Josef Herbert Fürth, Review of Economic Survey of Europe in 1950 and Economic Survey of Europe in 1951 (1952)

Josef Herbert Fürth’s review essay assesses two annual surveys prepared by the Research and Planning Division of the United Nations Economic Commission for Europe (ECE). He praises their descriptive and statistical achievement but challenges their forecasts and policy recommendations. His central contention is that the surveys’ recurrent errors reflect a distrust of the market-price mechanism: their authors underestimate the effectiveness of credit restraint and favor direct controls, public investment, and government manipulation of exchange rates. The review proceeds through three tests of this judgment—American inflation, European inflation, and exchange-rate policy—before drawing a qualified methodological conclusion.

Fürth begins by emphasizing the surveys’ importance to American readers, whose country’s economic and political fortunes are closely connected with Europe and the British Commonwealth. The volumes offer comprehensive accounts of production, trade, inflation, and international payments, supplemented by more than a hundred statistical tables each. He also singles out the 1950 discussion of raw materials and the 1951 chapters on the Soviet economy and coal. His criticism thus rests on a distinction between valuable economic reporting and the more demanding task of prescribing policy:

Nevertheless, these additional functions also entail additional responsibilities, and the authors must be prepared to face criticism looking beyond technical accuracy and competence to the validity of their proposals and the soundness of their judgment.

Expertise warrants attention, Fürth argues, but does not exempt recommendations from scrutiny. He acknowledges that his selection of failures is one-sided and that hindsight makes criticism easier; he does not claim that his own forecasts would have been better. The relevant question is whether the mistakes exhibit a pattern capable of informing future work.

The American case establishes that pattern. The 1950 survey predicted a $20 billion inflationary gap for 1951, declining exports, and a substantial current-account deficit. Instead, inflation came under control and exports rose sharply—46 percent by value and 28 percent by volume. Fürth objects not simply to the failed prediction but to the subsequent explanation. The 1951 survey emphasized construction restrictions and weak consumer demand without adequately discussing general anti-inflationary credit policy or considering its connection with consumption. Its appeal to initially low exports explained away a result using information already available when the forecast was made. Fürth likewise questions the comparison between American and Soviet flexibility: sustained Soviet military production did not present the same problem as rapid American reconversion.

The European discussion extends this criticism to the choice of policy instruments. Despite predictions that countermeasures would come too late and that civilian consumption and investment could scarcely grow, 1951 proved considerably better than expected. The later survey nevertheless criticized governments for using credit restriction rather than comprehensive controls. Fürth treats its vocabulary as conceptually consequential:

It is not quite clear whether the use of the term “rationing of credit” instead of the more usual “anti-inflationary credit policies” was meant to make credit policies more acceptable to the advocates, or less attractive to the opponents, of rationing and other direct controls; in any case, the choice of the term seems to obscure the differences between policies that operate through the market mechanism, and direct controls that seek to nullify the operations of that mechanism.

The distinction matters because Fürth sees monetary restraint as working through market adjustment, not as equivalent to administrative allocation. He also challenges the assumption that reductions in public investment necessarily lower investment quality. Rather than merely asserting private investment’s superiority, he proposes a comparative study of productivity under different investment regimes.

Western Germany supplies his strongest counterexample. The surveys criticized decentralized investment, relaxed import controls, and insufficient government coordination, yet Germany achieved substantial production growth, restrained price increases, external balance, and a European Payments Union surplus. Fürth answers subsequent complaints with figures showing increased credit, industrial employment, and real payrolls, together with a declining unemployment ratio. France and Austria illustrate the opposing danger: earlier criticism of excessive financial caution was followed by inflation, with France’s expansionary credit policy subsequently identified as a contributing cause. British recommendations to increase European imports and redirect exports likewise preceded a large payments deficit. These comparisons expose the difficulty of maintaining policy prescriptions when circumstances and outcomes contradict their premises.

The exchange-rate section examines the proposal to appreciate non-dollar currencies and adjust rates repeatedly to insulate domestic prices from external inflation. Fürth argues that its stated assumptions concerning raw-material prices and American and European export capacity proved unfounded. More fundamentally, the surveys acknowledged beneficial effects from the 1949 devaluations while supposing that appreciation would not produce corresponding adverse effects:

This argument is pure speculation: the weight of evidence, including that of the devaluation of 1949 cited in the survey itself, points to the contrary.

Frequent unilateral adjustments, potentially supported by stronger import controls, would therefore pursue national insulation rather than liberalization of international trade and payments.

Fürth concludes by connecting these errors to a common theoretical disposition, while refusing to make market economics an unquestionable doctrine:

However, on the basis of our present knowledge of economic behavior, a dogmatic rejection of policies utilizing the market-price mechanism would be no more justified than a dogmatic rejection of all alternatives.

Prices, interest rates, and exchange rates require further clarification, and nonmarket policies may sometimes be preferable. The review’s enduring concern is the relationship between analytical commitments and practical judgment: illuminating theoretical ideas can still yield unreliable advice if contrary evidence receives insufficient weight. Fürth accordingly recommends the surveys as stimulating resources for theoretical economists, while urging practical economists to approach their prescriptions cautiously.