tute's facilities if they succeed in negotiating medical service plans.15

The Philadelphia Union Health Center does not press health education; nor does it plan to bring in other unions or embark upon industrial medirine. Officials of the center have not undertaken an extended program because of fear that facilities would soon become overtaxed.

Union Approach to the Plans

Since employers' contributions to health funds are regarded by the unions as a substitute for a wage increase, control of the funds is considered to be of primary concern to the unions and their membership. To assure adherence to the objectives of the program and to protect the workers' interest as consumer of the medical services which it affords, union officials of both the Labor Health Institute and the Union Health Center contend that medical service plans must be union-administered as to both basic policy-making functions and day-to-day operations.16 Their view recognizes the wide latitude to be given the medical administrator in professional matters. However, it does not conceive of the medical administrator as coequal in ultimate authority but rather as an employee of the medical center.

Union suspicion of bipartite or tripartite (including medical representation) control is explained by the fact that some employers actively opposed the medical service plan and accepted it only after strike action. Since the program entails an added cost to the employer (partly discounted by income tax deduction), it is vulnerable to attack when business declines. Union officials are of the opinion that minority employer representation on the governing body is desirable. This enables employers to understand more clearly what the problems of a medical service plan are and makes for more responsible criticism. Opposition of organized medicine to prepayment group medical

For the calendar year 1946, the Union Health Center reported that 1,500 separate individuals utilized 35,650 services (a service is defined as a visit to any department or technical unit). About 100 individuals a day were treated; referral cases averaged from 70 to 80 a month. For the period July 1945-December 1946, the Labor Health Institute reported that 1,700 separate individuals utilized 20,300 services in the medical center, and about 2,400 services outside the medical center. Complete statistics on cost of operation are not available.

* Under the Labor Management Relations Act of 1947, health-welfare plans in effect prior to January 1, 1946, are not required to provide for equal representation in the administration of the plan.

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care plans accounts to some extent for the disinclination of unions to agree to medical representation on the governing body. Finally, union administered medical service programs add considerably to the prestige of unions; the member cannot but come away with the impression that these benefits are available because of the unions' efforts.

Given a union administered medical service plan, the question facing unions is how comprehensive to make it. If the health center is one of a number of benefits, it must compete for available funds. When the health center is the recipient of the entire contribution, it can develop a comprehensive medical care program. Clearly, too, multiple cash benefits, however limited each may be, necessarily curtail the scope of medical services unless financial contributions and facilities are increased.

The medical director may be generally expected to demand increased and improved services. Union officials and the lay director are usually persuaded to expand, with an eye to future curtailment when financial reserves contract.

Employer Approach to the Plans

Employer attitudes toward medical service plans included in the survey may be summarized as acceptance on the part of some, "wait and see" on the part of others, and opposition by a third group. In the ladies' garment industry where benefit plans have become standard collectivebargaining provisions, employer acceptance is based on the principle of industry responsibility for the health and welfare of its workers. In St. Louis, some employers were of the opinion that the medical service plan was producing a favorable effect upon worker efficiency and morale, and others were skeptical of its advantages and preferred to make up their minds at a later date. Employers who opposed the St. Louis plan contended that insurance would be cheaper, particularly since workers were not utilizing the facilities of the plan, and that employers were being denied equal participation in the administration and control of the Labor Health Institute. In their opinion, the cost of operating the institute would be the first object of employer attack in the event of a business recession.

Development of the European Recovery Plan

1

THE EUROPEAN RECOVERY PROGRAM dates from June 5, 1947, when Secretary of State Marshall outlined Europe's need for aid and America's interest in the problem. In effect, the European nations were invited to submit a unified program to the United States Government of their needs for aid and rehabilitation, and of the part "those countries themselves will take in order to give proper effect to whatever action might be undertaken by this [United States] Government." Secretary Marshall indicated that the Government would give sympathetic consideration to such a program.

The European nations indicated early that they would accept Secretary Marshall's suggestion. After an unsuccessful attempt in late June to obtain agreement with the Soviet Union on a program of cooperation among all the European nations, Britain and France invited 22 additional countries to meet in Paris on July 12 to consider a recovery plan. Nations under the influence of the Soviet Union refused to attend the conference, although at least in the case of Poland and Czechoslovakia, with obvious reluctance. Representatives of the 16 other nations 2 met on July 12, and created the Committee for European Economic Cooperation (CEEC). On September 22, CEEC presented its report to the Department of State. The 16 participating nations had reached a unanimous agreement on their production goals and their requirements from outside sources for the period 1948-51.

