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L'américanisation en Europe au xxe siècle : économie, culture, politique. Volume 1

 | 
Isabelle Lescent-Giles
, 
Dominique Barjot
, 
Marc de Ferrière

Deuxième partie. Mythes et réalités du projet américain

American hegemony and the adoption of national income statistics in Western Europe after 1945

Till Geiger

Résumé

À partir des analyses de Ch.S. Maier, ce chapitre montre que le lien entre la mobilisation économique de guerre et l’étude du revenu national est la clef pour comprendre pourquoi les responsables politiques américains promeuvent l’adoption de la comptabilité nationale dans l’immédiat après-guerre. En suivant le processus d’adoption des statistiques du revenu national, cette étude montre qu’elles sont d’une utilité limitée pour la prise de décisions en politique économique du fait de la nature rudimentaire de la comptabilité nationale. Par contre, sa réelle importance repose sur le fait qu’elle fournit une justification à la politique économique américaine menée en Europe occidentale. Cette technologie économique crée un contexte favorable à la promotion de certaines idées économiques sur le développement économique contrôlé par l’état. Cela dit, l’adoption de la comptabilité nationale n’implique pas nécessairement que les gouvernements suivent une telle politique. Ce chapitre montre que la comptabilité nationale fait figure de symbole dans l’interprétation de l’histoire économique récente par les responsables économiques nationaux. L’analyse du revenu national est un instrument politique, mais aussi et avant tout un instrument scientifique utilisé par les organisations internationales pour mettre en oeuvre leur poliltique.

Texte intégral

  • 1 Ch.S. Maier, “Finance and Defense: Implications of Military Integration, 1950-1952”, in F.H. Heller(...)
  • 2 For a detailed examination of Maier’s analysis of the NATO burdensharing debate during the initial (...)

1In his studies of the nature of the American empire, Charles Maier argues that national income accounting became a vital cornerstone of American hegemony in Europe.1 This particular claim arises from his analysis of burdensharing debate between the United States and its NATO allies during the initial phases of the Korean War. In this context, he suggests that national income analysis provided a policy tool (or language) for resolving the conflicts within the Alliance over the economic impact of western rearmament. A close examination of this episode shows that the available national income statistics proved insufficient to permit reliable comparisons between the economic impact of national defence efforts on individual member States. In the end, the political compromise over burdensharing drew on a comparison of the proportion of GNP spend on defence by member States to justify to the American Congress the prevailing distribution of the defence burden and the Truman administration’s demands for additional military aid for western Europe.2 While Maier’s analysis does not necessarily withstand critical examination, it highlights the political aspects of this economic technology drawing attention to a cultural transfer of a particular kind — the application of a certain economic model to national security policy and thereby international multilateral policy coordination. In this sense, his analysis shows how national income analysis served to extend American interests in western Europe.

  • 3 On the dual function of some economic ideas as policy and scientific tool, see M.S. Morgan, “The Fo (...)

2Taking its lead from Maier’s analysis, this paper will show that the link between economic mobilisation for war and national income analysis is the key to understanding why American policy-makers promoted the adoption of national income statistics in the immediate post-war period. By tracing the process of adoption of national income statistics, this analysis will show that national income analysis proved of limited use in economic policy-making due to the rudimentary nature of national accounts statistics in this period. Instead, the real importance of national income analysis lay in providing a justification for American foreign economic policy towards western Europe. As part of this process, this economic technology provided a context, which permitted the promotion of certain economic ideas about government managed economic development. At the same time, the adoption of national income accounting did not necessarily mean that governments would pursue such policies. In this context, this paper will stress the symbolic significance of national income account occupied in some interpretation of recent economic history by some national economic policy-making communities. Besides its potential role as policy tool, national income analysis was primarily perceived as a scientific tool assisting its use within international organisations.3

  • 4 A.S. Milward, “The Springs of Integration”, in P. Gowan, P. Anderson (ed.), The Question of Europe,(...)
  • 5 For the period of this paper, the theoretical and methodological aspects of this process are extens (...)

3To restate my theme, this paper will analyse the political process, which led to the adoption of a standardised national accounts System to co-ordinate multilateral co-operation among western European countries in the immediate post-war period. In this sense, this paper will try to provide a tentative answer to Alan Milward’s call for historians to examine the impact of national income statistics on economic reconstruction and the process of European integration.4 This analysis will show that national income statistics contributed significantly to these political economic processes in providing a new policy tool (or cultural context) enabling economic reform and multilateral policy co-ordination in western Europe. Therefore, this paper will only in passing discuss the development of national accounts in various countries.5

  • 6 At theoretical level, the reason for the political nature of national income analysis is the fact t (...)
  • 7 Clark, Conditions, p. 30-1.
  • 8 See the discussion below and references in footnote 27.

4Given the focus of this paper, it worth emphasising the political element underlying national accounting. Despite their wide and unproblematic use as measurements of national wealth and living standard, the concepts of national accounting such as GNP or GDP are in themselves deeply political.6 For example, Soviet definition of the Net Material Product excluded all “nonproductive” expenditure such as health care or education normally included in western national income estimates for ideological reasons. Similarly, German statisticians reclassified military expenditure as investment after the Nazi seizure of power in contrast to the convention in other countries, which treat such expenditure in peacetime as public consumption7. Despite their general acceptance today, the agreed international convention of the OECD or UN System of national accounts (UNSNA) arguably reflected the values of a key epistemic community in most western countries at the time. The contemporary disputes over the treatment of military expenditure show that national income aggregates were not “value-free” scientific concepts, but reflected different views of the role of government within the economy.8 In this contest, the advocates of national income analysis as a policy tool for increased government intervention in the economy prevailed over those economists, who regarded it as primarily a scientific tool and therefore wanted to exclude certain types of government expenditure.

