Economic Aspects of Relief and Rehabilitation


By EUGENE STALEY, Technical Program Rupert (Economic) of the Office of Foreign Relief and Rehabilitation Operations

Delivered before the Canadian Institute on Public Affairs at Lake Couchiching, Ontario, Canada, August 26, 1943

Vital Speeches of the Day, Vol. IX, pp. 730-734.

THE oldest of all problems in economics is this: Starting with limited resources, to go as far as possible toward meeting almost unlimited needs. Bringing relief and rehabilitation aid to victims of war is a problem in "economics" and "economizing" in this classic sense.

Some 540 million men, women, and children are under the despotic rule of the Axis in the occupied areas of Europe, Asia, and the islands of the seas. We know that some of them are starving, that many more are suffering from serious undernourishment and malnutrition. Malnourished people

are an easy prey to disease. Supplies of clothing and soap, both essential not only for comfort but also for the prevention of disease, are seriously depleted in the occupied areas. Millions of people—refugees, prisoners of war, laborers forced to work for the Axis war machine—are separated from their homes. Some say that there are 9 to 10 million such "dislocated persons" in Europe alone; others double that figure.

The battles for Europe and Asia may themselves create appalling new human misery and physical destruction. If the Axis armies are able to execute systematic plans of withdrawal we may expect to recapture civilian economies that have been stripped of movable supplies; foods and medicines, railway engines and cars, essential machines. Factories and public utilities may lie in ruins. Even if the Axis has to fall back too quickly for systematic destruction, the productive powers of newly liberated countries will be far below normal. Lack of fertilizer during the war has impaired the fertility of the soil. Machines and equipment have deteriorated. Fishing boats have been destroyed. Roads, bridges, port facilities, locomotives, will be in disrepair. The farmers of Nazi-occupied Europe have lost about one-fourth of their cattle and a third of their draft animals.

Even aside from physical destruction and deterioration, and in the aggregate perhaps even more important, the capacity to produce will have been seriously impaired in liberated areas. Consider the mental strains and the personal and social conflicts among workers and managers after years of war and enemy occupation. Consider the confusion over rights to land and commercial and industrial properties. Millions of workers have been busy against their will on Axis war orders. Where will they turn for employment? In many cases, under Nazi policy, their factories have not even been making complete articles. They have been producing for assembly plants in Germany. Banking and financial systems which have been fitted into the German or Japanese financial structure will also be in a state of disorganization. Currencies now linked to the mark or the yen will inspire no confidence when the Axis begins to topple. There will be danger of economic demoralization as a result of fantastic price rises associated with runaway inflation.

The need for relief and rehabilitation aid will, in truth, be at once very great and very urgent. For many reasons we must do our utmost to meet these needs. First of all, there are the humanitarian and moral reasons for bringing help to the civilian victims of war. These I need not elaborate. Second, there are the military reasons. Civilian conditions in the rear or "zone of communications" of the United Nations armies must be stabilized. Liberated populations must be kept enthusiastically loyal so that supply lines may be lightly guarded. Disease must be checked so as to protect the health of the troops. Production must be quickly restored so as to reduce the strain on supply lines and to help provide materials and transport for the liberation of other areas. Proof of prompt attention to the needs of the civilian population in re-occupied territories must be given, so that resistance among still unliberated peoples will be encouraged, thus hastening the enemy's military collapse. Third, there are the longer-range political and economic reasons. It would be no credit to the cause for which we fight, and it would imperil our own future prosperity and security, if the areas liberated by our armies should have to endure unemployment, inflation, disease, and other consequences of economic disorganization any longer than is absolutely unavoidable. A helping hand from us in order to restore the liberated peoples of the world as rapidly as possible to a self-respecting, self-sustaining basis is in their interest and our own, too.

Yet the resources with which to carry out these urgent tasks of relief and rehabilitation are not easy to come by. Foodstuffs, textiles, shoes, farm implements, gasoline, coal, and other items needed to rescue people and to revive production in war-stricken areas are in acute shortage today. Even when supplies are available somewhere there is one great overriding shortage that hampers their effective use—namely, the shortage of transport. These are the conditions under which we must meet at least the first stages of the relief and rehabilitation task. Nor will there be unlimited funds. The necessary money costs of a relief and rehabilitation program will not be nearly as great as the costs of a few weeks of war. Those costs are essential if we hope to make of our victory more than a mere stop-gap between a second and a third world war. Yet, obviously, peoples in all countries, confronted with huge financial burdens and high taxes, will rightly insist that expenditures be held within the most reasonable limits that can possibly be achieved while accomplishing the vitally important purposes of relief and rehabilitation.

In a word, as I said at the beginning, relief and rehabilitation poses a practical problem of "economics" and "economizing" in the most fundamental sense. The problem is how to make too little food do the job, and how to make too little shipping and too few railway cars do the job, how to make too little money do the job.