On June 22, President Truman appointed 3 committees to study different aspects of a foreignaid program in relation to the domestic economy. The reports of the "Krug," "Nourse," and "Harriman" committees were made available in

1 Address delivered at Harvard University commencement. For the text of the address and a summary of other documents here summarized, see Senate Document No. 111, 80th Cong., 1st sess., The European Recovery Program-Basic Documents and Background Information, Washington, 1947. 2 The countries represented were Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, and the United Kingdom.

The Government Committee on Resources under the Chairmanship of Julius A. Krug, Secretary of the Interior; The Council of Economic Advisors, under Chairman Edwin G. Nourse; and the President's Committee on Foreign Aid under W. Averill Harriman, Secretary of Commerce, issued reports entitled, respectively, National Resources and Foreign Aid; The Impact of Foreign Aid Upon the Domestic Economy; and European Recovery and American Aid.

October and November 1947. The reports wh are here summarized appraise the resources of United States in relation to domestic needs a the needs of the European countries; the eff upon domestic production, consumption, a prices of a substantial program of foreign aid; a the "limits within which the United States m safely and wisely plan to extend economic to Europe."

Simultaneously, the House of Representativ was making its own inquiries into the questi A preliminary report, using available informati and indicating the policy issues to be studied, w issued by a subcommittee of the Foreign Affa Committee in July. On July 29, Congressm Christian A. Herter, of Massachusetts, introduc a resolution to set up the Select Committee Foreign Aid to study the problem on a bro basis. A 19-member Committee, representing t major standing committees of the House co cerned with the foreign-aid program, was a pointed, with Congressman Charles A. Eaton, New Jersey, as chairman, and Congressman Hert as vice chairman. The Committee was divided in 5 subcommittees and made a first-hand stud in Europe (August 28 to October 10). As result, a series of reports was issued on the existin situation and the requirements and availabiliti of critical commodities.

Meanwhile, rising domestic prices, particularl of food, were creating problems which threatene both the stability of the American economy an the foreign-aid program. The reports of th President's committees pointed to the possibilitie of further increases if no action was taken to re strain the combined effects of unprecedente domestic purchasing power and a continued exces of exports over imports. In a message to th special session of Congress on November 17, th President outlined measures for combating in flation at home and urged enactment of immediat "stop-gap" aid for France, Italy, and Austria pending adoption of a program for European relief and rehabilitation.

General Report of CEEC

Before World War II, the 16 participating nations were, for the most part, highly efficient in industry and agriculture and derived a sub

stantial income from international trade and commerce, the CEEC report states."

Their economies were largely integrated, which permitted a high degree of specialization in the different countries. This specialization was largely responsible for the relatively high consumption levels that most of the countries enjoyed; but the maintenance of these standards depended on the uninterrupted flow of goods and services in international trade.

Trade, industry, and agriculture in the European countries "had been twisted out of shape" by the forces of war, the CEEC report stated. Great numbers of workers were displaced. Foreign customers had transferred their trade to the United States. Overseas investments had been destroyed or sold and foreign indebtedness had been incurred during the war. Sources of supply, both for raw materials and for food, had been destroyed or disrupted, and capital equipment and transportation facilities had been destroyed. There was a shortage of all basic materials, and especially of food, fertilizer, coal, and steel. Inflationary pressures developed in all countries and in some the rising prices, unbalanced budgets, and unstable currencies threatened the whole economy.

Reconstruction in Europe was well under way until the continued shortages of food, coal, and other essential commodities brought a setback in the severe winter of 1946-47. Winter frosts and spring droughts seriously damaged principal crops. By the early summer of 1947 hope for a rapid and sustained recovery for western Europe was gone. Industry was depleting its financial reserves and dollar balances were fast shrinking. The recovery program adopted has four important elements: (1) A strong production effort by each of the participating countries, especially in agriculture, fuel and power, transport, and the modernization of equipment; (2) the creation and maintenance of internal financial stability as an essential condition for securing the full use of Europe's productive and financial resources; (3) the development of economic cooperation between the participating countries; and (4) a solution of the problem of the international trade and exchange deficit with the American continent by increasing the exports of the participating coun

For the CEEC manpower report, see Monthly Labor Review, November 1947 (p. 567).

tries over a 3-year period during which substantial aid is required.

