Government and Socialist Republics saw fit to argue that these the Polish people towards the reconstruction of difficulties are to be traced back to the Marshall their country. plan, as if the Marshall plan could have caused the drought which occurred in France during the However, any comparison between the produc­ spring and summer of 1947. tionfigures of pre-war Poland and those of present-day Poland must, if the slightest degree This is an easy way of producing an effect, of objectivity is to be attained, mention that the but it is not convincing. Moreover it is a method frontiers of Poland have been changed, and that which, in altered circumstances, can lead to very the country now includes great industrial areas different conclusions. For example, this year we which did not belong to it before the war. are reaping the benefits of an excellent harvest Mr. Bods, France 107

and my country's position is at this moment im­ Statistique generale de la France, the figures for proving very rapidly; the situation willpe entirely November 1947 and November 1948 are 1,501 changed. For instance, the cost of living is now and 2,024, respectively, and the increase is only falling. When, in a few months' time, these changes 34 per cent. (I do not have the figures for October, become even clearer, will our Polish colleague which must be roughly the same.) Consequently blame the Marshall plan? real wages cannot be said to have dropped during the year October 1947 to October 1948; on the 1 pose the question, but 1 really know the contrary, they rose slightly. answer. Mr. Katz-Suchy has revealed to us the secret of his dialectic. Whenever something un­ Yet I know well that it is very easy, when an pleasant happens in a country in receipt of Mar­ inflationary situation exists in a country, to take shall aid, that is due to the Marshall plan; but as a basis either the period immediately preceding when something pleasant happens, and saine im­ an increase in wages-and that period only-or provement must be admitted, then it is in spite of the period immediately following a sharp rise in the Marshall plan. prices and to show that wages are lagging behmd the cost of living. It is a well-known method. We Our Polish colleague is a man with a good sense are familiar with it, and presumably our Polish of humour, but 1 hope he will allow me at this colleague used this method. moment to explain one of his best jokes for the benefit of those who perhaps did not realize at the 1 can tell him that I heartily agree that if one time that it was a joke. takes, for example, the first seven or eight months of 1948, one will find that on the whole the pur­ Let us now tum to more serious matters. The chasing power of wages in France has decreased. Polish representative spoke of a fall in real wages But this development was not confined to the in France, which is said to have taken place during purchasing power of workers' wages. During the the first nine months of 1948. 1 must first give same period, the purchasing power of all French particulars of the facts, on the basis of the figures people, with very few exceptions, decreased. The published by the United Nations. reason is simple. This was the period, I repeat, when we were all suffering from the consequences The real situation is as follows: th.e Monthly of the very poor harvest of 1947. Bulletin of Statistics published by the United Na­ tions gives figures for six-month periods ending I do not want to pile up a mass of figures, but April and October. Accordingly, 1 must compare if the Council will refer to table 5 of the world the figures for October 1947 with those for October economic indices, in part II of the publication, 1948. This is what 1 find: as regards wages, table Major Economic Changes in 1948, it will see that 63 of the Monthly Bulletin for January-February the grain production index for France fell in 1949 shows that the rate of hourly wages in France 1947/48to 51 (taking 1934-1938 as 100). This rose from 57.93 francs in October 1947 to 87.54 is one of the most disastrous figures ever recorded. francs in October 1948, an increase of 50 per The harvest of 1947/48 has been compared to a cent. particularly bad harvest in the Napoleonic period.

During the same period, the cost of living index, Such a decline could not fail to affect the living given in table 64, rose from 1,515 to 2,203, an conditions of the French people. Their standard increase of 45 per cent. 1 must add that this index of living was bound' to reflect the consequences. refers exclusively to foodstuffs, that is, the com­ If this is what our Polish colleague meant, 1 see modities for which the increase in prices has been no objection to granting him his point. But one most noticeable. question arises: what would have happened if we had not received Marshall plan aid, if we had If we take the cost of living itself, as measured not been able to turn to United States aid for the by the cost of a number of items, including basic means of meeting an unprecedented deficit in consumer goods other than foodstuffs, in the French production? 108 Mr. Boris, France

I put the question, but I must say that the I have now finished what I may call the chapter French people know the answer, and they do not of refutations. Fortunately, the Polish represen­ forget what this help has meant to them. I say it tative did not confine himself to calculations and lest our colleagues imagine that the propaganda criticisms which, as I think I have made clear, they are trying to spread here could influence had no foundation. His speech contained more French opinion. than one constructive suggestion and we were in­ terested by all he said on the position of the coun­ Now let me return to the question of the situa­ tries about which our only complaint is that we tion of France. We have had to use part of our are inadequately supplied with exact statistics on Marshall plan credits for imports of foodstuffs­ their actual situation. a larger part than in the preceding years. Mr. Katz-Suchy shows surprise at this. He is sur­ We were also happy to note his words stressing prised that 1948 should, in comparison with 1947, the desire of his country, and of other countries have witnessed a decrease in the proportion of of eastern Europe, to develop their trade with the capital goods imported under the Marshall plan. countries of western Europe. On this point, as he The explanation, however, is very simple. In or­ must know, we agree with him. The Polish delega­ der to provide sufficient food for the French tion cannot have overlooked France's constant people, we had to import large quantities of food­ efforts, both here and in the Economic Commis­ stuffs in 1948. This meant that imports under the sion for Europe, as well as in bilateral negotia­ Marshall plan comprised a far larger proportion tions, to develop trade between eastern and west­ of foodstuffs than in 1947. ern Europe.

