International Economic Cooperation and Small Nations


By JOSEF HANC, Director of the Czechoslovak Economic Service in U. S. A.

Delivered at the Convention of the General Federation of American Women's Clubs. Saint Louis. Mo,. April 25, 1944

Vital Speeches of the Day, Vol. X, pp. 462-465.

PROBABLY at no other time the problem of the future of small nations has attracted so much attention and concern as today. Many people believe that this is the era of the great powers. Indeed, the ease with which Germany invaded some seventeen smaller neighbors in three short years, clearly demonstrated the precarious position of military weak nations. Some planners of the postwar world go so far as to insist that the mere existence of smaller countries constitutes a temptation to aggression by stronger powers and that the best method to prevent future conquests

would be to do away with smaller countries altogether. This could be done, so they say, by absorbing them into larger units through persuasion if possible, or by coercion if necessary. These planners overlook that no country whether large or small is capable to defend itself single-handed against a better prepared enemy. They also ignore the fact, that international anarchy among the great and small powers alike, together with the accompanying absence of an adequate international security organization, is a much more real danger to peace.

It is gratifying to know that the United Nations do not favor any such futile course against the future existence of small countries. The recent agreement signed at Moscow, by Russia, England and America, provides for the re-establishment of a free and independent Austria. This agreement indicates that the restitution of small nations is to be one of the cornerstones of postwar European settlement. Incidentally, the Moscow agreement serves to revise the popular belief that there has been a steady trend of history towards ever larger political units. In reality there have been two steady and simultaneous trends in opposite directions. In the last hundred years we have seen the unification of several small states in Italy and in Germany. At the same time the dissolution of the Ottoman and the Hapsburg empires, the rise of the self-governing British Dominions, and quite recently the decentralization of the Soviet Union into its sixteen constituent republics offer evidence to the contrary process.

Thus both tendencies come into play at various epochs and in various areas. The result is that we have never had and we are not likely to have a world which would consist exclusively of only one category of nations. In fact, it is almost impossible to draw a line between a small and a large country. Most nations are neither too big nor too small. They feel quite comfortable as they are, occupying the position which national aspirations, history and political expediency assigned to them. After the war, the world will again consist of numerous states of unequal size, population, wealth and national psychologies. Each of these states will be imbued with a more or less keen sense of sovereignty. There will be a few great powers with large resources and with hundreds of millions of inhabitants but there will also be many more medium size and small nations with a population of only a few million. In addition, the war will have rekindled in the minds of the masses of all continents a burning desire for political and economic advancement and for social and cultural emancipation. Many more people than ever before will be claiming better opportunities.

Nations whether large or small are equally self-conscious and dynamic living social realities. They cannot be drawn or bent like metal. They cannot be experimented with in the same manner in which a chemical engineer experiments with plastics. Rivalries are likely to persist and the problem of coexistence will become more urgent and more complex. Only wishful thinkers can afford to indulge in the illusion that all of a sudden through some miraculous intervention, international clashes of interests will give way to a perfect harmony. Practical economic statesmanship must attend to the less popular but absolutely necessary job of removing the areas of friction and thus eliminate some of the incentives to war insofar as economic causes add fuel to war-like policies. This objective can only be achieved through a well-conceived and sustained international economic cooperation. Such cooperation can bring the various national and regional structures more in line with one another. Because of the differences of geography, climate, natural resources, temperaments and general economic development, the economic systems of different parts of this shrinking world cannot be made mechanically alike. Some of these differences are rooted in natural conditions, in the inequality of the distribution of main factors of production, such as raw materials, labor, capital or organizational tradition, while others have been accumulated in the course of long and unequal economic evolution. A continued effort must be undertaken toward alleviating these differences. Otherwise, the task of establishing an orderly international community government by law would become difficult if not impossible of achievement.

It is particularly in the field of world economy that the argument against the small nations gained some popularity. Little criticism has been raised, on the whole, against the older established smaller states in western Europe. The alleged evils of smallness have most frequently been discussed in connection with the states of Central and Southeastern Europe which regained their independence largely as the result of the First World War. There can be little doubt that any shift of territory from one sovereignty to another is bound to produce temporary economic dislocations, requiring a certain time to adjust to new conditions. Such dislocations occur both during the process of dissolution of a large territory into several smaller units and vice versa.

