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Mr. Chairman, I appreciate this opportunity to express
my views on the proposed British loan. This is one of the most
important issues of our time, and one of the most difficult.
During the weeks and months of continuous negotiations which we
conducted with the British representatives last Pall, I
formulated three questions in my mind which I eventually found
could be answered, at least to my own satisfaction.
1. Why do the British need help from abroad?
2. What would it cost us to help them out?
3. What would we get in return?
Iirs±: Why do the British need help from abroad?
They need it because they have just finished an all-out
war against our common enemies. They need a blood transfusion
to help them regain their international economic health. The
proposed credit is not and, therefore, should not be judged as
a commercial loan. It is more like a draft on a blood bank.

We in this country know something about the cost of
war. We too have thrown our resources into the breach without
thought of anything but victory. And we too face a tremendous
job of reconversion and of recovery from the strain which the
war effort placed on our economic and financial system. This
job we plan to do with our own resources. Why can't the British
do the same?
To answer this question we must look at the peculiar
character of the British economy. We, in America, who are
accustomed to a Nation with vast continental resources, find
it difficult to realize how different is the position of a
country where lifeblood is in foreign trade. The key to the
whole British problem is that here is a country which cannot
live largely from its own resources, a countiy which must import
or die. The British are handling their domestic reconversion
well enough but let's look at the problem they are up against in
getting back to a pay-as-you-go basis internationally.

-3Britain's export trade, the main source of her
international earning power, was reduced to one-third of normal
during the war. ?fliy? Because in her wartime partnership with
us, it was agreed that she should concentrate her efforts on
war production while we provided her essential imports under

Lend Lease. Lend Lease abruptly ended on V-J Day. Britain s
real struggle to rebuild her export trade did not begin until
that day. She has already made great progress under severe
handicaps. She must free labor and materials badly needed for
reconstruction at home in order to manufacture goods for export.
She must renew contact with foreign markets and adjust her output
to the world's needs. All of this takes time, effort, and
organization. Meanwhile the essential imports of food and raw
materials must keep flowing in if the British people are to

-4This temporary loss of exporting power would have
been serious enough by itself but in addition, again as a
result of the war, Britain has suffered other losses of overseas
income. Before the war Britain was one of the greatest creditor
countries in the world, receiving each year close to one billion
dollars of net income from her foreign investments. To finance
her war effort, she had to liquidate a large part of her
foreign investments and to incur, in the form of frozen sterling
balances, foreign obligations amounting to approximately 12 billion
dollars. As a result, her net income from foreign investments
has been reduced to about 400 million dollars. Not only has
she lost this income to pay for current imports; in addition
she no longer has as large a volume of liquid assets as would
otherwise have been available to tide her over this postwar

-5In short, the British need help from abroad in
meeting the bill for essential current imports during the
period when they are getting back on their feet in international




Pi 0fitU S

to hf?1 p t f f l


The bill which is before you calls for a line of
credit in favor of the British Government up to an amount of
13,750,000,000. This figure was not just picked out of the
air. It represents the very careful judgment of the American
negotiators as to the minimum amount which the British need
from us. It assumes that the British will continue to maintain
an austere living standard while they work their way out of
their postwar predicament. It takes into consideration the
extent to which they can use existing resources and borrow from
countries other than the United States. It represents the
hard-core deficit in Britain's overseas balance of payments during
the postwar transition period.

-6Now what does a loan of $3,750,000,000 cost the
United States? The interest rate which our Government has to
pay on borrowed money is not the important matter that some
have tried to make it seem. The real question is the strain
on our financial and economic resources. That involves a real
cost. I scarcely need remind you that we, too, have inherited
troubles from the war. As a result of the way in which we
financed the war, our national debt amounts to nearly 275 billion
dollars and our people possess a mass of excessive purchasing
power. The great shortage of goods relative to this purchasing
power has created dangerous inflationary pressures in our
economy. The expenditure in our markets of dollars provided
under this loan would admittedly add to these pressures at this
time. However, the added pressures would not be as heavy as
they might seem at first sight. The risks which remain are,
in my judgment, a small price to pay for what we expect to get
in return.

-7Ixpenditure of the dollars under the proposed loan
would not hit our markets all at once. In fact it would be
spread out over a number of years. The line of credit would
be available until the end of 1950 and would be drawn upon by
the British only as needed. Furthermore, many of the dollars
drawn under the credit would be spent initially in other countries
and might take some time finding their way back here. Even the
dollars spent in this country during the next year or so would
be used in part for purchasing goods in ample supply. And
unless we bog down in the management of our own affairs at home,
our vast capacity to produce goods will progressively overcome
the shortages during the life of this extension of credit.
It was neither practical nor desirable to attempt to
specify as a condition of the loan how, or when, or for what
the dollars should be spent in our markets.