  • 9 Wg. Vincenti, “Engineering Theory in the Making: Aerodynamic Calculations “Breaks the Sound Barrier (...)

5Moreover, it is noteworthy that the theoretical advances in national accounting methodology were not confined to one country. Indeed, the technological advance as far the methodology occurred simultaneously in several countries foremost Britain, the United States, Norway and the Netherlands. However, economics resembles technology in the sense that “once people become motivated in a common direction, simultaneous independent invention of both theory and devices is not exceptional”. As Walter Vincenti has suggested for the engineering profession, the reason for this is that applied economists “like engineers, cannot avoid the universality of the physical world, or indeed the existence of the real world generally”.9 At the end of the 1930s, most economists searched for policy solutions to overcome the economic crisis of the inter-war period-except those who believed to found them in the methods of State socialist or fascist economic planning.

  • 10 G.J. Ikenberry, “A world economy restored: expert consensus and the Anglo-American postwar settleme (...)

6Indeed, the spread of this economic technology owed a lot to the reforming Zeitgeist and the role of the United States in the new international economic order. In the adoption of an international compatible System of national accounts, economists formed an epistemic community in order to promote the creation of a new international economic System as a precondition for stable economic development. In an influential article published in 1992, John Ikenberry showed, how the British representative, John Maynard Keynes, and his American counterpart, Dexter White, persuaded their respective governments that the liberal regime, they conceived at the Bretton Wood Conference, provided the best solution to this shared problem. As a consequence, this epistemic community consisting of economists and financial experts was able to overcome domestic opposition to the new international economic order.10 This episode illustrates how a small group of experts (or an epistemic community) can embed their own worldview through creating new institutional structures. The widespread adoption of national income statistics offered economists a similar conduit to advance their ideas about the shape of the post-war world.

7As Keynes and other economists were aware, the enduring success of the new international economic order depended on a willingness by the signatories of the Bretton Woods agreements to co-ordinate their domestic economic policies as well as share the capital costs for the newly created institutional structures. Given the experience of the inter-war period, British economists insisted that the new arrangements contained provisions, which would permit national governments to pursue an expansionary economic policy in case of mass unemployment even in case of a balance of payments deficit.

  • 11 R. Stone, “National Income in the United Kingdom and the United States of America”, Review of Econo (...)

8Therefore, international economic co-operation required a degree of policy coordination on a world scale. Sharing the cost of the new international institutions presented a similar problem for economic policy-makers. To overcome these problems, the same epistemic community advanced national income accounting as a solution for these problems.11

  • 12 M. Beaud, G. Dostaler, Economic Thought since Keynes: A History and Dictionary of Major Economists,(...)

9The extension of State activity, however, necessitated a similar extension of administrative capability of western European bureaucracies. If the State assumed responsibility for economy, governments needed to have more information about the economic structure and development. Arguably, most governments lacked adequate statistical information about the economy to contemplate Keynesian macro-economic management before the Second World War. During the inter-war period, the severe economic problems triggered renewed interest among economists and statisticians in improving the available economic information. To a large extent, these efforts concentrated on the analysis of the business cycle and economic fluctuations, which contributed to the development of econometrics.12

  • 13 Clark, Conditions.
  • 14 J.M. Keynes, “How to Pay for the War”, in Essays in Persuasion, ed. Royal Economic Society, Basings (...)

10At the same time, there was a marked revival of interest in national income accounting. Due to the limitations of space, it is not possible to review these developments in detail. Within this growing body of work, three projects stand out as important innovative studies foreshadowing post-war applications of national accounting. Reflecting different strands of national income analysis, these studies reflected the State of the art at the beginning of the Second World War. These three projects are Colin Clark’s book The Conditions of Economic Progress13, John Maynard Keynes’pamphlet How to Pay for the War14 both originally published in 1940, and the American Victory Program first conceived in the same year.

  • 15 Clark, Conditions, p. 29-58.
  • 16 M. Abramovitz, “Economics of Growth”, in Thinking About Growth and Other Essays On Economic Growth (...)
  • 17 Clark, Conditions, p. 16.

11Colin Clark’s The Conditions of Economic Progress build on the attempts by some economists, particularly Simon Kuznets and his teams of researchers, to improve the understanding of economic development over time using national income statistics. Clark’s study pioneered the international comparisons of national income estimates attempting insure comparability by converting available national estimates into International Units based on the average purchasing power of one dollar in the period 1925-1934.15 The remainder of the book analysed the pattern of economic development and its effects on the pattern of employment and labour productivity in the three economic sectors as well as on consumption and investment patterns. As Moses Abramovitz acknowledged in 1952, this aspect of his work made an invaluable contribution to the study of economic growth.16 While analysing the problem of underemployment of economic capacity, Clark emphasised that given the uneven industrial world “the most important problem remains the problem of increasing productive capacity.” More remarkably, he continued to argue that “in comparison with this, the under-utilisation of productive capacity is a local and temporary problem”.17 In this sense, Clark, as other analysts of the period, embraced a distinctly expansionist stance believing that the economic stagnation of the inter-war period could be over-come with appropriate economic policies encouraging economic growth.

