Evening star. [volume] (Washington, D.C.) 1854-1972, 1935-03-03
BY ANDRE SIEGFRIED,

IL capital. This is one of her
present reasons for optimism,
and in fact no question is Of more
Importance for her. The angle from
which her financial center, the city, y
regards this problem under the pres
ent circumstances is very interesting.
In the nineteenth century, and in
fact right up to 1914. England played
the role of the worlds chief f1nancier.
There were other countries able to
make outside Observation-Disclosures,
for example; also Switzerland and
Holland-but the British Isles, with
out dispute. were the principal source
of the capital which kept the rest of
the world at work.
In the second part of the last cen
tury the economic development Of
other continents grew by leaps and
bounds. Railroads were built, ports
and international canals were con-
structed, mines had to be equipped
and more and more new industries
appeared. For these things ever more
and more capital was needed. Some
times this activity was private and
ecuted public works, which, of course,
In the last analysis tended to bring
about the same results.
Structure Ideally Balanced.
So England was ahead of the other
countries by at least one generation.
She was rich before all the others and
she possessed not only surplus of
available capital, but financial and
economic structure which made 1t
possible for her to dispose of it under
the most profitable circumstances.
Her economic relations with the en-
tire world gave her a valuable insight,
and all over the world one could find
Englishmen who were watching over
and guarding England's interests.
A complete national policy of in
vestment grew up and continued to
expand, and finally it developed its
own technique England knew by ex-
perience that when she loaned capital
to foreign country for improving the
latter'S equipment in one field or an
other it usually meant indirectly, and
often directly. an order for British in
dustry. Financing Of new railroad
carried with it an order for rails, for
locomotives and carS-and these Or
ders were always given to England, be-
cause there was hardly any one else
who could be depended on to deliver
the goods.
The "city" had learned that If the
world was to buy British products it
had to have the means to do so. In
supplying this means they would i'm
prove their own position at the same
time. From the time of this realiza-
ton broad policy of huge exporta-
ton has been inseparable. in the Brit
ish mind, from a broad policy of
large-scale investments in foreign
countries.
War Brought Change.
This system, the functioning of
which had run perfectly for a CEN
fury, began to break up as a result
of the World War There were sew
eral reasons for this. Primarily,
England, crushed by a debt of un-
precedented proportions, no longer
had the freedom of movement which
she had formerly enjoyed; less rich
and more burdened, she had less
capital funds at her disposal for
foreign investments. Even when she
did place money in other countries,
this frequently was done at the ex-
pense of her monetary security. One
of the causes of the sterling crisis
in 1881 was that the city had re-
invested in long-term notes a part of
the short-term deposits which in some
uncertain manner had been attracted
to London.
Now, just at the moment when Eng
land found herself less able to con-
tinue her role of international finan-
cial leader, the United States appeared
upon the scene, suddenly making a bid
for Englands place She was album
dainty provided with capital funds for
the purpose. The Americans did not
have the experience of the English,
their patience or their innate under
standing of international affairs, but
the massive power of their wealth was
such that nothing could resist them.
It was not, as the saying goes, a
pretty performance: they loaned
everywhere haphazardly, much pre-
occupied with signing many guaran-
ties to interminable contracts-but
the proper precautions were not taken
to insure the security of these loans,
as we have seen by the results.
Money was often used as stop gap.
rather than for the purpose of Great
ing new wealth; in South America
they made loans to pompous dictators.
in Europe to poor but pretentious
municipalities
U. S. Exports Gained.
However, no matter what is said,
the system worked in Americas favor
as it had worked with the English;
American exports followed American
money. When a South American
country was equipping his tramways,
its telephones, thanks to the success
full financial competition of the
United States, the orders for ma
terial went to the American manu-
facturer and the recruiting Of person.
mel was largely done in America. Eng
land and the rest of Europe suffered
from this competition, which seemed
to have become irresistible. New York
tended to become, in the very face Of
London, a competing marketing for
capital, the influence of which ex-
tended to the British dominions them
selves.
In the presence of this challenge
the English became very discouraged.
They were duly conscious of their
technical superiority IN financial mat
tiers, but they perceived that the
worlds center of gravity was leaving
Europe and themselves. But now,
since the crisis. new fact has ap-
peared-the American prestige has
paled and the Americans themselves,
disguised because they have lost so
much money in badly considered in
vestments, appear, for the moment at
least, to be retiring from the game.
The field is now open for England to
profit from this situation.
In order to take advantage OF It,
several conditions must be met. First
ENGLAND must actually have capital