The New York herald., 1922-10-05
ENGLAND WILL PAY WAR
DEBTS, M'KENNA MESSAGE
Continued from First Page.

continued from flrSt rage.
IN any representative character. i ap-
proach the question solely from the
economic point of view and my en-
deavor is to determine so far as l can
the limit OF the debtors capacity to
pay. and the effect OF payment upon
the worlds trade. Our duty Us to satisfy
ourselves on the financial possibilities
of the case. 1t is not what the debtors
may justly be called upon to pay, but
what they are able to pay. which we as
business men. anxious to discover the
conditions upon which trade Nmen,
anxious to discover the conditions upon
which trade prosperity is founded. must
consider with the most careful attention.
England Able to Pay.
MY second observation is to meet
possible criticism. How can /, MEM
Der of a nation which is one Of the
debtors of the United States speak free
1y to an American audience upon inter-
national Indebtedness? The primary and
essential duty Of a debtor Is to dis
charge his liability and, until this is
done, all observations on the origin OF
the debt and on the economic couse-
quences of international payments are
liable to be viewed with suspicion A
creditor may, If he like. open up ques-
lions OF that kind. but debtor should
ADMIT his obligation without further dis
oussion l recognize that these are OBJ
Jectlons which l must answer and 1 be-
neVe that can do so conclusively In
the course of my argument 7 shall show
mat England has the ability to pay,
and. once that is established, I can un-
hesitatingly assert her determination to
honor her bond in full.
believe / am justified in asking
you to treat England's debt TO the
united States as certain to be provided
Tor, and IL this be conceded. we shall
De free to consider the question of the
remaining international debts as one in
Which America and England are equally
concerned and in. which both have the
same interest as creditors
FIRST let us look at the magnitude
or these international debts The great
est or all Is that Of Germany for repa-
rauons, debt of which the United
states declined to receive any share.
Ihe amount was not defined in the
treaty or Versailles, but subsequently
by the London ultimatum 1t was put at
$32,000,000. 700. at which amount n
stands ncminally to-day
or the remaining debts the liability of
France to the United States and Great
Britain Is six and balf billion dollars.
and of Italy to the same two countries
four and half billion dollars. Russia
owes these countries three and n half
billion dollars. and further one billion
dollars to France. These are the princi-
pal debts; the others are all compara-
lively small in amount. or the cred
itors of the European continental Gov
ernments England Is the greatest.
Claims without Parallel.
I'VE have no record in history of in
ternational claims of this magnitude
The indemnity exacted by Germany from
France under the treaty Of Frankfort in
1871, in round figures one billion dollars
created the largest debt between Gov
ernments ever known until the recent
war; and Is the only precedent we have
OF q considerable international payment
1t is of interest to recall how the liabil-
ity was discharged Payment of $780,.
100000 was made In gold and silver coin
and in German bank notes and currency
collected In France. and the balance In
foreign bills chi ''y German currency
bills. The pre- sc form in which the
payment was made Is, however, COM
paratively unimportant. For our pres
ent purpose the significant question Is
how France procured the means OF pay.
ment. She was bound to acquire Ger.
man marks or foreign currency ex.
changeable for marks. and to do so she
had either to find German or other for.
eign buyers for such things as she had
to sell or to obtain foreign subscriptions
TO her loans. Very considerable sales
were made to foreign securities owned
by French nationals, the French loans
were largely subscribed externally, and
the export of French goods was so much
increased that an average excess of i'm
ports of $65. 900 a year in the four
years, 1S6S-1S71. was converted into an
average excess of exports OF $46,000,00O
year in the four subsequent years BY
September, 1873. the whole indemnity was
paid. and although France remained
liable for the loans she had issued, she
was clear of any direct debt to the Ger
man Government and indeed of all for
eign debt payable in any but her own
currency.
Here we have an example of a con-
siderable international debt paid off
without any serious disofganization of
the worlds trade Now that were the
conditions which made this possible? The
war had been short, and the amount
of the indemnity was well within the
capacity of France to pay. Her
nationals held large blocks of foreign
securities, which were realisable In for
eign markets.: = her credit was good
which enabled her II obtain foreign
subscriptions to her ltans; and In her
effort to increase her rlexports she was
not hampered by high tariffs. She was
driven off the gold Aandard and al
though there was some decline In the
value of the franc. the depreciation
never exceeded 5 per rent. and, taking
the whole period through amounted to
barely more than l pei cent But OF the
several factors in the French ability to
pay the most important lay in her ac-
cumulated reserve OF wealth, the for
eign securities owned by her nationals.
1T is interesting B note the indus
trial condition OF Frmce at that time.
Employment was extremely active, and
production was on ~ great scale. She
had to meet her kternal liabilities,
which compelled her to increase her
sales in foreign marltts, and she did so
notwithstanding the ctnpetition OF other
nations. The improvh standard OF eni-
cheney in production phich was thereby
forced upon her endded long after the
period of the indemnity. In Germany
on the other hand thee was very dif-
ferent experience. che receipt or a
large amount of goh and silver had.
with other causes then In opetation, a
serious eject upon German internal
prices which rose rpidly. IN 1879
there was a brief trade and inanclal
boom followed in the ensuing year by
n crisis which was the beginning of
period Of depression. IL would not be
correct to say that the trade coalitions
Sa~,,apy wara entiraly dueitO the