Can the United States Contribute Further toward International Solvency?

Abstract

THE United States, through her policy of economic assistance, first in the form of the Marshall Plan and since I952 in the form of Mutual Aid, has helped many friendly countries to recover from the ravages of war without any appreciable reduction in living standards. Had the United States not come to the rescue, a highly developed area like Western Europe would have been forced to adjust herself in one way or another to hard economic circumstances. In the process she would surely have had to suffer a decline in living standards productive of social unrest and possibly of communal strife sufficiently violent to have brought into power in some countries political parties of extreme doctrines and hostile toward the United States. If that danger has been avoided, it is by no means over. Though production in the rest of the world, and in Western Europe in particular, has recovered and advanced beyond its prewar standards, there is still some evidence of a dollar shortage suggestive of a structural disequilibrium which is unlikely to be solved with the mere passage of time. The question naturally arises what further measures might be undertaken by the interested countries to promote the expansion of world trade on a multilateral basis. If we agree that in the immediate future the prospects of a substantial contribution to this end by West European countries are rather poor, our main concern will be to reconsider the efficacy of those policies by which, it is frequently alleged, the United States might further contribute toward its realization. First, however, let us appraise briefly the existing imbalance. From June I95I to June I952 the United States current account had a surplus of $4,I00 million.' From June I952 to June I953 the current account surplus was roughly $68 million. One concludes the United States surplus on current account is tending to disappear completely, a conclusion which has promoted some cautious optimism. But optimism is warranted only if the situation has been brought about without further trade restrictions; in the present situation, that would be largely by an expansion of the value of to the United States in a way which would be unlikely to prove merely temporary. Glancing at the figures we discover that, of the reduction in the surplus from $4,I00 million to the present insignificant figure, the in to the United States accounted for less than $I,400 million. Of this increase in exports to the United States, about $500 million was an in United States government expenditure on purchases by its personnel abroad, and an estimated $250 million was on offshore purchases. Of the reduction in from the United States of close to $2.6 billion, a small part was accounted for by an in the output of coal in Western Europe and by better harvests abroad. The remainder is attributable largely to the effects of a further of import restrictions abroad in late I95 i and in I952. If these import restrictions are considered temporary, then the potential deficit is still very large. It would be larger still if the political situation were other than it is. For then the United States item imports of government services, which provided some $I,900 million in the period I952-53, would be reduced to a fraction of this sum. As a final damper to the optimism, it may be pointed out that should the high level of economic activity in the United States recede, even slightly as in I949, to the United States would fall off rapidly. At any event it must not be assumed that as soon as the surplus in the United States balance This figure results when we include government of services (largely on its military personnel abroad), offshore purchases both for the United States forces stationed abroad and NATO forces, and private remittances, and when we exclude all military-aid (in the form of goods and services).