PRESENT policy, both in America and the rest of the world, clearly needs to be directed not only to immediate but also to long-term objectives; and it is reasonable that much that is done, or decided, during the present E.R.P. period should depend upon what it is believed will be the situation at the end of that period. A true picture of the future balance of international payments, and a realization of the consequences that must follow from it, would, I suggest, be a valuable guide to present action.
Any forecast made now must of course be based upon one of three alternative assumptions. The first -- unhappily the least probable -- is that the tension between west and east will be quickly resolved, that we shall soon enter a period of such reasonably assured peace as was hoped when the U.N. Charter was drafted in 1945, with the restoration of confidence and reduction of military expenditure that would then follow. The second is that we shall soon be plunged into actual and open war, with consequences that are now incalculable. The third -- not perhaps the least probable, and the only one on which any forecast is now both practicable and useful -- is that we shall long continue in a state of dangerous conflict, but without actual hostilities.
The crux of present difficulties, or the most convenient reflection of them, is the "dollar deficit" -- that is, the inability of countries whose economies were seriously impaired by the war to export enough to pay for what they need for their recovery from the rest of the world, especially from America. It is to meet this need that E.R.P. has been started. Its purpose is to enable the deficit countries, by aid over a transition period of a few years, to increase their production and exports so that, at the end of the period, they will be able to pay their way. Reasonably good progress is
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