  • 18 Keynes, “How to pay”, op. cit.
  • 19 R. Stone, “The Use and Development of National Income and Expenditure Estimates”, in D.N. Chester ( (...)
  • 20 J.E Meade, R.E. Stone, “The construction of tables of national income, expenditure, savings and inv (...)
  • 21 R. Stone 1993, 14.

12At the same time, the Second World War accelerated the development of national income statistics as economic policy tool. In the early stages of the war, Keynes used national income analysis to propose a non-inflationary policy of war finance in a series of articles in the Times, which reissued as pamphlet entitled How to Pay for the War.18 His argument was based on a very crude estimate of British national income prepared by Eugen Rotblatt. Having become the government’s chief economic adviser, Keynes encouraged James Meade and Richard Stone to develop his original analysis further. Based on their pioneering work, the British government used national income analysis to manage its wartime finances and to a lesser extent the war economy. These original estimates used available statistical information to estimate national income and manage economic demand.19 Taking their lead from Keynes’articles, Meade and Stone revolutionised national income analysis by drawing up the double entry accounts System which still forms the basis of national income analysis today.20 Through using a double entry accounting framework, Meade and Stone argued that missing aggregates could be estimated from available statistics. To calculate the national product, they relied on different methods to estimate the gross national product (GNP) or the sum of all (traded) goods and services produced by the national economy. The proposed System of national income accounts provided detailed consistent information about the structure of expenditure, production and income distribution. At the same time, national income analysis provided a theoretical framework for the interpretation of these new statistics. The pioneers argued that national income statistics would provide vital information that would enable economic policy-makers to manage the economy, to plan investment and to prevent unemployment. Moreover, national income statistics allowed for the first time meaningful international comparisons of economic performance and development.21

  • 22 R.R. Nathan, “GNP and military mobilization”, Journal of Evolutionary Economics 4, 1994, p. 4-9.
  • 23 S. Broadberry, P. Howlett, “The United Kingdom: ‘Victory at all costs’”, in M. Harrison (ed.), The (...)
  • 24 R.R. Nathan, “GNP and military mobilization”, p. 10-6.; C.S. Carson, “The History of the United Sta (...)

13On the other side of the Atlantic, the American government started planning the expansion of military production for the beleaguered democracies in Europe. This effort centred first on the Research and Statistics Division of the National Defense Advisory Commission directed by Stacy May and his deputy Robert Nathan. Nathan had joined the National Defense Advisory Commission from the Department of Commerce where he had been the chief of the National Income Section. Since American military planners could not supply Nathan with estimates for their likely requirement in the case of war, he used national income analysis to determine realistic output targets and plan necessary inputs. Drawing on existing national income estimates, the war production planners calculated the “full employment” national product as the key variable of the war production plans. Nathan concluded that “the war effort could, at maximum, absorb about 40-45 of GNP, which approximated the British experience”22 in 1940.23 Based on their forecasts, Nathan and his economic planners pressed for the expansion of American Steel production capacity to meet the likely demands of military production despite the fierce opposition of the steel industry. After America’s entry in the war, the Supply, Priorities, and Allocation Board finally compiled the military requirements needed by the war departments in order to fight the war in form of the Victory Program. Having received the military requirements, Nathan chairing the Planning Committee of the War Production Board used national income analysis to assess the feasibility of the Victory Program confirming that the production targets could be met by spring 1944. At the same time, War Production Board asked Simon Ku2nets to assess the implications of the Victory Program for the whole economy. On the one hand, he assisted Nathan in showing that more extensive co-ordination of military production was needed to maximise output. On the other hand, his study showed that there was a serious shortfall in meeting minimal levels of consumer expenditure. In this respect, national income analysis proved valuable in assisting the US Treasury to combat the resulting inflationary gap.24

  • 25 Carson 1975:177.

14As a result of its widespread use during wartime mobilisation, national income estimates achieved new recognition among economic policy-makers mainly in Britain and the United States. In her history of American national income estimates, Carol Carson concludes, “by the end of the war, income and product estimates had emerged as an essential tool in the formation of economic policy”.25

  • 26 P. Studenski, Income of Nations, p. 153-4. These debates centred on the question of whether or not (...)
  • 27 I. Ohlson, On National Accounting, Stockholm, Konjunkturinstitutet, 1953, p. 61-3.

15The wartime application of national income estimates contributed to their wider acceptance as an economic policy tool. However, the wartime exigencies meant that government statisticians won the debate over the appropriate treatment of government expenditure, which led to shift in emphasis from the net to gross product figures.26 Just like the American GNP estimates, the Meade — Stone approach avoided the problem of the social contribution or value of expenditure. Stone’s System of national accounts balanced relative empirical simplicity with the needs of economic policy-makers.27 In this sense, the construction of the Meade-Stone System overcame the limitations of existing statistics and provided a workable basis for wartime planning of the economy. Since the war had led to a suspension of academic research on the topic, the official statistics came to crowd out the alternative national income estimates. On balance the relative success of wartime economic planning established national income accounting as an instrument of economic policy-making in Britain and the United States. Wartime experience largely explains the choice for this form of national income analysis in Britain and the United States, but it does not explain the almost universal adoption of Anglo-American national income concepts in the immediate post-war period.

