ANY attempt to look at some of the economic problems confronting the Atlantic group of nations over the next ten or fifteen years must take into account the general change in the economic climate which has occurred in the last five years. The long postwar boom ended in the summer of 1957. Before that climacteric the Atlantic group had enjoyed a period of almost continuous prosperity. Demand was high; markets were good; prices were satisfactory; and production was at capacity. Businessmen projected the lines of their graphs upwards and on without a kink. Growth and progress seemed here to stay. Since 1957 it has been a different story. Spurts of prosperity have been succeeded by the languors of recession and stagnation, except among the Six; and even among them the rate of growth has been slowing down and they have begun to be plagued with many of the problems already affecting the rest of the group. It has been a time of growing uncertainties: about maintaining the volume of production, about the erosion of profits, about the status of the two great currencies which, with gold, constitute the media of international settlement. This accumulation of doubts about the future has found expression in the last few months in a major decline in prices in the stock exchanges of the Atlantic group. There is a widespread feeling that a new set of problems has come up which will be with us for a long time and with which we do not know how to deal.

These uncertainties and problems spring from one basic dilemma which affects the political and economic life of this group of nations. In itself it is not new; it existed between the wars but was submerged by the tides of war and then by the continuous prosperity of the postwar boom. During the last five years it has steadily reëmerged and now asserts itself with new force and urgency. The classical description occurs in lectures given in 1931 at the Academy of International Law at The Hague by Professor Maurice Bourquin:

A hundred years ago, there were neither railways nor steamship lines, nor electrical telegraphs, nor telephones, nor submarine cables, nor aircraft, nor wireless communications; there were stage-coaches, wooden sailing- ships, interminable journeys, full of difficulties and, sometimes, dangers. . . . Industry was still in its infancy; the machine had been introduced only recently; there were small workshops serving a local or regional public whose needs, limited and well-known, determined production; industry demanded little capital investment, occupying in general only a secondary place in the economy of the country, of which agriculture still was the main basis. . . . Political organization corresponded to economic needs; . . . international life was still rudimentary and, for the most part, of secondary importance. By and large, every state could provide for its essential needs; if absolutely necessary, it could live on its own resources without straining its existence to the breaking point. Hence, in order to solve the main problems besetting it, no more was necessary as a rule than taking counsel with itself, guided only by a consideration of its own interests. The state machine had enough power and differentiation to cope with the requirements of the life of the community, and the notion of sovereignty found considerable support in the independence which each national entity enjoyed.

Now in the economic and social field there is no question of any importance which can be settled outside the international sphere. It is here that a civitas maxima has come about which is an undeniable fact, . . . a tangible, living, inescapable reality. But is it a reality all along the line? Certainly not; for the political organization of the world continues, on the whole, to be based on the particularism of states; and it is that which results in the unbalance we suffer from, the maladjustment modern society has come to feel more and more acutely. An economic pattern on an international scale; a political pattern mainly of a national texture.[i]

It is because of their international scale that the major economic problems in the relationships of the Atlantic group[ii] have become so difficult to deal with. And this statement in no way reflects on the reputation and success of the great international institutions set up at the end of the war-the United Nations, the World Bank and the International Monetary Fund. These all presuppose the political pattern of nation states, and their performance has been determined by the framework within which they work. Of recent years the International Monetary Fund, for example, has done magnificent work in keeping the international monetary mechanism running; it has intervened in crises with support and, when it appeared prudent, with advice; it has alleviated the crises and given time for national economies to adjust themselves to the facts of the current situation. It has saved things from going badly wrong on a number of occasions; it mitigates but cannot cure the difficulties which spring from Bourquin's dilemma.