Marshall plan aid provides us with three types However, we must bear in mind that results do of goods: foodstuffs, raw materials for industry not depend merely upon the goodwill of the par­ and capital goods. ties concerned.· They also depend upon what each one has to offer. The exchange of goods is in pro­ As a result of our poor harvest, we had to portion to production and, in the reconstruction change the proportions established for each of period through which we are passing, it happens these three categories of goods, in order to meet only too often that, owing to force of circum­ our increased needs for foodstuffs. This meant stances, offers are insufficient on either side. We that we had a choice between reducing our pur­ ourselves have far too great a need for equipment chases of raw materials or of capital goods. to be able to provide'others, who also need it, with The purchases of raw materials have not been all they would like to receive. reduced. We needed coal, petrol, cotton, wool and non-ferrous metals, if our industries were not to Eastern Europe, for its part, has not been able be halted. All these products were imported; the to provide.us with all the goods of primary neces­ result was that industrial production could be sity which we urgently require. In other words, further increased and made to rise above the 1938 we have had to make great efforts to raise produc­ level, as the Polish representative himself ad­ tion; still more efforts must be made for general mitted, although he added that this was in spite development before the trade between eastern and of the Marshall plan. western Europe can reach the desired scale. I note that we are unanimous in agreeing that this scale Thus the proportion of capital goods had, in­ should be considerable. evitably, to be reduced. Besides, France at that time had started producing such goods-electrical On the one hand, the successful development tools and tractors-and now this production is ex­ of production in the various countries of the world, ceeding all our previously recorded results. due in particular to the recovery of western Eu­ rope-which our Russian and Polish colleagues Next year, as the United States representative wish to ignore, but which they will not lliways be has already pointed out, we shall return to more able to ignore-on the other hand, the work which normlli quotas. will be achieved, we hope, to hasten the develop- Mr. Katt-1iiudlv. Poland 109

ment of under-developed countries-and we are Poland-all this must help us towards our com­ not forgetting the results obtained in countries like mon goal.

25 FEBRUARY 1949, MORNING MEETING

Mr. KATZ-SUCHY, Poland his statements-in one of his many appraisals of The United Kingdom representative, the United the Marshall plan or of the so-called European States representative and the French representa­ Recovery Program-mentioned that the eastern tive have attacked certain parts of my statement. European countries opposed· the plan because The United States representative started his at­ they want to prevent the reconstruction of Eu­ tack with a differentiation between the high levels rope but the Marshall plan is, and continues to be, of the discussion and the low levels of the discus­ vital to Europe and to the United Kingdom. One sion. He immediately divided the discussion into or two days earlier, with a great boast, the United statements of high level, which included - of Kingdom representative told us it was time to stop course, very modestly-his own, and the low-level speaking about the recovery of the United King­ statements, which included the statements of the dom: the United Kingdom has already long ago Union of Soviet Socialist Republics and Poland. recovered and is now progressing. Therefore, we His line of differentiation was very simple. The are quite justified in asking the question, as it was measure which he used for t,he evaluation was still asked in Washington yesterday: if it is so good, simpler. Those who joined the gratitude train after why is it so bad? If progress has been made so far, the statement of the United States representative if recovery is proceeding with such speed, if 700 with regard to United States grants in the past, in factories of an undescribed denomination have the present and in the future were the high levels; been opened, if the standard of living has been those who were more critical of it were the low raised so high, if everything is so beautiful, why levels. I can guarantee that I will not lower my claim again the necessity for aid? Why claim the level to the high level of the United Kingdom necessity for the Marshall plan? Why be a car­ representative. riage in the great gratitude train to America?

The United Kingdom representative used sev­ Of course, Mr. Mayhew did not take special eral arguments against two statements which have care to find facts against the arguments which he been made-against the statements of the repre­ brought. He simply called them invented facts, sentative of the Union of Soviet Socialist Repub­ distorted facts; and in one place he even spoke lics and the representative of Poland. The first about the truthful allegations of the Polish repre­ argument I have already described. The second, sentative. I wonder whether it was not a mistake, the third, the fourth and the fifth arguments were whether the word "truthful" was not some slip "communist representatives", ."communist propa­ of the tongue which Freudist theory, not economic ganda", "communist myths" and similar items. theory, could easily explain. I am sure that these arguments were not intended for the Economic and Social Council; they were Mr. Mayhew accused Poland and the Union of rather intended for the listening public. They had Soviet Socialist Republics of using newspapers, to create the proper impression on the public and instead of official statements and statistics. If, not only on the Council, because I cannot believe however, he would look at the statement of the that the United Kingdom representative's argu­ representative of Poland, he would find that me!).t for introducing the difference in develop­ where figures were given, they were given on the ment between socialist economy and capitalist basis of the seventh report of the Economic Co­ economy is simply to create a communist myth. operation Administration, the Monthly Bulletin of He knows much better what is a myth and what is Statistics of the United Nations and others. And a reality. just to show how he quotes governmental figures Let us turn to the reality he spoke about. The -official statistics-he immediately quoted clip­ representative of the United Kingdom, in one of pings from the Yugoslav Press concerning trade 110 Mr. Katz-Su.chy, Poland

