The Colorado Alumnus
March 1946

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An Economic Program For Peace

What the United States can do in the critical months ahead in shaping the world of prosperity and peace is told in this challenging article by Dr. Earl C. Crockett, professor of economics at C.U.

One of Colorado's leading economists and a student of international financial problems, Dr. Crockett served as principal economist for the War Production Board in Washington, D.C., in 1942-3.

He is a member of the American Economics Association; the National Tax Association; Pi Gamma Mu, honorary social science society; Artus, honorary economics society; the Kiwanis Club of Boulder, and the Boulder Chamber of Commerce.

Professor Crockett took his Ph.D. in 1931 at the University of California, where his thesis dealt with the history of California labor legislation. He held a teaching fellowship at California University in 1929031. He took his B.S. at Utah University in 1927. Before coming to C.U. in 1934, he was an assistant professor of finance at the University of North Dakota.

By Dr. Earl C. Crockett

"This point in history at which we stand is full of promise and of danger. The world will either move toward unity and widely shared prosperity or it will move apart into necessarily competing economic blocs.

We have a chance, we citizens of the United States, to use our influence in favor of a more united and cooperating world. Whether we do so will determine, as far as it is in our power, the kind of lives our grandchildren can live."

-Franklin D. Roosevelt

These words were spoken by Mr. Roosevelt a few weeks before his death. The occasion was a message to Congress urging ratification of the Bretton Woods proposal - a program since then ratified by a sufficient number of nations, including our own, to insure the establishment of two important economic institutions on a world-wide basis. Thus a significant step has been taken in the direction of the cooperation and unity requested by our late president.

However, the job is not yet completed. In its quest for a durable basis for peace in the world, the United States must seek to promote a comprehensive, positive conscious, and continuous economic cooperation among nations. This is vitally necessary if the newly created world political unit - the United Nations Organization - is successfully to be an agency for the prevention of future wars. For international economic security is fundamental to international security in the political and military sense.

In other words, if the world's family of nations is ever going to live peaceably together, the foundations of such peace will have to be a certain amount of economic security for the respective nations, which can come only through cooperative activity.

What, then, are the requisites of a comprehensive program of economic cooperation among the nations of the world and how may such a program be initiated and carried through to successful operation?

Stamped Toward Nationalism

Before directly answering these questions, let us briefly remind ourselves of some of the errors made after the First World War. At that time and especially after the depression of 1929, the various countries of the world, in varying degrees of panic, were stampeded into nationalism. Economic rivalries grew into intensive economic warfare. Relative to currencies, foreign trade, and international investment, countries devised new nationalistic measures of defense, aggression, and retaliation.

The First World War put a severe strain upon the economics of the defeated and victorious nations alike. Changes occurred in the normal directions of trade, in debtor-creditor relationships and in domestic problems of readjustment to peace. Consequently, in the quest for security, and in the absence of international organizations to deal with problems common to all, there is little wonder that nations turned individually or in blocs, to measures intended to bring national self-sufficiency.

Thus, intensive nationalism became the order of the day. Numerous barriers to foreign trade were established. In addition to traditional devices such as tariffs whose rates were raised to an all-time high, other restrictions were placed upon trade. Most of these restrictions had at least the appearance of being for some special laudable purpose, but actually many were nothing more than economic weapons to be used against other countries.

During the decade of the thirties, the fascist countries established trade barriers to a greater extent than other nations, yet the democracies and other countries resorted to them also. Embargos, quotas, barter arrangements, blocked currencies, and exchange controls were some of the more drastic restrictions in addition to tariffs.

Yet the restrictions upon trade were not the only manifestations of economic rivalry which developed after World War I. Similar nationalistic policies grew up all over the world regarding monetary systems, international borrowing, lending and investment, and the interchanged of technical knowledge.

The inevitable result of all these measures - really world anarchy in the economic realm - together with unsound domestic policies in various countries, was the worst depression the world has ever known and then a Second World War more devastating than the first.

