Europe, Formerly a Trader Nation,
By Robert
P. Koenig
President, Aynhire Collieries Corp.;
Member, AlME
F
OR the &st time other than on
occasion of war the people of the
United States are experiencing fullscale participation in world affairs.
Public concern has seldom been so
involved with conditions and events
beyond our own continental limits.
Our interest is not wholly of recent
origin. Over the years the activity of
the United States as a world power and
an important trading nation brought
about the widening of our political
interests and the progressive interrelation of our economy with that of
the rest of the world. Some may see
in our present phase of world-wide
activity the natural consequence of
our continued growth. Such observers
must also be aware that within recent
years our importance in world affairs
has been considerably increased. For
within the space of an extremely short
period events have occurred that have
literally jet-propelled the United States
into the role of a leading participant
in the conduct of world affairs. Little
of the choice of this role was left t o us.
The decline of power in western
Europe, the ascendancy between the
Elbe and the Pacific shore of an
obviously antagonistic force, om. earnest endeavor t o secure international
control of atomic energy. the necessity
of providing relief and rehabilitation
t o war-ravaged areas, and the police
work that must be done in occupied
territories are problems which have
risen in great measure without our
help-but
they cannot be solved
without it.
For the first year or so after the
war our foreign activities were dkected
chiefly to problems related to the
peace settlements, of the attempts to
arrive a t an orderly functioning of the
United Nations, and of international
control of atomic energy. All other
issues, including that of reconstruction,
were to varying extent contingent on
settlement of these main questions,
and action when taken on other
specific problems consisted of shortterm measures. Partly, this was necessary. The reconstruction of western
Europe, for instance, was inexorably
bound to the nature of the disposition
of Germany, which, in turn, can be
determined only upon the ultimate
ratification of a peace treaty. This
may partly explain why on both sides
of the Atlantic the work of European
reconstruction was not pushed more
vigorously. On the European side
there was also the fact that few governments were either willing or able t o
impose unpopular economic reforms.
On this side the Administration refused to risk presenting t o the economyminded Congress and people a program
of full-scale European aid. To secure
passage of such short-term arrangements and piecemeal plans as foreign
loans, the United Nations Reconstruction and Rehabilitation Administration, the Export-Import Bank,
and the International Bank, the
Administration forecast results which
were not based on realistic appraisal.
In the face of continued disageement on the peace treaties and the
protracted inability of the UN t o
function on major issues, short-term
arrangements were insufficient. In
addition, our own lack of success in
holding down rising prices a t home
substantially reduced the buying power
of our loans and commitments. By
the spring of 1947, the situation in
Europe was progressively worsening.
That western Europe could not
accomplish its own recovery should
cause no surprise. The nations of
western Europe for many years have
been dependent on the Western Hemisphere for large imports of food and
raw materials. Western Europe is a
great industrial area, but its industry
depended for efficient operation on
the flow of international trade. The
products of its mines, mills, and
factories paid for the food they
imported, and for materials and resources they needed but did not have.
As trading nations they were predominant. They had nearly one half
of the world's international commerce,
plus invisible exports, such as shipping,
which were sufficient to pay for almost
a quarter of their total imports.
Destruction of producing facilities in
Europe reduced its ability to earn,
and a t the same time increased the
amount of its needs. Stop-gap, carryover aid did much to relieve suffering
and misery during the interim period
before and after the end of the war
( I say this for those who feel our money
has been going "down a rathole"),
but such aid did not broach the fundamental difficulty-the
disparity between western Europe's essential needs
and its ability t o pay. Western Europe
could not balance its account with the
rest of the world. The surplus in the
United States balance of payments,
for example, was running a t an annual
rate of $10,000,000,000 by early 1947.
A large percentage of world consumption of minerals is concentrated
in western Europe, but with a few
exceptions, production is not similarly
concentrated. The area is dependent to
varying degree on imports of most
minerals essential t o a modern industrial economy, including petroleum,
lead, zinc, ferroalloy metals, and rock
phosphate. Of the major minerals only
coal, iron ore, bauxite, and mercury
were produced in quantity equal or
greater than indigenous demand.
Current output of even some formerly adequate minerals is not sufficient
for baaic needs. Forecasts of coal output during this year, for example,
MINING AND METALLURGY
P
,r European Recovery Program
:ds
Raw Materials to Build
Up Industries
compared to requirements, indicate a
deficit of 58 million metric tons. Almost
2.5 million metric tons of crude and
semifinished steel and 1.3 million
metric tons of finished steel products
will have to be made available from
outside sources during 1948 if requirements are to be met. The degree
of the inability of western Europe t o
balance its account may thus be seenit is essential that it import those
commodities which were once the core
of its industrial system.
