The Paris Plan

For ten weeks the delegates in Paris had worked hard, consulting charts and tables and their own political feelings. The difficulties were great. They had finished their report, however, in apparent unanimity, persuaded that they had better hang together or they would hang separately.

What Makes the Mare Go. Their plan recognized that money, even if it pours in from the U.S., is not everything. Four overriding conditions must prevail to bring Europe back to health.

First and foremost, Europe's production effort must be recharged with food, fuel, power, transport and equipment. Said the report: "More food for miners means more coal; more coal means more steel; this in turn makes it possible to produce more mining and agricultural machinery to produce more coal and more food, and more transport equipment to enable the increased supplies of coal to flow smoothly from the pits." The plan specifically included western Germany.

Secondly, Europe must be made financially stable. Then inflation would end, prices would come down, black markets would disappear and people would stop hoarding food. When confidence in currency was restored, European capital would stay at home instead of flying nervously abroad. To establish confidence, European governments want $3 billion in dollars and gold from the U.S.

Thirdly, the 16 nations would cooperate more closely by reducing trade barriers, swapping manpower, planning for common sources of electric power, standardizing equipment, pooling freight cars. In other words, the Paris Plan contemplated an economically unified Europe.

Last but not. least, the unbalance of Europe's trade with the rest of the world had to be solved. Foreign trade had to be a two-way street or it ceased, with catastrophic results for all.

Shopping List. With these conditions laid down, what, specifically, did Western Europe want from, the U.S.? The answer was a total of $20.4 billion* in food and materials in the next four years. From the rest of the Americas: $14.8 billion. This was Western Europe's "shopping list" (the report called it an "analysis of maladjustments") of things it wanted from the U.S.:

P: $1.5 billion of food and fertilizer in 1948; a total of $5.4 billion in the next four years.

P: $300 million of coal in 1948; a total of $700 million in the next four years.

P: $500 million of petroleum in 1948; a total of $2.2 billion in the next four years.

P: $400 million of iron and steel in 1948; $1.2 billion in the next four years.

P: $400 million of timber in the next four years.

P: $1.1 billion of electrical plants, freight cars, and equipment for petroleum refining, steel plants, mining and agriculture in 1948, a total of $3.3 billion in the next four years.

P: $7.2 billion of "other imports" such as cotton and non-ferrous metals in the next four years.

The Two-Way Street. How did the 16 countries propose to amortize this vast and steadily accumulating deficit? Actually, they said, the recovery program which it would set under way would "reduce the dollar deficit progressively." For example, 1948's deficit would be $8.04 billion; 1951's would be $3.4 billion. Along with a reduction of imports would go an expanding export trade with the Americas and other countries of the world.

The report added a plea and a warning to high-tariff Americans: "The maladjustment can never be corrected on a basis of expanding trade unless market conditions in the American Continent permit Europe to sell goods there in steadily increasing quantities and permit other countries to earn dollars there and use them to purchase from Europe."

The hopeful implication was that if the U.S. did let in a flow of foreign goods, the riddle might be solved. In some distant future (the report did not guess when), a favorable trade balance would make it possible for the 16 nations to pay off their debt.

Admittedly, the Paris Plan was not a sound, orthodox banking proposition. But on it, the report implied, depended "whether Europe can achieve economic stability and thereby be enabled to make her full contribution to the welfare of the world."

* All dollar values were based on July 1, 1947 prices. Fluctuations in domestic U.S. prices would change the values. A 10% rise in prices in the U.S., the report estimated, would add $1 billion a year in costs to Europe.

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