Tragic Domestic Picture

The experience in the United States can be well remembered. The richest nation in the world, presumably able to go its own way better than any other, encountered national disaster when international economic cooperation collapsed. With the virtual disappearance of international lending and investment, with the breakdown of world currencies, accompanied by numerous trade restrictions, our foreign trade declined more than 65 per cent between 1929 and 1932. The impact upon our domestic economy, as well as upon those of other nations, was tragic indeed.

Problems of the world depression contributed to the causes of the Second World War. In the midst of economic chaos, both domestic and international, there is little wonder that Mussolinis, Hitlers, Francos, and Herohitos came into power and ultimately thrust the world into war.

We must not repeat the tragic mistakes of nationalism and world anarchy which spread throughout the world between the two great wars. How then may we achieve international cooperation? In other words, what are the requirements for world economic security and peace in the years to come?

Toward World Security

First of all, any economic program for world peace and security should concern itself with certain measures primarily domestic in nature. Our chances for peace are greatly improved if internal conditions in each country, as much as possible, are conductive to full employment of capital and labor.

Production should be geared to an expanding economy based upon growing markets both at home and abroad. Higher standards of living will bring not only increased productivity in industry but also markets for the goods produced. Furthermore, it is easy for each country to refrain from restrictive international practices when its own resources and manpower are fully employed.

In is especially important to the rest of the world that the United States continue to operate on the high level of prosperity and employment. This is because the country's resources, production, and trade represent a very large portion of the world's total. If unemployment were permitted to develop here, the consequent low production with attendant loss of markets would cause harmful repercussions throughout the world.

Therefore, the American people would do well to consider carefully the advisability of adopting (at least before rejecting) various domestic measures intended to promote employment, production, and rising standards of living.

Some of these measures are currently sponsored by the Administration, but are now in the form of bills buried in committees of Congress. They include, among others, the following: (a) a full employment bill; (b) a fair employment practices bill; (c) a measure authorizing government fact-finding boards in important labor disputes; (d) a proposed amendment of the Social Security Act, extending the enlarging its benefits, and (e) a bill authorizing the development of river valleys including a Missouri Valley Authority.

Because of their extreme importance relative to the future welfare of the United States and, consequently, to the security and peace of the world, the Congressional Committees concerned should be forced to report these bills so that the Congress in general may debate their relative merits and then decide, by majority vote, whatever policies appear to be appropriate.

International Considerations

In addition to the domestic approach to world economic security and peace, there are important international aspects.

Today, in many parts of Europe and Asia, the aftermath of war is widespread devastation and famine. Millions of people in these areas are virtually without food or clothing while shelter is often is often little better than foxholes or dugouts. World peace will be most precarious and no nation will long be prosperous while these conditions are permitted to continue.

Therefore, nations such as the United States have an obligation to assist these destitute peoples. Not only ideals of Christianity require that this be done, but also it is necessary if a foundation for world peace and prosperity, including our own, is to be established.

Fortunately an international institution is now functioning for the purpose of assisting the destitute populations - the United Nations Relief and Rehabilitation Administration (UNNRA). Each member nation is pledged to contribute annually to UNNRA one per cent of the country's national income. During this critical period of war-aftermath, it is especially important that the United States, with her superior economic resources, continue to contribute her share.

Another economic requirement for a peaceful world is the establishment of a much freer system of world trade. Access to markets and raw materials by all nations, so that surpluses can be balanced against shortages in the normal process of trade and commerce, should become a prime objective.

Every country has its arrangements for production and distribution within its borders. To make the best use of these arrangements, countries must exchange their products. World trade is not only the device through which useful goods produced in one country are made available to consumers in another; it is also the means through which the needs of people in one country are translated into orders and therefore jobs in another.

Reference has already been made to the various kinds of restrictions which developed during the period of nationalistic rivalry between the two World Wars. It is to be hoped that those mistakes will not be made again. However, world cooperative action will be necessary if there is to be effective removal of the accumulated barriers to trade.