There are three lines of attack on this practical problem. The first is to mobilize all the resources that can possibly be made available. This means getting the help of everybody who is in a position to help. The second is to distribute the relief and rehabilitation aid efficiently and equitably so that it does the greatest amount of good. The third is to stimulate local production in the areas receiving aid, so that as soon as possible they may become able to sustain themselves and even, perhaps, to help others in turn. Let me discuss each of these points.

First, we must mobilize all available resources. The job of relief and rehabilitation is too big for any one nation or for a few nations. What is needed is the joint cooperation of all nations of goodwill. As you know, a draft agreement in which it is proposed to create a United Nations Relief and Rehabilitation Administration has been placed before the governments of the United Nations, and the other nations associated with them in this war. It already carries the approval of China, the Soviet Union, the United Kingdom, and the United States. If the proposed plan is adopted each member will pledge to bring to the aid of victims of war its "full support" within the limits of its available resources and subject to the requirements of its constitutional procedure. A country unable to contribute much in money might be able to help considerably with cocoa, or sugar, or coffee, or cheese, or wool, or cotton, or shipping services, or medicines or surgical supplies. As for wheat, one of the most important items of all in an emergency relief program, the governments of Canada, the United Kingdom, and the United States have already pledged in the International Wheat Agreement to contribute a total of 100 million bushels for international relief, and these governments, together with Australia and Argentina, have undertaken to agree on additional contributions later.

In the proposed United Nations Relief and Rehabilitation Administration we have a practical, realistic approach to a problem of great magnitude and vital importance. The peoples of the world have had bitter lessons in the folly of trying to isolate themselves from each other. The method which it is proposed to try in this United Nations Relief and Rehabilitation Administration is the method of collaboration. Under it the United States and Canada and each of the other cooperating nations would accept a responsibility commensurate with its ability to assist in meeting the emergency. No one nation and no small group of nations should either do all the giving or tell all the others what to do. None of us wants to see relief and rehabilitation run either on the principles of Santa Claus or the principles of Simon Legree.

The interest of all of us, I take it, is to help establish a self-running world in which each group of people plays its appropriate part in mutual cooperation to meet common problems—not to try to dominate the world, either despotically or benevolently, or to try to withdraw and have the world drift into chaos once more. Surely there is no more appropriate problem on which the United Nations, having learned from twenty years of history the weakness and perils of disunity, could begin to work out in actual practice the methods of acting together which will be necessary to prevent it all from happening again.

Let me call your attention to a cooperative relief effort already going on. It is one in which Canada is playing a major part. You all know the sufferings that have been inflicted on the gallant people of Greece. In Greece it has been possible to set up a system of relief feeding. Distribution is administered by a Swedish and Swiss commission with the aid of local Greek committees. About 19,000 tons of supplies a month are going in. Of this total, 15,000 tons consist of wheat contributed free of charge by Canada. The other 4,000 tons are vegetables, milk, vitamins, etc., sent from the United States under a Lend-Lease financial arrangement. Shipping services are provided by Swedish vessels financed through Lend-Lease. Thus, aid from many peoples is involved in this one relief effort.

So much for the mobilization of all available resources. The second line of attack on the fundamental economic problem of doing an immense job with short supplies, is, of course, to see that supplies are efficiently and equitably distributed so that they do the greatest possible good. No relief and rehabilitation program of the United Nations can promise anything like immediate restoration of pre-war consumption standards in liberated areas. What it can and must do is to assure peoples in dire distress that, subject only to the limitation of available supplies and transport, their most urgent needs will be met immediately and that ways will be found under ail circumstances to help them maintain a level of subsistence which, while not comfortable or even adequate by most peacetime standards, will at least preserve life and health and give them a base from which to start an advance toward better living. Such a minimum "level of assurance" as it might be called, must without fail be available to the liberated peoples. If this minimum is to be available to all, there must be equitable sharing. We must see to it that relief supplies are distributed according to need, without regard for race, religion, or political belief, and that supplies are not exhausted by those nations that are liberated first or which have gold or foreign exchange to use in purchasing abroad.

Here again the collaborative approach is the best. For] some time an Inter-Allied Committee on Postwar Requirements has been at work in London, calculating the essential emergency needs likely to be encountered in various liberated countries of Europe. These representatives of Allied Governments recognize that they cannot ask for more than the barest essential needs for their people in the emergency period, since to do otherwise would prevent others from reaching that minimum level. Then there is the third line of attack, the most constructive and promising of all, on the fundamental economic problem of doing a big job in spite of short supplies. That is to help the war-stricken peoples to revive their own production and distribution systems as speedily as possible so that they will again be able with the very minimum of delay to meet their own essential needs by production and trade. This is economic rehabilitation. It is a method of meeting relief needs not simply by shipping in food and clothing and medicines—which might be called "straight relief"—but by increasing local production of these and other essentials. Rehabilitation is not merely helping people. It is better than that. It is helping people to help themselves.

