An American View of the French Debt Question and Franco-American Collaboration

Transcription

1 The University of Toledo The University of Toledo Digital Repository War Information Center Pamphlets Ward M. Canaday Center: University Archives An American View of the French Debt Question and Franco-American Collaboration Follow this and additional works at: This Pamphlet is brought to you for free and open access by the Ward M. Canaday Center: University Archives at The University of Toledo Digital Repository. It has been accepted for inclusion in War Information Center Pamphlets by an authorized administrator of The University of Toledo Digital Repository. For more information, please see the repository's About page.

2 PAMPHLET OFFICE > An American View of the French Debt Question and Franco-American Collaboration University of Toledo Library Toledo, OhJO CENTRE D'lNFORMATIONS DOCUMENTAIRES 23, rue Notre-Dame-des-Vidoiies Printed in France. PARIS

3 INTRODUCTION The origin of the document here presented is this : NOTICE We extend our most cordial thanks to Dr. Horatio S. Krans, President of the Columbia Alumni Club of Paris, for authorization to reprint this document. Dr. Krans is one of the Authors of it, his ivoo Collaborators being Mr. Joseph Du Vivier and Mr. Hugh P. Guiler. In Paris, as in several European capitals and in all the large Cities of the United States, there is a Club of former Students of Columbia University. That University, situated in the City of Nev\^-York, is one of the best and one of the largest of American Institutions of higher learning, its Students numbering nearly 36,000. The Paris Columbia Club is known as the Columbia Alumni Club of Paris. Members of this Organization, resident in France, could not fail to realize that the question of the French Debt to the United States had resulted in chilling the cordiality of American sentiment towards France. They believed that, for convincing reasons of purely American self-mterest, and all questions of sentiment aside, this change of feeling was deplorable. The document that follows was written to explain why these Columbia men in France believe as they do. It vs^as sent originally as a circular letter to Members of some sixty other Columbia Clubs in the United States and in Europe. Horatio S. KRANS, Director of the American University Union, Paris. 3

4 AN AMERICAN VIEW OF THE FRENCH DEBT QUESTION AND FRANCO-AMERICAN COLLABORATION Speaking for a group of Columbia University men in France, we invite your attention to certain considerations which may tend to dispel the present Franco-American irritation and to create the atmosphere of friendliness and co-operation without which the road to international prosperity and peace must remain inevitably and absolutely barred. Like a host of Frenchmen in all walks of life, amongst them men of high distinction and wide influence, we regret that the December 15'"' debt instalment remains unpaid. The remarks and explanations that follow have, however, no controversial purpose, and do not seek to justify either the French or the American position. Their sole aim is to present certain phases of the actual situation and to offer certain explanations that may induce the mood and temper which will facilitate prompt and effective co-operation and collaboration. The economic and political crises the world over, the menace of further financial disasters, the war and the rumors of wars in the East, constitute a series of problems to be grappled with at once. There is no time to waste in exchanging hard words or in wrangling over the rights and wrongs of the case. A conflict of national interests exists. An accord must be reached. It can be reached only by conciliation and mutual concessions. 4 It should be remembered that the world's nerves are now on edge, that nations and individuals are harassed to the limit of endurance, an that unwonted things are happening everywhere. Even at best, occasional international crises are inevitable, and the present tension should not be taken hyperseriously. The relations between sensitive and highstrung peoples can never be uniformly and smoothly mechanical. Furthermore, while France and America may be proud, each, of its high level of national honor, neither is blameless. No people has a record of flawless good faith and promises kept to the letter. The nations are sinners all, and now, if ever, is the time for mutual tolerance and forgiveness. There are certain elements in the psychology of the French regarding the present difference which, whether justified or not, are natural under the circumstances, and should be kept in the front of the mind of those who desire to comprehend, and which might be conceded to be extenuating circumstances even by the most rabid adversaries of France. In the first place, there was the sudden Hoover moratorium that disorganized all the French plans for dealing with German reparations. France was persuaded the moratorium was declared for the purpose of enabling Germany to pay private debts to Americans, and also believed it was warrant for expecting special consideration in the settlement of its debts to us. Again, the French are absolutely persuaded that the debt negotiations between President Hoover and Monsieur Laval involved a diplomatic intimation, amounting to an assurance, that there would be a re-consideration of the debt 5

5 question before December 15"'. Walter Lippmann is of precisely this opinion. He declared (New York Herald, Paris, Jan. 20, 1933) that December 15"' marked a double default a default in American diplomacy and the French failure to pay on time. A third point : the French firmly believe, rightly or wrongly, that America, in urging the Lausanne arrangement between France, England and Germany for a lump-sum reparation payment, which was to reduce the German debt by 90 %, assumed a moral obligation to give a renewed and favorable consideration to the settlement of French and English debts due the United States. In view of the purpose of these remarks, place should be found for a word concerning two grievances against France, which seem never to be absent from the American mind and memory. One concerns the wealth in gold in which France is supposed to be rolling, the other the question of French armament and the unwillingness of the French to disarm as largely and promptly as many of our compatriots would wish. So far as the first question is concerned, let this be said : As a matter of fact this gold does not belong to the French Government, but to the Bank of France, a privately owned institution which has, since June 1928, been obliged by law to buy and sell at a fixed rate all gold offered or demanded. This obligation prevents the Bank of France from entirely controlling the amount of gold which it has at any time. Moreover, the Bank of France has now no more gold than is necessary to support the French banking structure under existing conditions, and anything over its normal gold reserve is held against foreign claims. 6 Before the war France was a creditor nation and a substantial portion of its assets were represented by claims on foreign countries. Paris, after London, was the world's principal money market and large sums were loaned each year to foreign governments and undertakings. Hence, the Bank of France had less need of gold reserves, as it could always draw on foreign debtors. The outbreak of the World War necessitated the liquidation of a great part of France's foreign holdings and large losses have been incurred, particularly in Russia. Thus, during and immediately after the War the position was reversed and France became a borrower instead of a lender. In addition, due to France's strong banking structure and the stability of the franc since 1926, as well as speculation in the franc in the preceding year, depositors in other European countries, who had lost faith in their own currencies, have, during the past few years, transferred large balances to French banks. Obviously, what has come so quickly could, with a change in psychology, leave as rapidly, and so, especially as France has no longer large claims on foreign centers which she could count upon to meet possible withdrawals of foreign deposits in France, the only businesslike course open to the Bank of France is to maintain franc for franc gold cover against foreign balances. It is estimated and here only an estimate is possible that of the gold held by the Bank of France approximately one fourth is held against foreign deposits. In the event of the withdrawal of these foreign balances, the gold reserve of the Bank of France might be reduced from 76 % to between 50 and 55 %, which under present conditions is considered by international bankers to be no more than absolutely necessary. 7

