The Pandemic Depression
The Global Economy Will Never Be the Same
THIS is not the first time that the British and American peoples have come together in a fighting partnership. Two decades back they were fighting side by side for very much the same reasons. Now they are doing the job all over again. From this experience at least one lesson should be plain. It may be difficult to say precisely what the two nations should do to coöperate effectively in the postwar world, but it ought not to be difficult to say what they should not do. They should not do what they did last time.
Their first main error is so obvious that it hardly needs underlining. They did not maintain their partnership. The second error is more fundamental but less obvious. They had a basic misconception of the nature of war and peace. If war is thought of as a sudden, inexplicable, arbitrary act, then it is possible to mistake victory for peace. In that conception, victory puts an end to war as a policeman removes an unwelcome intruder from the peaceful home of a respectable householder. The burglar has gone. The home resumes its normal preoccupations. The incident is closed. This is the basic assumption of the "normalcy" of peace. But war is not a sudden intrusion from without on an otherwise peaceful world society. War is simply a consequence of the way in which that society behaves. It is the violent crisis of deep-rooted social disease. A more exact if unpleasant analogy for war is that of an abscess on the body politic. It may gather in this place or that, but it draws its poison from the whole of the unhealthy bloodstream. Lancing the abscess is not enough. Until the bloodstream is cleansed, the sores will break out again.
Take the example of Germany between the wars. From 1925 to 1929, in the period when German society was fairly stable and the German nation was recovering some position in Europe, the Nazi vote was never above 100,000. Then came the Great Depression. The German unemployment figures rose to nearly 10 millions. During the same period, the Nazi vote soared to nearly 15 millions. If there had not been the human despair, the loss of selfrespect, the shattering of hope caused by this mass dislocation of the German economy, would the Nazis have come to power? If the victors had accepted it as their positive responsibility to build a Europe in which social dislocation on the 1929 scale was impossible, would the military crisis have recurred at all, or at least, so soon? In 1918, the abscess was only lanced. The poisons were left in the body. Within three decades, they had again worked themselves to the point of eruption. Today the task of lancing is being done again. The problem after victory will be to undertake the necessary cleansing of the bloodstream and to do it in time. Peace is not the process of cleansing. Peace is the result if the cleansing is successful.
One of the errors of the last Anglo-American partnership has been remedied. The two nations are together again. Again they are fighting to prevent the triumph of militarism and aggression. Again they are pledged to carry on until victory is secured. The new partnership is a better one than the old. The pooling of resources and the coördination of every phase of the war effort from the allocation of raw materials to the conduct of strategy has gone much further than ever before in the history of two allied nations. Between the two economies and the two war efforts, certain principles have been adopted which are not only essential to victory, but have a possibly revolutionary significance for the postwar world. The system of priorities and the allocation and supply of materials all pivot on the fact of need. The Americans and the British know that to beat Germany and Japan they need the maximum number of the right weapons in the right place at the right time. These concepts do not have anything to do with industrial purchasing power or the national origin of the arms produced or the ability or inability of the various belligerents to pay in dollars or sterling.
Within each national economy, tanks, shells and aircraft and all the other necessities of war have the highest priority. Though a man can afford three grand pianos, five cars and ten iceboxes, they are "out" for the duration. Need, not purchasing power, determines production. Between the two national economies, similarly, completed weapons, raw materials and manpower are sent where the need is greatest. About 80 percent of all Britain's war production goes overseas, a large proportion of it to Russia. American distribution follows the same pattern. To direct and regulate this vast network of coöperation, the two nations have created institutions which, without much publicity or recognition, are carrying on a revolutionary experiment in international control. The combined Chiefs of Staff, the Combined Production and Resources Board, the Combined Food Board -- these with their respective staffs represent a concrete institutional embodiment of the will to coöperate. They are the nuclei round which more permanent and more fully articulated institutions can be built. The pressure of war has thus overcome the most difficult obstacle to the creation of international government -- the lack of a concrete starting point.
The danger now lies not in the lack of a framework of coöperation but of the will to coöperate. This is a factor of more than Anglo-American significance. The paths of international coöperation are largely untried. If those nations which are best suited and best equipped to coöperate with each other fail, how much hope is there for others? There can be little doubt that the United States and the British Commonwealth have a better chance of achieving coöperation than any other group of nations. They speak the same language. They have been nurtured in the same traditions. They are the only present heirs and custodians of Western civilization's great experiment in human freedom. They have a wide variety of uniform social habits. They all love peace. Both the American federal union and the British Commonwealth are remarkable experiments in interstate coöperation. Together they spread a network of freedom around the world.