  • 28 R. Stone et al., Measurement of National Income and the Construction of Social Accounts: Report of (...)
  • 29 C.S. Carson, “The History of the United States National Income and Product Accounts: The Developmen (...)
  • 30 R. Stone et al., Measurement of National Income and the Construction of Social Accounts: Report of (...)
  • 31 T.C. Schelling, International Cost-Sharing Arrangements, Essays in International Finance no 24, Pri (...)

16At the end of the Second World War, the pioneers of national income accounting found a receptive audience for their ideas. British and American advances in national income statistics occurred contemporaneously with similar studies in a number of countries (Australia, Canada, Ireland, the Netherlands, Norway). As the pioneers acknowledged, their ideas represented “no radical innovation, but a logical development of recent investigations in the field of national income”.28 In this context, the hegemony of the Anglo-American ideas about national income accounting resulted from a tripartite agreement between British, American and Canadian statisticians in 1943. During the negotiations of this agreement, Richard Stone convinced his American counter-parts of the double-entry method underlying the British System.29 The wartime agreement between the British and Americans paved the way for the adoption of the Meade-Stone approach as the basis for the international standardisation of national accounts under the auspices of the United Nations. A working party of statistical experts mainly from the pioneering countries argued that comparable national income statistics would assist the process of economic reconstruction and the coordination of the new international economic System.30 Beside the necessity of international economic policy co-ordination, the impetus to standardise national income measurement arose from the creation of new international organisations in order to calculate the contributions to the United Nations and its relief effort taking into account a country’s ability to pay.31 Since Richard Stone drafted the technical appendix of working party’s report, it hardly surprising that the emerging United Nations System of National Accounts closely resembled the Anglo-Saxon national accounting conventions.

  • 32 T. Barna, “International Comparisons of National Accounts in Economic Analysis”, Income and Wealth (...)

17Despite the considerable problems of exchange rates and different quality of national estimates, the United Nations Economic Commission for Europe started comparing European national incomes in the late 1940s. However, these comparisons suffered from serious deficiencies due to these difficulties. These initial studies showed that the straight conversion of national income estimates tended to deflate the level of capital formation in relation to national income for poorer countries.32 Arguably, the United Nations report laid the basis for a universal System of national income accounting, but the shortcomings of contemporary statistics ruled out the use of these accounts for the co-ordination of international economic policy in the immediate post-war period.

  • 33 R. Frisch, “From National Accounts to Macro-Economic Decision Models”, Income and Wealth 4 1954, p. (...)
  • 34 A. Cairncross, “Economists in Wartime”, Contemporary European History 4 1994, p. 35-6.

18Despite these difficulties, many western European governments adopted national income statistics for the purpose of domestic economic policy-making in order to address the urgent problem of economic reconstruction. While not all western European countries routinely collected national income statistics, most States possessed the institutional (or social) capability to use national income accounting for economic policy-making. Given the constraints of time, I can only briefly summarise the most important features of the development of national income statistics for the purpose of economic policy-making in Britain, France and the Netherlands. In all three countries, economic policy-makers employed national income statistics to pursue rather different economic objectives. While British economic advisers used national income accounts to stabilise the economy, French and Dutch economic planners placed the emphasis on medium-term economic expansion. To some extent, different economic ideas about economic development seemed to influence the use of national income statistics in the policy-making process. While British and Dutch economic policy-makers followed domestic economic thinking about economic policy, Monnet and his team drew their inspiration from American wartime planning with its emphasis on developing the full production potential of the economy. This analysis confirms that national income analysis mainly provides the economic policy-makers with vital statistical information. Therefore, economic policy-makers, statisticians and economic theorist needed to enter in a constant dialogue to insure the relevance of the statistical information for economic policy-making.33 At First sight, the Dutch and French economic planning office seemed provide a more conducive environment for such a dialogue by initially combining the two functions of preparing statistics as well as co-ordinating the process of economic planning. In Britain, the link between theoretical elaboration, statistical data collection and economic policy-making became less tight after the end of the Second World War, because many economists left government service and returned to academia.34 As a consequence, the further development of national income statistics in Britain became slightly obsessed with refining the concepts for national income analysis rather than its potential contribution to economic policy-making.

19This cursory examination of different national experiences emphasises the importance of a receptive environment for the adoption of national income accounting in western Europe. Arguably, the advances in national income accounting were unlikely to take hold in the domestic economic policy-making community without an openness to new economic ideas, the availability of statistical information, and a developed government bureaucracy. In the Netherlands and France, a small group of experts pushed through the innovation in economic policy-making exploiting the frailty of post-war governments and bureaucracies. To some extent, this process was stifled in Britain by the brain drain of economists from government back to academia after the war. In other countries such as Ireland, government officials were closed to the new ideas effectively ruling out such policy innovation. The groups of innovating European experts soon receive support from like-minded Marshall Plan administrators arriving on their shores in the late 1940s. Indeed, the Marshall Plan played an important role in maintaining the momentum for the adoption of national income analysis in western Europe.