relations between Poland and Yugoslavia. He tries of eastern Europe by laying down an em­ quoted several newspaper clippings, giving them bargo. The reply is, "We have heard it before." to us as the basis for his allegations. Were they My reply is, "You hear it again." Did Mr. Thorp, statistics? Were they official statements? No. No did Mr. Boris, did Mr. Mayhew say that the one can blame him for it because I consider the United States is not committing economic war­ newspaper a quite valuable source of information. fare? Did the United States representative say that it was not true that penicillin, streptomycin, Another thing: Mr. Mayhew says that the Union spare parts for tractors, needles for cotton, are of Soviet Socialist Republics never produces sta­ being prevented from being exported although tistics. Immediately, however, he compares cer­ they have been ordered and paid for previously? tain figures with regard to the value of labour and No. the earning capacity of workers in the United Kingdom and in the Union of Soviet Socialist Mr. Mayhew says to this that it is not true that Republics. He even goes so far as to give these the United Kingdom is boycotting eastern Eu­ figures to the exact minute. To earn a cotton rope. This is quite true; no one is accused. I dress, a worker in the Union of Soviet Socialist pointed out the increase in the trade between Republics needs so many minutes; in the United east and west. Mr. Mayhew did the same as some­ Kingdom she, or he, needs much less. A minute one accused of robbery who claims that he did before he admitted he had no statistics. Are we not rape a junior. We made the accusation that not therefore justified in claiming here that these this action retards world recovery. Did anyone are pure inventions? Are we not justified in ac­ reply to it? No. I pointed out in my statement cusing a man who, in one and the same breath, that in spite of the efforts of the United States says that he has no statistics available-that he has this trade has been increasing. I pointed to it not: no statistics as to wages, as to prices, as to hours as Mr. Boris says, in a joke, but I pointed to it of labour and conditions of labour-but at the as a victory of the sound European economic same time draws such exact conclusions? The re­ mind, because western Europe cannot exist with­ ply probably will be that it was from a very good out trade with eastern Europe. I pointed to the newspaper, the Economist, which I very gladly influence of the recovery of eastern Europe on read every week. They were probably calculated, the stability of Europe as a whole and as a guar­ but was it a governmental source? What is the antee that the present policy of the United States statistical basis on which the calculation was must not result in war. made? Either the representative of the United Kingdom has statistics and has based his state­ I pointed out at the same time that there are ment on them, or he has no statistics and these attempts-and Mr. Anderson, in the discussion figures were invented by someon~. before the United States Senate Banking Com­ mittee, has quite clearly admitted that there are attempts-to force upon the European countries In my statement I pointed out several salient participating in the Marshall plan an embargo to features of the world economic situation during eastern Europe. I pointed out his reply to Senator the year 1948. I referred .in particular to certain Taylor. And may I point out now, Mr. Mayhew, aspects of that situation, namely the incomplete a statement which was made immediately after­ recovery of Europe-the uneven and differentiated wards by Harold Wilson of the British Board of development of European and world economy. I Trade, stating that the United Kingdom was pointed out the activity of the United States as thinking of a list of embargoes of its own. Since hampering world trade and retarding world re­ Mr. Anderson, speaking in the Senate of the covery. Did anyone answer on this point? United States, pointed to the secret negotiations which are going on between the United States and We accused-and we do accuse, and we have the participant countries within the Economic accused during the General Assembly-the United Cooperation Administration, I pointed out that States of leading economic warfare, of committing there must therefore be certain secret clauses an act of economic aggression against the coun- which are attached to the ECA. I believe I was Mr. Katz-Suchy, Poland 111

