THE FOUNDATION FOR ECONOMIC STABILITY
By THOMAS E. DEWEY, Governor of New York
Delivered at a Seventh War Loan Organization Dinner, New York City, June 7, 1945
Vital Speeches of the Day, Vol. XI, pp. 606-608.
IT is a great pleasure to be here tonight and to extend to all of you, on behalf of the State of New York, warm appreciation and encouragement for the great work you are doing. As far as I know they have not given out any medals in this war to those who have worked so hard on the seven successive war-loan drives. But I do not think any of you need medals to sustain your enthusiasm and energy. None of you has any hope or desire for reward. You are engaged in floating this Seventh War Loan because you know how tremendously important that job is.
New York State has been called upon to play a major part in this as in previous war-loan drives. Nearly $4,000,000,000, more than one-fourth of the total national goal, has been assigned to the quota of our state. That is a staggering sum. Yet I know you will achieve it.
The importance of the work you are doing does not lie alone in the amount of money that is raised. Even more important is the way that money is raised. In fighting total war money is less important than machines and it can be manufactured more easily. It can be manufactured by a mere stroke of the pen. But to finance the war that way would be unadulterated inflation. It might serve to finance the war for a time, but it would gravely jeopardize the peace.
The national goal is to raise one-half this great war loan out of the savings of individuals. Thus, you are working not only to win the war but to lay the foundation for economic stability after the war. Only with economic stability can we realize the promise of a lasting peace.
So it is appropriate, I think, to talk with you, briefly, about some of the things that need to be done if we are to achieve economic stability and lasting peace in the world.
It will not be enough to crush Japan militarily, as Germany has been crushed. Enduring peace cannot be won on the battlefield alone. Nor will it be won alone by the establishment of the world organization which is now being hammered out in San Francisco.
Real peace will only be achieved if the nations of the world can live and work together in mutual respect and confidence.
In the last world war we were also victorious in the field. But the end of armed conflict did not bring peace. War continued in a different form—the battle royal of economic warfare. It was every nation for itself and devil take the hindmost. In that economic war stupidity played a greater role than malice. The blind blows struck were aimed unwittingly at friend and foe alike.
Prohibitive tariff barriers, failure to settle the problems of war debts and reparations, a struggle for self-sufficiency led on to currency breakdowns, competitive devaluations, quotas exchange restrictions, clearing agreements and a progressive descent into authoritarian controls over every aspect of international commerce. Here was a grim game which weakened and divided the nations which carried high the banner of freedom, while the totalitarian aggressors grew bold and strong.
We all know it is playing with dynamite to repeat those errors of the past. Yet that dynamite already exists. We must recognize that we will emerge from the present war with many wartime restraints on international trade in effect and with many countries impelled by dire necessity toward the establishment of a whole new system of restrictions and controls. In other words, we will end this war with many nations using the implements of exchange restrictions, export and import controls and other authoritarian devices which appeared at the very end of the last period of peace. The vital question is: Where do we go from here?
Most of the countries of Europe have been impoverished The wholesale destruction of their industrial plants leaves them in desperate need of imports at a time when they have little to export in exchange. Inevitably such a condition is likely to encourage measures of self-protection to limit and control foreign trade.
The position of Great Britain is particularly significant.
She will emerge from the war weakened by the loss of a large part of her foreign investments and owing an enormous short-term debt abroad. Much of her industry will need rebuilding; her foreign trade has been disrupted and her shipping partly destroyed. At the same time she is in need of large imports of food and raw materials. The problem of Britain is serious. It is serious for us as well as for the British, because restoration of a strong and prosperous Britain is essential to world recovery.
Before the war, traditionally free-trade Britain had been forced to turn to protection and to a system of empire preference. Now billions in blocked sterling are owed to India, Egypt and the Dominions. The urge toward empire preference is stronger than ever and an influential section of British opinion has urged the creation of a tightly knit sterling bloc within which trade would be encouraged to the exclusion of non-sterling nations.
Almost everywhere we look—to the British Empire, the Low Countries, the Scandinavian nations, France and other nations—the dangers of renewed economic warfare in the years ahead are great.
We in the United States will emerge from the war with overwhelming power—financial and industrial. We shall have a gigantic, burdensome internal debt. But, nevertheless, we shall have great power. Inevitably the rest of the world wonders how we will use that power. We, beyond all other nations, have the capacity to produce quickly the machinery and goods which virtually every nation will desperately need. There is no question of the huge demand for our exports that will exist. The great question is whether we are prepared to accept payment for these goods in the only sound way that payment can be made—by taking in exchange the goods and services of other nations.
If that question is left in doubt, then, inevitably, we shall see our present allies seeking to protect themselves by import quotas, currency blocs, blocked currencies, and all the freedom-menacing machinery of economic war.
I am not one of those who believe that we have in this country a "mature economy" in the sense of an economy that has lost the capacity to grow and expand under a system of private enterprise. But I do think we have become a mature country, capable of playing a wise and mature role in the community of nations.
I take it we are agreed that we do not intend to see the world fall back into the conflicts and antagonisms of ultra-nationalism. Certainly, speaking for the Republican party last year, and consistent with its platform, I made it very clear that I stood for no such proposition. Equally clearly the Democratic party stands for no such proposition. The American people have made clear their determination to join with other nations in a world organization to maintain peace. But real peace cannot be achieved merely in the political field. The causes of international strife go deeper than mere unprovoked military aggression. All of the work being done at San Francisco will mean tragically little if economic conflict is to divide the nations.