The goals fixed by the CEEC call for unprecedented peacetime production by the whole population of all the participating countries. By the end of 1951, agriculture is to be restored to the prewar level and there is to be a significant expansion over 1938 in mining and manufacturing production.

Neither the production goals nor the necessary program of cooperation can be accomplished unless internal financial and monetary stability is restored or maintained in the various countries. Lack of confidence in the national currency in many countries has led to the hoarding of food by farmers or to its disposal in the black market. "Industrial workers spend much of their time looking for food and goods. People refuse to invest capital in fixed interest securities and seek to transfer it into gold or foreign exchange; capital held abroad is left there and becomes a hidden private asset which brings no benefit to the nation as a whole." To meet such situations, the participating countries have pledged themselves to carry out stabilization programs "in a spirit of determination.”

Normally, many of the European countries were mutually dependent economically. "It is therefore entirely natural that a complicated network of mutual help should exist, and that it should develop further as production grows." Broader proposals are being considered for the reduction of trade barriers and the removal of financial obstacles to intra-European trade.

Even after allowance for the supplies they can obtain from each other, the participating countries need to import from overseas almost 60 billion dollars of food, raw materials, fuel, and capital equipment in the years 1948-51. This raises two problems: (1) the inadequate availabilities of certain key commodities in the world and (2) the lack of means by the European countries to pay for them. The lack of supplies from normal sources in eastern Europe and southeast Asia means a greater dependence on supplies from the American continent-about 61 percent of outside requirements. Financial aid starting immediately is a necessary first step to fulfill the program of production, stabilization, and cooperation. It is hoped that the deficit with the American continent will be reduced each year

as production in the participating countries is increased. "By the end of 1951, given reasonably favorable external conditions, the deficit should be of dimensions which will be manageable through normal means without special aid."

Krug Report

In considering the additional demand on United States resources because of the European Recovery Program, the Krug report points to the very strong demand for most products and the supply bottlenecks that would be present even if there were no export program. But, in addition, production of certain products needed for relief and reconstruction has not been sufficient to satisfy even domestic requirements, with the result that exports of these commodities aggravate the problem.

The report also states that the fulfillment of the substantially increased European needs for grain imports for the coming year (200 million bushels more than last year) depends largely on the amount of grain fed to livestock. The problem is complicated by the short corn crop. Voluntary measures to save wheat by individual and industrial consumers will not be sufficient, if farmers find it more profitable to fatten livestock.

European needs for coal are, at the moment, tremendous, but with a functioning self-help program, including exports from Poland, the crisis should be short-lived. The peak in demand for coal from the United States should be over by the end of 1948. Present coal production in the United States would be sufficient to meet domestic and the most essential foreign demands if production was not limited by port facilities and the lack of coal cars.

The shortage of coal cars is only one of the important bottlenecks traceable to insufficient steel production in relation to demand. Output of industrial and farm machinery is limited by the insufficiency of sheet metal, transmission chains, and all types of castings. Petroleum production is held up by lack of steel tubing, casing, and pipe lines. Pressure tank cars and containers are the problem in chemicals and fertilizers. Freight car shortages complicate the problem of moving coal and wheat for export. With the European nations so dependent on

steel and its products in their reconstruction program and with urgent domestic needs for all types of steel products, the problem of increasing steel production is probably the most pressing. Some increase in output is anticipated through increased plant capacity and adoption of new techniques.

The current low level of food production in many European countries is due in part to the lack of fertilizers and the neglect of the soil during the war. In spite of domestic requirements, the report recommends much greater exports of fertilizer to increase European food production, through the greater utilization of plant capacity and the curtailment of industrial uses of nitrogen.

In general there is no evidence that shortage of labor is limiting the production of any important industry or product. Shortages do exist in a few highly specialized occupations and some stringencies are traceable to housing shortages, unfavorable wages or working conditions, or inaccessibility of work. However, there is reason to expect that, with the steady growth of the labor force and the upward trend of productivity, continuing full employment will mean a steady expansion in the volume of production. From existing indications as to the foreign aid program, gross exports in 1948 will not exceed those in 1947, so that apparently no additional manpower will be required.