Regaining of the ability to produce
and transport mineral commodities
in former quantities is essential to
European recovery. But here we run
headlong into the dilemma-the principal deterrent to industrial rehabiliPREWAR 1936 POSI'TION O F C.E.E.C.
PARnciPATILG N A T I O N S A N D
G E R M A N Y WITH RESPECT T O
PRODUCTION A N D CONSUMPTION O F SOME
IMPORTANT MINERAL
COMMODITIES
Percent of
Percent of
Mineral
World
World
Commodity Production Consumdion
Aluminum
54
Coal
44
P
Copper
42
Iron ore
19
Lead
1
Manganese
1
Petoleum
Tin
1
Tungsten
7
tation is the well-nigh total breakdown
of the general economic system. I n
other words, recovery of the mineral
industries must be preceded by the
restoration of some measure of economic stability, and economic recovery
is dependent on the ability of the
mineral industries to produce. The
necessity of outside assistance is
evident.
In recognition of this fact on June 5,
1947, a t Harvard, Secretary Marshall
APRIL, 1948
..
Europe's requirements
stated: " .
for the next the: or four years of
foreign food and other essential products-principally from America-are
so much greater than her present ability to pay that she must have substantial additional help or face economic,
social, and political deterioration of a
very grave character. . . . " The
Secretary then continued that before
the United States could proceed much
further in its efforts to alleviate the
situation and help start the European
world on the way to recovery, there
must be some agreement among the
countries of Europe as t o their requirements and the part those countries
themselves would take in setting up
Europe on its feet economically. The
role of this country would consist of
friendly aid in drawing up the European program and of later support of
such a program as far as we would do so
safely and wisely.
This, briefly. is the principle of the
Marshall Plan. The actual formulation
of the Plan has been the work of
foreign and American committees ever
since.
The blueprint for reconstruction
drawn by the sixteen participating
nations of the Paris Conference emphasizes the essentiality of regaining
former mineral production. To this
end these nations have agreed to make
full and effective use of existing equipment and man power and to organize
together the means hy which common
resources might be developed in partnership. They propose to increase
output of coal from 398 million metric
tons in 1946 to 582 million by 1951;
iron ore. tonnage is to be upped from
45 million metric tons in 1946 to 118
by 1951; 1946 production of steel
products, crude, semifinished, and
finished, is to be doubled by 1951;
production of other mineral commodities is to be expanded similarly. They
Importance of American mineral production as a key factor
in European reconstruction ie
pointed out in this article.
American exports to Europe,
however, should not be permitted to create shortages which
might jeopardize our economy.
Mr. Kyenig does a fine job in
appraising the reasons why
American aid is necessary to
rehabilitate Europe and at the
same time points out the intricacies inherent in thie complicated undertaking.
have stated, moreover, that they will
apply necessary measures leading to
internal monetary and economic stability and to co-operate with one another
in reducing barriers to the expansion
of trade among themselves and with
the rest of the world. Some of these
declarations of intent may appear to
be lacking in reality but in the past
several months we can note the increase
in coal production in Great Britain and
western Germany, the record United
Kingdom steel production, currency
reforms in Italy and France, and the
establishment of customs unions, Benelux, for example, as signs that these
are not empty promises.
As expressed in Secretary Marshall's
address, the intent of our Government
is to support the European recovery
program as far as we can safely and
wisely do so. The first step therefore
was t.o determine the ability of the
United States to provide aid, to gauge
the limitations of such assistance, and
to determine as far as possible the
effects of such a program on the
domestic economy.
A review, by the President's Committee on Foreign Aid, of the domestic
reserves and production potential of
American minerals indicated that they
might be classified as:
(1) Those whose reserves and production are sufficient for export, such
as coal, magnesium, and molybdenum.
Robert Purington Koenig was born in New York City on April 26, 1904.
After graduation from Haward in 1924, he sewed in various capacities
Corp., New Verde Mina Co., Newmont Mining
with Orro de P a m
and Lehman Brothers until 1936. He is now
Corp., the Montezuma o
p-idmt
of the Ayr#hire%llierim Corp. and Fairview Collieries Cap.
From 1942 to 1945 he served with the U. S. Army Corps of Engineers,
spending 34 months in the African and European theaters. His last
assignment with the Army was as chief of the solid fuels division of the
Allied Expeditionary Force. Mr. Koenig's distinguished military service
was rewgnized by British, French, and U. S. citations and the final rank
of Colonel.
Copt
.,
(2) Those whose reserves and production are sufficient for limited export
only. Iron and steel products are in
this group.
(3) Those whose reserves and production are not sufficient for export,
but import of which as raw materials
make export as finiehed and semifinished products possible in limited
quantity. I n this group are petroleum
products and aluminum metal.
(4) Those whose reserves and potential production are not sufficient for
export. This includes all minerals not
listed in the three prior categories.