This last year has seen a great deal of attention given to one of the dilemma's effects. The economic editor of the British Sunday newspaper, The Observer, wrote recently that we were gradually moving into a new era where prices are determined on an international competitive market, while wages and other costs are still determined on a national level. This, he said, was at the root of current industrial heart-searchings all the way from U.S. Steel to Ford at Dagenham, Britain. By a coincidence this view was confirmed on the same day in the same newspaper during an interview given by a shop steward of Ford at Dagenham who maintained that he stood for independence from the Yanks and for the British working class to control their own country. This situation, in which the international market sets the price for increasing quantities of manufactured goods, especially engineering products where wages are a high proportion of the cost, while wages themselves are determined in traditional social and political patterns in each state, has progressively troubled governments in several nations of the Atlantic group. This whole problem of costs and prices lay at the root of President Kennedy's intervention with U.S. Steel; it brought about Britain's "pay pause" with its difficult history; it has occasioned the running debate between Professor Erhardt and Herr Heinz Nordhoff of Volkswagen. Businessmen fear the erosion of profits, so-called "profitless prosperity," and governments fear for the competitive position of their nation's industries in the world market. The effect of the dilemma was fairly illustrated by a question asked by President Kennedy in the course of an address at Yale University: "With the necessity of maintaining our competitive position in the world, what should be the price and wage policies of our basic industries? Is there a public interest in such price and wage decisions, and, if so, how is it to be defined and organized and expressed?"


The five years since 1957 have thrown up at least four international economic problems of vital importance to the Atlantic group of nations. They are long-term problems affecting the future even more than the present and their solution or the lack of it will determine the structure of the economic relationships of the group. I believe that none of them is capable of solution either piecemeal by the unrelated efforts of the several members of the group, or by their coöperative action if this means conferences where the unanimity rule prevails or the traditional processes of negotiation and bargaining between the nations. The four problems are those of aid to developing countries, trade with developing countries, the means of international settlement and the surpluses of temperate-zone agricultural products.

Of course it is a false abstraction to describe these simply as economic problems; they are political too, and, unless their political importance is grasped and understood, the will to deal with them will lack strength. The fundamental political judgment that faces us is what kind of a world we want ourselves and our children to live in, and whether we want it enough to will the means necessary to attain it. Assuming that for the period under consideration severe and uneasy East-West tension will continue without exploding into thermonuclear war, the chief positive policy of the Atlantic group of nations must be to encourage and support the largest possible free world, so that in Latin America, Africa and Asia most nations will wish to live and grow and prosper outside the Communist system, maintaining friendly relations with the Atlantic group so that there increasingly comes into being a great company of peoples not separated by manmade barriers but freely exchanging ideas and goods. The aim is not that all the developing peoples should be made over into the image of the nations of our group, imitating the systems of democratic government familiar and usual among us and adapting their economies to our pattern. The point is that they should develop politically in their own ways, building societies according to their own situations, temperaments and aptitudes, not living in fear of solutions imposed from outside but confident of the friendship and support of the Atlantic group. Were this not high policy, then in all likelihood a great part of the world would develop away from us. We might find ourselves cut off and alone in a world indifferent and probably hostile to us. In the long run this is not a tenable position. That is why it is the interest and policy of the Atlantic group that there should be a large free world in which the group with others can move, converse and trade and have their being. The existence of an effective will to attain and maintain the goals of this policy is a criterion of the durability of Western civilization.

In this context, aid to developing peoples is a necessary means to the political end. During the last five years the problem has become of much greater importance and urgency and has led to large-scale action. But it is long term, not short term. Quite apart from moral considerations of what is due from rich nations living in the same world with many poor nations which have hundreds of millions of their citizens existing at subsistence level, it has been seen that the developing peoples face a vicious circle. Too poor to save, they cannot produce capital to increase the standard of living. Yet they cannot remain as they are, for the idea that men are not bound by an iron rule of nature to mere subsistence has spread around the world and the governments of the developing nations can retain power only if they can produce results. In this situation there is a choice. The governments must either resort to tyranny and by force and starvation extract the savings for capital investment or they must receive capital resources from outside. The choice rests with the Atlantic group. This is what aid is about, for the choice is at the same time whether there is to be a large free world.

In past years the main burden has been carried by the United States with Britain and France coming next. But recently the United States has felt the burden too heavy and has tried to persuade other members of the Atlantic group to bear a larger share, so far with little result. There has ensued a great deal of time-consuming argument in which the members of the group have tried to persuade each other that the real duty of providing more men and money for aid programs is somebody else's. Even in the leading case of India, where there has been a real coöperative effort, the coördinating committee has not been able to raise enough resources to meet the need. Generally speaking there is no agreement on the amount or duration of aid, on priorities or on methods. To a considerable extent the members of the Atlantic group do not know what the others are doing, at times with unfortunate results in the receiving country. There is a clear need for common policy and common action, not only in the provision of material resources but in finding the men and women needed for technical assistance and educational programs and in formulating policy on the stabilization of prices for the limited number of important commodities exported by the developing nations.

