Finance—Public & Private
A Banker on War Debts
I CONSIDER that, in every sense of the word, the speech delivered by Mr. F. C. Goodenough, the Chairman of Barclays Bank, at the annual gathering of shareholders of that institution last Thursday, was a great one. It marked the commencement of the series of annual bank meetings this year, and I fancy that on both sides of the Atlantic the observations of Mr. Goodenough with regard to War Debts will not only be read with profound interest, but will, also, have the effect of producing some sound and clear thinking upon the fundamentals underlying the problem of indebtedness to the United States in so far as such indebtedness is connected with War obligations.
I should like to touch upon some of the many subjects to which Mr. Goodenough referred in his speech, such, for example, as his reference to some signs of improve- ment in the industrial situation here and also to the unfair propaganda which is being waged in some quarters concerning bankers' charges, but to do so might be to divert attention from his reference to the problem of War Debts, and, therefore, I prefer to confine my comments to that portion of Mr. Goodenough's speech.
FACTS, NOT SENTIMENT.
In some quarters considerable stress is laid, and is rightly laid, upon the equity of the War Debts to America. It is pointed out that the debts were, for the most part, incurred after the United States came into the War and were concerned with meeting expenditure for the War in which although America had actually declared war against Germany, she had to trust her Allies to hold the field until she was ready to send her forces, which, as we know, was not until towards the end of the conflict. But while, no doubt, fully appreciative of this particular argument in the War Debts controversy, Mr. Goodenough at the outset of his remarks expressed his opinion that the problem of War Debts could be best approached " as a question of facts and not of sentiment." It hinges, he said, " upon the effect of payment both upon the debtor and the creditor and what in the long run would be the best for each." Referring to the contracts con- nected with the funding of the debt, the Chairman of Barclays Bank approved of our payment last December, but he added : "I certainly believe that the City of London would regard it as an unreasonable suggestion that, although it is clearly understood by all that there is to be a free and complete discussion upon the whole question of the payment of War Debts and the consequences if they are paid, yet pending the discussion and pending a satisfactory settle ment acceptable to all, the next instalment must be paid, and the next, and the next, no matter how long the discussions may be prolonged. I do not think that would be reasonable or right. . . . I feel that the United States will realize that Great Britain should not pay any further instalment until the whole matter has been discussed and an agreement for a final settlement has been reached. . . . There must bo some finality upon a question which so vitally affects the present and future conditions of the whole world."
FUNDAMENTAL FACTS.
Concerning this question of whether Britain should or should not meet the June instalment on the War Debts to the United States if no settlement has previously been reached, there may be differences of opinion, but there can be no difference of opinion as to the important funda- mental principles which, the Chairman of Barclays Bank maintained, should govern the whole consideration of this problem of War Debts. After showing the impos- sibility of a long continuance by Britain of payments of War Debts in gold, and after pointing out that the only alternative to payment in gold is payment in goodS, Mr. Goodenough proceeded to demonstrate the complete failure of the United States to realize what was involved by her change over from a Debtor to a Creditor country. The point is a most important one, for, carefully con- sidered, it goes to the root of many of the causes of world depression, and, moreover, unless the truth is perceived and is acted upon, that depression must almost necessarily continue indefinitely.
PRE- AND POST-WAR CONDITIONS.
When before the War the United States was a great debtor country' and had large sulks to pay to her creditois, (Continued on page 109.) Finance—Public and Private (continued from page 97) her foreign trade economy was necessarily based on the need for a surplus of exports on trading account. In other words, as a debtor, she recognized she could only make her payments in goods, and to that end, and also, no doubt, to stimulate home trade, exports were encouraged and imports discouraged by heavy tariffs. To-day, however, she has become a great creditor nation, and if she is to receive payment from her debtors she must, of necessity, for there is no other permanent alternative, arrange to increase her imports or decrease her exports. If, said Mr. -Goodenough, America wishes to receive payment she must accept it in the only way in which payment can be made, i.e., in goods, and not- withstanding all the difficulties make payment possible by a readjustment of tariffs. That a creditor must not make payment impossible must be regarded as a funda- mental principle at all times between every creditor and every debtor."
BRITAIN'S PAST POLICY.
By way of enforcing his point as to the need for a change of the American attitude towards the problem of War Debts Mr. Goodenough then turr ed to the economic policy of this country, and showed how for a period of over seventy years it had been the reverse of that of America. Our task, he said, had as a creditor country been to extend the fields of civilization and to develop the distant and unoccupied areas of the world and those countries which; though already populated, were ripe for development. As a consequence of this policy, however, the nations of the world became heavily indebted to Great Britain and, consistent with the principle of debts being payable through goods and services, Great Britain, by her Free Trade policy, made it possible for her debtors to pay the interest and service of the debts due to her through free sales of their goods in the British market. Un- doubtedly, Mr. Goodenough was right in saying that for this period at all events the Free Trade policy was the best suited for Great Britain and was consistent with the observance of the fundamental principle that a debtor should be permitted to discharge his debts. Now, of course, has come the great change whereby Britain, although still a creditor country, has not only been called upon to meet huge external liabilities, but has also had tariffs raised against her to an extent making it utterly impossible to pay the United States through an adequate export of goods, while the tariff barriers raised between many foreign nations resulted in Free Trade England being made the absolute dumping ground by certain other countries. Nevertheless, Mr. Goodenough was right to remind us that we still have, as a creditor nation, to give due regard to the fundamental principle of a creditor nation permitting its dcbtDrs reasonable facilities to dis- charge their liabilities.
INDISPUTABLE FUNDAMENTALS.
Now, as it seems to me, there is contained in this state- ment by the Chairman of Barclays Bank not only an exposition of the indisputable fundamentals of the War Debts but also of principles, the observance and perform- ance of which alone can restore the free workings of inter- national trade, international exchanges and the interna- tional credit system. It is, as Mr. Goodenough said at the outset of his remarks, a question of facts and not of sentiment, and I shall be surprised if his line of reasoning does not appeal to thoughtful men in America and in this country. Never was there an occasion when it was more important to get down to bedrock facts when we are con- sidering problems affecting not financial interests in the abstract but the practical interests of millions of unem- ployed individuals, and by his masterly exposition of the fundamentals underlying the problem of War Debts I consider that Mr. Goodenough has done much to clear the ground for the consideration which will shortly have to be given to the problem by statesmen representing this country and the United States. If those statesmen are sincerely desirous of bringing about a revival of world confidence and world trade, they will do well not to wander far away from the considerations which have been put forward by the Chairman of Barclays Bank.
ARTHUR W. KIDDY.,
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