840.50/9–844: Telegram
The Ambassador in the United Kingdom (Winant) to the Secretary of State
[Received 7:45 p.m.]
7350. For those concerned with Article VII discussions—No. 14 in the series.
1. Robbins, who returned recently, said he was disappointed with the public reception here of the results of the Bretton Woods Conference. He spoke of the difficulty, which we have frequently pointed out in this series of messages, arising out of the almost complete recruitment of United Kingdom economists and the extensive recruitment of the able industrial organizers by Government during the war. Powerful public support would come from them in peace time for such measures as those recommended at Bretton Woods. But they are obliged to maintain silence for the most part as long as they remain in Government. The only recent exception has been Keynes’ short letters to the Times replying to critics.
Robbins pointed out that apart from the Beaverbrook press, the attacks on Bretton Woods came almost entirely from émigrés of continental European origin. Much of the financial press has been on the whole favorable. It appears that what Robbins is most concerned with is the lack of a comeback in public against the writings of the émigré economists and financial journalist[s]. He said that Ministers are apt to be sensitive to the trend of public discussion. However, he has not yet had time since his return to check on the reactions of the Ministers most concerned.
[Page 73][Here follow further observations on critics of the Bretton Woods Conference.]
However, the fact that the viewpoint of the group in question thrives in some circles is probably due in the main to the widespread fear in Great Britain, which exists among all sections of opinion including those most committed to economic cooperation with us, that the United States is both unprepared and unwilling to prepare effectively for the maintenance of a high level of employment. American political sentiment is widely interpreted here as straining to get rid of controls, to minimize governmental operations and intervention in economic matter[s] and to rely on private enterprise to guide the economic life of the nation. It is recognized that these sentiments are not shared by leading American economists and by responsible administrators, but it is feared that a tide of political reaction will make it impossible for public authorities to adopt the necessary governmental measures to prevent an initial short inflationary boom followed quickly by drastic deflation.
In these circumstances, we return to the question raised in earlier messages in this series whether any action could be taken to reduce these fears which are widespread not only in United Kingdom but also among representatives of the European Allies. We have understood that the Australians have for some time pressed for a conference on full employment along the lines of the Hot Springs Food Conference. While recognizing the arguments for such a conference, we would point out, however, that it would not allay the fears described above unless a United States delegation could come to it with at least the general outlines of a national policy.
The primary need is for the early formulation of a national policy that will bring assurance to the rest of the world that at least the problems involved in the maintenance of full employment are officially recognized and that responsibility is assumed by the United States Government for the preparation of domestic plans sufficiently detailed to be put into effect promptly when signs of impending fluctuations appear. This applies particularly to plans for publicly sponsored investment, local as well as national, above all housing, to check declines in private investment.
We believe that an authoritative public statement on this matter in Washington would improve the prospects in this country and in European countries, liberated or to be liberated, of whole-hearted implementation of the recommendations at Bretton Woods and of the early formulation and subsequent implementation of recommendations on commercial, commodity and cartel policy along lines that we seek.
[Page 74]2. Further personal talks on the subject of controls as well as Mr. Harcourt Johnstone’s84 speech confirm the view that the maintenance of a strict control over particular products is regarded as essential so long as scarcity conditions remain and that complete control is likely to remain on a given product as long as any control is needed. If any part of a control is lifted before the rest, it seems likely that it will be at the consumer-rationing end and only on the import side afterwards when it has been demonstrated that there is enough to go round after rationing stops. The apparent difference of emphasis between London and some United States opinion groups may be due in part to the greater consciousness and experience of commodity scarcities here but also to the expectations of continued shipping scarcities which will affect United Kingdom incomparably more than United States [and] will probably force retention of rationing here for a time even after world scarcity passes.
In addition to the scarcity aspect, controls are likely to be used to facilitate readjustment of industry with specific priorities in view, one of the most important of which has to do with export industries. Some 1½ million workers have been moved out of export industries into direct war industries and occupations, many of them in connection with concentration plans. The sweeping curtailment of export industries during the war gives rise to considerable concern regarding the postwar period. Officials are above all anxious that United Kingdom shall place itself on a self-supporting basis from the standpoint of its balance of payments as quickly as possible after the end of the war in all theaters of operation. They dislike the idea of continued dependence after that time on any temporary wartime arrangements, and they also would deplore the substitution of external loans, which would cause further deterioration in their long-term debtor-creditor position. The only satisfactory course open to them is the restoration and expansion of their export trade and in view of the tremendous diversion of labor and materials away from export lines during the war, they feel that very high priorities must be given in respect of both workers and raw materials to export industries immediately after the war.
