Evening star., 1938-10-02
By OWEN L. SCOTT.

ment finance.
What is happening in Europe only ac-
centuates the choice and the problem
that confront this country and have con-
fronted 1t through all OF the depression
years.
The choice, as economists recognize 1t,
has been and still is this:
Should the United States make up its
mind to become the banker for the world,
utilizing its resources to make huge new
loans to foreign nations so that they can
buy surplus American products, thereby
syphoning of an important part of the
production Of American farms and fac
tories, and in that way stimulating a
broad recovery that would provide jobs
for all and profits for industry.
Or, should the United States make up
its mind that one experience rs an inter-
national banker has been enough, with
the result that the country now wants to
utilize its vast resources for internal de-
velopment, letting the rest Of the world
stew in its own juice while people here
set about making the adjustments that
would permit the controlled use of the
now idle resources of finance and man
power and machinery and raw materials.
Ofhcials point out that until now the
leaders in American business and finance
have refused to recognize that a choice
must be made. They look to develop
ments abroad to force an early recogni-
tion OF the two paths that lie ahead.
The first involves an adjustment OF
past war debts, it calls for repeal or dras-
tic change in this country's Neutrality
Act. it means repeal of the Johnson Act,
which now forbids loans to nations in
default on past debts and it involves
sharp downward revision of tariffs. Some
way would need to be found to redis-
tribute the immense gold hoard lying
buried in Kentucky.
Most important however, is the prob
lem of changing the attitude of the
public. Some way would have to be
found to induce private individuals to
lend their savings to foreigners after
their past experience in this field Some
way, too, would have to be found to re-
verse the nationalistic sentiment OF Ger
many and Italy and Japan and Russia
and South American nations so that
they would be interested in new Ameri-
can loans and would show less readiness
to confiscate the property Of foreigners.
Yet, II a return is to be made to the
good old days of pre-war competitive capi-
talism, or even to the boom days of 1929,
some such changes must be effected.
European war would only accentuate
the problem by increasing further the
pressure OF gold imports and the uncer-
tainties about lending money to foreign
governments for continued purchases in
American markets once the gold ran out.
The new war would find the debts Of the
last war still unpaid.
But if the United States Is going to
dodge the role of world banker, then it
has to face the difficult role of planner
in an effort to put the Nations vast re-
sources to work. This country's eco
nomic system is not geared to domestic
basis. If now the Nation is to make up
its mind that its efforts are to be devoted
to internal development rather than to
world development, the relationship be-
tween Government and finance must be
changed more radically than the New
Deal has attempted thus far to change
that relationship.
A deliberate policy of nationalism will
require that Government take positive
steps to put to work the riches that are
continuing to pile up only to remain idle
because of lack of economic organiza-
ton.
A decision by the American people to
turn from Europe and to avoid return
to the field of foreign lending would call
principally for Government to undertake
two vital jobs.
One of those jobs is to direct the in
vestment of idle dollars This task could
be carried out in many ways, several OF
which are rloW under consideration. For
example, the Government might decide
to form an immense corporation that
would set about building large number
of low-cost homes for rent to the Ma
tons underprivileged population. Or it
might decide to direct the investment of
large sums of money in new railroad
equipment that then would be leased to
the privately operated railroads. Or 1t
may decide to give tax concessions to
corporations which will agree to spend a
larger proportion of their earnings for
the construction of new plants and equip
ment.
Any broad venture Of this kind would
be expected to generate the start of an
active recovery in private industry. At
that point the second job would appear.
This job would involve price CONTROL in
Guiding control over the price that labor
demanded in the form of wages. Any
recovery can be destroyed by rapid price
advance With the base now laid for
credit expansion far beyond anything
ever dreamed Of in past periods Of pros
perity, Government would find itself
compelled to control prices to avoid q
runaway boom.
War could cause temporary demand
for those riches from abroad If Ameri-
cans would be willing to make vast new
foreign loans which foreigners then could
use to purchase American farm products
and raw materials and other commodi-
ties. But once that boom, based upon
war purchases, had died down and the
inevitable default had followed, there
then would rise once again the problem
of finding job for the Nations resources.
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