THE United States is at the beginning of a new era of foreign lending. It will be called upon to provide many other countries with goods and services far in excess of their immediate capacity to pay. The most urgent requests will be put forward by those countries that have suffered the greatest loss in the war. Partnership in arms gives them a claim upon our help. Furthermore, the United States is now deeply engaged in a common search with other countries for a new basis for international political life. A readiness to grant loans within the limits of the reasonable is an essential counterpart of the leadership we have assumed in the political realm. For these reasons, and because it conforms well with our economic position, the United States is ready, I believe, to enter into a new program of foreign lending.

The attitudes with which we will enter upon this program are very different from those that prevailed after the last war. We had then the innocent sense that victory had ended the danger that threatened us and expelled the evil we detested out of the world. The task ahead seemed a simple one of economic reconstruction and we marched into our lending activity without asking whether it was compatible with our isolation, and without reckoning its political consequences. A hopeful sense prevailed among us that the capital we were providing would somehow or other bring back the tranquillity that had prevailed in Europe before 1914. With easy complacence we trusted Germany just as much as we trusted our former allies. Moreover, the extreme character of the Communist revolution that had taken place in Russia cut us off from almost all traffic -- economic and diplomatic -- with that nation, and only a few Americans were fully aware of the significance of the gradual reëmergence of Russia into world affairs.

We are today deeply aware of the fact that events abroad affect our lives. In the next few years the boundaries of many of the countries of Europe and Asia will be drawn anew, and new political relationships will be formed. These years will test the inclination and ability of many countries to shape their domestic institutions and conduct their external affairs independently. They will decide the character of the political life of many peoples. In short, this is the period in which the territories of nations, their relative power, the prospects for peace and justice among them and for freedom within them will be settled for our time.

Thus, we are forced to consider an old and highly controversial issue: Shall we take political questions into account when making loans? It seems plain that we must. Our economic prospects, our safety, the chance that decency will prevail in this world -- all these will be affected by the use that foreign countries make of the economic strength for which we provide the nourishment.

It is easy to define in general terms the tendencies that we would wish, by lending economic aid, to encourage in other nations. We shall have satisfaction in furnishing capital to countries which are content within their boundaries, which are ready to submit differences with others to international settlement, which are disposed to give our commerce fair opportunity and which are devoted to the ideal that all men should have freedom and justice. We shall find little satisfaction in providing capital for countries which may seem either to threaten our own safety, or to wish to dominate others, or to be wedded to oppression. These preferences are the natural outcome of what the United States is, what it stands for, and what it requires for its protection. But preferences such as these are extremely vague, and subject to distortion. For one thing, our attitude toward particular loan proposals may be damagingly swayed by minority views. Policy has been influenced in the past, for example, by the sympathy of persons of Italian origin for their homeland; it has been warped by the anti-British feeling to which groups of Irish origin have been prone; it has been affected by the intense fear of Communist Russia entertained in some American groups, and simultaneously has been subject to the ardent attentions of Communist sympathizers. It is always subject to the tug and pull of highly organized economic groups within our boundaries, whose views of the national interest are likely to be shaped by conceptions -- sometimes ill-advised -- of their own interests. It is idle to believe that future decisions will not be subject to the same pressure of racial, class or group prejudices.

If we permit our foreign loan policy, like molasses taffy, to be pummeled about by each of these many nervous or greedy hands, it will be a poor and unsanitary product. The safeguard for this is not to pretend that such influences and interests do not play a part in shaping our policy, but to be more fully conscious of what they are and to put the national interest above them.

We must be aware of one other factor. No matter how informed and just our judgment may be, any purposeful use of financial power outside our frontier is in itself very easily construed as a form of "imperialism." The attitude of foreign countries is certain to be that our possession of capital gives us no right to judge or control their actions, or to wrest concessions from them. There is little point in debating this issue in general terms. Foreign countries may be justified in maintaining these views. As the price of obtaining capital from us, other countries should not have to submit to dictation by the United States as to the diplomatic connections they may form or the kind of political and social institutions which they may establish; nor should they be compelled to accede to unjust demands for economic or political favors. However, precisely as other countries will correctly insist upon their right to follow their own course in these matters -- provided they are not obviously threatening to us -- and to choose their own political and social institutions, so the United States can correctly insist upon the right to decide whether it is in our national interest to assist them in the course they choose to take, and to seek such return as seems to us reasonable.

