One Way Out.
p. 41 · Read in the full issue
Mr. W. R. Carpenter Discusses a World Problem.
The following is a copy of a letter by Mr. W. R. Carpenter (head of the well known Islands firm), which has ap peared in a number of Australian news papers. It is an interesting contribu tion to the most difficult problem before the world to-day.
IT has been apparent for at least two years that there can be no real pro gress towards the economic rehabili tation of the world until there has been a review of international debts and a general cancellation of the war debt obligations too hurriedly assumed by the various nations in the years im mediately following the war. The lat est news messages from Europe indi cate that all the Chancelleries have now adopted this view, and at this moment there is pending an international agree ment having for its basis the condition described by Mr. Neville Chamberlain on February 2 —namely, “a general cancellation of reparations and war debts.”
This is the obvious course to follow —for the debtor nations. But one must be reasonable and look at the situation also from the point of view of the creditor nation, the United States. Am erica financed the war —and it was not a war of America’s seeking nor one in which America was primarily con cerned. American statesmen realise, just as clearly as do the Europeans, that the world cannot get out of the present impasse so long as the present position remains, and Europe is com pelled to pay huge sums to America by way of war-debt principal and interest.
But, say the Americans—and quite rea sonably—why should Europe’s liability to America be cancelled, thus placing upon the shoulders of the American people the whole financial burden of a war for which America was not respon sible. It is apparent to the least intel ligent that if America does not receive interest and repayments on her loans to Europe, she must make good the amount thereby lost by increased taxa tion of the American people. There is the situation that has defied solution by the world’s economists ever since the depression settled down upon the world and made revision and readjust ment imperative.
It is my opinion—and I think it is the opinion of many thinking men who are trying to see a way out of the most difficult situation that has ever con fronted the modern world —that a solu tion which is practicable and which will represent fair treatment of the vital interests concerned is as follows: 1. Germany must not be allowed to escape al together from her responsibility for the world war, and the subsequent crippling of the world’s economic system. 2. The interests of the American nation which found such huge sums to permit the Allies to carry the war to a successful conclusion must be protected. 3. That the Reparations Councils should agree among themselves upon an amount which would fairly capitalise the amount of Ger many’s Reparations Debt to the Allied nations. 4. That the Allied nations should agree among themselves to abandon all further claim upon Germany for Reparations; and that they should collectively and individually assign all their reparations interest to the United States, as a means of cancelling an equal
amount of their indebtedness to the latter nation. 5. That all capital repayments of international debts cease for a period of three years and that only interest payments be made during that time. 6. That during the three years period all in terest payments on international debts be kept down to three per cent.
The more one studies the situation, the more clear it becomes that this is the only possible solution. All -the na tions except the Central Powers in re turn for foregoing their reparations claims upon the Central Powers should be permitted to cancel their obligations for the same amount to the United States, so that they may be free to attack the vital problem of re-building their trade and industry. Germany’s present liabilities to all the other na tions would be consolidated in one de finite debt to the United States; and the United States would not then be called upon to face the dangerous eco nomic collapse which otherwise is rep resented in the world’s insistent demand for “the cancellation of war-debts and reparations.”
The above suggested solution is a business-like re-arrangement of existing debts and obligations. It would impose no hardships because the allied nations, theoretically at any rate, are already paying out in war-debts everything that they receive in reparations; and it would clear the way for the world’s economic rehabilitation. Much, of course, depends upon what is going to happen in Germany within the next few months—but that does not alter the argument. If Germany is determined to repudiate her obligations under the post-war settlements, the ultimate loss is going to reach the American bond holders, either directly (under the scheme outlined above) or through the European nations (which, obviously, cannot pay America if Germany cannot pay them).