A relief program without a vigorous program of economic rehabilitation, starting at the same instant and pushed with the same sense of emergency, would be like trying to bail out a leaky boat without plugging the leak. Rehabilitation is the constructive means of relieving human misery, the means of shortening the relief period and economizing on Scarce supplies, the means of ending the necessity for emergency rationing, the means of keeping the money cost of relief within reasonable limits.

What are the methods which might be used to help revive the self-sustaining production of war-stricken peoples? The first thing, of course, is to help save the peoples themselves. Starving and disease-ridden farmers, workers, and managers cannot produce efficiently. To save the people in some areas it will be necessary to rush in considerable quantities of foodstuffs, medical supplies, and clothing materials from outside to make up the gap between locally available supplies on the one hand and the minimum health and subsistence needs of the people on the other. At the same time, every effort must be made, in cooperation with the government of the area and with the other United Nations, to help the people increase their local production of goods and services and to get those moving in exchange between surplus and deficit areas. The physical part of this problem is obvious. Railroads, highways, bridges, port facilities, the essential telephone and telegraph lines, must be quickly repaired. The armed forces, for military reasons, will undoubtedly do much of this work. Essential services such as water supply and sanitation must be restored in the cities and towns. Vital repair parts for factories and mines, seeds and equipment for agriculture, will all be needed as a part of the process of emergency physical rehabilitation. This physical repair of damage, in which we can cooperate by lending a helping hand to the liberated peoples, is a necessary part of restoring the productive powers of the community.

In addition to physical repair, however, measures must also be taken in a community devastated or disorganized by war to restore and maintain what might be called an economic environment favorable to production—that is, conditions that encourage people to take initiative, to produce and trade, and thus to create the wealth that makes a healthy, self-sustaining economy. If the community, through efforts of its own assisted by the United Nations, can quickly establish currency stability, a reasonably functioning system of credit institutions through which working capital can be made available to producers, and can get raw materials flowing through its factories and goods through its wholesale and retail channels once more, then the initiative of the people in the area will be released. They will be able to help themselves back to a self-sustaining basis much more quickly. Expert assistance from outside, vitally needed parts and equipment, essential raw materials, seeds and fertilizers, fodder, and replacements for livestock, suggest the types of rehabilitation aid that will pay for themselves many timesover in quickly reducing the need for relief and promoting a sound return to economic stability.

Under the conditions that face us today there are many reasons for emphasizing the rehabilitation aspect of a relief and rehabilitation program—that is, helping people to help themselves by assisting them to revive their own local production.

In the first place, the sheer magnitude of the problem of rescuing victims of war from hunger and disease, coupled with shortage of supplies and transport and funds, makes it impossible to do an adequate job in any other way. If the war lasts a long time and liberation occurs gradually in one area after another, supplies will be chronically short because of transportation bottlenecks and huge military demands. If the Axis collapses suddenly, the burden of helping to sustain all the peoples in disorganized and war-stricken areas will fall upon the United Nations all at once. The only real answer to the problem in either case is to couple the shipment of urgent relief supplies from outside with vigorous measures to assist the liberated peoples in restoring their own productive powers. Only in this way can millions of spindly-legged children and hollow-cheeked adults be rescued quickly from malnutrition and disease, and the liberated peoples be put in position to cope effectively with the social dangers of unemployment and economic collapse.

In the second place, it is better psychologically, both for the recipients of aid and for the givers of aid, that the rehabilitation aspect of a relief and rehabilitation program should be emphasized. Helping people to help themselves-that is, rehabilitation—is less injurious than relief to the self-respect of proud people who hate to be in the position of needing any outside help. Direct emergency handouts will be necessary in some cases to rescue people from acute distress, but the shorter the period of such relief can be made by a vigorous program of rehabilitation, and the more the emphasis can be put on reestablishing production rather than merely distributing supplies, the better for all concerned.

In the third place, the rehabilitation type of aid is much more efficient and economical than straight relief in terms of the amount of shipping, scarce commodities, and funds required to achieve a given increase in human welfare. Shipping tonnage can obviously be saved by sending seed potatoes (provided they are sent in time to meet the crop season and are properly used) instead of sending potatoes for consumption throughout the next year. It has been calculated in connection with Lend-Lease shipments to England that a ton of farm machinery produces enough food in the first year to save eight tons of shipping space. This is an illustration of the importance of physical aids to production. But the same principle applies to the revival of self-sustaining trade, commerce, and finance. The way those keep costs low is to emphasize from the very start those types of assistance, which, while feeding people today, also help them to become able to feed themselves tomorrow.

