2 
certain qualified ressemblance to the N1Cg (newly industrial 
countries). 
Second. This scenario is dominated by the fact that industry in 
the East is not able unprotected to withstand the competition from 
the West and that it will therefore for the greater part close its 
doors and dismiss its employees. Production, in a word, will be 
shifted from the East to the West (especially easily if the 
skilled labour moves with it, and thus completes the ruin in the 
East). With mass unemployment and low demand the East will not be 
attractive to foreign investors and will therefore be condemned to 
stagnation. This must also destroy the long term chances which the 
Western industry might have had under different conditions, i.e. 
with prosperity and full employment in the East. 
This scenario may be called Colonisation of the East. We have to 
think of historical comparisons such as the Italian Unity created 
in the 19th century which left Italy split into two regions with a 
vast economic difference which has not disappeared to this day 
with all its appalling consequences. 
Which of the two scenarios is more applicable or relevant to the 
prospective development of the various socialist economies I shall 
not try to guess. I should like,however, to say something on the 
conditions which favour the one or the other alternative. 
It seems to me that the first, brighter, perspective will be 
favoured by measures which keep the unemployment in narrow 
limits.This will be measures such as import restrictions or 
subsidies and retention of the traditional bilateral outlets in 
the east which keep the inefficient industries going as long as 
there is no alternative employment.( This policy has limits in so 
far as some products on account of quality may not find markets 
any more). The same purpose will be served by an appropriate 
exchange policy but there must not be too much undervaluation of 
the exchange rate since this would lead to inflation. The