The figures are only approximate, for they do not take into account compounded interest; and there is some doubt as to the propriety of including the Russian obligations to France, most of which date from before the war and are owing French nationals and not the French Government. Roughly speaking, the United States is the largest creditor, with $11,000,000,000 owing her, while Great Britain follows a close second, with $10,000,000,000 on her books against Continental European countries. Great Britain stands to be the heaviest loser; for the payment of none of her loans is assured, while more than 40 per cent of the American advances is represented by the loan to Great Britain, arrangements for the paying of which with interest have already been concluded.
When we consider the short time that the United States was in the war, its cost was staggering. And we must remember that the United States lent no money out of surplus, but that her ability to grant the huge credits to her associates in the World War was due to the successive Liberty loans and the Victory loan, which are internal obligations the interest and amortization charges of which are being carried in our national budget. On the other hand, the money did not actually leave the country, but was spent by the borrowing Governments for goods and food-stuffs manufactured and raised in the United States. The repayment of Great Britain’s debt does not work great hardship either on the British or ourselves; for Great Britain and her Dominions are large holders of American securities and have extensive investments in Mexico and Central and South America. The Continental European belligerents sold most of their North and South American securities during the war. The repayment of $6,500,000,000 to the United States would have to come largely through an excess of exports over imports from the United States.[28]
The transfer of surpluses of wealth from one country to another is an economic problem of both reparations and interallied debts that has not yet been solved. In the midst of all our discussion of the insistence upon the settlement of reparations and interallied indebtedness, where is the economist who has shown us how this can be done without the willingness of French markets to absorb German goods and American markets to absorb European goods?
However little it may appeal to us on first sight as a business proposition to cancel French and Italian debts in return for the sweeping modification by these two nations of indemnity demands upon Germany, we may yet come to see that such a course would be not only a magnificent contribution to world peace but also good business for ourselves. Is it not the alternative to a low tariff and dumping? Will it not lead to the economic rehabilitation of Europe, to which reparations and interallied debts are now the barriers? For our farmers and manufacturers alike, is not the restoration of Europe’s purchasing power a benefit worth a sacrifice of loans that either are bad debts or can be repaid only to our detriment?
Interallied indebtedness has also its psychological side. “Your money lend and lose a friend” is a true saying. The attitude of the American people on interallied indebtedness is a serious obstacle to Franco-American and Italo-American friendship. We cannot exact payment of the sums owing us without creating dislike, antagonism, and resentment. This may be a sad fact, but it is none the less true.
In conclusion, there are two points upon which Americans have the right to insist, and it would be foolish to cancel interallied indebtedness without insisting upon them.
The material advantages the United States gained from the World War were far less than those gained by the other victorious participants. Putting aside as hypothetical the argument that Germany, had she won, would have attacked us next (for it is an argument that does not take into proper consideration the importance of sea-power), we can say to our European comrades in arms, including Great Britain, that they ought to take into account not only the intangible rewards of victory, such as crippling a powerful adversary and competitor, but also the spoils—reparations already made, in which we did not share; shipping; territory annexed; and the division of rich German colonies and a portion of the Ottoman Empire. It is idle to say that these are not worth while and are liabilities rather than assets. If they are of no value, what shall we think of British and French statesmen who insisted on having them and who have been willing to spend blood and treasure, and to risk the friendships cemented in the war, in order to possess and enjoy them?
Even when the idea of reparations was enlarged to cover pensions, the United States did not lay claim to a share. This was in itself a generous contribution to our European associates. Nor did we ask for a sphere of influence in Turkey or a share in the German colonies. Our attitude was one of complete disinterestedness and of an unselfishness unparalleled in the history of peace-making by victorious coalitions. If we are now asked to make an additional contribution, should we not insist first of all upon a quid pro quo for our money in the form of definite understanding about the open door in Africa and Asia, especially in the mandated territories? Ought we not also to insist upon the military and naval neutralization of European possessions on the American continent and reciprocity in trade agreements between all these possessions and the countries of North, Central, and South America?
The second point is one on which we need light badly. Just what are the holdings of citizens of debtor nations and of debtor governments in the United States and other parts of America? Our debtors are pleading poverty and the impossibility of paying reasonable interest, much less of amortizing, what they borrowed from us. Just what truth is there in this plea, which has the tacit indorsement of some of our largest banks? Speaking at Toledo on October 16, 1922, Secretary Hoover declared:
The settlement of international balances between America and Europe contains factors that are in their volume unique in international commerce. For instance, the annual expenditure of American tourists abroad, the remittances of emigrants in the United States to their relatives, the growing volume of investment made by our people in foreign countries, interest upon investments in the United States of private citizens of our debtor countries, and other items of so-called invisible exchange combine to furnish a large supply of our money to Europe with which they in turn can make payments of interest on debts or for the purchase of goods from us. In total to the world these sums amounted to about $1,500,000,000 in the last fiscal year, which was, indeed, a year of depression, and these are sums which with peace in the world will grow constantly in the future. These sums are largely expended directly or indirectly in our debtor countries.... During that fiscal year the world had a paying power to us in excess of goods bought from us of about $750,000,000.