Right Above Race

by Otto H. Kahn

Nothing is plainer than that business and business men had everything to gain by preserving the conditions which existed during the two and a half years prior to April, 1917, under which many of them made very large profits by furnishing supplies, provisions and financial aid to the Allied nations, taxes were light and this country was rapidly becoming the great economic reservoir of the world.

Nothing is plainer than that any sane business man in this country must have foreseen that if America entered the war these profits would be immensely reduced, and some of them cut off entirely, because our Government would step in and take charge; that it would cut prices right and left, as in fact it has done; that enormous burdens of taxation would have to be imposed, the bulk of which would naturally be borne by the well-to-do; in short, that the unprecedented golden flow into the coffers of business was bound to stop with our joining the war; or, at any rate, to be much diminished.

The best indication of the state of feeling of the financial community is usually the New York Stock Exchange. Well, every time a ship with Americans on board was sunk by a German submarine in the period preceding our entrance into the war, the stock market shivered and prices declined.

When, a little over a year ago, Secretary Lansing declared that we were "on the verge of war," a tremendous smash in prices took place on the Stock Exchange. That does not look, does it, as if rich men were particularly eager to bring on war or cheered by the prospect of having war?

But, it is said, the big financiers of New York were afraid that the money loaned by them to the Allied nations might be lost if these nations were defeated, and therefore they manœuvred to get America into the war in order to save their investments. A moment's reflection will show the utter absurdity of that charge.

American bankers have loaned to the Allied nations—almost entirely to the two strongest and wealthiest among them, France and England—about two billions of dollars since the war started in 1914.

These two billions of dollars of Allied bonds are not held, however, in the coffers of Eastern bankers, but have been distributed throughout the country and are being owned by thousands of banks and other corporations and individuals.

Moreover, they form an insignificant portion of the total debts of the Allied nations; they are offset a hundredfold by their total assets. Even if those nations were to have lost the war it is utterly inconceivable that they would ever have defaulted upon that particular portion of their debt, because, being their foreign debt, it has a special standing and intrinsic security.

It is upon the punctual payment of its foreign obligations that a nation's credit in the markets of the world largely depends, and the maintenance of their world credit was and is absolutely vital to England and France. Furthermore, the greater portion of these obligations is secured by the deposit of collateral in the shape of American railroad and other bonds, etc., which are more than sufficient in value to cover the debt.

But let us assume for argument's sake that the Allies had been defeated and had defaulted, for the time being, upon these foreign debts; let us assume that the entire amount of Allied bonds placed in America had been held by rich men in New York and the East instead of being distributed, as it is, throughout the country. Why, is it not perfectly manifest that a single year's American war taxation and reduction of profits would take out of the pockets of such assumed holders a vastly greater sum than any possible loss they could have suffered by a default on their Allied bonds, not to mention the heavy taxation which is bound to follow the war for years to come and the shrinkage of fortunes through the decline of all American securities in consequence of our entrance into the war?