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Postwar International Planning

ISSUE:  Summer 1945

America’s Role in the World Economy. By Alvin H. Hansen. W. W. Norton and Company. $2.50.

In this brief and lucid book on “America’s Role in the World Economy,” Professor Alvin H. Hansen has encompassed the entire field of postwar international economic planning. He discusses the Bretton Woods agreements, UNRRA, the Food and Agricultural Organization of the United Nations, ILO, Lend Lease, international cartels, and the proposed Economic and Social Council of the World Security Organization. He provides a much-needed simple analysis of the complicated relationships between these plans and agencies and the world economic problems they are designed to solve.

Fortunately, Professor Hansen cannot approach any subject without an energetic point of view. Perhaps for this reason among others he seldom fails to enlighten and challenge his readers. This book is especially challenging because of the optimism and simplicity with which he views international relations after the war. He believes that “there are deep and fundamental reasons why we may expect that the settlement following World War II will rest on a more secure foundation than that which followed World War I.” He believes that there is a “general awareness” of the need for peace in the United States that did not exist after the last war. The United States is now ready to take its place in the economic and political councils of the world and to abandon isolationism. The Big Three nations balance and offset each other. The rise of Russia to the status of a major power is the cause of the balance. “Here is a framework,” says Hansen, “within which international co-operation has a chance to succeed. World security and world peace rest basically upon the United States and Russia.”

But more essential to Hansen’s optimism is the belief that the great nations are now ready to banish mass unemployment and depressions. These twin evils were fundamental causes not only of the economic but of the political frictions which started the last world war. No more significant point could be made concerning the causes of peace in the modern world than this emphasis upon the role of full employment. If this view were generally accepted, not only the Bretton Woods agreements but many domestic full-employment programs would have been approved by the governments of the allied nations before the beginning of the San Francisco conference. As Hansen points out, the United States in particular “could make no greater contribution toward the solution of the international political as well as economic problems than that of achieving a high degree of internal economic stability at a level of fairly full employment of labor.”

The fact that the United States Congress has revealed hesitation in enacting full-employment measures and that the Bretton Woods agreements have not met with universal approval does not dampen Professor Hansen’s optimism. He has ample faith in the coming of an era of international economic co-operation. This optimistic brand of idealism, if not carried to Utopian excess, has a wide appeal and in the end has a chance of softening the heart of even the most cynical American conservative. It is this economic cheerfulness that makes Hansen acceptable to labor and business men alike. But it constitutes both a strength and a weak- ness. On the one hand it spurs us to reform and on the other it hypnotizes us into insensibility to the hard selfishness that still seems to underlie many political decisions.

But Hansen confines his faith to the broad aims of his postwar international planning. On instrumentalities he is more realistic than most of us. He cautions us, for example, against exclusive reliance upon free trade as the basis of prosperity and peace after the war. The reduction of tariff barriers, although a desirable part, is not the whole solution to our postwar economic problems. International investments and the growth of domestic purchasing power through realistic and vigorous full-employment measures are now widely regarded as far more significant causes of world prosperity. In fact, free trade may be more effect than cause in that as prosperity increases it will become increasingly advantageous to lower tariffs. Nations with large buying power and much to sell will find it very desirable to lower tariffs and add to their supply of consumers’ goods in the form of imports. This policy was consistently followed by Great Britain as its wealth and economic strength grew during the nineteenth century.

Hansen has performed a useful service also in meeting squarely the unrealistic criticisms which have been levelled against both the International Bank for Reconstruction and Development and the International Monetary Fund. He answers clearly objections that the bank should be American-controlled, that as proposed it will fall under debtor control, and that a private bank would prove more effective. He demonstrates also why the fund, as contemplated, is not too large; that the quotas of the member nations are not unreasonable; that the fund will not foster international inflation ; and that it will not run short of American dollars. His suggestion is practical that there be established an International Trade Authority to eliminate discriminatory trade practices. The prevention of cartels and the complete removal of trade barriers in the immediate postwar period are obviously unrealistic. But we can manage to get along with monopolies both at home and abroad if we can regulate and reduce their discriminatory methods. The International Trade Authority is viewed as an international Federal Trade Commission. Had Professor Hansen revealed greater concern over the ability of such an authority to regulate trade practices in view of American experiences with the Federal Trade Commission, his argument for the authority would have seemed more convincing.


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