  • 35 A.O. Hirschman, “How the Keynesian revolution was exported form the United States, and other commen (...)
  • 36 M.J. Hogan, The Marshall Plan: America, Britain, and the reconstruction of Western Europe, Cambridg (...)
  • 37 H.B. Price, The Marshall Plan and its Meaning, Ithaca, Cornell University Press, 1955, p. 127-8.
  • 38 Interview with Donald MacDougall by T. Geiger in London, 9 July 1998.

20Arguably, the Marshall Plan exported Keynesianism from the United States to continental Europe. As Albert Hirschman has pointed out, many ECA officials were Keynesians motivated by the desire to help the war-torn countries of western Europe.35 For example, the Deputy Administrator of the ECA, Richard Bissell, firmly believed in the virtues of strategically planning the expansion of the European economy.36 After the early disagreements over aid distribution and exaggerated estimates of national dollar gaps, Bissell argued for using national income estimates to allocate Marshall aid rather than screening elaborate lists of commodities.37 Through the national income analysis, ECA officials hoped to acquire more precise information about the progress of national recovery programmes. However, a number of problems prevented the immediate use of national income statistics for the purposes of aid allocation. Firstly, national income estimates did nor exist for all OEEC member countries. Secondly, in order to be useful, the national income estimates would have to be prepared according an agreed standard format and be comparable. Therefore, ECA official regarded the standardisation of western European national income accounts as a priority. However, many European officials did not share the missionary zeal of American ECA officials. In an interview, the first head of OEEC’s Economics Directorate, Donald McDougall, recounted his annoyance being lectured to by Nancy and Richard Ruggles on the virtues of national income analysis. From his perspective, the standardisation of national accounts distracted rather than contributed to the urgent problem of western European reconstruction.38

  • 39 European University Institute, Historical Archives of the European Communities [hereafter: EUI HAEC (...)

21Nevertheless, the OEEC executive accede to the expressed American wish and proposed the creation of a National Accounts Research Unit to the OEEC Council in April 1949. The proposal of the executive suggested that this unit be set up under the direction of Richard Stone at the University of Cambridge. In the council, the Deputy Secretary General, Harry Lintott, spoke in support of the proposal voicing some concerns about the financial arrangements for national experts seconded to the Unit. The Belgian and Dutch representatives argued that the proposal should be regarded as an interim solution, because locating the unit away from the OEEC headquarters threatened to disperse the functions of the organisation. In reply, the Swedish delegate pressed for an early Council decision, because in this exceptional case setting the unit up in Cambridge “would save money and time”. After this exchange of views, the Council approved the Executive’s proposal.39

  • 40 R. Stone, K. Hansen, “Inter-Country Comparisons of the National Accounts and the Work of the Nation (...)
  • 41 Organisation for European Economic Co-Operation, A Simplified System of National Accounts, 1958 ed. (...)

22After its creation, the OEEC Research Unit simultaneously pursued two main objectives: firstly, the unit surveyed the existing national income statistics of the various member countries, and secondly, to develop standardised System of national accounts for the OEEC countries. To achieve the first objective, the unit began publishing a series of National Account Studies beginning in 1951. These studies described methods used by national authorities to estimate the national income. The first study on Swiss national income statistics revealed that the statistics provide next to no information about the components of national expenditure. The second study on Danish estimates relied to some extent on residuals to calculate two major components of national income (income distributed from enterprises to private households and savings of households).40 At the same time, the unit drew a list of essential and desirable elements for a standardised System of national accounts, which was published in 1951.41 At the same time, the unit assisted the OEEC Secretariat in the preparation of the third report to the ECA on the progress of European recovery.

  • 42 Organisation for European Economic Co-Operation, Statistics of National Product and Expenditure, 19 (...)
  • 43 M. Gilbert, I.B. Kravis, An International Comparison of National Products and the Purchasing Power (...)

23Despite significant progress, the problems highlighted by the country studies prevented the early publication of comparative national income statistics. Indeed, the OEEC published the first comparative national income statistics for the first time in 1957.42 In the meantime, the OEEC established its own department for national accounts under the directorship of Milton Gilbert, one of leading American experts in the field of national income accounting. The department continued to basic research on international comparisons of national income statistics and published several important studies on several important studies on purchase power comparisons and productivity differences.43

  • 44 R. Ruggles, National Income Accounting and its Relation to Economic Policy; Paris, Economic Coopera (...)
  • 45 Mutual Security Agency. Special Mission to Italy, The Structure and Crowth of the Italian Economy; (...)
  • 46 Price, The Marshall Plan and its Meaning, p. 311-2 (quote: 312).

24However, the American influence went beyond the establishment of the research unit in Cambridge. To spread the word, the ECA sponsored the publication of a book on national income analysis by Richard Ruggles.44 Moreover, the ECA requested national income estimates from all OEEC countries. At the national level, ECA administrators closely scrutinised the official estimates published by the government. Indeed, the ECA officials produced rival national income estimates for some countries. For example, American aid administrators published a study on Italian national income, because they believed that the official estimates under-estimated the national income. Indeed, this study went beyond the existing official national income statistics by including an input-output analysis of the economy.45 Despite the deficiencies in available estimates, ECA officials regarded national income analysis as “.. a useful tool for assessing recovery plans and policies and their effects in individual countries.” However, the ECA continued to rely mainly on balance of payments estimates for aid distribution.46 Arguably, the pressure from the ECA sustained the momentum behind the attempts to standardise national income accounts on a global basis in the immediate post-war period. Without the Marshall Plan, government statistical office and economic policy-makers might well have refined indigenous postponed the standardisation of national income accounts to a later date. Moreover, American sponsorship assured the triumph of the Meade-Stone System of national income accounts.