We should put aside temptation to use our financial power to obtain trivial concessions for special interests, or to interfere frequently in the lives of other nations, or to check shifts in the diplomatic alignments between them which do not threaten our peace and security. All use of this power must fully satisfy our national conscience, and concern itself only with issues of vital consequence.


Instruction as to the type of problem that lies ahead is more clearly found by considering concrete situations, rather than by generalized reflection. Let us choose the most stony field we may have to cross.

What of loans to the U.S.S.R.? Can they be discussed without appearing to voice unjustified fears and suspicions, without seeming to assert an American right to be arbiter for the world, or without incurring the charge of disguising commercial ambitions under idealistic phrases? The following observations represent an effort to do so. They should be deemed to be written lightly in chalk, subject to quick and easy erasure.

The first specific question is whether the United States should make the U.S.S.R. a direct loan of large dimensions for reconstruction purposes. Five or six billion dollars is the sum commonly mentioned. Mr. James B. Reston, the lucid and reliable writer who reports to the New York Times from Washington on such matters, recently has said that our delay in giving a definite response to this Russian request for a loan may be one of the reasons why that country has shown herself disinclined to compromise with us on other matters. It seems likely that the financial question has been prominent in the minds of the Soviet officials, though it certainly is not at the bottom of the difficulty over Poland, and I am sure that Russian policy on any issue which she considered significant could not be swayed by the granting or the withholding of a loan.

What are the proper components of American judgment in the matter? They are many and diverse. First of all, it may be said, all economic considerations would favor the making of a large loan. No one will doubt the ability of the U.S.S.R. to repay any debt it may incur toward us, and its record similarly eliminates doubt as to its will to do so. The choice of whether we would accept payment in gold or in useful goods would be largely our own. We need not fear the effect on our commerce of Russian economic advancement; her exports would be largely supplementary to our own; her expanding market would be a welcome addition to our export field; and we should, if we are wise, draw in large measure on her natural resources for our own needs.

Second, a promising groundwork exists for developing a harmonious partnership in the creation and operation of an international organization for the maintenance of peace and for agreeing upon the settlement of the issues of the peace. Americans are grateful for the valorous and victorious fight of the Russians; and the Russians are showing a similar appreciation of the American effort. There appears to be a promising mutual attraction and liking between Americans and Russians when they meet.

There is no fear in either country that the other may be planning an assault upon its territories or upon the territory of countries whose security or independence is clearly essential to it. Each may be somewhat anxious over the spread of the influence of the other in countries that seem to belong geographically within its sphere of security. Were any of the countries in the neighborhood of the Canal Zone, for example, to develop a foreign policy that seemed to lean primarily on the U.S.S.R. and to be challenging to the United States, we probably should become disturbed. Correspondingly, were any of the countries that border the Soviet Union on the west or the south to engage in activities that appeared to rest primarily on American support and were deemed hostile, Russia would become disturbed. But it is hoped that mutual recognition of these facts within both the United States and the U.S.S.R. will eliminate any danger of such possibilities. Further, it may be hoped that the day has passed when differences between our own and the Soviet economic and social systems operate as a decisive barrier. We have lost the impulse to try to influence the form of Russian life, and signs of a reciprocal tolerance and respect have grown increasingly clear.

Lastly, there remains the question of whether any vital and irreconcilable difference will arise between the two countries in the many immediate problems of peace-making. The most important question in this regard will center upon Germany. At the time of writing, many problems relating to German boundaries, the execution of the reparations program, the methods for governing Germany, the elimination of all forms of Nazi influence, and the maintenance of rule over the German people have yet to be worked out among ourselves, the U.S.S.R. and our other major allies. It must be expected that some of these questions will produce differences, especially since, in regard to several of them -- economic policy and war crimes, for example -- the United States has not known its own mind too well. But a solution by agreement is imperative -- and not only in order to clear the path to financial assistance; sustained quarrels over these matters will quickly char any paper text that is drawn at San Francisco.

