International Trade and Finance - Import / Export Finance, International Banking, Finance FAQs

Section V

For the present we are concerned with the benefits of international
finance, which have been shown to begin with its enormous importance as
the handmaid of international trade. Trade between nations is desirable
for exactly the same reason as trade between one man and another,
namely, that each is, naturally or otherwise, better fitted to grow or
make certain things, and so an exchange is to their mutual advantage. If
this is so, as it clearly is, in the case of two men living in the same
street, it is evidently very much more so in the case of two peoples
living in different climates and on different soils, and so each of
them, by the nature of their surroundings, able to make and grow things
that are impossible to the other. English investors, by developing the
resources of other countries, through the machinery of international
finance, enable us to sit at home in this inclement isle, and enjoy the
fruits of tropical skies and soils. It may be true that if they had not
done so we should have developed the resources of our own country more
thoroughly, using it less as a pleasure ground, and more as a farm and
kitchen garden, and that we should have had a larger number of our own
folk working for us under our own sky. Instead of thriving on the
produce of foreign climes and foreign labour that comes to us to pay
interest, we should have lived more on home-made stuff and had more
healthy citizens at work on our soil. On the other hand, we should have
been hit hard by bad seasons and we should have enjoyed a much less
diversified diet. As it is, we take our tea and tobacco and coffee and
sugar and wine and oranges and bananas and cheap bread and meat, all as
a matter of course, but we could never have enjoyed them if
international trade had not brought them to our shores, and if
international finance had not quickened and cheapened their growth and
transport and marketing. International trade and finance, if given a
free hand, may be trusted to bring about, between them, the utmost
possible development of the power of the world to grow and make things
in the places where they can be grown and made most cheaply and
abundantly, in other words, to secure for human effort, working on the
available raw material, the greatest possible harvest as the reward of
its exertions.

All this is very obvious and very material, but international finance
does much more, for it is a great educator and a mighty missionary of
peace and goodwill between nations. This also is obvious on a moment's
reflection, but it will be rejected as a flat mis-statement by many
whose opinion is entitled to respect, and who regard international
finance as a bloated spider which sits in the middle of a web of
intrigue and chicanery, enticing hapless mankind into its toils and
battening on bloodshed and war. So clear-headed a thinker as Mr. Philip
Snowden publicly expressed the view not long ago that "the war was the
result of secret diplomacy carried on by diplomatists who had conducted
foreign policy in the interests of militarists and financiers,"[4] Now
Mr. Snowden may possibly be right in his view that the war was produced
by diplomacy of the kind that he describes, but with all deference I
submit that he is wholly wrong if he thinks that the financiers, as
financiers, wanted war either here or in Germany or anywhere else. If
they wanted war it was because they believed, rightly or wrongly, that
their country had to fight for its existence, or for something equally
well worth fighting for, and so as patriotic citizens, they accepted or
even welcomed a calamity that could only cause them, as financiers, the
greatest embarrassment and the chance of ruin. War has benefited the
working classes, and enabled them to take a long stride forward, which
we must all hope they will maintain, towards the improvement in their
lot which is so long overdue. It has helped the farmers, put fortunes in
the pockets of the shipowners, and swollen the profits of any
manufacturers who have been able to turn out stuff wanted for war or for
the indirect needs of war. The industrial centres are bursting with
money, and the greater spending power that has been diffused by war
expenditure has made the cheap jewellery trade a thriving industry and
increased the consumption of beer and spirits in spite of restrictions
and the absence of men at the front. Picture palaces are crammed
nightly, furs and finery have had a wonderful season, any one who has a
motor car to sell finds plenty of ready buyers, and second-hand pianos
are an article that can almost be "sold on a Sunday." But in the midst
of this roar of humming trade, finance, and especially international
finance, lies stricken and still gasping from the shock of war. When war
comes, the price of all property shrivels. This was well known to
Falstaff, who, when he brought the news of Hotspur's rebellion, said
"You may buy land now as cheap as stinking mackerel," To most financial
institutions, this shrivelling process in the price of their securities
and other assets, brings serious embarrassment, for there is no
corresponding decline in their liabilities, and if they have not founded
themselves on the rock of severest prudence in the past, their solvency
is likely to be imperilled. Finance knew that it must suffer. The story
has often been told, and though never officially confirmed, it has at
least the merit of great probability, that in 1911 when the Morocco
crisis made a European war probable, the German Government was held back
by the warning of its financiers that war would mean Germany's ruin. It
is more than likely that a similar warning was given in July, 1914, but
that the war party brushed it aside. And now that war is upon us, we are
being warned that high finance is intriguing for peace. Mr. Edgar
Crammond, a distinguished economist and statistician, published an
article in the _Nineteenth Century_ of September, 1915, entitled "High
Finance and a Premature Peace," calling attention to this danger and
urging the need for guarding against it. First too bellicose and now too
pacific, High Finance is buffeted and spat upon by men of peace and men
of war with a unanimity that must puzzle it. It can hardly err on both
sides, but of the two accusers I think that Mr. Crammond is much more
likely to be right. But my own personal opinion is that both these
accusers are mistaken, that the financiers never wanted war, that if
(which I beg to doubt) diplomacy conducted in their interests produced
the war, that was because diplomacy misunderstood and bungled their
interests, and that now that the war is upon us, the financiers, though
all their interests urge them to want peace, would never be parties to
intrigues for a peace that was premature or ill-judged.