-8We already have over-all control of exports, through export
licenses, whereby we can control the timing and nature of all
foreign demands, whether they arise under this loan or otherwise.
This control should be retained during the period of inflationary
pressures in our economy whether this loan is made or not.
However, we shall have to share with the world some of our
scarce resources. This fact has been recognized in our food
program. We shall need to recognize it as it affects other
necessities if we are to help bring about economic and political
stability in the world.
Up to this point my assessment of the real cost of the
loan has assumed that it would be duly serviced and repaid.
But what of the risk of default?

What if this loan proves to

be a deadweight on the American taxpayer and not a self-liquidating
investment in British recovery?

-9Of course this risk exists but in my judgment it should
not deter us from action. It can easily be exaggerated and I,
for one, would enter upon this loan with every reasonable
expectation that it would be repaid. A country that has shown
the vigor, the courage, and the strength of character that
Britain has shown during this war period is a country in which
we can have confidence. Through all the rigors of wartime
life in England, the British people have shown a capacity for
government and for management of their economic affairs which
is rare in this world. The payments on this loan, which will
probably amount to no more than 2 per cent of Britain's annual
expenditures abroad, will certainly not prove unmanageable if
we succeed in building any sort of a satisfactory postwar

-10Of course we cannot foresee the conditions which will prevail
over the rest of this century and neither this loan agreement
nor any of the other economic arrangements into which we now
enter can survive a state of world-wide economic collapse such
as we suffered during the Great Depression. Further, we in
this country must recognize that in the long run international
trade must be a two-way street, and that only through an
adequate intake of foreign goods and services can we sustain
a thriving export business and enable the debts due us to be
But let me impress this thought upon you:

that our

very purpose in making the loan is to create the conditions in
the world under which it can be repaid.

Third: What would m

get in return?

-11The contract for this proposed loan provides for
repayment of the principal and for a moderate rate of interest,
but at this juncture in our affairs at home we are certainly
not looking for loans just for the sake of a financial return.
On the contrary no foreign loan should be made at this time
which does not reasonably promise lasting benefits and
compensations to the United States far outweighing the financial
considerations involved. My endorsement of this proposed loan
to Britain is based on the firm belief that it is an essential
step in world recovery and reconstruction.
We live today in a sick world. We have yet to attain
the objectives of the Atlantic Charter, freedom from want and
freedom from fear. We do not yet know whether the victory of
American arms in the war will be crowned by victory of American
ideals in the peace.

-12But we do know that if the war-shattered world is not restored
to a tolerable degree of economic health, our ideals of peace
and democracy cannot survive.
This situation is a challenge to America. We have
already gone far to meet this challenge but the measure which
is now before you is in a sense the keystone of the whole
program. As you know, this Government has taken the lead in
drawing up treaties of economic peace as the basis for a

stable world order. We have laid down rules of the game" for
a peaceful and productive system of world trade and finance,
first in the Bretton Woods Agreements and then in the proposals
for an International Trade Organization. The basic justification
for the British loan is that it would enable Britain to join
with us in turning these blueprints into a living reality.

-13Without the loan, the British would have to go their own way
without us—indeed in opposition to us.
As you knoir, Britain is the largest market in world
trade so that her commercial and exchange practices have a
very great influence on the rest of the world. Traditionally
she has tended to follow liberal trade principles. If we
refuse this loan, however, she could hope to maintain her
essential imports only by making a desperate bid for domination
in world markets. She would be forced to intensify the
restrictive and belligerent currency and trading practices born
during the years of war and depression. In order to exploit

to the full her advantage as the world s leading importer, she
would have to turn increasingly to state trading and barter. A
large part of the rest of the world would be forced into the
same pattern and free enterprise in foreign trade would be
strangled. Along this road lies further totalitarian

The alternative is clear. If we grant the British
sufficient credit to cover that hard-core deficit in their
overseas payments during the transition years, they will be
able to work their way out of their postwar predicament in a
peaceful and orderly way. They will be able to open their
markets to the world on a basis of non-discrimination and
receive access to foreign markets on the same basis. They will
be able to make pounds sterling earned by foreign suppliers
of the British market freely convertible into other currencies
so that trade would no longer have to be arbitrarily channeled
along bilateral lines. Dollars provided by the loan would flow
to the British Empire, to Latin America, to Western Europe—to
all of the countries receiving net payments from Britain.
The loan to Britain would become in this way a source of
assistance to a great many other countries which desire
dollars to make purchases here.

-15In short, the road would be opened to a genuine world trading
system, which is essential to the maintenance of productive
employment and economic stability in a democratic world.
The costs and risks of this project must therefore
be weighed against the objectives which we seek. Without
effective British participation, which is possible only if
we lend our aid, the Bretton Woods institutions and the
International Trade Organization cannot fulfill the hopes
which we have placed in them. Without the fulfillment of
these hopes for a stable and productive economic order in the
world, there is little prospect of success for the United
Nations Organization in its search for political stability and
security. Without economic or political stability, we can
expect only a continued drift of world affairs toward the
catastrophe of a third World War.