quite justified in saying so because the point of The representative of the United States tried the ECA agreement which I quoted spoke of the to show, by quoting certain parts of my statement, increase of exchange among the participant coun­ certain contradictions which I made in the state­ tries, both among themselves and with other coun­ ment. First of all, he quoted them out of context; tries. Therefore, the introduction of certain addi­ maybe they could confuse any listener but prob­ tional clauses, about which Mr. Anderson is so ably if the United States representative listened excited, shows that an attempt is attached, to to the statement again he would see that he was introduce an additional agreement which will confirming that which I stated by these very force upon the western European countries an quotations. embargo against eastern Europe. The representative of the United States says This is, from every point of view-from the ". .. we are damned if we do [release counterpart point of view of the Geneva convention on tariffs, funds], and we are damned if we don't [release from the point of view of the Charter and from the them]". I made the basic argument that the Mar­ point of view of the sound economic mind-a shall plan and the European Recovery Program violation of certain principles. are adjusted and built on the needs of the United States economy to meet certain difficulties, and Mr. Mayhew has another reply to it. He does not on the needs of European economy. Therefore not deny that the United States is committing an when, for United States economy, for United act of economic aggression. He claims that Poland States interests, it is convenient in Austria to re­ is committing it, and quotes newspapers. I be­ lease counterpart funds-whether it serves the pur­ lieve that Mr. Mayhew served my purposes very pose of Austrian industry or not, whether it will well by quoting that article. That article shows help in the increase of inflationary pressures or how Poland drives a treaty. We are hard bar­ not-these funds are being released. When, how­ gainers. We bargain for treaties as we bargained ever, the French Government approaches the in London, as we bargained with you in Warsaw. United States administrator of the European Re­ We are not prepared to accept what is given us. covery Program for the purpose of releasing a We are not prepared to accept the dictatorship of certain amount of francs in order to avoid new Mr. Hoffman. We are not prepared to accept pea­ taxation or to avoid any increase of inflationary nuts, as we are not prepared to accept maize or pressures, it is refused because at that moment it wine. It is the right of every country, when con­ does not suit the interests of United States industry cluding a treaty, to demand that the country be and of United States exports to Europe. given what it most needs-what the country most needs and what is the most scarce. We odemanded Mr. Thorp found another contradiction in my certain metals and raw materials from Yugoslavia statement. We say that they are dismantling plants; in exchange for raw steel. That was our right; it they stopped dismantling plants in the western was our way of bargaining. We demanded the zones of Germany. We say that they are building same materials which have been offered for sale up industry; the Union of Soviet Socialist Repub­ to the United Kingdom and the United States. lics says they are destroying industry. That is a We shall continue to bargain in that way whether very simple thing, Mr. Thorp. They are destroying the counterpart in the bargaining is the United and dismantling those parts of German industry States, the United Kingdom or any other country. which are in competition with certain United States We are not prepared to accept what is given us. industrial firms, so that these firms may continue H we offer, we want a counter-offer and we can the export of their products to Germany; while offer only to a counter-offer. the industrial potential with regard to the military industry is being increased. The same concerns western Europe. I pointed out that there is a certain limit beyond which we Mr. Thorp found another contradiction with may not be prepared to go in supplying western regard to Germany. The representative of Poland Europe, if what we consider a fair share for us allegedly has said that the programme was in is not reciprocally met. grants, 100 per cent in grants, and then he said 112 Mr. Katz-Suchy, Poland

that huge profits have been derived. That is quite There was one point which, the representative simple; that is quite possible. It only depends of France reminded me, was met with smiles. This from whom the grant comes and to whom the was when I spoke of the devaluation of the franc. profitgoes: who gives the grant and who takes the Mr. Boris, I am sure, knows that smiles have profit. The grants have been given but the use of never yet been arguments, and smiles have never the profits has gone to the various firms who were yet been convincing. I wonder whether Mr. Boris granted concessions-who were granted monopo­ has ever heard of a pamphlet which was published lies in the western zones of Germany. by the United States State Department shortly before the devaluation of the franc, which spoke May I make it completely clear that in my of the necessity for the devaluation of the franc. statement I did not oppose the reconstruction of Mr. Thorp says that I am accusing the United Germany as an economic part of Europe; I did States first of devaluating the franc and then of not say Germany should be left in its present dumping. I do not see any contradiction, because state without attempts to remove the influences the policy of weakening the franc has as its very of the war. I pointed out-and it was pointed out basis the attempt to eliminate the franc as an in­ several times by my Government-that we will ternational currency from world markets. There fully support any economic policy in Germany was no dumping, Mr. Thorp says. Mr. Boris said, which will help to bring back Germany as a part when I quoted the figure about the division be­ of European economy, because European econ­ tween capital goods and goods for immediate omy cannot be stabilized with a vacuum like consumption, that that was according to the need Germany in the middle. We pointed out, however, of French economy. Let me make one thing per­ that this reconstruction must be based on the re­ fectly clear. We never stated that United States moval of Germany as the centre of the economic loans within the Marshall plan were without in­ power which existed before the war-by the re­ fluence for the reconstruction of Europe. In the moval of war industries, so that Germany never very first words of my statement, I pointed out the again can menace the peace of the world. necessity for the reconstruction of Europe. What we were fighting against was not aid; we were May I draw the attention of the United States fighting against the economic and political. con­ representative to that part of my statement which ditions which were attached to that aid. I shall quote: That is where the danger lies, and that is what is dangerous for all European economy. The Mar­ "Of course the above-described tendency has shall plan has been built, not as a plan for Euro­ nothing in common with the reconstruction of pean recovery, but as a plan for United States German economy as a part of the reconstruction domination over world economy. Therefore, varia­ of Europe, nor with the needs of other countries; tions in the division of supplies will be made, not it is not accompanied by political and social re­ in accordance with the needs of European econ­ forms which would guarantee the peaceful char­ omy, but primarily in accordance with the needs acter of future Germany. The real menace is not of the United States market. so much the revival of German industry, which could be a constructive programme if it Were used Mr. Boris pointed out that in the next year of for the benefit of the people of Europe as a whole. the Marshall plan there will be an increase in the What we are witnessing today is an attempt by supply of capital goods. Somehow, this goes to­ the United States to create in the centre of Europe gether with the request which has been made by an economic basis which could be used as an the American Machine Tool Builders Associa­ instrument for the economic dictatorship of the tion, who complain that their share is too small. United States over Europe." We all know that when the Marshall plan was inaugurated, machine industries in the United That is something quite different from what I States still had very large backlogs of orders and have been accused of saying by the representative were indifferent to European business. That is one of the United States. of the reasons why the Marshall plan included Mr~ Katz-Suchy, Poland 113