All this is so familiar that it seems unnecessary to repeat it. The curious thing is how completely it appears to have slipped from the consciousness of the United States. One of the most disturbing phenomena of 1942 was the deterioration of good will between the United States and the British Commonwealth. An argument can be made that it was a passing phase, that better military results are already putting it right. This is true; common victory is the best cement of good relations. But it is not enough. The will to coöperate does not depend upon logical, rational premises. Just as a marriage of true minds may break up on trivial irritations about false teeth or tricks of speech, so constant ill-humored comment between the two nations, a sense of frustration or a nagging sense of annoyance on the part of one as a result of the shortcomings of the other, may leave severe enough psychological strains in their relations to undermine the precondition of effective coöperation -- the will to hold together. And if the parts of the English-speaking world cannot coöperate, who can?
One or two aspects of this changed mood have been particularly damaging to understanding and mutual respect. An English visitor is bound to notice, for example, the tendency to underestimate Britain's military performance. The most usual explanations for the series of disasters that has befallen the British land arm are that British military leaders come from an effete class-conscious clique, or that native peoples do not think the British Empire worth fighting for, or, more simply, that "the British cannot fight." Yet the clique which is criticized has produced naval leaders of the superb quality of a Vian, a Harwood or a Mountbatten, and air leaders of the skill and originality of a Tedder or a Harris. Again, the behavior of the native peoples in Britain's colonies in Africa and the West Indies has proved that they resented any suggestion that they should not be asked to fight for the Empire. The explanation that is rarely taken into account is that democracies do not put their best brains and resources into preparations for war in time of peace and therefore have a very painful time-lag to make up when war catches them -- as it always does -- unawares. Lack of equipment -- not lack of generalship -- was Britain's greatest handicap in 1940. For courage and risk-taking, few military decisions surpass Churchill's dispatch of Britain's only armored division to Africa on the morrow of Dunkirk. On that decision the whole of the later Allied successes in Africa is based. But these arguments are not brought up here in order to attack or defend them. They are mentioned simply to illustrate the apparent disposition, when there are several possible explanations of British conduct or policy, to prefer that which is unfavorable, and thereby to set up one more obstacle to that wartime movement of spontaneous friendship and confidence, which, operating almost at the level of the subconscious, is the precondition to coöperation after the war. After the exertion and heat of any war the subconscious trends of opinion are all bound to be toward passivity and isolationism. The trend can only be countered if now, during the war, the store of good will and active understanding is being steadily built up. It cannot be created out-of-hand in the moment of victory.
The remedy for misunderstanding and ill-temper on either side lies partly in the hands of the governments, partly with the press, but chiefly in the hands of the citizens themselves. In a free community, there cannot be controlled opinion. There is only individual responsibility. Each citizen is his own propaganda agent. His thoughts and reactions and sayings are part of the great surge of opinion that determines in broad outline all major matters of policy. An encouraging feature of the idea of the United Nations is that if one takes the official utterances of China, Russia, Britain and the United States at their best, the principles as stated largely coincide. It is true that Britain has colonial dependencies; it is true that China has an absolute dictatorship; it is true that Russia has no political liberty; it is true that the United States has a Negro problem. But the soundest way to foster good relations between them all is to insist on the good aspects of the achievements of each, and, as for the bad, where possible to give the benefit of the doubt. If that is true for the United Nations as a whole, it is especially true of the relations between Britain and the United States.
Take another case where American criticism of Britain is very free -- that of India. The tremendous complexities of the Indian problem make categorical pronouncements on it risky. Why has it been singled out as the chief obstacle to the establishment of a genuine "front for freedom"? We see a situation developing in which the desirability of Anglo-American collaboration is being dismissed as a veiled attempt to continue the system of "imperialism." In its stead there is being propagated the concept of American coöperation in the first place with Russia and China, the two great "fighting allies" pledged to the freedom of all peoples everywhere. In this picture the British Empire tags along as something of a slur on the genuineness of the Four Freedoms and as an entity to be liquidated in the general interest of putting an end to imperialism. This situation contains obvious elements of danger. One very practical one might be mentioned. Though the coöperation of the United Nations is highly desirable, no structure which would permit it to become the nucleus of world organization has so far been created. Anglo-American collaboration already exists. It would be tragic to throw the reality away for the possibility, to sidetrack concrete instruments of coöperation in the vast English-speaking world in favor of verbal endorsements of "the United Nations" and verbal condemnations of "imperialism," terms which need much more careful definition before they can be used as freely and easily as they are today. Given the good will of all the parties, the United Nations can still become a concrete institutional fact; but emptying Anglo-American collaboration of its significance will not hasten the day.
