Evening star., 1938-10-06

ism and policies of self-sufficency,
against American products, have been
the natural result of the inability of
European peoples to get capital to
replace that which went up in shot
and shell from 1914 to 1918.
Much of Americas lending power
was exerted in behalf of Europe be-
tween 1920 and 1929, but with little
safeguard against speculation, and
hence many loans became almost
worthless But it is surprising what
A huge percentage of these loans have
continued to pay interest and prin-
cipal.
The one outstanding default. of
course, was the war loans which,
however, were Government and not
private obligations. These, of course,
were affected by the delusion of the
Allies that Germany could pay the
reparation bill.
Europe Needs Prosperity.
The truth is the World War debt
couldn't be paid by this generation
or succeeding generations in Europe
without a phenomenal increase in
ecokomic prosperity. When Europe,
stripped of capital, was unable to find
revenue from taxation sufficient to
pay war debts and when Germany
rallied to pay, too, suspension Of pay
ments to the United States became
inevitable.
The passage Of the johnson Act
to forbid the fotation Of European
loans in the United States was popu-
lar at the time because of wide
spread belief in America that Europe
could but wouldn't pay. Whatever
doubts on this subject there may
have been, much has been dispelled
by the recent revelation of Europes
war fears and the heavy expense of
armament preparation in the last five
years. When, as we read this week,
France is having difficulty now raising
even the small amount of money to
pay for the mobilization last month
'of her armies when war was threat
ened over the Czech problem, it is
plain what the financial plight of
Europe really is.
Capital Is Crying Need.
There are many observers of eco
nomic trends, moreover, who think
that the German people would not
tolerate the dictatorship idea very long
if they could develop an era Of real
prosperity and get rid Of the arma-
ment expense. The one thing Europe
needs above all else today is capital, |
and Uncle Sam has more than half of
the gold of the world-the basis for
huge credits-buried in the hills of
Kentucky.
The argument that America should |
t.nd no more to Europeans because
the governments became virtually |
bankrupt is met by many economists
with the contention that, if, in capi-
talistic system, there Is refusal to
lend to business man who once made |
a failure or went through bankruptcy,
the chances Of increasing employment |
by encouraging enterprising individuals |
would become nil.
What Loans Did.
When Europe was borrowing from |
America during the period between |
1928 and 1923, it is interesting to note
that about $5,OO0,OO0,Ooo went over
seas, but approximately $4,000, 900, 900 |
came back in the form of interest |
charges and sinking fund payments on
debts, private and governmental. These |
figures were entirely apart from the |
huge foreign trade which America de-
vefoped. For, when American funds
were loaned, they usually were used
precisely as Senator Borah now sug-
gests, namely, to finance purchases of
American goods and manufactured
products.
The United States has singular
opportunity to encourage foreign trade
and increase employment at home by
making available credits to European
peoples. The johnson Act can still be
retained insofar as it applies strictly |
to lending to foreign governments, but
1t probably was never intended by the |
california Senator, who sponsored the
act, to put virtual embargo on the |
flow of private funds from people to |
people, something vital to the restora-
ton of world economy and hence to |
the prevention Of world wars.
(copyrisht, 1889