Some concern is felt privately among officials at what they believe to be inadequate realization on the part of the American public and Congress of (1) the loss to United Kingdom in a common war effort of the fruits of a century of saving and investment, (2) the extent of increase of exports necessary to offset this loss, (3) the extent of United Kingdom diversion of resources from export trades to the war effort. Officials believe that the State Department fully understands the situation but they doubt whether Congress and the American [Page 75] public do and they take note of such attacks as that quoted here from the Wall Street Journal which seem to them both to urge prompt cessation of Lend-Lease and also to adopt a combative attitude towards future United Kingdom efforts to reestablish and expand its trade. Criticisms made by United Kingdom economic officials in regard to this state of affairs are directed mainly if not entirely at United Kingdom information services and at alleged excessive United Kingdom secrecy on some of the facts that would make the position clearer in other countries.
3. Plans concerning particular commodities are originated as regards food in the Ministry of Food, as regards raw materials and iron and steel and their products in the Ministry of Supply, and as regards other manufactured products chiefly in the Board of Trade. The Ministry of Supply has a few able economists who are free from trade bias and who have held important operating posts during the war. The future of the iron and steel trade is a matter of concern to these economists. They are, it may be said in confidence, strongly against the prewar setup and especially against the Import Duties Advisory Committee which worked on purely opportunist lines and became an appendage of the Iron and Steel Federation. Economists in Government who are acquainted with the industry believe that the IDAC should be eliminated entirely and that the Federation should be reformed on new lines. They are seriously concerned about the postwar position of the industry. The principal defect, they believe, is in the location of many producing units in the industry. “Efficiency” in the industry is largely a matter of transport costs and they believe that all plants working on imported ore should be re-located right on the coast close to the appropriate ports. In addition, many small or inefficient producing units should be eliminated. But they do not believe that these changes could be carried through by the industry itself because of the numerous interests involved. Their view is that only the Government could bring about such a wide reform on the basis of a national plan for the industry.
Such plans could probably be produced by an able group of younger men in the Ministry but our impression gathered privately is that Duncan, the present Minister, because of his past association with the Federation and with the industry, and because it is possible that he is looking to a job in the Federation in future, would not back any Government action on a comprehensive scale. Therefore, plans are hanging fire and there is danger that the industry will be unready to meet postwar conditions in the most effective manner.
An able economist of the Ministry of Supply (who has specialized in the history of the iron and steel industries) said he thought that there would be a shortage of iron and steel in the early postwar period [Page 76] in United Kingdom and perhaps in Europe but after 3 or 4 years production would tend to outrun demand and pressure for cartel arrangements and import restrictions would become strong. He did not believe the demand for iron and steel could be increased beyond 25% above the 1937 level except in the immediate reconstruction period.
In these personal conversations, a Ministry of Supply economist and a Colonial Office economist both raised the point that economies of large scale operation apply to international trade in a number of commodities as well as to production and to domestic trade and a policy of merely forcing dissolution of cartels, though desirable, may not provide a solution in all cases. A Colonial Office economist who generally favors private trade expressed the view that the cocoa trade from West Africa could best be handled by Government operation of shipment. He thought also that the banana trade must necessarily be handled in bulk on a rigid schedule by very large units of operation and that such monopoly as this involves should not be left in private hands. An economist of the Ministry of Supply expressed the personal view that in about 10 years the iron and steel industry would have to be nationalized in United Kingdom as the only effective means of reorganizing the industry on efficient lines and eliminating private cartel arrangements. He thought this would not mean an end of competition but a change in its form: There would be substantial competition in operating results of different units. These views were not put forward by doctrinaires but by Government economists with little or no political attachments. The Colonial Office appears to be doing considerable work on British colonial territories but very little on the relations between these colonies and those of other countries—apart from the Caribbean area. We shall follow up the trading aspects of colonial problems in future messages.
- British Parliamentary Under Secretary of State for Overseas Trade.↩