Trade Barriers in Central Europe

Abstract

THE CENTRAL EUROPEAN economic policy of the years I919-39 may be considered to be a major cause of the downfall of Europe. It was not in itself the main reason for the evolution of Naziism and for the subsequent disaster: the forces underlying the development of these political ideas were not economic ones. But Naziism could not have won its victories if the small nations had not been worn down by the economic depression, and the depression might have been checked in time if economic cooperation had been a reality rather than a slogan. The characteristic feature of Central European economics was the disruption of the economic unit which had been the Austrian-Hungarian Monarchy. Its political dismemberment was probably inevitable since the empire was unable to satisfy the non-economic needs of its population. But the new governments failed to solve the economic problems which emerged after the political freedom had been achieved. The monarchy had been an almost self-sufficient unit, depending on the exchange of the Western industrial and Eastern agricultural products. The trade between the socalled states of succession was, for all economic purposes, to be treated' as domestic rather than as foreign: for instance, Austria exported as late as I93I, in spite of all the new trade barriers, about 25 per cent of her total output and 45 per cent of her industrial production. However, the new rulers insisted on an autarchistic policy as if economic interdependence had been a threat to political freedom. There were many reasons for this attitude. First, the nationalism of the liberated races who hated their old enemies, their neighbors, more than they loved their own well-being: they paid gladly twice as much for goods provided they were produced by fellow Czechs, Magyars, Austrians, Yugoslavs, Poles, r Roumanians, rather than by the despised Roumanians, Poles, Yugoslavs, Austrians, Magyars, or Czechs, respectively. Secondly, the socialism of the emerging working classes who did not want foreign trade to interfere with their domestic experiments: well-meant but costly achievements in social security had to be protected by excluding the products of cheaper labor from less developed countries, or industrialization was to be promoted by preventing imports from more advanced communities. The conservative farmers who remained comparatively free from nationalistic and socialistic ideas, but insisted on planting wheat in steep mountain valleys and lacked capital for modern equipment, needed protection from foreign competition, too. All parties combined to erect barriers against the outside world while the economists, brought up in the tradition of the Austrian school of economics, talked of the blessings of free trade. These nations were not satisfied with the traditional means of tariffs and subsidies. During the period immediately following the first world war, the governments resorted to super-inflation in order to build up their new machinery. In the resulting monetary chaos, their resources were necessarily concentrated on the task of getting the most urgent food and fuel, and all other imports were sup-