Invitation to Seizure

August 27, 1956

How did the West manage to get itself into the position where it can be blackmailed or robbed by any petty pirate, and hardly dares defend its own property or treaty rights?

It was not always so. Compared with our own era of war and constant dread of war, the nineteenth century (or from 1815 to 1914) was an era of international peace, disturbed, apart from our Civil War, only by a few short conflicts. There was no United Nations, but there was real respect for international law. And one of the cornerstones of international law was the acknowledged right of each country to protect the lives, liberties, and property of its citizens, wherever they were. If any little despot or robber chief defied the treaty rights of, say, Great Britain or the United States, an ultimatum went out, or the Marines landed. Such action is now in disrepute, but no effective substitute has been found. It protected citizens in the peaceful possession of their property abroad as well as at home.

MEXICO AND IRAN

This state of affairs began to disintegrate during the first world war. Even in the interwar period the great powers rashly set precedents which undermined the foreign property rights of their own citizens. When on March 18, 1938, President Cardenas of Mexico seized the British and American oil properties there, Mexican orators and newspapers told their people that President Roosevelt had approved the seizure. His public protest, in any case, was gentle, belated, and perfunctory. Two weeks later, he publicly said he was pleased that Mexico was willing to pay compensation, but he hoped the American companies would limit their claims to the amount of their actual investment. This was putting pressure, not on the Mexican Government to pay the going market value of the properties, but on the American owners to accept less. The American owners, in fact, in the end got less than $30 million for properties valued at $120 million.

On May 7, 1943, after Bolivia had defaulted on a private American loan, President Roosevelt actually apologized to the then Bolivian President on the ground that an interest rate of 8 percent was too high anyway, and that “of course” Bolivia was unable to pay either interest or principal. This informed every foreign country that the American Government would not protect the foreign investments of its citizens from seizure or repudiation unless it decided (retroactively) that it approved the terms.

In World War II, the “democratic” victors even put pressure on neutral countries to seize the private property of citizens of the conquered nations. Then came an astonishing performance after Mossadegh had seized the Anglo-Iranian oil properties. President Truman wrote to him on July 9, 1951: “You know of our sympathetic interest in this country in Iran’s desire to control its natural resources. . . . We were happy to see that the British Government has on its part accepted the principle of nationalization.” This in effect supported Mossadegh’s contention that a government is entitled to sell a concession, invite foreign capital in, then repudiate its contract and seize the capital.

The worldwide spread of Socialism and disregard of private property was ominously revealed on Dec. 11, 1952, when 31 members of a United Nations committee approved a proposal, the U.S. alone dissenting, permitting any member nation to expropriate natural resources without compensation. A majority of the U.N. General Assembly itself accepted the resolution in a modified and vaguer form on Dec. 21, 1952.

DILEMMA OF SUEZ

Now another little dictator has seized the Suez Canal, and the injured governments, instead of standing flatly against the violation of property rights or even the flagrant treaty violation, talk of referring the question to an ineffective United Nations, or having a friendly conference with the thief, or drawing up a new treaty for him to violate.

If investors in foreign countries have no assurance against expropriation, then private investment abroad will cease. The worst sufferers, in the long run, must be the very “underdeveloped” countries that insist on the right of arbitrary seizure.