I wish I had time to produce here conclusive evidence showing that much of the criticism of the smaller nations is either exaggerated or unjustified. In the interwar period the agricultural and industrial production of these countries rose more substantially and more rapidly than in many larger countries. Their general standard of living reached a higher level than at any time before their liberation. Individual and national realization that one is free to manage one's own affairs according to one's best conscience has always been the most effective encouragement of maximum individual and national effort. Before the rise of Nazism, each one of these countries made considerable strides toward economic recovery and full rehabilitation.

From the point of view of international cooperation, justifiable grievances might be felt against any country which by a narrowly nationalistic policy hinders the flow of goods and services, or prevents its own people or other nations from developing its resources. Another objection advanced against the small countries is that they try to create new national industries upon uneconomical basis and then seek to protect them by high tariffs. Again, it would be unjust to single out the smaller countries as the principal culprits. In most cases the industrialization of these countries became a social and economic necessity for the purpose of relieving the population pressure, finding employment for surplus labor, exploiting local natural resources, especially agricultural, and raising the national income. Some of the new industries were uneconomical if measured by the standards of older industries in more advanced states, such as the United States. But it was a question of sink or swim. While raising the employment at home, the industrialization did not bring about any contraction of international trade. The blame for raising high tariffs must be laid squarely upon the shoulders of most countries. We all sinned against common sense. Some large states were even greater sinners than the small ones. On the whole, major economic disturbances resulted from the restrictive economic policies of the great producing and consuming nations rather than from smaller countries, having a limited share of the world economy. The case of Germany, seeking more Lebensraum by all sorts of discriminatory restrictions and finally by force, is too well known to require any comment. Otherwise no special obstacles were introduced by small nations which would make it impossible for the nationals of greater countries to place investments within their territories, or to trade with them on the basis of equal rights. In fact, world trade in general has not suffered from anymaladjustments which could be ascribed exclusively to the existence or to the policies of small countries. In many instances, the trading interests of larger countries have gained appreciably from the creation of these states.

On the other hand, the world economic crisis made deep inroads in the national economy of all nations and especially of the countries with more limited possibilities of internal expansion. For this reason small countries are vitally interested in the greatest possible measure of international economic cooperation. Eager to heal the wounds of the war and of the German occupation, they will do their utmost to once again put their house in order. However, the more international cooperation we are able and willing to provide for, the more expeditiously the work of recovery can be done.

Let me now refer briefly to some of the purposes of cooperation as seen from the point of view of small countries. The ultimate objective of economic cooperation is to create, by joint efforts, a world in which all productive power is employed fully and efficiently so that the people everywhere can obtain the highest degree of economic satisfaction. This is a highly remote ideal which can probably never be reached, at least not within our own lifetime. But we can approach it by pursuing a policy which will increase the purchasing power of the consuming masses so as to bring it closer to the consuming capacity of the purchasing public. The consuming capacity includes not only the things which the people actually buy but also the things they would buy if they could pay for them. This potential ability of people to use goods and services both known and those to be discovered represents the most elemental and dynamic force in world economy. It opens up almost unlimited possibilities of expansion and progress. However, unless the increasing purchasing power is spread more evenly among the various areas and nations, the gap between the unredeemed and the effective consuming capacity will be kept wide open, with all disturbing consequences to follow. Regions of disproportionate standards of living can no longer coexist side by side without provoking great international crises. The crux of the problem is not how to create equality in poverty but how to bring the prospect of social rise within the tangible reach of every man and nation willing to work for it. Conscious international cooperation must be brought into play as a corrective of the inequalities created by nature or produced by the unequal economic development in the past. Cooperation which would multiply the profound and harmful discrepancies, originating from natural or established conditions, would be a misnomer.

Contrary to popular belief, nations will not need to start cooperating from nothing. Ever since the first shipment of goods crossed the international boundary many centuries ago, there has been a steady, if slow, progress toward a more comprehensive realization of economic interdependence. Within our own generation the inevitability of cooperation entered into the consciousness of the growing numbers of people in every walk of life. The present war has brought about such a degree of economic collaboration among the various combined agencies of the United Nations that it seems almost unthinkable that we could ever allow haphazard or willful economic maladventures to split once again whatever unity of action we have won. One wishes to hope that a measure of international planning is going to stay with us, and that it will be a planning by common sense through voluntary cooperation by nations standing on the solid ground of realities.