Nourse Report

The Council of Economic Advisers point out that the size of the export surplus rather than gross exports is the important measure of the impact of foreign aid on the domestic economy. The postwar export surplus has been very largein 1946 exports totaled 15.3 billion dollars and the export surplus 8.1 billion dollars. In the second quarter of 1947, exports reached the peak annual rate of 21 billion dollars, with the export surplus at the rate of 13 billion dollars; but in the third quarter of the year exports declined to the annual rate of 18.3 billion dollars and the surplus to 10.3 billion dollars.

In spite of the postwar export surplus, the tremendous increase in production has given the domestic consumer the highest level of living he has ever enjoyed. While the foreign demand for goods has added to the inflationary pressure, it is the huge domestic demand arising from high incomes which has primarily caused rising prices.

When the export surplus reached its peak in the second quarter of 1947, prices were stable. But in the third quarter, although exports in general were declining, the foreign need for grain (in the face of adverse crop conditions in the United States) added to the pressure on agricultural prices. Assuming foreign aid of about 7 billion dollars in 1948 and imports at the current level of 8 billion dollars a year, exports of about 20 billion dollars could be expected and an export surplus of about 12 billion dollars would result. This is less than the amount reached in the second quarter of 1947 and since it would decline in succeeding years, it appears that the export surplus under the foreign aid program would at no time equal the peak of 1947. With the likelihood of increasing production, the conclusion is reached in the Nourse report that the general impact of the foreign aid program can be sustained because a larger impact has already been sustained. However, if not dealt with effectively, problems raised by the foreign demand for specific commodities in relatively short supply could make a difference in the generally optimistic picture.

The relative shortage of steel is mostly due to domestic demands. With no prospect of a significant increase in production of steel and steel products in the short run (while both domestic and foreign demands will remain heavy), serious danger of further price increases exists. "Vigorous affirmative measures" to prevent sharp increases and to assure distribution of steel for the most urgent uses are needed.

According to the report, the foreign demand for coal and fertilizer can be substantially met without extraordinary measures. Domestic shortages are not serious and shipments abroad will hasten European recovery.

The policy of financing foreign aid through taxation and not through increasing the national debt should be continued, the report stated. As long as inflationary pressures continue, taxes should not be reduced, regardless of the size of the foreign aid program.

In the long run, the United States has an important interest in a practicable rehabilitation of the European economy. It will be beneficial in restoring useful foreign trade; its failure will mean a new economic orientation of those countries which would be detrimental to the domestic economy. Any loans made can be repaid only if

the trade of the world is restored. This would mean added competition for certain United States industries, but the consequences will have to be met. Some outright gifts for emergency aid would be desirable to enable the recipient countries to qualify for International Bank and private loans. The severity of the impact of a new foreignaid program on the domestic economy will depend on the measures adopted with regard to its administration and to related questions of domestic economic policy.

The relative shortages of specific commodities require export controls, allocations for domestic use, discouragement of misuse and excessive use, efficient transportation and distribution, and the curbing of speculation and hoarding of goods.

The general inflationary threat resulting from the combined impact of foreign and domestic demand requires the continuance of tax revenues at present levels, maximum economy in Government expenditures, stimulation of saving, and the enlargement and aggressive use of measures to control dangerous expansion of credit.

Harriman Report

Aid should not be viewed as a means of supporting Europe, according to the Harriman report, but "as a spark which can fire the engine"; the amount of aid required from the United States will place a substantial burden on the United States; the idea, expressed by some, that export of goods as gifts is necessary to insure prosperity in this country is "nonsense"; the immediate economic danger is, rather, inflation-a shortage of goods relative to demand.

This Nation's interest in Europe is not only economic-it is also "strategic and political." The democratic system must provide the necessities of life and arouse the hope that by hard work a higher standard of living is attainable. If these countries cannot achieve an improvement in their economic affairs by democratic means, they may be driven to turn in the opposite direction.

As a condition for continuing aid, the European countries should be required to take all practicable measures to achieve the production and monetary goals which they set for themselves in the CEEC Paris report, summarized above. The nations should adopt their own methods to achieve