After aid comes trade, in many ways a more difficult problem. It is already possible to see its nature and formidable awkwardness. In the case of many, if not most, of the developing countries aid must provide a substantial program of industrialization as well as measures for improving agricultural skills and resources. Industrialization is what the developing nations and their governments want and insist on. One of the gifts to the world of the Atlantic group has been the idea that the definition of a modern nation includes industrialization. It has become a status symbol as well as being the only way to employ the surplus labor of the countryside. But sooner or later, and often sooner, the developing nation wishes to export some of its manufactured goods. It is driven to this partly because of the relatively small and inelastic supply of foreign currency which can be earned by exporting its traditional primary products, when increased amounts of foreign currency are required to sustain the momentum of development, and partly because it desires to progress beyond dependence on aid to the stage when it can stand on its own feet and earn its living in the world. This is not only inevitable and laudable but exactly fits the Atlantic group's aim of a free world in which and with which to trade. And, further, the Atlantic group increasingly needs foreign markets now that it seems easier to create new industrial capacity than to sell the products. If the developing nations earn more from their exports, they will be able to buy more.

But what an awkward process this is politically to the Atlantic group, how disruptive internally it threatens to be as the volume of manufactured imports from developing nations increases! Britain is already familiar with the problem of textile imports from India, Pakistan and Hong Kong. But India is also making some lighter engineering products in quantity and exporting them-for instance, bicycles and sewing machines. Very often the simpler manufactured goods which are within the competence of the developing country, when exported, hit at old, established industries which are already having a hard time. The immediate interest of politically influential employers and trade unions is to keep them out. Yet the long- term political interest of all the Atlantic nations is to formulate a policy for admitting them. No such policy exists. The problem of trade, of manufactured imports from the developing countries, is kicked around in the hope that in the meantime someone else will do something. Here again the requirement is a common policy and common action.

Adequate and enduring programs of aid, the digestion of adequate quantities of manufactures from developing countries can be successfully undertaken only if the economies of the Atlantic group prosper and grow. But prosperity and economic growth presuppose confidence, and one of the prime constituents of confidence in the trend of the future is lacking today: confidence in the international monetary system which is the creation of the Atlantic group. International debts must ultimately be settled in gold or in one of the two great reserve currencies, sterling and the dollar. There is not nearly enough gold to serve as the sole means of settlement, nor would there be if the price of gold in terms of currencies were doubled. But off and on since the war sterling has been suspect and now in degree the dollar has joined sterling. No doubt this situation has arisen for virtuous reasons: Britain trying to sustain political responsibilities assumed a long while ago, the United States in a similar position because of assistance given to the free world since the war. The six nations of the European Economic Community have become the largest holders of free reserves, while Britain and the United States hesitate to adopt policies of growth because of anxieties about the balance of payments.

Here is the third great economic problem on the international scale. When confidence in the two great reserve currencies comes and goes, confidence in the future of the whole trading system of the Atlantic group and, with it, of the free world generally, also comes and goes. At present there is a real possibility of a monetary crisis some time in the future. If it ever occurred, it would divide the nations of the Atlantic group and forfeit the trust of the free world. The problem calls for a common solution and common action. No nation alone can deal with it, nor can adequate arrangements made on a national basis between central banks, helpful though they are in tiding over immediate difficulties. The international monetary problem of the Atlantic group is different and calls for different treatment.

In the fourth place there is the problem of the surpluses of the agricultural products of the temperate zone-for example, wheat and dairy products. An acute manifestation of the problem has appeared in the current negotiations between Britain and the Six. Of the countries which need to import wheat and can pay for it, Britain provides the largest single market. Historically it has been supplied by Canada, Australia and Argentina. Now France has reached the point of breakthrough and her rich acres are beginning to yield to modern agricultural skills far more wheat than France can consume. Western Germany takes some but France looks for a major outlet in Britain if Britain joins the Economic Community. The difficulties of Britain, France and the Commonwealth would not be so great if effective demand for wheat in the world was in balance with supply. But it is not: there is heavy surplus and therefore an economic problem on the international scale. It has been mitigated in recent years by exports of wheat from the United States under P.L.480 and by the Canadian deal with Communist China. But the problem remains, for Western Europe used to be the great market for the surpluses of the main primary producers; now Western Europe produces much more of its own wheat, thanks to the same advances in science which have permitted the primary producing countries to grow far more on fewer acres. I quote Pierre Uri, who played so important a part in the drafting of the Rome Treaty:

It seems to me that if all of our developed countries just forge ahead-with our present agricultural policies, talking about surpluses and trying to protect ourselves against each other's surpluses, at the same time trying to overcome those obstacles which each raises against the other, then there could be a tragic failure for the policy of the West at large. For we cannot forget that we are living in a world of hunger. We cannot forget that about three-fifths of the world is underfed. The sooner we begin to realize that, the sooner we begin to see that in such a situation there are no real surpluses. The only question is to find a tie between the need for large aid to developing countries and a better use of our capacity to produce food, in which case the sooner we shall be able to solve the problems of our own agricultural policy.

Once more a common problem on the international scale requires a common solution.


It is said that General Marshall, when Secretary of State, remarked on discovering some of the officers of the Department endlessly arguing the points of a problem: "Don't fight the problem, gentlemen: solve it!" To tackle the problems under review piecemeal by national efforts is only to fight them; it is to relapse into the Bourquin dilemma. What is needed is to find an approach to them which will discover common solutions that can be accepted by the Atlantic group of nations.

At this point it is worth looking at the procedures adopted by that part of the Atlantic group which over the last five years has displayed creative political thought and economic vigor of remarkable quality-the European Economic Community. The Six have had for their own purposes to overcome the dilemma. Their ultimate purpose, as laid down in the Treaty of Rome, was political: to create an ever closer unity. They set out to accomplish this by a series of economic arrangements each of which from the point of view of the members of the Community was on the international scale. If they were to achieve the political purpose of the Community step by step through the successive economic arrangements that came into force, they had to devise a procedure which would ensure that the proposals for each arrangement were designed to promote the common good of the whole Community while at the same time being acceptable to the several member states. The result has been an interesting political experiment, the more significant because it has worked. It is in important respects a new way of finding common solutions to common problems.

The new procedure involves the interplay of three institutions of the Community: the European Commission, the Council of Ministers and the European Parliament. The Commission has the sole power of initiative to make proposals; it also executes policy, when it has been approved. Its major purpose is to represent the whole against the parts. The Council of Ministers alone decides whether or not a policy is to be adopted; it more nearly represents the interests of the member states. The Parliament is in close touch with both Commission and Council and can exert pressure on both; it has control only over the Commission.

The way in which the procedure functions was well illustrated by the prolonged and difficult negotiation over agriculture at the beginning of the year. It can be seen in the argument over one main point. The Commission put forward proposals to provide a general framework for the common farm policy and further proposed, if this general framework was approved, that most of the consequent executive decisions should be left to the Commission. The Council of Ministers hesitated to accept the latter proposal. Both the French and the German Ministers for different reasons wished execution to be undertaken by bodies which would give more weight to considerations of national policy. But the Parliament intervened and threatened to censure the Commission if it gave way on its proposals. The intervention was effective and the Council decided in favor of the Commission's original plan.

The novelty of this political procedure is evident. When the Commission, exercising its power of initiative, makes a proposal, it is thinking for the Community as a whole-as a unit. The Community, therefore, through its institutions gives itself the opportunity of working out a common solution to a common problem, something that cannot be attained by the normal processes of international bargaining between states which so often produces only a least common denominator of agreed action. But if the Commission proposes, the Council disposes. Broadly speaking, nothing can be decided except by the Council which ensures that policy, when finally formulated, is acceptable to the member states of the Community.

It would be false and misleading to suggest that bargaining between states has been eliminated from the total procedure, that there can be no haggling over a compromise between national interests. That happens in the Council of Ministers but it happens in the presence of a third party to the argument, the Commission's proposed solution to the common problem. The Ministers find themselves bargaining against a common solution of independent origin at least as much as against each other. And this has produced results of a different kind from those which could have been reached by traditional methods of negotiation. The argument on agriculture demonstrates by itself that we are observing a new form of political life.

