7 MAY 1932, Page 5

America and the Debts

WITH the Lausanne Conference little more than a month distant, it is of vital importance that the European Powers concerned should get their minds completely clear on the subject both of reparations and of inter-Allied debts. The two are formally distinct. To attempt to make a reparation settlement dependent on the complete or partial cancellation of Europe's debt to the United States would be fatal. No one with the smallest familiarity with American opinion can doubt that. But, actually, of course, the payment of reparations and the payment of War debts are inseparably associated. This country, to take the most obvious example, long ago agreed to demand no more under the heads of reparations and debt payments than it had itself to pay to the United States year by year. That, again, is not 'formally the same thing as saying that if we do not receive payments ourselves we cannot pay America. But actually the effort would be beyond our strength, and what is true of Great Britain is much truer of more impoVerished countries on the European continent. If, therefore, Lausanne results, as it must inevitably result, in the cancellation of the whole or by far the greater part of the reparation payments due from Germany, the next step must manifestly be con- sideration of the relation of America to her European debtors.

Before that time comes it will be well to realize what America's views on the matter are. Mr. Stimson has, no doubt, imparted them to Mr. MacDonald, Dr. Bruning and other European statesmen whom he has recently been meeting at Geneva, but Mr. Stimson is in the rather curious position of being compelled to speak officially and yet at the same time unable to commit the admin- istration he represents, for at the present moment—and it will not be very different after the coming Presidential elections—neither President nor Cabinet can impose a war debt solution on the country. That is a matter in which Congress stands supreme, and Congress, where finance is concerned, is almost neurotically sensitive to public opinion. Public opinion, in this case, means the opinion of citizens who will have to pay more taxes if the European debtors do not pay their debts. That is one fundamental fact to recognize. But the American public, approached in the right way, is far from ungenerous and by no means disposed to insist at all costs on its pound of flesh. The European debts have already been scaled down heavily, particularly those of France and Italy. (Great Britain has obtained much less remission.) Under what conditions is it reason- able to ask the United States to remit further payments still ? An answer to that, one of many answers forth- coming is to be found in a speech by Senator Borah, Chairman of the Foreign Relations Committee of the Senate, the full text of which has just reached this country.

The significance of Mr. Borah is well understood on this side. He has long presided over the most important Senate committee. His independence of mind is notorious, but he has a remarkable knack of expressing the views of the common man whose decisions ultimately shape American policy, and in preaching one more sermon from a time-honoured text on the subject of debts and reparations Senator Borah is almost certainly expressing the mind of the average American and, -in all likelihood, the mind of the administration as well. To put Mr. Borah's.thesis in a sentence, he insists once more that there is no good reason why America ihbuld remit the debt payments due from Europe when her European debtors are spending year by year on armaments eight times the amount of their debts pay- ments to her (Mr. Borah's own country, incidentally. heads the list of national armament budgets), and impoverishing themselves by tariff walls that go far towards producing that inability to pay which is sending Europe as suppliant to America's feet. No one who has watched the evolution of Europe since 1918 can refuse to admit that the Senator's words arc, in the main, profoundly true.

Even• if they were not true, it would be well worth Europe's while, under present conditions, to accommodate itself so far as may be to the American point of view. The Americans, like practical business men (and practical business men can be generous and far-sighted when they choose), want to get value for their money. They see the condition of the world and suffer from it them- selves. America's external trade, like everyone else's. is drying up. The result is written in unemployment figures such as America has never known and hardly even imagined. 1,200,000 people arc said to be in receipt of relief or in need of relief in New York City alone. What effect is the remission of debt going to have on these conditions if it stands by itself ? If the amounts due to the United States are simply written off with a stroke of the pen, and the American tax-payer left to find the interest and amortization due every year to the American bond-holders, the average American voter can hardly be expected to feel much enthusiasm for that solution. If, on the other hand, the operation is part of a new attitude of the world to its problems ; if there is hope of closing the reparation controversy for ever ; if the Disarmament Conference now sitting at Geneva is really to do the job it was meant to 'do and get arma- ments actually and visibly reduced ; if the paralysis that has fallen on international trade is to be ended by some concerted effort that will set the wheels of industry moving once more ; then America may convince herself that the cancellation or drastic reduction of debt is no mere thankless piece of enforced charity, but a stroke of sound business that will hasten the return of prosperity both on that side of the Atlantic and on this.

If that, broadly, is the general Americrin thesis, and there is every reason for believing it is, it cannot be seriously contested. And it is the right way to face the future. Whether German reparations can be abolished altogether is still an open question. The world would be far better off if they were, but in all matters where the unanimous decision of many nations is required com- promise is necessary, and account must be taken of the attitude of France. But there must in any case be final settlement at Lausanne. The world needs, before all things, a new start, and it cannot get that with potential liabilities still overhanging it. America, it may be repeated, does not sec things in all respects as we see them. When Mr. Borah describes the tariff walls of Europe as merely a continuance of the military struggle that was supposed to have ended in 1918 he is sacrificing truth to epigram far too summarily, and when he makes no mention of the enormous additional burden laid on the European debtors by the fall in prices, and the consequent increase in the amount of goods required to satisfy a given gold debt, he is ignoring one of the vital factors in the situation. But that does not affect his main thesis nor help the States of Europe-to evade the main conclusion which emerges from his argument. Nothing is more essential than that Europe should realize what that conclusion" is

and grasp its importance. There can be no formal guarantee that under given conditions the European debt to the United States wilt be remitted. But all the indica- tions—not the mere indications of a moment but signs which have been accumulating over a period of months and even years—arc that if Europe (for this is primarily Europe's affair) can make the Disarmament Conference a success, and the States concerned in reparations can make LauSanne a success, then the United States will view the debt question in a totally new light, and setting the coping stone on the other two settlements may be ready to take action that will lift the world out of the morass in which it struggles and set it moving once more up the slope towards prosperity and settled peace, .