Try to guess who said this and when: "The modern system of the division of labor upon which the exchange of products is based is in danger of breaking down. The truth of the matter is that Europe's requirements for the next three or four years of foreign food and other essential products -- principally from America -- are so much greater than her present ability to pay that she must have substantial additional help or face economic, social, and political deterioration of a very grave character."
The answer is then-Secretary of State George C. Marshall, describing in 1947 the goals of the Economic Recovery Plan, later to become known as the Marshall Plan, which helped give hope and assistance to 270 million people in 16 nations living in Western Europe.
The Marshall Plan was aimed at: (1) increasing production; (2) expanding European foreign trade; (3) facilitating European economic cooperation and integration; and (4) controlling inflation.
Some are calling for the U.S. to help bail out Europe again, as we did in 1947. Ironically one of the leading rationales for the Marshall Plan was that during1947-48 Europe lacked the capital to invest, mainly because they had to overcome a massive U.S. trade surplus.
How times have changed. While Europe did eventually recover and resumed its ranking as our largest trading partner, today, U.S. exports to the 27-nation European Union dropped 4.8 percent in the year ended April, 2012. According to the U.S. Department of Commerce, it was the worst 12-month performance since November 2009. The slump in Europe coincides with slowing growth in other major markets for U.S. goods, such as China and Brazil.
The EU and the U.S. economies account for more than half the entire world GDP. They are essential in maintaining world economic stability. This partnership has benefited people of all nations.
While Americans worry about a moribund economy and 25 million unemployed and under-employed workers, it’s understandable that the financial crisis in Europe might be seen as somebody else’s problem. The trouble is it also can quickly become a really big problem for the U.S.
Much is at stake for America if the European economy collapses.
They are our largest trade partners; it is where we get most of our foreign direct investments; where we have long standing financial relationships; and where we rely on our relationship with these governments to help maintain world peace.
When foreign markets stop importing U.S. goods, it has a ripple effect in America, impacting job creation from small businesses, which account for 97 per cent of U.S. Exporters.
Now we are watching European debt destabilize five of the region’s countries – Greece, Portugal, Ireland, Italy, and Spain. Germany, which caused the European economy to collapse in 1947 and was the largest benefactor of the Marshall Plan, has the strongest economy of any European nation and is the only nation that can prevent the meltdown of its neighbors.
To date they have been tepid about playing a larger role, worried about their own growing debt. We certainly know what that feels like.
The head of the Bank of England in 2011 referred to the European crisis as “the most serious financial crisis at least since the 1930s, if not ever.”
Here we are, revisiting some of the same financial circumstances that caused the U.S. to originally launch the Marshall Plan. Sadly, this time around, we aren’t in any position to offer financial assistance because of the gross mismanagement of our economy over the past few years that has seen us add a staggering $5 trillion in new debt, turning our currency into vapor paper.
Italy is Europe’s third-largest economy, and unlike Greece, Ireland or Portugal, a bailout would be prohibitive for America to undertake.
In 1947, the world looked to America to apply its economic principles to Europe’s crisis. And why not? America had pulled out of the depression of the '30s and came back stronger than ever. The U.S. clearly knew how to run its economy -- the awe of the world. We aren’t that U.S. anymore. We are now seen by many as wounded warriors incapable of recovering our past glory.
Europe is no longer looking at America to offer a vision, guidance and solutions. They have witnessed an Administration that clearly doesn’t have the answers to its own problems. They recognize that President Obama and his economic advisers are simply imitating their failed policies.
America stands at a threshold. We can restore the power and prestige we enjoyed on the world stage in 1947; or we can wring our hands and wait for the European financial chaos to come to our shores. This is not an option.
America is defined by a history of bold ideas and action. Along with American democracy and our Constitution, our economy is our greatest achievement. It is time to unlock this intrinsic power to change the world for the better.
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