Trade Conference Planned

Therefore, it is encouraging that our Department of State has recently recommended to the nations of the world that not later than the summer of 1946 an international conference on trade and employment be conducted under the sponsorship of the United Nations Organization. Furthermore, the State Department has outlined a plan for a permanent International Trade Organization which it hopes will be approved at the conference.

The proposed International Trade Organization would have the following purposes:

1. To promote international commercial cooperation by establishing machinery for consultation and collaboration.

2. To enable members to avoid recourse to measures destructive of world commerce by providing, on a reciprocal and mutually advantageous basis, expanding opportunities for their trade and economic development.

3. To facilitate access by all members, on equal terms, to the trade and the raw materials of the world needed for their economic prosperity.

4. In general, to promote national and international action for the expansion of the production, exchange, and consumption of goods, - thus contributing to an expanding world economy, to the establishment and maintenance in all countries of high levels of employment and real income, and to the creation of economic conditions conductive to the maintenance of world peace.

Several nations, including England have already indicated approval of the State Department's proposed conference on trade and employment. During the weeks immediately ahead we will undoubtedly hear more about this conference.

In order to provide a satisfactory basis for the interchange of goods there is need for stabilization of the currencies of the world. Thus another requisite for economic security and peace is presented. However, the achievement of this requirement is well underway as the International Monetary Fund - part of the Bretton woods program - is designed to accomplish this objective.

The fund is now in the process of being established and is intended not only to stabilize all currencies of the world but also to provide short term financing often required in the multilateral exchange of goods.

Still another requirement is the long-term financing essential to the transfer of capital goods from countries with large productive capacity, such as the United States, to those countries in need of reconstruction and development, particularly the war-devastated and the backward areas of the world.

The International Bank for Reconstruction and Development - the other part of the Bretton Woods program - is intended to provide a means for filling these long-term investment requirements. Such loans as the currently discussed American loan to Britain may ultimately be arranged through the World Bank after it is once established. Both the monetary fund and the bank are to be located in the United States.

U.S. Leadership Commended

Several additional economic institutions for "rounding-out" a comprehensive program intended to assist the achievement of world security, prosperity, and peace are now being organized. These include an International Organization on Food and Agriculture, and an enlarged International Labor Organization. Plans are also being developed for world agreements relative to commercial shipping and civil aviation.

It is expected that all these economic institutions and arrangements will become part of the United Nations Organization. Thus unification may be achieved of the various world cooperative efforts.

In furthering this objective of unification, as well as in the sponsoring of the world organizations in the first place, the United States has demonstrated genuine leadership. This dominant role on the side of international cooperation is in striking contrast with the isolationist attitude of our country following the First World War.

Nevertheless, even though we have cast our lot on the side of internationalism by sponsoring and then officially endorsing the structural framework and operating machinery for world cooperation, the task is not completed. The structural framework is but an empty shell and the machinery is largely useless unless actual life can be generated and vitally developed through making the organization really work. Therefore, the critical period may yet prove to lie ahead of us.

Whether we people of the world will measure up, when the real test comes, remains to be seen. There will have to be genuine statesmanship exercised by our representatives who are to operate the organization and machinery of cooperation. Also there must be tolerance, patience, and understanding developed by all peop0le generally.

We must learn to conquer suspicion, to give as well as to take, and to appreciate the problems of the other fellow who may be living in another country and who perhaps has a different colored skin or speaks another language. We must not only fight for the democratic and Christian principles many of us cherish, but also attempt to apply them on a worldwide basis.

These goals will not be easy and perhaps the aims of world security, prosperity, and peace will never be completely achieved. If so, the struggle must constantly go on, accompanied by vigilance and human understanding. Let us hop, however, that in the years to come we shall make progress toward the achievement of our goals. The alternative - in a future atomic age - is not a pleasant prospect.