25The development of national income statistics contributed to the transformation of the post-war economic policy-making in western Europe.

  • 47 United Nations. Economic Commission for Europe. Research and Planning Division, Europe in 1948, p. (...)
  • 48 H.S. Ellis, The Economics of Freedom: The Progress and Future of Aid to Europe, New York, Harper & (...)

26Arguably, its contribution lay not in its fonction as policy tool for economic policy, but as an argument for economic expansion and the necessity for international economic co-operation. In many ways, national income statistics were still in their infancy and therefore unreliable guide to economic planning and the international co-ordination of economic policy. Nevertheless, national income analysis highlighted the considerable gap between the national income levels in the United States and western Europe.47 In this sense, these crude comparisons made the productivity gap visible to European policy-making communities. Marshall Plan administrators argued that western Europeans could achieve the American level of prosperity by emulating the American model. The optimism of ECA officials partly derived from the success of American wartime planning, which they felt provided a model for European reconstruction. As Keynesians, these officials accepted the need for economic planning for recovery and pump-priming the European economy. In contrast to traditional economists, these Keynesian economists defended the high levels of investment in new machinery and the infrastructure of war-torn western Europe. Their analyses often made extensive use of national income statistics to explain to an American audience why the western Europeans invested quite as much and could not really afford to spend more on deffence. A prime example of this justificatory discourse is the Howard Ellis’book The Economics of Freedom.48 This pragmatic approach infosed a bias towards economic growth and development.

  • 49 T. Geiger, “Why Ireland needed the Marshall Plan but did not want it: Ireland, the Sterling Area an (...)
  • 50 A.H. Hansen, “World Institutions for Stability and Expansion”, Foreign. Affairs 22 1944.
  • 51 H.A. Innes, “Great Britain, the United States and Canada”, in Essays in Canadian Economic History, (...)

27At the same time, the epistemic community on both sides of the Atlantic promoted national income analysis as a basis for international policy coordination reaffirming a shared belief in the growing interdependence of the world economy. Through their shared understanding of the problem of reconstructing the international economy, economists informed the choice of a policy solution for the dollar gap — the provision of American economic aid on the one hand and its acceptance on the other. In this context, economic analysts not only shaped the manner in which certain phenomena were interpreted and represented, but their interpretations informed institutional structures which shaped international relations. In Europe, indigenous developments of economic policy regimes based on national income analysis made American demands for economic policy co-ordination on the same basis more acceptable to national policy-making communities. However, this acceptance was by no means universal as for example the resistance of Irish policy-makers to any form of economic integration or policy co-ordination on a European level shows.49 At the same time, American policy-makers constantly reiterated the responsibility of their government to contribute to international economic stability.50 To some extent, such statements allayed fears among European policy-makers that the United States might return to the isolationism and its irresponsible foreign policy of the inter-war period. Indeed, some observers warned Europeans that officials and experts were leading them surreptitiously into the clasp of American imperialism.51 However, this study rejects the notion that national economic policy-making became americanised due the American promotion of the adoption of national accounting as a policy tool. Indeed, rather than resulting from external pressure, the adoption of this economic technology owed more to indigenous efforts and the regular interchange of ideas among the experts in the field after 1945. In this sense, this analysis follows Ikenberry in contending that in the immediate post-war period, economists became a catalyst for international policy co-ordination by altering the expectations of national decision-makers and thereby enabling the adherence to particular regime of international policy coordination through the OEEC.

28Therefore, national income analysis was in the immediate post-war period more than a mere analytical tool for economic policy-makers being deeply intertwined with a particular optimistic model of economic development through international co-operation. Even if economic reality did not live to the expectations of the epistemic community, national income analysis left its imprint on the immediate post-war period. In the end, national income analysis provided the solution to the problem of western European reconstruction, but more in terms of a discursive identification of the problem and a justification of the preferred policy choice rather than in day-to-day economic management.

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Clark C. 1940. The Conditions of Economic Progress, London, Macmillan.

Ellis H.S. 1950. The Economics of Freedom, The Progress and Future of Aid to Europe, New York, Harper & Brothers.

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Geiger T. 1998. Studies in thepolitical economy and economic impact of British defence expenditure and American military aid to Britain, 1945-1955, Ph. D. Dissertation, University of Aberdeen, p. 169-218.

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Gilbert M. 1944. “National Product, War and Prewar”, Review of Economic Statistics 26.

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Gilbert M. et al. 1957. Comparative National Products and Price Levels, A Study of Western Europe and The United States, Paris, Organisation for European Economic Co-Operation.

Hansen A.H. 1944. “World Institutions for Stability and Expansion”, Foreign. Affairs, 22.

Hirschman A.O. 1989. “How the Keynesian revolution was exported form the United States, and other comments”, in Hall P. A. (ed), The Political Power of Economic Ideas, Keynesianism across nations, Princeton, Princeton University Press.

Hogan M.J. 1987. The Marshall Plan, America, Britain, and the reconstruction of Western Europe, Cambridge, Cambridge University Press.