(I venture to add, by way of digression, that the essential conditions for achieving agreement are clear proof from the United States that we are in earnest about punishing Germany for her evil behavior; that we do not desire to spare her out of commercial considerations; that we intend to prevent her from ever again becoming a strong Power or an important factor in world affairs; and that we have not the slightest desire or intention of making her a bulwark against the U.S.S.R. Equally essential is clear proof that the Soviet Government does not wish to bring Germany under its permanent control and that it does not intend to use her as a base of attack on western security or as a means of forcing Communism on the west.)

These are the elements in the general outlook that encourage optimism. But it would be foolish to pretend that the horizon is entirely clear. Americans, at present, are longing for more definite assurance that -- as the years go by -- the contribution which our capital may make to Russian development will turn out to be advantageous to American safety and peace. This, I believe, is not because of doubt regarding the direct uses that the U.S.S.R. may make of her great power, but over possible indirect uses. There is anxiety that she may exert her power to extend her influence or control over the life of other countries in ways that will make us uncomfortable or may even seem threatening. The course followed and the methods used in the case of Poland seem to us unjust and hard, and in the case of Austria rude, and, perhaps, deceptive. They seem to be imposed solutions, based on Russia's will; we had our mind set upon solutions that would emerge from the expressed preference of the peoples concerned. To the Russian mind, these fears and criticisms seem ill-founded. On the other hand, Russians feel that we fail to perceive the necessity of policies which will make the U.S.S.R. secure, because we forget the vital danger to which their homeland has been exposed, and the hostility of which it remains the object. Russia's strong initiatives in the affairs of various nearby states -- as they emerge from the Nazi grasp -- seem to her essential to Russian safety and to the stability of the area. For us to resent this activity appears -- to paraphrase words used by Pravda in a recent Moscow broadcast -- to be an attempt to elbow the U.S.S.R. out of her legitimate sphere of interest. The process of drawing together these different points of view will take time. It will be achieved only if both countries firmly accept the view that in their respective "security spheres" they may properly exercise leadership but not domination; and if both are obedient to the requirements of a larger world society.

Certainly any ban on financial assistance to Russia because of vague anxieties and secondary differences would be most unwise. It would endanger the prospect of carrying our present coöperation with the U.S.S.R. into the postwar period. We should, on the contrary, enter the postwar years with a definite willingness to aid the U.S.S.R. financially. Simultaneously, the assignment of American diplomacy will be to obtain effective acceptance by Russia of American views on matters vital to us and to work out compromises when there appears to be a divergence of interests or purposes. If that effort fails, we should be compelled to reconsider our course. But it must not fail. Both peoples have such endless opportunities before them, as they exchange toasts on the Elbe.


Our political relations with Russia may also enter into our decisions as regards loans to her neighbors, in particular Poland, Czechoslovakia, Austria, Hungary, Jugoslavia, Rumania, Bulgaria and the countries to the south -- Turkey, Iran and all the Arab states. Many of these are certain to seek dollars for economic reconstruction, both through American loans and through the International Investment Bank, if it is established. Such requests will necessitate an assessment of the position of each of these countries in the contemporary world, and that in turn will raise the question of the relation of each of them to the U.S.S.R., their relationships with the United States, and the character of their political institutions.

We shall be wise to recognize that it is not only natural but desirable for these countries to form extensive, and possibly intimate, relations with the Soviet Union. The Russian view that all traces of Nazi and Fascist influence in these countries must be exterminated is justified, as is also the Soviet effort to make sure that they cannot be revived under any form of reactionary leadership. Power and propinquity also justify Russia's expectation that the governments of these countries will give consideration to her interests and ideals. The American mind must not only compass all of these prospects but even welcome them as the basis by which peace may be maintained in Europe.

