The Balance of Payments Problem

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IT IS a new thing for Americans to be concerned with our balance of payments. We are accustomed to thinking of ourselves as a nation with almost limitless productive resources--a nation capable of turning out goods and services sufficient for our own needs and for a sizable foreign demand, without undue monetary strain. After all, didn't World War II demonstrate that the United States, with a very small proportion of the world's population, could produce much of the material needed to win a world war, maintain high living standards at home, and afterwards provide an unprecedented amount of assistance to war-torn countries elsewhere?

All this is true. But time moves swiftly.

Our resources did in fact make it possible for us to act quickly after World War II in easing the "balance of payments" problems of others. The destruction and economic dislocation of the war had wiped out much of Western Europe's monetary reserves. Export earnings had greatly diminished. The United States recognized that the war-devastated countries had little ability to pay for imports of food, materials and equipment--the foundations on which swift and effective rehabilitation had to be built.

It was clear that capital was required in the underdeveloped areas of the world also. During the war and afterwards, people in many formerly isolated areas were brought into abrupt contact with both the institutions and the advanced technology of the West. Not only were old customs and allegiances weakened; there was an urge, stronger than any ties with the past, to achieve the conditions making for improved standards of living. For this, too, capital was needed.

It was against this background of rehabilitation needs in Western Europe and the thrust toward economic advancement elsewhere that the United States supported the International Bank for Reconstruction and Development and the International Monetary Fund, devised the Greek-Turkey aid program and the European Recovery Program, and has continued during the postwar period to participate actively in broad programs of aid and foreign loans. As a result of all of these efforts the balance of payments problems of many countries have been reduced to manageable proportions; indeed, in some cases, they have been eliminated. What is new in our present situation is the realization that we now have a balance of payments problem of our own...