THE ORGANISATION FOR EUROPEAN ECONOMIC COOPERATION
Paul-Henri Spaak, first Chairman of the OEEC, in 1948
Be that as it may, it was quite plainly the desire of the US - continuous from Morgenthau and White in the Treasury to Marshall in the State Department - to open Europe up as a free trade area accessible to US exports. The assumption had initially been that, given the perceived need to suppress Germany, the motor force for the process would be the UK and France, principally the UK which, it must have seemed, had been beaten into shape by White's victories over Keynes both with regard to the Bretton Woods arrangements and the subsequent conditions for the post war reconstruction loan. This was discussed in the last two articles in this series. The jewel in the crown of White's achievements was obliging the British to agree to the convertibility of sterling which would have opened up the whole sterling area to penetration by the dollar. Convertibility was implemented in July 1947 but, as we saw in the last episode, sterling almost immediately came close to collapse as holders of sterling made a rush for the much more reliable dollar. This was not at all the intention and the reform had to be quickly reversed.
It was obvious that Britain - still reliant on a protected sterling area, and on the principle of 'imperial preference' - could not fulfil the desired role of motor for a free trade Europe. Nor was France to American eyes a likely alternative despite the ambitions of Jean Monnet. The Monnet Plan aimed to use German coking coal to enable France to replace Germany as the major European producer of steel and other high value capital goods. But France had a long way to go before it could fill that role and, like Italy, it had the disadvantage of a powerful Communist Party. In American eyes it was obvious that the leading role would have to be played by Germany but that happy outcome, and indeed the whole project of an integrated Europe, had many obstacles in its path.
For the US, the creation of an integrated Europe was the principle aim of Marshall Aid, and the first vehicle for achieving it was the Council for European Economic Cooperation (CEEC), meeting in Paris in July 1947. The principle was that the Europeans themselves would come together to hammer out a plan for the distribution of Marshall Aid. But instead of an integrated plan covering the whole area of Western Europe what the Americans received amounted to fifteen separate plans for the differing ambitions of the fifteen countries represented. Nor was the situation much improved in the case of the successor, the hopefully permanent Organisation for European Economic Cooperation (OEEC). The main obstacles to the US project were Britain and France often working in tandem on this, despite their disagreements on other matters.
The closest the US got to support - given that Germany was still excluded - were Belgium and the Netherlands ('Benelux'), especially Belgium which at the end of the war had an exceptionally well placed industrial capacity and had become the most successful European exporter, a privilege obstructed by continued European reliance on bilateral trade agreements and in any case threatened as other countries caught up. Belgium was keenly supportive of both the main planks of the US policy - regeneration of Germany and an integrated Europe - and with US support the Belgian Prime Minister Paul-Henri Spaak was elected as chairman of the OEEC with 'no enthusiasm on the part of the others present' according to a British Foreign Office memorandum quoted in Alan Milward's book The Reconstruction of Western Europe, 1945-51 (p.179). (4)
(4) Alan S. Milward: The Reconstruction of Western Europe, 1945-51, Methuen & Co, 1987 (first published 1984).
Milward goes on to describe the impossible task the OEEC had. It was the European liaison with the American ECA (Economic Cooperation Administration), charged with organising Marshall Aid for the whole of Europe, that is, in principle, developing a consensus as to what each country should receive, a problem made the more difficult in that all the European countries were hoping for their own export led recovery, meaning they needed other countries to take their imports. But Marshall Aid money was to be spent on imports from the US. At the same time Marshall Aid was subject to annual renewal by the US Congress which was feeling progressively less generous as, by 1949, the US itself went into recession and it became clear that the Europeans were not advancing towards the 'United States of Europe' which Congress was persuaded was the whole point of the exercise. To quote Milward (p.191):
'The period from July to October 1949 was the grand climacteric of the first American attempt to bring European economic integration into being. The political struggle coincided with a sharp recession in the US whose international repercussions on the European economies exacerbated their differences with each other and made the allocation of aid within the OEEC an even more divisive function. Thenceforth the OEEC faded rapidly from the forefront of European politics and began its transition to honest statistical toil.'
He continues (pp.206-7):
'The purpose of making them divide that aid had been to build in the process an integrative European organisation which would survive the end of the ERP [European Recovery Plan, 'Marshall Aid' - PB] and go from strength to strength. Nothing held it together in July and August 1949 but the scramble for dollars and even that worked no further than to produce an unsatisfactory report in an unsatisfactory way leaving no hope that the exercise could be done again next year and not the slightest hope that, if it were, it would advance the cause of integration. No sooner had the exercise been completed than there was a sweeping readjustment of European exchange rates, done with no co-operation and no reference to the OEEC, making nonsense of the forecast deficits and the programmes of aid to finance them which had taken the OEEC nine months to hammer out ...
'In future the ECA itself would decide on the allocation of Marshall Aid ...'