only a small proportion of industrial machinery. Mr. Boris says that food had been brought to Now that industry has advanced, the backlogs France in a time of hunger: food for dollars which have diminished and machine tool manufacturers burdened the balance of payments of France very have suffered a very sharp decline in their busi­ heavily. That food could have been bought without ness. For this reason, the American Machine Tool dollars from eastern Europe by means of barter Builders Association has asked the Economic Co­ trade. It could have been bought for French ma­ operation Administration to put pressure on the chinery, and this would have been beneficial both European countries to validate these orders under to eastern Europe and western Europe. It would the Marshall plan. This is not because there was have increased the productivity of French fac­ a bad harvest in France, or because there will be tories and·at the same time would have estab­ a good harvest this year-it is the need of United lished normal relations. States economy. We eQuId quote hundreds of examples like this from the list of goods being supplied under the This year there will be an increase in the de­ Marshall plan. The discussion which took place liveries of machinery under the Marshall plan. between the United States of America and the Next year, maybe, there will be an increase in the United J(ingdom with regard to the supply of to­ delivery of peanuts. Another year there may be bacco is well known. The United Kingdom rightly an increase in the delivery of tobacco. The delivery considered that tobacco need not be bought in of tobacco last year totalled $109 million. This Virginia for good hard United States dollars, but year, the deliveries of tobacco may be smaller. could quite easily be bought in Greece. Finally, For the week ending 11. October 1948, a ship­ the United Kingdom became convinced that Vir­ ment of 12 million shelled peanuts was made to ginian tobacco is much better for it and its supply Bizonia. That shipment has provided every in­ of tobacco, instead of coming from Greece in ex­ habitant of western Germany with one bag of change for goods manufactured in the United peanuts for every day for a month. A similar ship­ Kingdom, became a deficit in the balance of pay­ ment was made in Austria, but that shipment was ment of the United Kingdom. Greece had a similar so large that it provided every inhabitant with one experience in respect of tobacco. The Greek bag every day for two months. I do not know how market was flooded with American tobacco and big the shipment of shelled peanuts to France will American cigarettes, and the Greeks complained be next year but, whatever it is, it will not be be­ about the breakdown of their industry and the cause the French children like peanuts. I do not decrease of their main exporting resources. They think they do. It will be because maybe in the were then told" they should change and produce year 1950 there will be a huge surplus of peanuts something other than tobacco. in the United States markets. Mr. Boris accused me of using improper figures That is our criticism of the Marshall plan. We by picking out special dates or special times which consider, as I have said, that there is no need to served my purpose. I do not know whether my oppose sound economic aid. The United States example has encouraged him to do the same, but representative will agree that it was the delegation he has picked out figures which serve his pur­ of Poland which asked for the continuation of the pose. He gave us a comparison between Novem­ United Nations Relief and Rehabilitation Admin­ ber 1947 and November 1948. I quoted figures istration and which asked that all grants of aid be of 31 October by which, according to French made through the agency of the United Nations. statistics, there was a decrease in the buying ca­ It was the Polish delegation which spoke against pacity of the Parisian worker amounting to 20 per the Marshall plan for by-passing the United Na­ cent and a decrease of 8 per cent for the average tions and for by-passing the Economic Commis­ French worker. Mr. Boris quoted November 1947 sion for Europe. We believe that this should be and November 1948 .figures. I do not know done on the basis of world recovery and on the whether Mr. Boris was so busy at the Palais de basis of the needs of world economy. Then it Chaillot that he did not know that an increase in would be beneficia1. salaries was made on 14 November 1948, by 114 Mr. Katz-Suchy, Poland