Ikenberry G.J. 1992. “A world economy restored, expert consensus and the Anglo-American postwar settlement”, International Organisation 46, 1992, p. 289-321.

Innes H.A. 1956. “Great Britain, the United States and Canada”, in Essays in Canadian Economic History, Toronto, Toronto University Press.

Keynes J.M. 1984. “How to Pay for the War”, in Essays in Persuasion, ed. Royal Economic Society, Basingstoke, Macmillan.

Kuznets S. 1948. “National Income, A New Version”, Review of Economics and Statistics 30.

Kuznets S. 1944. “National Product, War and Prewar, A Reply by Professor Simon Kuznets”, Review of Economic Statistics 26.

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Notes

1 Ch.S. Maier, “Finance and Defense: Implications of Military Integration, 1950-1952”, in F.H. Heller, J.R. Gillingham (ed.), NATO: The Founding of the Atlantic Alliance and the integration of Europe, London, Macmillan, 1992.; Ch.S. Maier, “The Making of Pax Americana: Formative movements of United States Ascendancy”, in R. Ahmann, A. Birke, M. Howard (ed.), The Quest for Stability: Problems of West European Security, 1918-1957, Studies of the German Historical Institute London, Oxford, Oxford University Press, 1993.

2 For a detailed examination of Maier’s analysis of the NATO burdensharing debate during the initial phase of the Korean War, see T. Geiger, Studies in the political economy and economic impact of British defence expenditure and American military aid to Britain, 1945-1955, Ph. D. Dissertation, University of Aberdeen, 1998, p. 169-218.

3 On the dual function of some economic ideas as policy and scientific tool, see M.S. Morgan, “The Formation of ‘Modern’ Economics: Engineering and Ideology”, Working Papers in Economic History 62/01, London School of Economics and Political Science, 2001.

4 A.S. Milward, “The Springs of Integration”, in P. Gowan, P. Anderson (ed.), The Question of Europe, London, Verso, 1997, 9.

5 For the period of this paper, the theoretical and methodological aspects of this process are extensively described in P. Studenski, The Income of Nations-Theory, Measurement, and Analysis: Past and Present: Study in Applied Economics and Statistics, New York, New York University Press, 1958.

6 At theoretical level, the reason for the political nature of national income analysis is the fact that national income analysis implicitly assumes the existence of a social welfare function equating increased spending as improving social welfare disregarding any diseconomies. As Gunnar Myrdal suggested, the presumption of an existing social welfare function obscures the political element underlying any economic reasoning; see G. Myrdal, Daspolitische Element in der nationalökonomischen Doktrinbildung, 2nd ed., Bonn, Verlag Neue Gesellschaft, 1976, p. 185-99. On this point, see also C. Clark, The Conditions of Economic Progress, London, Macmillan, 1940), p. 17-28. Colin Clark’s analysis relies heavily on Pigou’s book Economics of Welfare. As Gunnar Myrdal suggested, the presumption of an existing social welfare function obscures the political element underlying any economic reasoning.

7 Clark, Conditions, p. 30-1.

8 See the discussion below and references in footnote 27.

9 Wg. Vincenti, “Engineering Theory in the Making: Aerodynamic Calculations “Breaks the Sound Barrier”, Technology and Culture 38, 1997, p. 850.

10 G.J. Ikenberry, “A world economy restored: expert consensus and the Anglo-American postwar settlement”, International Organisation 46 1992, p. 289-321.

11 R. Stone, “National Income in the United Kingdom and the United States of America”, Review of Economic Studies 10 1943, p. 14.

12 M. Beaud, G. Dostaler, Economic Thought since Keynes: A History and Dictionary of Major Economists, London, Routledge, 1997, p. 64-67; M. S. Morgan, The History of Econometric Ideas, Cambridge, Cambridge University Press, 1990.

13 Clark, Conditions.

14 J.M. Keynes, “How to Pay for the War”, in Essays in Persuasion, ed. Royal Economic Society, Basingstoke, Macmillan, 1984.

15 Clark, Conditions, p. 29-58.

16 M. Abramovitz, “Economics of Growth”, in Thinking About Growth and Other Essays On Economic Growth and Welfare, Cambridge: Cambridge University Press, 1989, p. 81 and 90.

17 Clark, Conditions, p. 16.

18 Keynes, “How to pay”, op. cit.

19 R. Stone, “The Use and Development of National Income and Expenditure Estimates”, in D.N. Chester (ed), Lessons of the British War Economy, Cambridge: Cambridge University Press, 1951.

20 J.E Meade, R.E. Stone, “The construction of tables of national income, expenditure, savings and investment”, Economic Journal 51 1941, p. 216-33.

21 R. Stone 1993, 14.

22 R.R. Nathan, “GNP and military mobilization”, Journal of Evolutionary Economics 4, 1994, p. 4-9.

23 S. Broadberry, P. Howlett, “The United Kingdom: ‘Victory at all costs’”, in M. Harrison (ed.), The Economics of World War II: Six great powers in international comparison, Cambridge: Cambridge University Press, 1998, p. 47.

24 R.R. Nathan, “GNP and military mobilization”, p. 10-6.; C.S. Carson, “The History of the United States National Income and Product Accounts: The Development of an Analytical Tool”, Review of Income and Welth 21 1975, p. 174-7.

