Carroll Quigley - Tragedy and Hope - A History of the World in Our Time

In Britain and in the United States (with Canada) fiscal policies were much more conservative, with demand somewhat dampened down by efforts to balance budgets, to control inflation, and to influence both adverse balances of international payments and the flows of domestic credit by conservative financial policies (notably, high interest rates). Moreover, in both countries, there was a good deal of unproductive expenditure either in misjudged enterprises and inefficient production or in defense and other nonproductive areas. As a consequence, not only have growth rates been low in the English-speaking countries but unemployment rates have been high. In 1960, for example, the United States unemployment rate was 5.4 percent and the Canadian 6.9 percent, while that of France was 1.3 percent and of West Germany only 0.9 percent.

This sharp contrast between the prosperity of the EEC and the languishing economy of Britain eventually brought the latter to a recognition of the advantages of membership in the European system. But the decision was too late, based on wrong motives, and was eventually nullified by the imperious De Gaulle, who, like an elephant, never forgets an injury. Governments in London paid lip service to European unity and to British cooperation with it, but whenever an opportunity offered to take a real step toward European union, Britain balked. In the immediate postwar period, this reluctance was attributed to the rather provincial and doctrinaire Socialist outlook of the British Labour Party, but the situation did not improve when Winston Churchill returned to office in 1951. The general British outlook was that British participation in a united Europe was precluded by Britain’s rather intangible and sentimental commitments to the Commonwealth and to the United States (that is, to the “English-speaking idea”) and that a unification of Europe without Britain would be a threat to British markets on the Continent. This decision by Britain was copied by the Scandinavian and Baltic countries (Denmark and Finland), whose trade alliance with England went back to the creation of the “Sterling Bloc” in 1932. In a similar way Britain refused to cooperate in the ECSC or EDC.

This reluctance in London was a great tragedy, excluding Britain from the European growth toward economic prosperity, making it difficult or impossible for the European effort toward integration to make decisions that would have hastened the whole integrative process, and leaving Britain emphasizing Commonwealth and American relationships that were less and less prepared to give due weight to British ideas and power. In a sense Britain was making commitments to areas that were not prepared to make reciprocal commitments to Britain and would, if the occasion arose, leave Britain out on a limb. This, indeed, is exactly what happened in October 1956, when the United States threatened to throw its power and prestige against Britain’s efforts in the Suez fiasco. And throughout the period, the chief Commonwealth countries, notably South Africa and Canada, made it perfectly clear that they were not willing to make any notable sacrifices for Britain’s prosperity, and were reluctant to follow London’s lead in many of the world’s political issues of the period.

In fact, even with Commonwealth preference and all the intangibles that link the Commonwealth together, Britain’s trade and financial links with the Commonwealth are decreasing in importance, and the links of both with outsiders are increasing. For example, Nigeria and Ghana doubled their exports to EEC over the 1955-1959 period, while their exports to Britain decreased by 15 percent. On the whole, in recent years, the countries associated with the sterling area have found that association one of decreasing satisfaction. This is reflected in matters other than market conditions. Sterling itself has been subject to periodic crises since the war ended. The reason is obvious, for the United Kingdom tries to handle $12.3 billion in imports and $10.9 billion in floating short-term debts on a base of reserves of no more than $3 billion (in 1961), while, at the same time, the EEC, with $16 billion in reserves, had only $2 billion in short-term debts and handled $23.2 billion in imports. As a result of all this, London is decreasingly attractive as a source of investment capital, while the EEC becomes increasingly prominent in that activity. And as a source of development funds for backward areas, the United Kingdom has ceased to be of major significance. In 1960, for example, the United States provided $3,781 million and EEC provided $2,626 million, compared to the United Kingdom’s $857 million and the rest of the OECD countries’ $469 million. In fact Germany’s $616 million was almost comparable to Britain’s $857 million, with both far less than France’s $1,287 million. Thus the Six provide about a third of the world’s financial assistance to underdeveloped countries, while Britain provides only one-ninth.

Considerations such as these help to indicate that the Commonwealth attachment to the United Kingdom is based rather on the intangibles of traditions and old patterns than on the solid advantages of today’s economic and financial situation. The merging of the United Kingdom into the EEC would still give a fair jolt to economic life both in England and in the Commonwealth, but the slack would be taken up very rapidly. In fact, the rising demand for goods of higher quality in Japan will probably draw much of the export trade of New Zealand and Australia in butter, meat, or even wool from their older English-speaking markets even without Britain joining the Common Market.

The reluctance of the English leadership to face these changing conditions, like their refusal to face the causes of Britain’s economic lassitude, contributed much to confuse the situation that Europe, and especially EEC, reached by the mid-1960’s. In December 1956, in a vain effort to sidetrack European integration, British Foreign Secretary Selwyn Lloyd produced a “Grand Design,” a pompous name for an undigested scheme to dump an assortment of European consultative bodies into the Common Assembly of the Coal and Steel Community. This idea was generally recognized as sabotage, and sank without a ripple.

The next British effort was for a Free Trade Area; this was a scheme to permit British goods to enter the Common Market without Britain joining it. This was necessary, in British eyes, because the joint external tariff of the ECC was to be higher than the tariffs of four of the Six had previously been, and would reduce British sales in those countries. The Free Trade Area plan was for an all-Europe free-trade zone embracing the Six along with all those who did not wish to join the EEC. That means that the Free Trade Area would abolish mutual trade barriers but would not establish a common external tariff. This British suggestion, made in November 1956, was regarded within EEC as another effort at sabotage, or, at best, a typical British attempt to have the advantages of both worlds by combining the abolition of European tariffs on British goods with continued British preference for Commonwealth foodstuffs. The lower prices on the latter (compared to food prices within the Six) would permit Britain to have lower wage costs and thus lower industrial prices to give British industry a competitive advantage in the unprotected Common Market.

When France, with West German support, broke off the Free Trade Area negotiations in December 1958, the British were left out of the EEC which began to function in the ruins of the Free Trade Area. Britain reacted by forming the European Free Trade Association (EFTA) of Britain, Sweden, Norway, Denmark, Austria, Switzerland, Portugal, and (later) Finland.

This EFTA provided for mutual tariff reductions of member states by steps to complete abolition by 1970, but the process added only 38 million persons to the existing British market of 52 million, and promised small prospect of any substantial increase in sales because the tariffs of most of these countries were already low on British goods. This could not compare with the EEC market of 170 million customers, but British public opinion, even in the 1960’s, could not bring itself to accept the reorientation of outlook required to view itself as a European state necessary to make it possible to accept the economic integration that could make this great market available to British industry. For this, the semislump of 1960-1961 was needed, and only in July 1961 did the British government announce its readiness to start the complex negotiations needed for its joining the Common Market. By that late date, De Gaulle was well established in power in France, and was prepared to impose his own peculiar point of view on the negotiations.