WORLD ECONOMY: Redressing the Balance

From Washington this week two grimly determined men set out for Europe bent on keeping friends—but saving U.S. gold and dollars. To strengthen their sales pitch, Treasury Secretary Robert Anderson and Under Secretary of State Douglas Dillon had a potent new persuader: the seeds of a "Buy American" policy in the cuts in U.S. spending abroad decreed last week by Dwight Eisenhower (see NATIONAL AFFAIRS). But it was unlikely that the travelers would be obliged to brandish this weapon. Unable to blink any longer the sobering fall in U.S. gold reserves, U.S. allies around the world had at last begun to move to the aid of the Western giant.

Most dramatic change of fiscal heart last week was in West Germany. On the eve of the Anderson-Dillon visit, Chancellor Konrad Adenauer abruptly cut his country's cackle about being short of spare cash: his Cabinet hastily announced "complete agreement" to launch West Germany's first real foreign-aid program in 1961. Under the projected billion-dollar program, Germany will at last make available to the capital-hungry underdeveloped nations a significant hunk of the record $7.4 billion gold and hard-currency reserves accumulated during the spectacular German economic comeback.

The new German aid fund will tap private industry for a loan of $400 million, siphon off state-government surpluses ($125 million), and drain unused Marshall Plan counterpart funds and the federal government's own customary budget surplus. Still another source: sale to the public of $125 million in shares in the Government-owned Volkswagen works, whose sales abroad have made a mighty contribution to West Germany's foreign exchange hoard. The new aid, announced Economics Minister Ludwig Erhard, would be offered to underdeveloped countries at low interest and over a long term; unlike past German pinch-pfennig credits, it will not be "tied," i.e., need not be spent exclusively for German exports.

Grim Gratitude. Washington, which has poured out $73 billion in aid since 1945, including more than $3 billion to Germany, was grimly grateful for Bonn's patched-together foreign-aid package. But for all its potential value in helping meet the insatiable needs of the new Afro Asian nations—which the U.S. cannot hope to meet alone—the German program would not reduce this year's U.S. international-payments deficit in the slightest; it was, a U.S. spokesman laconically noted, "a beginning."

Of more immediate interest to Treasury Secretary Anderson's practical intelligence was the $700 million that the U.S. spends annually on the 250,000 U.S. troops that, together with the British army of the Rhine, still constitute the backbone of West Germany's defense. Here was a point at which the Germans could help directly to stem the rising flow of U.S. gold and dollars to Europe. All along, Adenauer's government has stubbornly resisted making any direct contribution to the support of U.S. forces in Germany, on the ground that this would smack too much of the old Occupation days. But as his showdown talk with Anderson approached, the Chancellor was reportedly resigned to kicking in at least $125 million annually through some dodge labeling the money as a NATO contribution.