which every worker received an additional grant These are facts-which have been said in the of 2,500 francs, and that in the previous year, French National Assembly and which are being 1947, a similar grant was made, of 1,500 francs. stated in the French Press all the time. In view Re compares these two salary figures, which have of this I do not know whether it is right for Mr. just received an immediate increase to meet the Boris to come here and claim that the falling decreasing purchasing power of wages, as a standard of living-which I describe as one of the counter argument in our discussion. symptoms of an approaching crisis in the capital­ ist system-should be denied so fiercely. We all know that no responsible French states­ man, either in the National Assembly or outside, I am quite convinced that if the representatives would commit himself at the present time to a look through the substance of my statement again statement that the living standards of the French they will find that it was based on statistical ma­ working class have been raised. I mentioned cer­ terial-on information supplied by various agen­ tain parts of the confidential report on the basis cies, on United Nations materials and, of course, of which the report of the administrator of the on tp.e Press-and that it was not exaggerated, es­ Economic Cooperation Administration was made, pecially in so far as concerns the part in which Mr. in which it was stated that by 1952, with all the Thorp accused me of exaggerating. activities of the Marshall plan, the standard of living of the average western European worker With respect to the symptoms of crisis in the would still be below that of 1938. Of course, the United States, I made it quite clear that it was too standard of living in France has not been at a early to give a definition as to their effect, either standstill. We know that, as a result of action in the United States or in Europe, and too early to which was started by the French trade unions, the say whether they portended a depression, an in­ Government of France has agreed to a monthly flation, a deflation, anti-inflation or whatever name indemnity of 1,500 frances, to be added to the may be invented for it. I am sure the situation wages according to the Paris level. From 15 No­ will develop in one direction or another and, dur­ vember 1947, the French Government has refused ing the next meeting of the Economic and Social to maintain the purchasing capacity of that new Council, members will have full figures at their dis­ wage. posal to enable them to discuss these new develop­ It should be pointed out that this purchasing ments should the situation so require. power was far below the purchasing power of these same wages in July 1946. Right up to Au­ I quite agree as to the strength and high pro­ gust 1948, real wages decreased continuously in ductivity of United States industry and commerce France. All the trade unions of all political de­ as described here by the representative of the nominations-the Conjederation Generale du Tra­ United States. We know the reasons for this, and vail, the Force Ouvriere and the Christian Trade we have discussed it, but let us remember one Unions-asked for either a lowering of prices or thing: capitalism has shown itself to be always a revision of wages. In September 1948, the Gov­ very vulnerable, even at its highest peak of devel­ ernment finally agreed to an indemnity of 2,500 opment. Crises result from it, as do depressions, francs-which came into effect later-by which the with very grave results. That is not a communist wages were raised 12 per cent. In December 1948, myth, Mr. Mayhew. Capitalist depressions existed all French trade unions-again of all political de­ even in the nineteenth century~or was this, per­ nominations (so Mr. Mayhew cannot call it a haps, already the influence of Marxism? I do not communist myth, since I hope he will not call the know. Force Ouvriere part of the great communist myth) stated that the Government had done nothing to In my statement and explanations I think I prevent the raising of prices and again a raise in made it entirely clear that in the discussion I laid wages was claimed. They asked for a 15 to 20 per stress on one main feature which I considered the cent rise in order that purchasing power could be most important of all, namely, the uneven and restored to its previous level, since it had suffered differentiating development of two systems, the so heavily in November 1947. capitalist system and the system of socialist planned Mr. Tsarapkin, Union of Soviet Socialist Republics 115

economy. We know only two such systems. Mr. Mr. Mayhew has concerned himself with abor­ Mayhew has told us of another system, a social tion. This too should be well known to Mr. May­ democratic system, and on a previous occasion he hew. What statistics do you need in this regard? tried to explain to us how ingeniously and cleverly I cannot lmderstand what need Mr. Mayhew had the United Kingdom was building socialism with of such slanderous manoeuvres. It seems to me capitalist dollars. However, as I say, we know only that his sole aim was to shade over and distort the two systems. We are approaching the half-way real state of affairs, to present everything in a false mark of the present century. The twentieth cen­ light, to turn the facts upside-down and to distract tury has shown a victory for socialism over capi­ attention from the serious problems which have talism in many countries. In spite of the boasting now arisen in the world, the problems facing the as to the strength of American economy, we are capitalist countries, whose economy, notwithstand­ confident that the twentieth century will be a cen­ ing the Marshall plan-or, I should say, despite the tury of socialism, and not of capitalism. Marshall plan-has not yet, in the overwhelming majority of those countries, reached the pre-war level. As for the United Kingdom, even if the pre­ Mr. TSARAPKIN, Union of SovietSodalist war level has at times peen surpassed, this is true Republics (translated from Russian) only of certain branches of industry.

I had no intention of speaking a second time What was it in my statement that so annoyed on this question, but the speech made by the the United Kingdom representative? First of all, United Kingdom representative yesterday obliges Mr. Mayhew was greatly annoyed by the fact that me to make a few observations. the standard of living of the workers in the United I must first of all point out that the United Kingdom had dropped. In my speech I quoted facts Kingdom representative's statement is almost the taken from the report and from Mr. Mayhew's twin of the statement he made at the sixth session own speech. The Secretariat's report states that in of the Economic and Social Council, also in con­ 1948 the cost of living of British workers rose 7 nexion with a speech by the representative of the per cent, while Mr. Mayhew informed us in his Union of Soviet Socialist Republics. The same old statement that between March and December of record was played again yesterday, and the only that year the wages of British workers rose only difference was that yesterday's speech included 2 per cent. It should be clear to everyone from a quotations from the newspaper Borba. comparison of these two facts-these two indices -that the standard of living of British workers has I must observe that the hysterical statement dropped. This is an indisputable fact, and in his made yesterday by the United Kingdom repre­ statement yesterday Mr. Mayhew called this in­ sentative is slanderous from beginning to end. I disputable fact a libel on the British :vorking class. will give examples. He asked why the SovietUnion I do not know whether the circumstances that its does not provide statistics about smallpox, plague, standard of living has actually been lowered is a abortion and unemployment? Really, only some­ libel on the British working class. It is no libel; one from the moon, or perhaps from Mars, could it is the true state of affairs. Mr. Mayhew, I think, raise such questions. There have been no cases knows better who is responsible for this state of of smallpox or plague in the Soviet Union for a affairs and he could, if he were objectively minded, very long time. This should be well known to explain to us how and for what reasons the stand­ everyone. Extensive prophylactic measures have ards and conditions of life of British workers completely eradicated these diseases throughout the are not improving but, on the contrary, are Soviet Union and there have been no cases of deteriorating. these diseases in the Soviet Union for several decades. As regards unemployment, I consider it . The statement by the representative of the ridiculous even to talk about unemployment in Soviet Union which provoked such annoyance, the Soviet Union, when there have been no un­ and to which Mr. Mayhew devoted his long speech employed in the Soviet Union since 1930 and all yesterday, contained facts and figures taken from who are capable of work ate working. official sources. By his questions about smallpox, 116 Mr. Borberg,Denmark