By what practical methods can a closer economic collaboration materialize? The question has been somewhat obscured by the introduction of ideological issues. Essentially economic cooperation is primarily a problem of specific functions to perform and less a problem of ideologies. International planning as referred to is perfectly compatible with the existing different systems of the United Nations' governments, but not with the wholly non-cooperative Nazi fascism and Japanese exclusive so-called "co-prosperity" spheres. In countries with a keen sense of private enterprise national participation in international agreements will be formulated differently from countries with a more or less pronounced tradition of state supported economy. However, the differences of the economic mind should not be permitted to interfere with international economic action destined to result in common benefit. Some of the problems of cooperation, as for instance the reconstruction of whole countries, are of such magnitude that no single group within one nation could possibly tackle them singlehanded. Such problems will have to be attended to by the combined ingenuity of national governments and private interests. In specific fields government assistance will become unavoidable and from the point of view of private interests sometimes even desirable.

Coming to specific fields which call for international action the most immediate and urgent is the assistance in the relief and rehabilitation of the liberated countries after the cessation of hostilities. The United Nations Relief and Rehabilitation Administration has already been set up to do this emergency job. The work of this agency will be judged by the speed with which it will be able to procure sufficient supplies of goods and services and to distribute them fairly and according to need among the millions of suffering peoples of Europe and Asia. When speaking about such international agencies, one must never lose sight of the truism that no matter how well their administration is set up, their ultimate success depends upon the support given them by the constituent national governments. With full backing by its member states, the League of Nations would have been able to produce miracles. Without that support it became a sorrowful failure, except for its economic activities.

The United Nations Relief and Rehabilitation Administration will discontinue its operations once it has helped the people to help themselves. The United Nations Organization on Food and Agriculture, to be formally created this year, is the second international agency to emerge from the war. It is going to be a permanent organization binding the member states to raise the level of nutrition and standards of living of their own people, to improve the level of agricultural production and distribution, and to cooperate with other nations for the achievement of these ends. It has been ascertained that two thirds of the people of the world have never had enough to eat and that two thirds do not have enough of the right kinds of food for health and a decent life. This new organization makes it obligatory for each of its member nations to contribute toward combating this evil by securing freedom from want especially within its own national boundaries. This is a voluntarily accepted international duty and each member country undertakes to give account to world opinion on its stewardship.

Next on the program of international action come the establishment of an international stabilization fund to assist the nations in stabilizing their national currencies, and the creation of an international investment bank. This bank would facilitate the extension to its member states of long-term credits for reconstruction purposes. Both steps involve many technical details and are still the subject of preliminary discussions with foreign governments. I do not propose to go into them here. I would only like to remark that we look forward to seeing both projects realized in one form or another. Without sound monetary relationships among nations and without a healthy credit organization effective international cooperation is hardly thinkable.

There are other cooperative agencies which we would like to see established in the postwar world. One of them shouldlay down the principles and practices for the promotion of international trade. Nations of the world should freely subscribe to an international trade authority for the gradual reduction of trade barriers and the abandonment of discriminatory practices of all kinds. Another type of agency which might substitute a degree of order for prewar anarchy are various international commodity agreements, such as the international sugar or wheat conventions. Functional agencies of similar type might guarantee a steady flow of goods from the producing to the consuming countries at fair prices to the producer and consumer and thus obviate the anomalous situation in which the producing nations find their resources frustrated while the consuming nations are facing acute want. This is not the place to enter into the technicalities of these arrangements. It should be mentioned, however, that in order to be socially responsible any such arrangement must not favor the high-cost producer to the detriment of the low-cost producer and the consumer. At any rate the consumer and labor should be fully represented in such agreements alongside the governments and private producers. Moreover, the philosophy behind all international agencies of cooperation should be that of expanding markets and not of restricted production. Finally, the primary precondition of economic cooperation is the creation of stable political conditions. While nations prepare for war or for defense against imminent aggression, economic activities must inevitably become uneconomical. A functioning system of collective or joint security, based on clear understanding of the leading great powers, would remove fear among peoples, stop the incentives to uneconomical production and increase the material well-being of nations.

I have not yet said a word about my own country. Even though a smaller country, Czechoslovakia has tried to practice public and private virtues as fully as it has been done in larger nations living under less exposed conditions and surrounded by more accommodating neighbors. Let me, therefore, conclude with the assurance that as an industrial nation keenly interested in the expansion of its economy, Czechoslovakia will support every constructive initiative for the closest possible integration of world economy. We have always pursued a cooperative policy, both of necessity and of preference.