6 The only foreign loans of any magnitude France has made since the War are those to Central European countries, and most of these really represent a transfer of material and not of funds. The recent loan to Austria that France is supposed to have made was in reality not a loan but simply a guarantee which, on July 15, 1932, France and Great Britain, at the suggestion of the League of Nations, had agreed to extend in order to prevent financial disaster in Austria. The point is that there was no transfer of funds, and not a cent was actually paid to Austria. The French are also accused of not paying taxes to the extent of other peoples. While it is true that only some two million French people pay direct income taxes, and 80 % of such income taxes are paid by some 200,000 only, nevertheless through the multitude of indirect taxes and cumulative taxes, the French are among the most heavily taxed people in the world, and certainly far more heavily taxed than Americans. It has recently been estimated that, of the total revenue of the French people, about 40 % is actually collected by the French government and its agencies, departments and municipalities. As regards the question of French armament and disarmament, the following figures and remarks afford, for our present purpose, food for reflection. There is much misunderstanding on the subject of France's attitude towards disarmament. In the words of Professor James T. Shotwell : «The French are right in claiming that at bottom the problem of disarmament is not one of mathematical ratios, but of fundamental security... The nationalist movement in Germany is as much a part of the disarmament 8 problem as the armaments themselves. No nation is likely to disarm if there is any cause for fear that it may be attacked when defenseless. To disarm in the face of the menace of war is criminal folly ; disarmament is justified only in proportion as the policies and the institution of peace supplant those of war.» (International Conciliation, N" 287, February, 1933). France believes she has a real problem of security and self-defense. Her natural geographical borders on the East and North-East lay her wide-open to attack. In these regions is to be found 85 % of the industrial wealth of France. There Germany is her neighbor. Italy is her neighbor on the South East. The French believe the spirit of both Germany and Italy to be dominantly militaristic. So far as French security is concerned, the reading of history is not reassuring. The French bring home their situation to Americans by a hypothetical case. They say : «Suppose Canada to be ambitious, militaristic, and of a bellicose temper, and to have a population half as large again as your own. Suppose Mexico to have a Fascist leader and a population equal to that of the United States, and to be none too friendly. Such is, relatively speaking, the position of France with regard to Germany and Italy. Grant that you had been thrice invaded in a century, with results apalling in loss of life and wholesale devastation. Grant, also, you were sure there were grounds for fear of a fresh invasion. Then you would understand our problem of security, and the necessity of organized force for self-defense.» Free as we are, comparatively speaking, from danger of attack, our proposed budget for 1933 for armament is 9

7 ^ 805,000,000, while the corresponding French budget for the same year is about half of that amount. (From report of Secretary of U. S. Treasury, Nov. 20, Cited by France-Amerique, Dec. 4, 1932). Americans do not perhaps generally know that our expenditures for armament since 1913 have increased fully four times as rapidly as those of our leading European debtors (War Debts, by Professor H. D. Gideonse, Chicago University Press, 1933), In Europe this fact is dwelt upon, however. French effectives are less than they were in 1913 by some 150,000 men ; the period of French military service has been reduced from three years (1923) to one year (1928) ; her military budget has been reduced, between July 1932 and March 1933, by ^ 80,000,000. Her military expenses are this year not more than 20 % of her budget. To secure adequate self-defense at home and sufficient protection for her far-flung colonies, these are not exaggerated measures of protection. No one who knows the France of to-day can say that the French people are agressive or militaristic. No country has done more than France for the cause of public international law and for peace and international arbitration. Now it asks only to be left unmolested. We think it may be said, in general, that France and the United States were made to be friends, and for good reasons. Despite differences, which those of us who have lived in France do not underestimate, the two nations have bonds that unite them naturally in friendship. They love and hate the same things. They both love liberty, equality of opportunity, and a sort of democratic fraternity. They both hate tyranny, militaristic arrogance, and the 10 privileges of caste and class. Both are willing to pay the high democratic price for liberty of speech and action. Both share cherished memories of historic comradship and collaboration. And both have qualities that draw them sympathetically together ; they are alert, quickly responsive, of a gay and humorous temper, expansive, and sensitive. For the rest both nations are, relatively speaking, conservative, and their interests are not conflicting. We hope that this word to our friends at home from their fellow alumni in France will not be unwelcome, and may arouse a sympathetic echo. We are convinced, too, that where France and America are concerned, old friendship and a spirit of tolerance and conciliation will displace the irritation of the moment, and that the two countries will work cordially together for a better day. May this cordial co-operation, which is to our interest and to the interest of the world in general, begin at once! Continued wrangling is futile, leads nowhere, and spells blind stupidity and barren dissension. Cahors, imp. Coueslant,