An International Central Bank
HE fascinating scheme of an International Central 1 Bank, towards which the Reparation experts in Paris are groping their way, was inherent in the Dawes plan much more truly than the proverbial sculptured figure was inherent in the block of marble ; but until the experts entered upon the present discussions nobody foresaw that an International Central Bank was likely to be produced out of the material. Yet the stages by which the idea was reached were easy—almost inevitable —when some of the leading experts had laid it down that it was essential to take the Reparations problem right out of politics and solve it, as it can only properly be solved, in purely economic terms. The vision of an International Central Bank then began rapidly to take shape.
It was not only the Dawes arrangement for Repara- tions which led to this creative idea ; for some years various nations have been building up central banking systems. And under the encouragement of the Bank of England, and of the Federal Reserve Bank of the United States, there have been tentative movements towards regular international co-operation in banking. The time is ripe for an International Central Bank. It would be a boon to the whole world if this institution, beginning as a clearing-house for the payment of Reparations—for it would, of course, take the place of the Agent-General for Reparations—became a head- quarters for the stimulation of trade and for the creation and regulation of credit. All this sounds so attractive and advantageous that one suspects that there must be flies in the ointment. A tendency among British commentators so far has been to be more conscious of the presence of the flies than of the ointment. In parti- cular, the danger that the proposed International Central Bank might extend the principle of the payment of Reparations " in kind " is viewed by some people as a fly of specially poisonous properties.
It is said that the permission already given to Germany to pay with goods instead of with money has done much injury to the British export trade, and that it would be intolerable if Germany were allowed to make pay- ments in kind to Great Britain as well as to France, Belgium and Italy, and still further to cut into British trade by making payments in kind to nations which were neutral in the War. We would only say on this subject that the discussion on payments in kind has not yet reached a critical point, and that even if an extension of the principle were found to be necessary, we should not be averse from accepting it if it were an unavoidable temporary condition for the success of the International Central Bank. The British repre- sentatives in Paris, Lord Revelstoke and Sir Josiah Stamp, are level-headed and extremely experienced men ; it is inconceivable that they should mistake a lesser for a greater interest. They would not sacrifice immediate and tangible advantages unless there were far- reaching ultimate advantages to be bought at this price.
The primary function of the proposed Bank, then, would be at first to act as a trustee, receiving payments from Germany and distributing them among the creditor nations. As a link between debtor and creditor it would facilitate transfers. There are already three methods of payment—by controlled transfers, by uncontrolled transfers, and by payments in kind. As has. repeatedly been pointed out, Germany can in the long run pay only, in goods ; however much the - transactions may be disguised,_ mitigated or prolonged, there is always the danger of the creditor being swamped with goods which he does not want. -On the other hand, when there are heavy "ntermediate payments of money, the stability of the exchanges and of prices may be so upset that the unhappy creditor for the time being wishes for almost anything rather than to receive what is due to him. There is a story, which is significant even if it is apocry= phal, that when France was making her payments to Germany after the Franco-German War—making them with a rapidity which nobody had dreamed of—Bismarck, contemplating the disturbance of German commerce and finance, ironically exclaimed, Next time I shall take good care to pay an indemnity, not to receive one."
If the International Bank should extend deliveries in kind, the process would presumably be only an incident in the general- -settlement. We do not want, however, to pretend that objections to payments in kind are not real. When the Treaty of Versailles sanctioned such payments, a great many people thought that they.-would amount to little more than the provision of materials for the restoration of devastated France and Belgium, and of Italy. British coal-owners have always complained, however, that a considerable part of their distress is due to many of their markets in the Allied countries having been taken away from them. Under the Dawes plan the list of goods which Germany was allowed by the Versailles Treaty to supply in lieu of money was enlarged so that some of our heavy industries have added their plaints to those of the coal-owners. It must always be remembered, however, that one of the most important functions of an International Bank would be so to arrange trade and credit as to prevent the shoe from pinching anybody unnecessarily. It is an entire misconception of the Bank to think of it as creating grievances, not curing them.
Naturally the whole constitution and work of the Bank would have to be experimental at first, but we are so convinced of its potential value that we cannot be frightened by the incidental dangers. The Bank would be an intermediary between, all the interested Governments and the issuing bankers in the marketing of such bonds as might be required for the commer- cialization of German annuities.. As a reservoir of foreign exchange it would probably be of great service to the existing Central Banks. It has been objected that it would really be a kind of Super-Bank, but from every- thing that Lord Revelstoke and Sir Josiah Stamp have said it is clear that it would defeat its purpose if it tried to impose its will upon others. It would rather try to strengthen between the Central Banks that co-operation which has already been found to be their true policy. It would supplement, not duplicate. It would assist, not direct.
The release of the whole Reparations question from the political auction room, with all its sinister cross-bidding and intrigue, would be such an unmixed blessing that the individual trade of every country in Europe would gain more than it could possibly lose. In general, Great Britain must continue to be guided by the Balfour declaration that the total amount received yearly by her in Reparations and in debt-payments from her Allies must not be less than the amount she pays yearly to America. We cannot take less unless, of course, the supreme good of a complete settlement should reconcile all the Allies to take less than they have con- templated. That is to say, the only condition on which Great Britain could take less would be that the amount allotted to her remained constant in proportion to the shares of the other Allies.
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