War and the Private Investor
by
[Doubleday, Dorati, $3.50]
THOSE who incline to disagree with the views set forth and the conclusions reached by Eugene Staley in his classic study on War and the Private Investor will be interested in the resolution which was adopted by the organization of World War Commissioned Officers at the closing session of their fifteenth annual convention at Atlantic City on September 18. ‘Prosperity,’the resolution reads, ‘depends on the exchange of commodities and manufactures in international trade. American business and enterprise must find their field all over the world. Congress, however, has denied support to American citizens whose business may require their presence in potential war zones.’
Regardless of whether or not the national government will heed it, the resolution is none the less significant in that it represents the point of view of one important section of the American people which, if in power, might conceivably carry out its plan of ‘protecting’ American citizens in ‘potential war zones.’ What is true of American army men is equally true of the British and the French, the Italian and the Japanese. The dictum that trade follows the dollar, or the pound, the franc, the lira, or the yen, may appeal in the classroom or the lecture hall. In actuality, it is the gunboat and the cannon which sooner or later follow a nation’s overseas commitments. It is this relationship between international private investments and international politics, particularly in their bearing on international political friction, which Dr. Staley endeavors to analyze and interpret.
With at least two continents again threatened by complications of the gravest character, in which the rest of the world, not excluding the United States, may well become involved, Dr. Staley’s comprehensive and illuminating study should prove exceedingly timely. According to the author, ’Investments used in the service of naval and political strategy, colonial expansion, quests for national glory . . . have been more productive of international friction in the past than investments actuated solely by private profit motives.’
A number of concrete examples are cited to illustrate the above, including the Yalu timber concession in Manchuria which is said to have been responsible for the Russo-Japanese conflict, and the activities of the Banco di Roma which are supposed to have pressed the Italian Government into action in order to protect its investments in Tripoli and to enhance the value of its land holdings.
With international investments aggregating $54,600,000,000 (in one place Dr. Staley estimates the total at $47,500,000,000 — an insignificant discrepancy in the author’s opinion), the problem of international investments is no longer one of merely academic interest. Nevertheless, Dr. Staley expects that ‘recovery from the world depression, when, if, and as it appears, will bring renewed international investments’ and that the ‘growth trend of the last hundred years will continue, thereby proving that recent interruptions due to war and depressions have been like similar interruptions in the past, but temporary.’ Dr. Staley submits that ‘there is no doubt about the future bringing world-wide investment relationships beside which the present ones will seem puny. ’
As safeguards for the future, he outlines various types of private investments abroad which are most likely to involve governments in international disputes or lead to armed conflict. These include investments which tend to (1) contribute to economic strength, by opening markets and sources of raw materials for national industry; (2) contribute to national power and thus serve as useful adjuncts to diplomacy; (3) sustain military power by providing a reservoir of foreign exchange which can be used to finance the purchase of supplies; (4) serve as important tools of military and naval strategists in seizing, consolidating, and strengthening bases for operations abroad; (5) screen secret military operations; (6) facilitate penetration and conquest; (7) enhance power and prestige; (8) maintain regional dominance; (9) build alliances and rapprochements; (10) exert pressure on political adversaries.
This is Dr. Staley’s Decalogue of Don’ts in foreign investments, In order to protect those who, heedless of the advice, will continue to invest without regard to the political consequences, as well as those who already hold large commitments abroad, Dr. Staley recommends (in addition to many institutions and enterprises already in existence) the creation of three new instrumentalities, including a World Investment Commission composed of representatives of the investing public and a rather vague set which Dr. Staley chooses to designate as ‘international society as a whole’; a World Commercial Committee whose primary function would be to promote ’denationalization and mondial supervision of international investments’; and a World Investment Bank which would ‘filter out the national interest in world capital movements . . . thereby promoting the dual process of denationalization and mondial supervision.‘
It is here that Dr. Staley is perhaps less convincing than elsewhere in his study. Despite the numerous agencies which have been mated in the past to perform certain specific functions, the aims which their sponsors hoped for were rarely, if ever, attained, because they could not in advance compute with precision the human element. In consequence, investments will continue to be made in the future as they have been in the past; mistakes will continue to characterize the transactions; and all one can hope and pray for is that man will benefit from past experience.
Despite the omission of the human factor, which apparently did not appeal to the author as of particular significance, and despite his failure to suggest a remedy for the political ills resulting from the investment of funds in foreign lands, Dr. Staley has provided a valuable study on a subject which, now more than at any other time, should prove of exceptional help to the statesman and the financier.
MAX WINKLER