Copyright 1947, by Henry Hazlitt

LIKE the famous British economist Walter Bagehot, whom he admires, Henry Hazlitt has been a writer in diverse fields—literary criticism, philosophy, politics, economics and finance. He was literary editor of The New York Sun from 1925 to 1929, literary editor of The Nation from 1930 to 1933, and succeeded H. L. Mencken as editor of The American Mercury in 1933. One result of his ten years of book-reviewing was “The Anatomy of Criticism,” published in 1933. His deep interest in political questions led to the book, “A New Constitution Now,” published in 1942.

THERE is a widespread belief that the United States has a duty to lend or give huge sums to other countries, principally in Europe, if it is to save the world from communism and chaos. This belief is held almost as strongly in the United States, which would make the sacrifices, as it is in the European countries that are expected to benefit from them.

IN ANY economic survey of Europe, however brief, it is most profitable to begin with Germany. Germany has become the economic cancer spot of Europe. It has been producing a pitiable fraction of its pre-war industrial output. Steel production in the British and American zones, which reached 17,800,000 tons in 1938, has been cut down in 1947 to a bare 2,800,000. To support their own economies, the Allies have tried to encourage at least the production of coal.

GERMANY is the outstanding case of a demoralized production imposed by stupid controls from without. We come now to countries which have disorganized and prevented production by unintelligent government interference from within. To keep from making this story too repetitive, by discussing the remarkably similar interventions of each government in turn, it will be more convenient to present a sort of composite photograph of the situation in a single country, which we shall call Ruritania.

THIS brings us to the question of the much discussed “dollar shortage.” This phrase has become extremely fashionable in Europe. It has even been accepted at its face value by many Americans.

THIS brings us to the basic facts and principles that must be kept in mind in connection with the whole problem of foreign aid:

1.As the United States produces only 12 per cent of the world’s food supply, it is clear that America cannot feed the whole world.

9.It is not true that the United States needs foreign loans to keep full production and employment at home. It is not true that we can get rich by giving our goods away.

11.There is no scientific or objective way of measuring either Europe’s “needs” for aid or our “available resources” for supplying it. The report of the Paris conference of sixteen nations does not solve this problem. Any total arrived at must be arbitrary or sheer guesswork.

12.Making heavy loans or gifts to European nations is not the most effective way to fight world communism.