Our primary objective is to secure peace and prosperity for the United States. But we know that we cannot live alone in the world. Certainly we cannot obtain the healthy vigorous economy we seek if the rest of the world is sick. We seek an economy of abundance with full opportunity for employment and a rising standard of living. A broad, flourishing trade among nations is essential to the establishment of peace and prosperity in the world. This in turn is essential to our own goal of high level employment and a rising standard of living under a system of competitive free enterprise.
In the achievement of these ends the United States must take the lead. Our preponderant economic power makes us the nation which can make the most effective contribution to economic peace and can best afford to take the lead.
How shall we do it? Certainly no single step or action will do it. Many, if not most, of the controlling factors are in the hands of other nations. The United States has never, in peace times taken to government-controlled cartels, exchange controls and restrictions, the widespread use of quotas or dumping. These are the handicaps to trade which other countries must lead in removing.
But there is much we can do. High tariffs are one barrier we ourselves can lead in reducing, as we have done in recent years and as we shall continue to do under the renewed reciprocal trade agreement act when the Congress completes action upon it. Beyond that, our country should initiate a world conference for general tariff reductions. Such a conference ought to develop a program for the speedy removal of war-time trade controls and other barriers to the exchange of goods and services among nations. None of these measures can work only one way. This must be a two-way street and serve the primary interest of our own people, or it will not work and will not continue to be supported at home. There are other serious barriers to world-wide economic recovery, including problems of exchange and of uneconomic debt, some of which still remain as a legacy of the first world war.
The twenty-five-year-old foreign government debts to the United States arising from World War I will never be paid because they cannot be paid. We should be honest and intelligent enough to say so officially and cancel them. Along with this should go an immediate repeal of the Johnson act which forbids private loans to governments and nations now in default on these debts remaining from World War I.
Efforts should begin at once toward settlement of the lend-lease obligations arising out of this war. Every action to this end should, in accordance with Article VII of the mutual aid agreements, be directed to the expansion of production, employment and the exchange and consumption of goods; to the elimination of all forms of discriminatory treatment in international commerce and to the elimination of other trade barriers.
It is an essential part of the lend-lease agreement that the terms and conditions of final settlement shall not be such as to burden commerce, but to promote mutually advantageous economic relations. In carrying out this program it may well be that we shall have to cancel a major part of the financial obligations under lend-lease. We are entitled to ask in return that our partners shall fully live up to the other part of their obligations by eliminating barriers to commerce and promoting the betterment of world-wide economic and social relations, as well as the cause of freedom of the individual, for which this war is being fought.
As a part of this whole program the United States should join in the Bretton Woods proposals for the establishment of an international monetary fund and international bank for reconstruction and development. I recognize fully the imperfections of the Bretton Woods plan. The ablest brains of our country were excluded in its preparation and, in many respects, it was a clumsy job. The greatest danger is that this plan may be considered a final solution to the problems of money, credit and trade. It should be obvious that it provides no final solution but merely a method and an organization through which men can work toward solutions.
If the United States were to look upon Bretton Woods simply as a method of stimulating exports, or if other nations were to consider the fund merely an easy method of obtaining American goods, nothing but disillusionment would follow. But the prolonged debate and the important amendment procured at the insistence of the minority in the House Banking and Currency Committee have already lessened this danger. The interpretations which the American delegates are to obtain, will greatly clarify the functions of the fund and the bank. They will mean that the fund is to be confined to strictly monetary stabilization and may not be used for relief, reconstruction or other long-term capital requirements, while the bank will be equipped to make general stabilization loans. These interpretations are essential if the plan is to be a success.
A further important safeguard is provided in the proposal to give the fund and the bank a common board of governors, The success or failure of this plan will depend upon the management of the fund and the bank. The various member nations will need to appoint as their representatives men of ability and sound judgment. We would not be justified in abstaining from the proposals for lack of faith in the willingness of ourselves and other nations to appoint such men, and it is essential that we go forward with it.
Moreover, I see no reason why an effort should not immediately be made by the United States and Great Britain for the long-term stabilization of the all-important dollar-sterling rate. We must begin now to pick up at least part of the pieces from the wrecked London Economic Conference of 1933. An overwhelming preponderance of world trade is carried out in these two exchanges—the dollar and the pound sterling. If once the relative value of the pound sterling and of the dollar is settled, the most important step that can possibly be taken toward the ultimate establishment of worldwide currency stability will have been accomplished. Cooperation between the British and ourselves must be a cornerstone in any program of world economic revival.
These are merely some of the measures which should be taken to lay the foundation for economic peace. We cannot expect that all of the difficult economic problems left in the wake of two world wars will be solved in a few months. I have said before, that when the war is over we shall have to wage peace with all the vigor and energy with which we have waged war. We are learning at San Francisco just how hard we must wage peace even to launch upon it. Just as the United States has taken a leading part in the solution of the political problems of lasting peace, so it must take a leading part in the solution of economic problems.
It does not lie wholly within our power to make certain that the world of the future is a world of active trade, expanding commerce and broadening opportunity. But it does lie within our power to block such a development if we fail to assert the leadership which our strength and prestige demand In our self-interest we should take the lead in promoting the trade which is the lifeblood of our standard of living, our enterprise system and our individual freedom.
I cannot think of any group better equipped to take leadership in these problems than the men and women who are leaders in our war-financing work. As you push forward in the drive for individual war-bond subscriptions, you are thinking not only of the weapons that money will buy, you are thinking of the billions of savings securely invested for the future, of the safeguards against inflation and the foundations of economic stability thus erected. You are helping the fight for victory over Japan. You are also helping the fight for American future of broader opportunity, greater individual freedom, higher standards of living and greater security. We want that kind of America and we want that kind of a world.