If the Atlantic group of nations seriously wills the attainment of its broad political ends in the world and searches for common solutions to its economic problems on the international scale, it must escape from the Bourquin dilemma. It is difficult to see how this can be done except by adopting political procedures akin in some respects to those operating in the Six. This is not at all the same thing as advocating that Britain should join the Economic Community, let alone the United States or Canada. These are separate considerations. But it does involve saying that the partnership of the Atlantic group of nations cannot get where it wants simply by the established processes of coöperation and negotiation: conferences with the unanimity rule and the compromising out of agreement between national interests. The scale and the urgency of the problems no longer permit it. A new way has to be found: a new organization, institution or commission, which will have sufficient standing, independence and initiative to formulate common solutions and put them forward to the governments of the several nations of the group, so that they will have to face in argument not merely each other but also and at the same time the solution proposed for the partnership as a whole as best realizing its common good.

Of course there will be objections to this suggestion. The first is obvious. It will be asserted that such a procedure is incompatible with national sovereignty and therefore with the proper responsibilities, which cannot be compromised, of the Executive, of Congress or Parliament, to their citizens. This is the old-fashioned view of the sovereignty of the nation state which by definition is not subject to any other, and autonomously regulates its own affairs. By force of tradition it tends to be the major premise of argument, unconsciously adopted, for all of us so long as we do not think about it-and this holds good particularly of governments and government departments. But it is not true. All national sovereignties are in commission to others in some degree. Whether the United States shall have peace or war does not simply depend on the decision of the United States. Total thermonuclear war could occur through the action of Britain, an ally, or Russia, an opponent. And it is within the decision of still other nations to overthrow the peace of the world. The same is true of the economic pattern. The decisions of the governments of the United States, Britain and Western Germany to try to make the public interest count in the complex of wages, costs and prices were not wholly free decisions. They came from the pressures of prices set in the international market, combined with the fears of governments about inflationary additions to costs and a consequent inability to export, which would lead to difficulty in the balance of payments. For all the brave words so often spoken in public places, the objection that national sovereignty would be compromised by the suggestion is a piece of sentimental romanticism which has no place in the world today.

There is one other objection. Any suggestion to set up an institution or commission with some status and independence and with the initiative to formulate and put forward proposals on international economic problems will be attacked because it sets up a body to plan-and planning, especially by governmental bodies, is anathema to the free-enterprise system. This objection is as frequent as it is silly. All men, all business corporations, all governments plan. They have to, because they have to think, decide and act. All thinking leading to action is planning and it at once reflects and expresses the characteristic and fundamental human conviction that by taking thought men can modify and change their environment to suit their desires. Objections to planning by the government are really objections to some but not all such planning. A man may dislike Communist or, it may be, Socialist planning and boldly proclaim he is against planning. It does not follow that, if he is an American, he is against the Sherman Act or that, if British, he will be against the Restrictive Practices Court. Yet both Act and Court are the products of government planning. Or a man may object to planning by governments-to all such planning, he will say-because he is content with things as they are, entirely oblivious that things as they are are what they are because of the existing accepted phase of planning. What he is against is the disruption of the status quo: he dislikes the discomfort of change.

But the real enemy of the suggestion is not like these, an intellectual attitude. It is lethargy, the dream of the lotus-eaters: Why bother? "Let us alone. Time driveth onward fast." It is precisely because time drives onward fast, and these economic problems which confront the Atlantic group of nations are growing more acute, that the time for change has come and the suggestion for a new procedure has been put forward. If what is done results from the separate decisions of the nations or from the established methods of haggling, it is likely to produce increasing division among the members of the group. Unity and a common purpose depend on finding and accepting common solutions to these economic problems on the international scale, so that the strengths of all the member nations will be multiplied in joint action as the problems themselves over time receive their answer. On this procedure and policy the direction of our economic relationships would be set toward expansion; governments would no longer hesitate to adopt policies of growth and it would be possible to make steady progress with the lessening of tariffs and the increase of freedom of trade. We could make progress toward the kind of world that we desire.

[i] "Receuil des Cours," v. 35. Paris, 1931.

[ii] I have deliberately avoided offering a definition of the Atlantic group, for I do not wish to include or exclude. But I shall concentrate primarily on those powerful, highly industrialized nations which form its center.

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