The Evening Post WELLINGTON TUESDAY. SEPTEMBER 25. 1945

Evening Post, Volume CXL, Issue 74, 25 September 1945, Page 6

The Evening Post WELLINGTON TUESDAY. SEPTEMBER 25. 1945

ETHICS OF CUSTOMER AND CREDITOR

In practical economics, it would be naive to assume, literally, that the customer is always right and that the creditor is always wrong. , When the customer finds himself heavily in debt, he is inclined to look to the creditor to help him out; but creditors also have rights, and these rights are not absolutely abolished by the fact that the customer has been involved in a fight—for a long period in a lonely fight—in the cause of world freedom. It is true that tremendous moral importance attaches to the fact that World War II is the prime cause of Britain's indebtedness to America, and that Britain is a very old customer of America and would not find herself in her present indebtedness but for war circumstances beyond her control; it is also true that Britain is a customer that America cannot afford to dispense with if current ideas of post-war multilateral trade are to attain reality; yet the onlooker must not ignore that a creditor has rights, that creditor Governments do not lend abroad money which they picked off trees in the garden, and that it is to be assumed that a Government which forgives a debt of a billion dollars owed to it oversea still owes that billion dollars, or most of it, in loans, long term or short, to its own citizens. The creditor Government, by forgiving the oversea debtor, does not- appease its own ultimate creditor, the bondholder. So there are many reasons why the reluctance of a creditor Government like America to scale down debts must not be too harshly viewed. Another reason is that America is not the only creditor to whom Britain may be forced to apply for reduction of debt. Through the sterling credits which the British Dominions have accumulated in London for wartime supplies, the Dominions appear as Britain's creditors for smaller but appreciable amounts. Can the Dominions place creditor America in the dock for maintaining creditor rights, without standing in the dock alongside her?

Such complex problems cannot be decided by proverbs or by abstract formulae. They can be solved only by give and take, worked out in infinite detail. And such solutibns are nearly always attainable in cases where —as in this case—trade is mutually profitable and necessary, and where the self-interest of the creditor is to keep the debtor in business. No sane creditor is indifferent to a market in which he has traded profitably for a century, and which perhaps has been for half a century the sole market of his surplus. If America, the principal creditor, were inhabited by people who are blind to the broad advantages of mutual trade, then the prospect would not be good. But what remains in America of the old inclination for one-way trade is being fiercely assailed by many agencies of publicity in America herself. For instance, Robert Chandler in the "New York Nation," writes: "Actually the United States as a whole—and foreigners see this clearly—has, not a policy but policies, and these policies often cancel each other. We are strong advocates of free private trade, but we have the highest tariff walls any creditor nation ever had. We do not like to do business with countries through government purchasing missions, but we are out after Russian trade. We believe that competition is the law of trade, but we pay subsidies to producers till we have more goods than we can consume. We do not believe in dumping, but we practise dumping. We do not believe in organisations which limit production, such as cartels, but we are in favour of international commodity agreements—provided we are in on the agreements."

If, as is confidently hoped, the American Government and Congress are now convinced that a creditor nation cannot export ahd refuse to import, there will be no persistent attempt—apart from bargaining tactics —to use British debt for the purpose of reducing Ottawa preferential duties without regard to American tariffs and subsidies. Debts and tariffs are all part of one economic whole. Drawing a lesson from the past, Robert Chandler writes: "The figures of our [America's] exports and imports from 1919 to 1929 make sad reading today. Every year except one we had a surplus of exports over imports. Every year our gold holdings increased, until we had most of the world's supply of gold, having drained it out of other countries as payment on their debts and their excess purchases from us. Then all payments stopped, and we had 1929, Hitler, and finally war. Other countries do not want to see this happen again. . . . People who are bankrupt do not have to get involved with the money-lenders—not if they are willing to work together and make sacrifices." An American may say to an' American what a debtor might hesitate to say to a creditor.. But an Empire creditor in any case must not say to an American creditor what an Empire creditor would not say to himself.