The Press TUESDAY, DECEMBER 2, 1952. After the U.S. Defence Drive

Press, Volume LXXXVIII, Issue 26903, 2 December 1952, Page 8

The Press TUESDAY, DECEMBER 2, 1952. After the U.S. Defence Drive

(The details given in a cable message j from Washington on Friday of the | tremendous achievements under the ■ United States defence production i programme are impressive even for ■a country which habitually deals in I billions of dollars rather than in • millions. The American economy jhas been geared since the outbreak of war in Korea to a steadily increasing rearmament programme; but it is a mistake to assume, as so many do, that the whole economy has been directed to this purpose. I Indeed, the United States is still spending only 18 per cent, (compared with Britain’s 13 per cent.) of its national production on arms; and because the accelerating programme ■ has been achieved mainly by I increasing the nation’s productivity [rather than by the diversion of productive resources, the rearmament programme has had little or no depressive effect upon the standard of living. What will happen when the defence targets are finally reached, probably in the first half of 1954? That question is an anxious one for the whole world; and there is some comfort to be found in the knowledge that American Government agencies are even now preparing to deal with the economic problems that will arise when defence production reaches its peak and levels out in a “ plateau ”, The magnitude of these problems may be judged from the scale of the present capital investment, not simply in the production of arms but in the provision of the means to make arms. Moreover, the defence programme is not concerned merely with producing a certain number of guns, ships, aircraft and other weapons for the American forces and the forces of its allies; it aims at the development of an industrial economy which can quickly and efficiently be adapted to the needs of a nation at war. It has been estimated that for two years after the defence targets are reached the decline in security expenditure will be no more than 10 per cent. This is insignificant beside the decline in defence spending at the end of the last war—roughly 80 per cent, between 1944 and 1946—but even so, it could have far-reaching effects on the sensitive American economy—and upon the economies of other countries. President Truman’s council of economic advisers has expressed the opinion in a recent report that a high level of production and employment can be maintained throughout the nation if proper adjustments are made to the economy in good time. But the question, commented “ The Times ”, is whether the challenge will not come from the growth of productivity in general rather than the pruning of defence expenditure.

It is too early [continued “The Times”] to say to what degree that challenge will be successfully met. But some factors can be listed. On the one hand the population of the United States will ’be larger by 20,000,000 next year than it was in 1945. Incomes today are more widely distributed than before the war. The demand for goods should be higher. Private investment will have seek out new fields and business will have to create or win fresh markets. The Federal, state, and local governments will be pressed to expand their rate of spending. More money will be available for slum clearance, highway development, dam construction, and housing programmes. On the other hand there are signs that the construction of new houses at the present rate is running ahead of the formation of new families. Arrears of supplies of “ consumers’ durables ” have about been made good. There are reports that the cost 6f caoital investment may be getting out of line with tbe prices of consumer goods, and that new investment is beginning to look less profitable.

During his election campaign General Eisenhower made it very clear that he regards the present “ war economy ” of the United States as a temporary phase, and that one of the main tasks of the new Administration must be to prepare for the transition to a more normal state of economic affairs when the United States and its allies have secured their defences. Perhaps it is not too much to hope that by then plans for economic cooperation will have matured sufficiently to permit America’s prospective surplus of capital resources to find a useful and profitable outlet in the countries where development is now being damagingly retarded.