But while the United States can properly be called upon to accept Russian leadership in these countries, it cannot happily accept Russian dictation of their policies and way of life; nor could it happily accept the exclusion of American economic enterprise. Our political philosophy and interests incline us to the opinion that the people within these countries should be free to determine their own forms of social and economic life, and should be independent in their foreign policy. Our disposition is to desire that their institutions be of the type that we regard as "democratic," that is, with the control of the government resting in the people and with the government on a constitutional basis which protects the personal liberties of the people. Furthermore, the United States will be disturbed if these countries come under the forced domination of any Great Power. Their ability to speak and act independently on future international political issues seems of importance to us. And we hope to carry on trade and financial activities within their domains with reasonable freedom and on terms as advantageous as those enjoyed by any other country. This would be unlikely if they became, in practice, subordinate parts of the Russian Soviet system. In other words, our desire is that they remain as independent as any small states can be in the future world. However, should any of them, in what is plainly an act of their own free will, decide to become part of the Soviet system and add themselves to the U.S.S.R., or adopt for themselves the Russian economic system, the United States should not combat that decision by financial bars.

When proposals for financial aid for any of these countries arise, the American investment agency will -- albeit silently -- turn over in its mind the answer to many questions. Has the country really cleared itself of all National Socialist influence? Is it sympathetic to democratic ideals? Can it be counted upon as a steadfast supporter of international order and justice? Is it proving a good neighbor? Will it grant reasonable opportunity to American trade? And finally, will it be independent in its external political relations? It would be silly to believe that capsule answers will be available to questions of this type when they are most needed. Decisions will often have to be groping and uncertain. The mien that countries display when in need sometimes changes afterward.

A similar set of questions may emerge in regard to certain parts of Asia -- particularly China. We are bound deeply to China by an old friendship and by mutual support during this long war. We are committed to assist in the rebuilding of China; we are confident she will always be a peaceful friend. As an invited and friendly participant in China's life, we look forward to the day when the Chinese people enjoy increased political freedom and achieve a large measure of economic and social justice. Our devotion to the idea of a unified, strong and progressive China is shown by our present effort to bring about a reconciliation between Chiang Kai-shek and the Chinese Communist Government and armies. Our support of China's territorial claims likewise shows that we confront our future relations with her with trust in the basic purposes of the Chinese people. It seems to us that the ways of life and the external policy of an independent Chinese people will be congenial and reassuring to us. Our assurance as to the wisdom of strengthening China would be shaken if the Chinese Government should seem to come under the decisive influence of Russia, or of any foreign government. China, during her years of convalescence, must revive and cherish friendly relations with all other peaceful countries. She must, in other words, take the road to partnership with the large Powers indicated by the place granted her in the Dumbarton Oaks proposals.


The preceding reflections have been concerned with the ways in which American-Russian relationships will affect foreign investment operations undertaken by the United States Government and American private investors. The same considerations will, in a no less significant way, affect the operations of any international investment bank such as that proposed by Bretton Woods.

Advocates of this venture -- in whose number I include myself -- think that one of its advantages is that it might free capital-seeking countries somewhat from the need of paying heed to the ideas, aims or influence of any particular source of capital. The Bank, for example, might take over the task of financing certain countries in which the financial activities of any one large Power would be looked upon with anxiety by others, and thus it might make possible loan and investment operations in countries where the interests of different Powers were not in settled adjustment, or were in a state of rivalry. But it should not be expected that an international investment organization, even if it grows and prospers, can eliminate the political element in many international financial situations. Countries controlling the flow of capital will ask political questions, whether they act independently or as participants in an international bank.

The Bank will exist to facilitate specific economic projects which, if well judged, will add to the economic strength of the country obtaining the capital, and thereby enable it to become a greater factor in world affairs. By rendering financial assistance, the Bank will strengthen the position of the government in power in the borrowing country. When any proposal comes before the Board of Directors of the International Bank, either as a request for its own funds or for a guarantee of funds that private lenders are ready to provide, it is to be presumed that each Director will ask himself whether his own government would be in favor of thus strengthening that country.