25 Carson 1975:177.

26 P. Studenski, Income of Nations, p. 153-4. These debates centred on the question of whether or not government activity (and in particular military expenditure) contributed to the national income; see M. Gilbert, “National Product, War and Prewar”, Review of Economic Statistics 26 1944; M. Gilbert et al., “Objectives of National Income Measurement: A Reply to Professor Kuznets”, Review of Economics and Statistics 30 1948; S. Kuznets, “National Product, War and Prewar: A Reply by Professor Simon Kuznets”, Review of Economic Statistics 26 1944 and S. Kuznets, “National Income: A New Version”, Review of Economics and Statistics 30 1948.

27 I. Ohlson, On National Accounting, Stockholm, Konjunkturinstitutet, 1953, p. 61-3.

28 R. Stone et al., Measurement of National Income and the Construction of Social Accounts: Report of the Sub-Committee on National Income Statistics of the League of Nations Committee of Statistical Experts, Studies and Reports of Statistical Methods no 7, Geneva, United Nations, 1947, 8.

29 C.S. Carson, “The History of the United States National Income and Product Accounts: The Development of an Analytical Tool”, p. 177-8.

30 R. Stone et al., Measurement of National Income and the Construction of Social Accounts: Report of the Sub-Committee on National Income Statistics of the League of Nations Committee of Statistical Experts, 9.

31 T.C. Schelling, International Cost-Sharing Arrangements, Essays in International Finance no 24, Princeton, International Finance Section, Princeton University, 1955, p. 1-6.

32 T. Barna, “International Comparisons of National Accounts in Economic Analysis”, Income and Wealth 3 1953, 151; United Nations. Economic Commission for Europe. Research and Planning Division, Economic Survey of Europe in 1948, Geneva, United Nations. Department of Economic Affairs, 1949, p. 229-40.

33 R. Frisch, “From National Accounts to Macro-Economic Decision Models”, Income and Wealth 4 1954, p. 1-2.

34 A. Cairncross, “Economists in Wartime”, Contemporary European History 4 1994, p. 35-6.

35 A.O. Hirschman, “How the Keynesian revolution was exported form the United States, and other comments”, in P. A. Hall (ed.), The Political Power of Economic Ideas: Keynesianism across nations, Princeton, Princeton University Press, 1989.

36 M.J. Hogan, The Marshall Plan: America, Britain, and the reconstruction of Western Europe, Cambridge, Cambridge University Press, 1987, p. 151-2.

37 H.B. Price, The Marshall Plan and its Meaning, Ithaca, Cornell University Press, 1955, p. 127-8.

38 Interview with Donald MacDougall by T. Geiger in London, 9 July 1998.

39 European University Institute, Historical Archives of the European Communities [hereafter: EUI HAEC], EUI HAEC, OEEC-9: C/M. (49) 7 (Prov.) Thirteenth Session, Minutes of the 60th Meeting of the OEEC Council on 12 April 1949, 28 April 1949; Euihaec, OEEC-19: C (49) 28 (1st revision), Proposal for a Research Unit on National Income and Related Matters 24 March 1949.

40 R. Stone, K. Hansen, “Inter-Country Comparisons of the National Accounts and the Work of the National Accounts Research Unit of the Organisation for European Economic Cooperation”, Income and Wealth 3 1953, p. 113-4.

41 Organisation for European Economic Co-Operation, A Simplified System of National Accounts, 1958 ed., Paris, Organisation for European Economic Co-Operation, 1951.

42 Organisation for European Economic Co-Operation, Statistics of National Product and Expenditure, 1938 and 1947 to 1955, Paris, Organisation for European Economic Co-Operation, 1957.

43 M. Gilbert, I.B. Kravis, An International Comparison of National Products and the Purchasing Power of Currencies: A Study of the United States, The United Kingdom, France, Germany and Italy, Paris, Organisation for European Economic Co-Operation, 1954; M. Gilbert et al., Comparative National Products and Price Levels: A Study of Western Europe and The United States, Paris, Organisation for European Economic Co-Operation, 1957; and D. Paige, G. Bombach, A Comparison of National Output and Productivity of the United Kingdom and the United States, Paris, Organisation for European Economic Co-operation, 1959.

44 R. Ruggles, National Income Accounting and its Relation to Economic Policy; Paris, Economic Cooperation Administration, 1949.

45 Mutual Security Agency. Special Mission to Italy, The Structure and Crowth of the Italian Economy; Rome, Mutual Security Agency, 1953.

46 Price, The Marshall Plan and its Meaning, p. 311-2 (quote: 312).

47 United Nations. Economic Commission for Europe. Research and Planning Division, Europe in 1948, p. 224-8.

48 H.S. Ellis, The Economics of Freedom: The Progress and Future of Aid to Europe, New York, Harper & Brothers, 1950.

49 T. Geiger, “Why Ireland needed the Marshall Plan but did not want it: Ireland, the Sterling Area and the European Recovery Program, 1947-1948”, Irish Studies in International Affairs 11 2000.

50 A.H. Hansen, “World Institutions for Stability and Expansion”, Foreign. Affairs 22 1944.

51 H.A. Innes, “Great Britain, the United States and Canada”, in Essays in Canadian Economic History, Toronto, Toronto University Press, 1956, p. 402-12.

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