One of the reasons, of course, why jarring notes are heard in Anglo-American relations is the very fact that they are coöperating in a concrete way and therefore have to face specific difficulties which can cause disagreement between them. The United Nations approach seems a great deal easier at the present juncture because China and the United States have few immediate military, economic and strategic decisions to make in common, and because Russia is fighting its own war as far as direction, control and propaganda are concerned. Naturally it is easier for the three nations to be friendly; there are so many fewer concrete things for them to be unfriendly about. But this is all the more reason to make a good job of friendship and understanding between Britain and the United States now, for it can be an important part of the preparation for the more difficult and ticklish job of establishing an effective alliance with China and Soviet Russia.
It is especially true because the British and the Americans will face a unique and inescapable responsibility at the end of this struggle. Their political and the moral responsibility they will share with other nations. Their economic responsibility is going to be, for the first year or so at any rate, almost entirely theirs alone. The war is not making it more likely that there will be freedom from want after victory. Year by year, the process of devastation has been covering wider and wider areas. Europe's resources are draining away. The harrow of the war has been driven over the richest agricultural and industrial lands in Russia. China has been bled white by years of exploitation. Of the four great allies, two only are in any condition to give concrete material assistance to the victims of war -- the United States and Britain. Two of the principal victims are Russia and China. They cannot shoulder added responsibilities when their own people will be crying out for help.
Unhappily it is also true that the economic sphere is where Britain and America face some of the greatest risks of friction. The United States now occupies the position of Britain in the nineteenth century, that of being able to out-produce and undersell any other industrial nation in any free market. If it now swings the full weight of its industrial machine into unrestricted competition with its less powerful neighbors, the result will inevitably be to develop defensive and obstructionist policies on their part -- quotas, bilateral barter agreements, exchange control and similar methods, all equally anathema to the free trading spirit in which the United States basically believes. Britain may even find itself in the paradoxical position of being able to maintain free trade relations with every nation save only the United States, whose political support and coöperation it needs the most. Anyone who has read the reports of some of the manufacturers' associations in Britain will see the danger of such a development; it would mean the disappearance of any hope of economic coöperation for a more prosperous and stable world.
Is such a head-on collision between rival economic interests inevitable? Only if a certain conception of the world market is the only one which is possible. Moreover, however true that conception may have been in the past, it is not rooted in the nature of things and can be changed if Britain and the United States possess the necessary political will and wisdom. In a restricted world market, conditioned by low purchasing power and recurrent crises of unemployment, there is not enough room for the vastly expanded industrial capacity of the English-speaking world -- quite apart from that of the other great industrial nations. Suppose, however, that the problem were approached the other way around, from the end not of existing purchasing power but of existing needs (the angle of approach, incidentally, of any successful war effort). Suppose an inventory of basic human needs -- food, clothing, medicine, building, irrigation, communications, fuel and power, just to name the simplest -- were drawn up and against it were set the inventory of the world's economic capacity. The result would not show that Britain and America had industrial and agricultural capacity in excess. It would show that all the existing capacity the world over is insufficient to satisfy some of the simplest basic needs of mankind. The old tag that if each Chinaman added an inch to his shirt, American textile factories would work overtime is a simplified but substantially correct example. If the problem of world markets is approached from the standpoint of the consumer as a problem of world needs, there is little danger of economic collision. It is quite possible for Britain and the United States and the other industrial units to work out a world economic policy, provided they accept the necessity of an expanding market.
Here are merged the problem of securing a framework for economic coöperation and the more fundamental problem -- so misunderstood in 1918 -- of dragging up the roots of war. Many of the chief causes of war -- poverty, chronic unemployment, disease, ignorance, autarky, exploitation -- could be abolished if a policy of maximum national and world consumption were adopted as the conscious goal, first for Anglo-American economic collaboration, later for a world economy. The prospect is not as utopian as it sounds, for it is simply applying to the conditions of peace certain of the expedients which have proved satisfactory in time of war. In this war, need has been substituted for purchasing power as the criterion of production. The instruments of Anglo-American economic policy, lend-lease, the Combined Boards, W.P.B., the Ministry of Production, the Raw Material Controls are all working on the principle of securing adequate materials and manpower for the vast program dictated by the need of defeating the Axis Powers. Every official engaged in these organizations is gaining some experience of controlling output in the interests of expansion, according to a given program of need, not, as with the controls of the past, in the interests of restriction to maintain a certain price level. Some of this mechanism and much of this experience can be carried over to meet a vast program based on the needs of peace.
