Economic Foreign Policy of the United States

By Benjamin H. Williams | Go to book overview
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CHAPTER V
CAPITAL EMBARGOES

GENERAL CHARACTER

The influence of diplomacy in international finance is not always encouraging and stimulating to investments. It takes on a negative aspect when the power of statecraft is used to prevent the flotation of foreign loans. The capital embargo is an effective weapon in the hands of government officials. The nation which would keep abreast of the rapidly moving tide of material development must have capital, and hence free access to the money markets of the world is highly desirable to those. countries that are unable to supply their needs from internal sources. Industrial development, currency stabilization, military and naval requirements, and the refunding of maturing loans are among the chief reasons which impel finance ministers and entrepreneurs to approach the bankers of creditor nations for financial assistance. Inability to obtain the desired funds may sometimes result in a serious crisis or a substantial retardation of national development. The officials of creditor nations are therefore able to use the much desired privilege of admission to their money markets as a valuable quid pro quo in the diplomatic game.

There are two methods by which the ban on foreign loans may be accomplished: (1) by formal legal action such as is authorized by the laws of France, Belgium, and Italy, and (2) by extralegal influence, which is the means used in Great Britain, Japan, and the United States.

In France, the Minister of Finance must give his permission before a foreign loan is admitted to quotation on the Paris Bourse. The finance minister always consults with the foreign office1 and thus the Minister for Foreign Affairs has the opportunity to inject into the matter considerations of French foreign policy, which may be entirely divorced from the question of the

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1
VIALLATE ACHILLE, "Economic Imperialism," p. 58, The Macmillan Company, New York, 1923.

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