A fourth reason for urgent attention to rehabilitation is that an early chance to get back into constructive, self-respecting, self-sustaining work is what the people and governments of the liberated areas will want almost as much as they want food itself.

It must not be forgotten that in a modern community people need steady jobs almost as badly as they need food and clothing. Immediately after liberation and immediately after the cessation of hostilities the inhabitants of war-stricken areas will be faced with great problems of unemployment. Factories previously producing for the Axis will need new orders if they are to keep their employees at work.

Returned prisoners of war and refugees must not look in vain for useful jobs. The social and political consequences of failing to meet such problems adequately are easy to imagine. Furthermore, it seems unlikely that the people of war-stricken areas will be able to meet these problems without substantial assistance in the form of raw materials, expert advice, and—perhaps most important of all in some cases—outside aid in organizing a coherent program to bring order out of a chaotic situation.

Fifth, and finally, the rapid rehabilitation of each successive liberated area will help to build up a new source of supply for later use in other liberated areas and for support of the military effort itself.

What of the long-range effects of such a program? Is it economically sound? Is it going to react to the disadvantage of us here in North America? Some people will fear, particularly, that helping other people to get back into production again will mean competition for our own producers and interference with our own efforts to achieve higher living standards after the war. These fears are real, even if mistaken, and we must confront them frankly.

One thing people are always forgetting is that if you help others to produce more it also makes it possible for them to consume more. A man who is healthy and equipped with good tools and a member of a well-functioning economy is both a better competitor and a better customer than a man who is handicapped by malnutrition and disease and who has to work with poor tools or in badly equipped factories with little working capital. We in the United States and Canada need not worry about being cut out of markets by foreign competition after the war, if the world markets are large and prosperous. Our industries are amply able to take care of themselves in a world where there is a lively demand for all kinds of products. The things we have to guard against is getting back into the world situation of the thirties where even the most efficient business had a hard time showing a profit because the customers were not able to buy from anyone.

Quick rehabilitation of the economy of liberated areas, and, indeed, the very process of bringing that rehabilitation about, may be an important means of cushioning the shock of postwar economic readjustments in our own countries. We shall be faced with a great problem of reconversion, "economic demobilization." Even if we have a general boom after the war, as a result of the enormous pent-up demand for all kinds of goods and the release of purchasing power with which to buy them, people in over-expanded war industries will face serious problems of unemployment when military demands stop. Later, after the pent-up civilian demands of industrial and private consumers have spent themselves, we shall face the problem of preventing a general collapse of demand which would bring a general depression. We cannot avoid drastic readjustments, but there are ways of cushioning the shock. If we take a bold economic initiative now it should be possible as hostilities come to an end to dovetail part of the need for repair and rebuilding and new equipment in liberated areas into the need for employment in other areas. It should be possible to make the rehabilitation of war damages and also the further economic development of the world serve a double purpose—helping other people to help themselves, and helping to stabilize our own employment.

Some years before the outbreak of this war a widely quoted statement ran as follows: "Peace is indivisible." Many so-called "realistic" people pooh-poohed that idea at the time. They were wrong, and the manner in which this conflict hasspread over the whole globe has demonstrated rather conclusively that under modern conditions peace really is indivisible. After the war the peoples of this world will either go forward on the road to progress together or they" will go to economic ruin together. There are those who will dispute this statement, but they are quite as wrong as events have proved those people to be who denied that peace is indivisible.

These are some of the economic principles on which a practical program of relief and rehabilitation could be based. Such a program would be compounded of humanitarianism, military and political necessity, and enlightened economic self-interest. It would be directed toward rescuing people, by soup kitchens and handouts where necessary, but above all by helping them to become self-sustaining again, as quickly as possible. As Governor Lehman, Director of the Office of Foreign Relief and Rehabilitation Operations, recently said:

"In all situations, the technique of salvage and rehabilitation must constantly be oriented toward the objective of reconstituting the economy of the recipientnations. That is the way to put an end to relief. That is what we want. That is what the suffering peoples of the liberated areas will have richly earned.

"The rehabilitation that will restore peace and world stability will be the one that lays the foundation for prosperity. There can be no question but that the initial step must consist of providing emergency assistance on a relief basis. The next step will be to help the liberated people to help themselves, and thus restore the framework of the economies that were shattered by war. Once this framework of economy has been restored, the world can proceed into the long-range program of reconstruction, in which both the liberated peoples and great producer nations will be equally ready to restore sound commercial relationships. A Europe that is really prosperous will be a Europe where living and nutrition standards are constantly rising. Such a Europe would be the best kind of a customer for the products of the new world. This is equally true of Asia."