AMERICA AND THE LOAN
HILE this is being written, Parliament is debating the V V American loan and the Bretton Woods Monetary Plan with which it is so intimately connected. The loan and the plan have already inspired considerable controversy, and considerable bit- terness in the opponents of the agreements ; and there is no doubt that their bitterness accurately reflects the state of mind of many people in this country. Our American friends will be much mistaken if they believe the loan is likely to be received with gratitude here, or that its terms are calculated to increase the friendship between the two countries. Perhaps this is ungenerous on our part ; for our genuine friends in the United States have their own difficul- ties to contend with, and have to justify the loan to a Congress which on the whole believes that once again the United States is being asked to play the part of a philanthropist who gives some- thing for nothing. In this country, on the other hand, we believe that the loan has been made an occasion for commercial bargain- ing in a matter in which pounds, shillings and pence should have no place ; and that the United States are playing the part of a Good Samaritan who asks to be paid for his services at the highest rates prevailing in the market. For this country has been bled white by the war. Proportionately, it has contributed more, and more con- tinuously, and longer, than any of the Allies ; and it continues to suffer for its efforts. For over a year, together with its Dominions, it fought alone in a battle in which the interests of the United States were as deeply involved as our own, and in which our success made possible the total victory that was to come later. When those days were over, this country continued to fight to the limit of its resources, making sacrifices incomparably greater than any which were ever required of the United States. Even now, six months after victory, it continues to endure restrictions and privations which are the direct result of the unlimited liability which it under- took in waging the war ; and they are likely to continue for some time longer. If in these conditions we now accept the loan granted by Washington, it is not because we think the terms reasonable ; it is because we have no choice. It is as well that this should be understood, both in this country and in the United States.
The bargain which has been made at Washington is indeed a bad omen for the opening of the " American century " which we have been promised as the prize of victory. For unless the United States can learn to use the immense wealth and power she has acquired by the Allied victory with greater magnanimity and generosity, and with greater understanding of the needs of others, than she has shown on this occasion, then the " American cen- tury " will prove an unmitigated evil to every country that cannot escape it. For this era which is opening makes two implacable demands on this country and on the United States. From this .:cuntry it demands the immense psychological effort of adjusting itself to being a debtor nation. From the United States it demands the even greater effort of recognising the obligations and responsi- bilities involved in her position as the wealthiest and most power- ful nation the world has ever known, and of realising that they are not compatible with preserving, in her international transactions, the mentality of an astute commercial bargainer. As things are at present, it seems likely that this mentality will in future have an increasing influence on American policies ; for everyone knows that at Washington the American representatives demanded not the maximum but the minimum of what Congress expects of them. And when the debate on the loan opens in Congress, as it has already opened in the American Press, we may confidently expect to bear this country denounced by the real enemies of international magnanimity and generosity for her trickery, her idleness, her avarice and her poverty.
In an article on another page a contributor discusses some of the details of the loan and of the other agreements with which it is connected. While his analysis may seem to some over- optimistic, it is clear that, as he says, the terms of the loan are not, as a purely commercial transaction, intolerable. They can be borne, and they will have to be borne. For those who carry their distaste for the loan and its attendant obliga- tions so far as to advocate their rejection have until now failed to indicate what their alternative implies. It implies, not merely the continuation, and intensification, of our present privations ; less food, fewer clothes, less fuel, to say noth- ing of such frivolous luxuries as films and tobacco. Even this might be borne, though with difficulty. It also implies an economic war with the United States which we are ill-equipped to conduct suc- cessfully ; it implies the perpetuation and development of closed commercial areas, based on the pound and the dollar, so far as possible impenetrable to each other and always tending to form closed political as well as financial ,systems. It implies a relapse into the methods and ideals of Dr. Schacht, and into the economics of scarcity and restriction, and says a long farewell to any hope of recreating the free international exchanges without which the peace of the world must be both poverty-stricken and precarious.
If such is the case, then the only reasonable attitude for this country is to seek and encourage by every means the conditions under which it is possible for us to discharge the new obligations we have assumed. The essential factor is a recovery of world trade such that this country can secure a large enough share to maintain and improve her existing standards of life ; and this in turn implies a world market in which this country can sell exports to the value, under present conditions, of roughly £1,000,000,000 a year, and thereby pay for the imports which are essential to her existence. In such a balance of payments, the interest and capital payments involved in the loan would form a very small propor- tion, of perhaps 3 per cent., and could be easily borne. Should our exports fall appreciably lower, not merely would the cost of the loan rise proportionately higher, and indeed to a level where it would become intolerable, but, more important, the prosperity and the standard of life of this country would decline to such an extent that inability to fulfil our payments on the loan would be only one of its minor consequences. In this sense it can confidently be said that the problem of meeting our obligations under the loan is only a minor factor in the greater problem of maintaining and improving our general conditions of life, and that without solving the greater problem there is no solution for the lesser one.
Here again, however, it is the United States that has the de- cisive part to play. Whatever our efforts to promote a recovery of world trade, they will be useless unless, both internally and externally, the United States adopts economic policies v hich are aimed, not at her exclusive profit, but at the common benefit of all who enter into the world market. It must be confessed that this calls for a total revolution in the commercial policies she has hitherto adopted, and requires that she should cease to protect and shelter an exclusive home market which she can use as a secure base from which to unload her surplus production on the world. The most encouraging feature of Bretton Woods is that it is designed precisely as a preliminary step to effecting such a revo- lution, and is an essential part of a plan to encourage a recovery of the world market. The critics of Bretton Woods are opposed to the plan because, they claim, it involves a return to the gold standard. It is difficult, in fact, to understand whether they oppose the return to gold or the return to a standard ; for Bretton Woods gives sufficient opportunities to relax the rigidities of a system automatically tied to gold, and some common standard there must be if international exchanges are to regain the freedom without which the recovery of the world market will remain obstructed.
For this country, indeed, it would appear that the success of Bretton Woods is an inescapable necessity, and that the plan would remain desirable even without the loan. There is stronger ground for criticism of the fear that the United States, while endeavouring to recreate freedom of trade and of the ex- changes, will not play the game according to its rules. In a large degree she is attempting to create an international system of which she shall be the centre, as Great Britain was the centre of the nine- teenth Century financial system. That system worked because Great Britain was willing and anxious to accept the imports by which the exchanges were balanced. It would be absurd to call it a sacrifice for the United States to accept a similar role in the new world market she wishes to create ; it does, however, involve the sacrifice of sectional industrial interests within the United States, each strongly entrenched and in possession of great political power. Unless they can be overcome, the United States will fail to play the historic role which she now claims.
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