plague and the like, Mr. Mayhew in no way re­ to suggest. Speeches have been made here, not futed the facts and figures contained in the Soviet only by the representatives of the Soviet Union Union representative's speech. He merely evaded and· Poland, but by many other representatives them; indeed, they cannot be refuted. who have pointed out precisely the alarming symptoms and unsatisfactory state of their econ­ It is now clear to all that there are two groups omy which are causing them to speak out and to of countries in the world, in whose economic de­ give warning of the further consequences of the velopment there is an obvious difference. One economic situation of these countries. These rep­ group, developing very quickly, have restored resentatives have claimed that it is essential to take their economy and are forging ahead in industrial effective steps to avert catastrophe in these development, agricultural development and econ­ countries. omic advancement. The second group of coun­ tries are still in a state of uncertainty-are, so to Did Mr. Mayhew not hear these speeches? speak, marking time. In some cases their economy Were they not made in this Council? Were they is retrogressing and an uneven development is to not made by the representatives of countries not ~~communist" be observed. This is an indisputable fact and no connected with the countries, to use slanderous distortions, no attacks against repre­ Mr. Mayhew's expression? These facts can, of sentatives who have spoken here, can eliminate course, be ignored, but they do not thereby cease it. This fact exists whether Mr. Mayhew likes it to exist. They do exist, and everyone, including or not. Mr. Mayhew, should and must take account of them. I do not want to hold the Council's attention any longer and should like to sum up the question as follows: Mr. BORBERG, Denmark

The United Kingdom representative-if I used The old Greeks had a conception of discussion the dictionary to which he resorted yesterday, I which is evidently not the one we have been fol­ might call hinl the "representative of the capital­ lowing. They tried to find, by dissecting words ists" since he called me the "representative of the and by stating facts, the real objective truth. When communists"-attempted to distort the real state you are dealing with government representatives of affairs and distract attention from the serious it cannot be helped if they tend towards a variation economic problems and difficulties which face the of that concept. I think we have now had what I capitalist countries and which show that one sys­ should like to call the anti-Marshall plan cere­ mony. tem is superior to the other. The attempt will not, in my opinion, succeed, since the facts which We all know the attack is recurrent, and we all were quoted are contained in my speech and any­ know at least the essence of the attack and the one can study them. Not one of these facts or essence of the answer. However, i since the cere­ figures was refuted by Mr. Mayhew. Powerless to mony has taken place and all the Marshall plan refute them, Mr. Mayhew resorted to a peculiar countries have been criticized for accepting the sort of attack, using such nonsensical assertions plan, I wish to remind members that last year I as his statement about the existence in the Soviet explained our gratitude to the United States for Union of smallpox, plague and unemployment, the help which they gave us. Since then, the which for a long time now have been unheard of Foreign Minister of my country, during the gen­ there and which the young people living, working eral discussion at the last session of the General and studying there cannot even imagine. Assembly, gave a full statement of the point of view of my Government and of the overwhelming It seems to me that the discussion which has majority of Parliament and the people of my taken place here in the Council on the report by country. the Department of Economic Affairs has shown that the economic situation in the capitalist coun­ Since then, conditions in Denmark have further tries is not as favourable as Mr. Mayhew has tried improved, owing in no small measure to the Mar- The President Mr. Owen 117