Analysis of the mineral position of
the United States in these terms discloses that the scale of exports contemplated under the aid program can
be met safely and wisely and without
danger to the domestic economy.
Coal is the principal mineral commodity required from the United
States in the aid program. Its availability in adequate quantity is a key
factor in the recovery of European
industry. The importance of coal t o
the industrial life of this nation has on
occasion been forcibly demonstrated.
Yet coal is an even more essential
item in Europe where large supplies
of natural gas, petroleum, and hydro
power are not available. The United
States has ample coal reserves, producing capacity, and mine labor t o
export the quantities contemplated
in the aid program. During the past
year transportation was the limiting
factor in coal output. Had coal cars
been available a new production
record would have been attained.
Prospects of significantly increasing
the car supply in the near future are
not good. The target of 5,000 new opentop cars per month set for last October
has not yet been reached. Retirement
of old cars is still almost equal t o
receipt of new stock. The transport
shortage can be solved by the more
efficient use of existing equipment and
by speeding up production of new
cars. Both actions are possible.
The question of the availability of
steel presents a more difficult problem
in the aid program. Despite the fact
that output of ingot steel in 1947
was near capacity there was a domestic
steel scarcity. An extended aid program
will necessarily aggravate the internal
shortage. In relation, however, to our
total output of steel products, European needs are not great, and because
availability of certain steel commodities is essential to the success of the
over-all European recovery program,
it appears reasonable t o supply the
most important needs of western
Europe even a t the expense of some
part of the domesti? market. I t should
be emphasized, nevertheless, that essential needs here a t home must be
assured prior t o export of any steel,
and that supplies made available for
foreign use be channeled to the most
important uses.
Europe has always been one of our
principal export destinations for petroleum products, accounting for nearly
40% of our overseas shipments. However, our exports of petroleum products t o Europe constitute only about
3 % of our production. Europe's requirements in 1946 were supplied
about 20 % from European production,
20% from the United States, and 60%
from the Caribbean and Middle East.
Caribbean and Middle East shipments
to Europe will probably further supplant American exports. Since the
war the United States imports have
essentially balanced U. S. exports of
refined products. The shipments of
lubricating oils, gasoline, and other
products t o northwestern Europe have
been quantitatively less than our
imports of crude. The logical source
of petroleum for Europe is the Middle
East, where the greatest increase in
output may be expected. The primary
need for restoring Europe's petroleum
economy is transportation capacity to
carry Mid-East oil to European markets. Refining capacity in Europe can
be increased by repair and reconstruction of damaged facilities and the
building of additional plants.
Because the present high level of
consumption of so-called strategic minerals will delay the stock-pile procurement project of this country, it was the
recommendation of the hesident's
Committee that legislation establishing
the European aid program include
specific provision for procuring for
United States stocks such strategic
minerals as are available from the
participating countries or such of their
colonies as can produce and sell mineral
products to the mother country without running their own financial structure into the ground. Progress in
building stocks of strategic materials
has so far been slow, principally because of current heavy demands of
industry throughout the world. Completion of present expected additions
to stocks during 1948 will result in
achievement of only 20% of the
minimum objective in terms of total
value of materials. Acquisi~ionof many
items has been negligible. Under present conditions, large stocks can be
accumulated only by expanding world
production. Should there be a general
falling off in economic activity in the
industrialized areas of the world, then
supplies for stock-piling would be more
rcadily available. A preliminary survey
indicates that with generally small
increase in output (nllirh us~lally
w o ~ ~ l he
d reattainment of no more
then wartime peaks) strategic raw
materials valued a t al~proximately
$23 1,000,000 annually could Iw: made
available from natior~s and their
coloniea participating in the Marshall
Plan. Such imports wor~ldI)e at least
partial recompcnse for aid extended.
Pending such time that western
Europe will again assume its former
place in world commerce, it m u ~ look
t
t o the United States as one of the
principal sources nf aid. As indicated
by this all-too-brief glimpse of just one
part of the program, that of the role
of certain mineral industries, the reconstruction of western Europe is a vast
and complicated problem. I t places
upon the many agencies engaged in
its solution a great re8ponsibility. I t
should engage the minds and will
of the best men industry and government can produce.
ALUMINUM FOR HOME
WIRING
At the recent meeting of the American
Society of Agricultural Engineers in
Chicago. E. W. Renfree, chief engineer
of the western division of the wire and
cable department of the U. S. Rubber
Co., prophesied that many American
homes of the future would be wired
with aluminum instead of copper wire.
Aluminum today is more plentiful and
more economical than copper. New processes permit production of aluminum
electrical wire equal in quality t o copper, and i t is easier t o handle and less
expensive to transport. Flexibility and
tensile strength are about equal t o copper. Former difficulties in making connections and terminals in the installation of aluminum wire have been
eliminated.
MINING AND METALLURGY