Since the United States will contribute so large a share of the funds which may be invested through the Bank, the American Director in particular would be expected to weigh the wisdom and justification of making the loan, in terms of American opinion and interest. He would have to take into account essentially the same considerations that, as we have seen, would influence the decision of an American official who was placing an independent American loan. Before he could happily consent to making an important dollar loan to any country, through the International Bank, he would strive for assurance 1, that the United States could count upon its peaceful friendship; 2, that it was in a position to act as a devoted and independent supporter of justice in any important issue that might arise between ourselves and other countries; 3, that the government in power was striving to give effect to democratic ideals; and 4, that American economic interests would secure fair opportunity and consideration. A wisely instructed official would abstain from opposing particular operations unless very definite and serious objections presented themselves. But he would have to insist that American views not be consistently overlooked or disregarded, for he would know that if they were, American support for the Bank would soon fall away; and it would be his task to have his colleagues understand that fact.

The U.S.S.R. will have a corresponding set of concerns with the Bank's operations. If a foreigner can undertake to guess at them, they will be to assure that the operations of the Bank, to which the U.S.S.R. will also contribute an important amount, will be used to strengthen countries that 1, are not unfriendly to Russia or Russia's social ideals; and 2, give fair consideration to Russia's economic interests.

Harmony in the relations between the United States and the U.S.S.R. will be as essential for the satisfactory operation of any international investment bank as for independent loans.


I have chosen, in illustration of the political questions to be faced in making foreign loans, thus far to travel only a single circuit -- that of American-Soviet relations. But in making loans we shall also encounter difficult questions on other circuits. There will be complaints against other countries and disputes with them which will affect the temper and the hands that control the purse. There may be occasions where it is appropriate and just to use our lending power as a counter in some transactions having to do with economic affairs. If our own trade policy affords fair opportunity to other countries, we shall be justified in requiring free and equal opportunity in return. Our lending power may be a useful means to gain that end. But if it is used to support selfish American policy, in the end we shall prove to have cheated ourselves. Furthermore, our financial power may be useful in gaining for American capital and enterprise equal opportunity to develop foreign resources. Expectation of such opportunity is justified. We shall not want to aid the great empires of the world to reserve their resources exclusively for their own people. It may even be proper at times to exchange our capital for some territorial or political advantage. However, the pursuit of these ends must be patient, modest and untarnished by suspicion that what we are seeking is not economic opportunity but unfair and unavowed political ends.

There will, no doubt, be times when foreign governments, in the American mind, seem oppressive, incompetent, corrupt or scheming. To these we shall be loath to provide capital. The purse will be unclasped for them grudgingly, if at all. While in happy contrast, governments which seem to us genuinely concerned with the welfare of our country, peaceful and competent, are likely to gain our confidence and command our wish to be helpful. These are but a few of the nuances of preference that are certain to enter into the business of foreign lending.

In conclusion, then, it may be said, first, that the United States will be compelled to take into account in the development of its foreign investment activities the political and social consequences of that activity; and, second, that, if we and the U.S.S.R. are working together in firm friendship, the serious complexities which will present themselves in this field will be few and unimportant. But if, on the contrary, relations between these two countries are severely disturbed, then our program of foreign financing is certain to be engulfed in, or become part of, the general disturbance.

In a settled and secure world we shall have to take little heed of the political aspects of our foreign financial activity; in an unsettled and insecure world we shall have to pay much heed to them. The student can only hope that the treasury official will have little need to consult political atlases and reports, and can draw his guidance primarily from the ledgers of peaceful business information. It will be a good omen if the conduct of international finance can be left to the care of banking minds -- illumined and refined by the flame of suffering through which the world is passing.

You are reading a free article.

Subscribe to Foreign Affairs to get unlimited access.

  • Paywall-free reading of new articles and a century of archives
  • Unlock access to iOS/Android apps to save editions for offline reading
  • Six issues a year in print, online, and audio editions
Subscribe Now
  • HERBERT FEIS, recently Adviser on International Economic Affairs in the Department of State; author of "The Changing Pattern of International Economic Affairs" and "The Sinews of Peace"
  • More By Herbert Feis