shall plan. It is obvious that, from our point of and I think we shall be able to give a much more view, we have no reason to be affected by this balanced geographical treatment of the economic discussion. data in that report. At the same time we shall be mindful of those who hope that, at that time, with Therefore, as the representative of Denmark, I a mature consideration of the data before us, we gladly and with good conscience enter the grati­ shall be able to give a more thorough analysis of tude train, as one representative called it. But I the economic trends, if it is possible, than has been am glad that I am the last speaker, because I do possible at this stage of the year. think that there is no use continuing this dis­ cussion. The last thing I should like to say is that the work of the Secretariat depends very largely upon the co-operation of governments in the submission The PRESIDENT of economic data which we can embody in our If there are no further speakers, I take it that reports and make the basis of our analysis. If our we have reached the end of this discussion. report suffers from certain limitations, in some respects it is due to the lack of comparable data. As members know, two draft resolutions have The more co-operation we can get from members been circulated: one has been circulated by me of the Council and from other Members of the and is contained in document E/1180; the other United Nations, by having them submit data at has been circulated by the delegation of the United an early stage, the better will be the work which Kingdom and is contained in document E/1190. we can submit to you. Before coming to the consideration of these draft resolutions, I should like to call on Mr. Owen for a brief comment on some of the state­ The PRESIDENT ments that have been made and on the general Before I come to the draft resolutions to which nature of this debate. I have drawn your attention, I should like to make just a brief statement. Mr. OWEN, Assistant Secretary-General in charge When I introduced this item, I recalled a state­ of Economic Affairs ment made by Mr. Malik-who was then the Presi­ dent of the Economic and Social Council-that I am very grateful for the opportunity of saying, when we had a similar debate here a year ago he on behalf of my colleagues in the Department of felt it was the best debate he had ever attended. Economic Affairs, how encouraged we are by the My feeling is that the debate that has just now reactions of delegations to the report which we closed has been even better than the one in which have placed before you. We are very encouraged we participated twelve months ago. As I have by the complimentary remarks which have been listened to it from this Chair, the feeling has made, and we have been very much helped by the crossed my mind several times that I was listening comments and criticisms made by the delegations. to the Economic and Social Council at its best. We should like to apologize for a number of I congratulate members on the high level at which errors which have crept into the report at various .this debate has been maintained. In general, mem­ points and which have been pointed out to us by bers have confined themselves to an analysis of delegations. We are very much aware of certain the publications made available by the Secretariat, limitations of this preliminary report, due to its to a statement of problems as they see them and hurried composition at such an early point in the to proposals by which improvements in the world year and due to the fact that we have in mind the economic situation can be made. What has par­ preparation of the much more comprehensive re­ ticularly pleased me is that the speeches have been port which we shall make available to the Council couched in language which generally excluded de­ when it meets in July. At that time we shall have nunciation and insinuation. There have been very before us the reports of our regional commissions few lapses as to that. We can expect serious differ­ in Europe, in the Far East and in Latin America, ences of opinion here, but we have no right to 118 Mr. Tsarapkin, USSR The President Mr. Mayhew, United Kingdom

object when members take attitudes, and take Mr. TSARAPKIN, Union of Soviet Socialist them very firmly, with which some may disagree. Republics (translated Russian) But if what is said is expressed in the spirit of reason and conviction, discussion can hardly be Nevertheless I consider it expedient to put the other than helpful. resolution to a formal vote.

In the results of this debate a picture has been presented by members' contributions, in which The PRESIDENT those who are interested may see the problems that exist. This should assist authorities the world Very well. As the representative of the USSR over to prepare themselves against possible de­ has asked for a vote, we shall have a vote. velopments and to correct the weaknesses that The resolution was adopted by 15 votes to none, have been revealed in our prevalent world econ­ with 3 abstentions. omy. By such debates, the Economic and Social Council fulfils one of its great purposes, and I should say that governments, and the other or­ The PRESIDENT ganizations mentioned in the resolution I shall in­ troduce to the attention of the Council in a The other resolution has been submitted by the moment, will be thankful for the guidance this delegation of the United Kingdom. discussion affords them.

In conclusion, I personally should like to thank Mr. MAYHEW, United Kingdom the Secretariat for the diligence and the capacity with which it has prepared these documents for I think that the resolution of the United King­ our consideration. This work must have been done dom is largely self-explanatory, and I do not pro­ under very great stress, and the fact that it has pose to introduce it in anything more than a for­ been done in these circumstances puts us very mal speech. deeply in the debt· of some devoted international civil servants. I would, however, draw the Council's attention to the fact that the information asked for by the As members know, I have circulated a draft resolution refers only to such information as the resolution. It is a very simple one and it should Secretary-General normally collects. It does not not arouse any controversy. concern such information, for instance, as the specialized agencies collect-in case there should It reads like this: be any misunderstanding about it. I think the resolution is self-explanatory. We all agree about "The Economic and Social Council the need for supplying information for the Secretary-General's report. "Taking note of the Secretary-General's report, We heard from the Secretariat this morning of Major Economic Changes in 1948, the importance of co-operation in this field, and I formally move my resolution. "Draws the attention of Member States, of the Economic and Employment Commission, of the regional economic commissions and of the spe­ cialized agencies to the views expressed by mem­ The PRESIDENT bers of the Council concerning the world economic I shall now read the resolution: situation." "The Economic and Social Council There is another resolution, but I suggest that the one I have just now read· might be put and "Urges all Member Governments, subject to the carried without further discussion. requirements of security, to give the greatest pos- The President 119

sible co-operation to the Secretary-General, in The resolution was adopted by 15 votes to making available data required for the regular none, with 3 abstentions. monthly and al1l1ual publications of economic and social statistics and for reviews of world economic The PRESIDENT conditions." That brings us to the end of the consideration As no one wishes to speak, I shall put the of this most important item and I thank you very resolution to the vote. sincerely for your co-operation. SALES AGENTS OF THE UNITED NATIONS PUBLICATIONS

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