The most honest solution, which, intelligently enough, J.M. Keynes has seen from the first, is that each of the inter-allied countries should renounce its state credits towards countries that were allies or associates during the War. The United States of America are creditors only; Great Britain has lent the double of what she has borrowed. France has received on loan the triple of what she has lent to others.
The credits of France are for almost two-thirds undemandable credits of Great Britain; more than 14 milliards being with Russia, they are for considerably more than one-third bad debts.
France and Italy would be benefited chiefly by this provision. Great
Britain would scarcely either benefit or lose, or, rather, the benefit
accruing to her would be less in so much as her chief credits are to
Russia.
The United States would doubtless have to bear the largest burden. But when one thinks of the small sacrifice which the United States has made in comparison with the efforts of France and Italy (and Italy was not obliged to enter the War), the new sacrifice demanded does not seem excessive.
During the War the United States of America, who for three years furnished food, provisions and arms to the countries of the Entente, have absorbed the greater part of their available resources. Not only are the States of Europe debtors, but so are especially the private citizens who have contracted debts during or after the War. Great Britain during the War had to sell at least 25 milliards of her foreign values. The United States of America, on the contrary, have immensely increased their reserves.
But this very increase is harmful to them, inasmuch as the capacity for exchange of the States of Europe has been much reduced. The United States now risk seeing still further reduced, if not destroyed, this purchasing capacity of their best clients; and this finally constitutes for the U.S.A. infinitely greater damage than the renouncing of all their credits.
To reconstruct Germany, to intensify exchange of goods with the old countries of Austria-Hungary and Russia, to settle the situation of the exchange of goods with Italy and the Balkan countries is much more important for the United States and the prosperity of its people than to demand payment or not demand payment of those debts made for the common cause.
I will speak of the absurd situation which has come about. Czeko-Slovakia and Poland unwillingly indeed fought against the Entente, which has raised them to free and autonomous States; and not only have they no debts to pay, being now in the position of conquerors, or at least allies of the conquerors, but they have, in fact, scarcely any foreign debts.
The existence of enormous War debts is, then, everywhere a menace to financial stability. No one is anxious to repudiate his debts in order not to suffer in loss of dignity, but almost all know that they cannot pay. The end of the War, as Keynes has justly written, has brought about that all owe immense sums of money to one another. The holders of loan stock in every country are creditors for vast sums towards the State, and the State, in its turn, is creditor for enormous sums towards the taxpayers. The whole situation is highly artificial and irritating. We shall be unable to move unless we succeed in freeing ourselves from this chain of paper.
The work of reconstruction can begin by annulling the inter-allied debts.