East v. West

"In continental Western Europe the general picture is one of a continuing strong growth of output, with boom conditions especially pronounced in France, Western Germany and The Netherlands. In the United Kingdom, on the other hand, total industrial output has fallen decisively below the level reached at the end of last year." Thus did the latest seasonal report of the United Nations' Economic Commission for Europe last week sum up the economy of Western Europe.

In the first quarter of 1956, said ECE, continental Western Europe's total industrial output soared 26% over the 1953 figure while Britain's limped along at a 13% gain. Output of consumers' durable goods rose 96% in West Germany, 68% in Italy, 50% in France, only 28% in Britain. Accelerating Britain's slump was her skidding production of autos, chemicals, textiles.

German Rise. The big reason for Britain's slide was mounting competition from West Germany. While Britain's gold and dollar holdings dropped, West Germany's shot from $134 million to $360 million. So fast was West Germany forging ahead of her Western neighbors in exports and payment balances that ECE cautioned that "the increasing divergence between the balance of international transactions of Western Germany and of other countries does constitute a potential threat both to the future progress of trade liberalization in Western Europe and the continued expansion of the Western European economy."

Still, Germany and the rest of the booming continent share one problem with Britain. A pressing labor shortage is curtailing industrial expansion throughout Europe, said ECE. As a result, demand is outracing supply, and prices are on the way up.

Russian Gain. ECE also reported sizable increases in production in the Iron Curtain countries--based on their own somewhat questionable statistics. Soviet Russia's three big agricultural areas this year expect to produce 60 million tons of grain v. 36 million tons before Nikita Khrushchev plowed into the virgin lands of Kazakhstan and Siberia in 1954.

First-half industrial output increases over the same period of 1955 mounted by 13 1/2% in Bulgaria, 12% in the U.S.S.R., 11% in Poland, 10% in Czechoslovakia, 7% in East Germany and Hungary. But East Germany fell 3% short of its own production goals, largely because of the flight of 142,000 refugees to West Berlin in the first half of 1956. In Czechoslovakia the coal mines were harassed by a big rise in absenteeism (miners missed 18% of the shifts v. 9% prewar). Besides the manpower shortage, another big production bottleneck in the East was the lack of fuel and other sources of energy. In the first six months of 1956, Russian oil-refinery output dropped 400,000 tons short of its plan. Rumanian and Hungarian oil production also fell behind schedule.

Consumer Lag. Whatever the progress in the East, the consumer was slow to benefit. In Eastern countries goods are still short, and the average worker must spend all or most of his wages just to feed himself, his wife and two children. ECE calculated that a monthly breadbasket, including just 4 Ibs. of meat. 3.3 Ibs. of butter and lard and 9 eggs per person, would cost 110% of the average worker's income in Rumania, 105% in Bulgaria, 95% in Poland, 93% in Hungary, 88% in the U.S.S.R., 77% in Czechoslovakia, 72% in East Germany. Concluded ECE: "The rate of increase [in personal consumption] has lagged behind popular expectations in some countries, notably East Germany, Hungary and Poland.''

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