Priorities for the needs of war will be familiar by the end of the struggle. Why not priorities for the needs of peace? Why not accept the principle that the first charge on any community are the basic human necessities of its citizens, that they are as vital to successful peace as tanks and shells and aircraft to successful war? This is not overstressing their importance. If war is the product of deep social evils, if the Nazis and the Japanese militarists are in one sense merely the product of the diseased social conditions which threw them to power, it would be folly to fight them only. Food, housing, schools, medical services, better roads, better communications, better irrigation are weapons of peace, some of the weapons we must use if we are to succeed in the postwar effort to root out the deep causes of war.
There will be no coöperation after victory if there are no concrete objectives to be secured by coöperation. Britain and the United States do not coöperate today in vacuo. They are coöperating because they have a common enemy to defeat. If the social evils and dislocations of our age can be seen as permanently dangerous adversaries, the concept of a common front, of a crusade even, can be carried beyond the strenuous and exhilarating days of war into the period of reconstruction. It does not always happen that self-interest -- the need for expanding markets -- coincides with a noble cause -- the rooting up of some of the deep causes of war. Anglo-American relations can be based on just this coincidence.
The techniques of a policy of expanding consumption have yet to be worked out. Many people will shun the methods used in the war on the grounds that they are bureaucratic and would involve the world in a winding-sheet of red tape. But to say that many of the contemporary methods of planning in Britain and America are unsatisfactory does not invalidate the principle of planning. Moreover, the concept of priorities for peace does not entail a totally planned economy. In all highly developed economies, consumer wants are infinitely varied and depend more and more upon changes in whim and fashion. For these, the free price system and the profit motive are probably the most sensitive mechanisms available for recording and satisfying variable human needs. But basic human needs are not so variable and are more predictable. There is no inherent reason why economies, both national and international, should not be part planned and part free. The democratic nations have here a new possibility of escape from the unattractive "either-or" of total planning or entire laissez-faire, a chance to develop a new type of economy in keeping with their own genius and traditions. The British desire to guarantee a Citizens Economic Charter based on existing and expected social services -- a plan foreshadowed in the Beveridge Report -- is one example of the half-planned, half-free approach within a national economy. Several possibilities in the planned sector of a future world economy are already discernible -- the Pan-American Highway, for example, or a continuation of the Alaska Road to Moscow and Narvik. From the R.F.C. it is not a very long step to an I.F.C., an International Finance Corporation, through which the United Nations might jointly undertake great public works of electrification, irrigation and communications which would help maintain world employment, raise living standards and give the peoples of different lands interests in common which transcend their national frontiers. Why not a T.V.A. for the Danube Valley?
Many will object to envisaging Anglo-American or United Nations collaboration on a scale at once so vast and so concrete for the reason that it is too utopian and too difficult. To them there is only one reply, that everybody everywhere is passionately desiring something most difficult and utopian -- a lasting peace. Two world wars in one generation should have dispelled the idea that peace can be had for the asking, can be enjoyed by a comfortable relapse into all the old easy ways. Peace is not easy to win. It is much harder to win than victory. The world has known thousands of victories. It has known very little lasting peace.
To those who object that policies and programs conceived at such a level and on such a scale are beyond the grasp or responsibility of the average citizen, the answer is to point out that it is only where a majority of citizens understand and accept the need for international coöperation on this scale that there is any hope of a democratic government accepting it. An analogy from Britain may explain this point. Between 1932 and 1935, Britain must have spent some $86,000,000 on unemployment. At the end of that period, the unemployed were still there and citizens were complaining bitterly of the ruinous cost. In 1942, Britain spends about $86,000,000 a day on the war effort and no one complains of ruin. Is the difference economic ? No, the difference lies simply in the will of the people; nobody felt as strongly about conquering unemployment as they feel about conquering Hitler. In Britain as in America, people ultimately get the policies and the government they desire. If by needless carping and distrust now they are using up their "reservoirs of good will" they are preparing for international anarchy after the war. If they are still blind to the real nature of war and are still unready to undertake the positive and aggressive policies necessary to create peace, then they are already heading for a state of complacent "normalcy" that will inevitably produce another war.
"With charity for all" . . . how far have Britain and America fallen short of this ideal? "A new birth of freedom" . . . how far have they accepted this vision as their common goal?