Syllabus on International Relations

By Parker Thomas Moon; Institute of International Education (New York, N.Y.) | Go to book overview
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b. Effect of the War--repayment of about billion dollars owed to foreign investors (i.e., purchase of industrial securities from foreigners); purchase of foreign securities at rate of about 1 billion a year; governmental loans of about 11 billions to Allies; U. S. suddenly transformed from borrowing nation to chief money-lender of world.

1. "Over-saving"--tendency toward accumulation of capital by capitalists (and small investors) more rapidly than it can be re-invested in domestic industry at existing rates of interest or profit.
2. Possibility of investing this "surplus capital" at higher rates of interest, or for larger profits, in colonies and relatively undeveloped countries.
3. Desire of capitalists, in some cases, to escape heavy taxation in their own country by investing in other countries.
4. Desire of manufacturers, in some cases, to escape high tariff duties of other countries by founding branch factories in such countries.
5. Desire of banks, manufacturers, or government, in making foreign investments, to promote export trade by enabling borrowing country to buy more.
6. Desire to obtain raw materials, by establishing plantations or opening mines, which necessitate investment.
7. Theoretical necessity of maintaining balance of trade--if a nation exports much more than enough to pay for its imports (including shipping charges, tourist expenditures, immigrants' remittances, interest on foreign debts, etc., as "invisible items"), it must export capital or it will have an increased supply of money, tendency toward "inflation," perhaps higher prices, unfavorable exchange rates.

1. Use of loans for ulterior purposes.
a. To cement politico-military alliances--French loans to Russia before the War; French loans to Poland, Czechoslovakia, etc., since the War.
b. To acquire control over backward countries--American "dollar diplomacy" in Central America; French loans to Morocco before establishment of protectorate; Japanese loans to China during War in return for concessions.
2. The withholding of loans as a political weapon.
a. Refusal of diplomatic recognition to a revolutionary government as a form of financial boycott--reluctance of bankers to lend money to an unrecognized government. American non-recognition of the Obregon Government. Allied non-recognition of Russian Bolshevik government.
b. Power of French minister of finance to exclude foreign securities from quotation on Paris Bourse for diplomatic reasons--e.g., exclusion of Bagdad Railway bonds before War.
c. Somewhat similar negative control of loans in other countries, for political purposes.


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