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A TRADE POLICY A\ppropriate for a Great Creditor Nation the spellbinder on the street corner; many others have studied or read the teachings of our foremost economists so often that we are in a haze. We wonder what it is all about. These gentlemen have been furnishing us with bimetalism, depreciated currency, international credits, etc., so much that we won- der whether we will ever get back to the time when the ‘‘man on the street’? will understand just what they are driving at, if anything, We all are familiar with the terms ‘debit’? and ‘‘credit’’ and, as I un- derstand trade and banking, those are all of the terms necessary for use in explaining our dealings with our friends and neighbors. Of course, there has to be a token to use as a means to balance debits and credits, as goods and labor are not flexible enough. S O MANY of us have listened to Token Lacks Uniformity Unfortunately the world has not adopted a uniform token. We have some nations with gold alone as the token; others have a mixture of gold and silver; a few have silver alone, and one or two have nothing to back up their money. This lack of uni- formity has, no doubt, influenced and fixed the value of labor. It has influenced and fixed the value of raw materials both mined and grown. World trade on this account has never been on an equal value bal- ance, As the world has developed from the time of Adam and Eve some nations have taken advantage of this lack of stability and have amassed such wealth represented by precious metals, jewels and securities that they were for a long time, and in some cases still are, in a favorable credit condition. They have been able to live upon the labors of other peoples by, what we would call, a scientific adjustment of their exports and imports of goods and tokens. I am not looking for an econom- ical argument. Nowadays I can get enough of that at home. [ would like to know, however, whether or not we might profit by the use of formulas worked out and applied by creditor nations in the past. Who were they and how did they operate? England, as we all know, was, for a long time prior to the World war, the chief creditor nation. France 16 and Germany were also in a major position in credit standing. On the opposite page stood the United States as the largest debtor. Ever since the birth of this democracy we have led all other countries in paying ‘‘inter- est’’ in one form or another, without appearing to reduce the amount of the ‘“‘mortgage’’. Of course, it was all legitimate. We had to borrow to build, We Are Debtor Minded During all this time we, like all oth- er debt bearing examples, became debt- or minded. We built our financial operations, our industrial relations, and even our home life with these financial obligations in mind. We must always save to pay the interest; we must rush, rush, rush to make the necessary profit. We must produce and discover our raw materials local- ly to manufacture our goods for ex- port. We must bleed our reserves. All of this we had to do for the neces-_ sary credits to balance our foreign obligations, It was imperative that we have the balance of trade in our favor. Our government stressed balance of trade with great wisdom. Our industrial- ists ‘‘hopped”’ all over the globe in- citing the cheer leaders of American goods, and with good results. We managed to keep just ahead of the landlord’s agent—but bear in mind that we were continually stripping our reserves to do it, It is common sense that a debtor cannot pay his debts unless he can show a profit, A nation, which is a combination of agents producing raw materials and manufactured goods, cannot pay the interest or the prin- cipal of its indebtedness unless it shows a profit, or, in other words has the balance of trade in its favor. Actions of Creditor Nations The question naturally arises as to what policy England, France, Ger- many and the other creditor nations pursued when they were in the favor- able credit position. What was their method of handling the balance of trade? How did they handle their international transactions when they were in the landlord class? How did they vary and spread their chores so that they could keep their own people busy, active and happy and at the same time allow their debtors MARINE REvieEw—February, 1935 BY G5. CLARE enough to pay their obligations? In order to confine and limit this article so that the monotony of this kind of reading matter is partially eliminated, I am going to use Eng- land as the yardstick or example of how a creditor nation must properly handle international trade. Le us now look at the United States-United Kingdom trade ledger. We show the imports from the Unit- ed States to the United Kingdom and exports from the United Kingdom to the United States as follows: 1905 to and Including 1912 Year Exports Imports $175,811,918 $523,396,852 210,029,487 583,090,123 246,112,047 607,783,255 190,355,475 580,663,522 208,612,758 514,627,375 272,029,772 506,552,891 261,289,106 576,613,974 272,940,700 564,472,186 You will note how uniform and regular the balance of trade remained in our favor. You will see the vot- ing power the United Kingdom had in directing in which ships bottoms this lading should move. Is it any wonder that they should have a large merchant marine? Out of their ships’ slings there were unloaded on the piers and bulk- heads of Liverpool, London, Belfast, Dublin, Edinburgh and Glasgow, such articles as cotton, wool, wheat, auto- mobiles, iron, lead, etec.—even coal was imported for Newcastle. Most of these raw materials went to the centers of their industrial zones for refashioning into articles for export. England made but a small part of her luxuries. She man- ufactured but few of her dolls and tops. She controlled this balance by her very liberal tariff wall. What few of nature’s gifts she was en- dowed with she conserved. As she moved up to her period of affluence she had learned to govern her buy- ing and selling so that she lived upon the fat of others, and the prac- tice has proved that it was wise. U. S. Becomes Creditor Nation We in the United States, with the help of the World war, changed our financial status during the years 1914 to 1918. We changed from an ex- treme debtor nation to an extreme creditor nation, as gaged by past standards. We dropped our ‘“‘inter- est’? payments—we had paid off the “mortgage’’. In addition to our al-