When Do We Stop?

December 24, 1956

Suppose a friend stood by while a thug snatched your bankroll; then urged you to negotiate a compromise with the thief; next called a policeman only to restrain you after you had seized the thief to get your money back, and finally offered to share your losses himself if you would promise to stop threatening the thief. What would you think of your friend’s friendship—or of his mental balance? Yet this is pretty close to the policy we have followed with the French and British. A devastating analysis of our foreign political blunders by Hans J. Morgenthau, director of the University of Chicago Center for Study of American Foreign Policy, recently appeared in, oddly enough, The New Republic. “When we heard spokesmen for the government,” wrote Professor Morgenthau, “propound the legal and moral platitudes which passed for foreign policy in the interwar period, we thought this was the way in which the government tried to make the stark fact of foreign policy palatable to the people. . . . We were mistaken. These platitudes are the foreign policy of the United States.” He went on to point out how our “renunciation of force . . . actually increases the risk of atomic war”; and how the subordination of our national policies to the U.N. “makes it well-nigh certain that the enemies of the U.S. will make the terms of the [Middle East] settlement.”

FOREIGN AID FOREVER

Let us turn now to some of the economic consequences of this policy, particularly to the new foreign-aid offers that our government has been so freely making. Whether it was wise or necessary for the British Government to ask the U.S. to cancel $81.6 million and Canada to cancel $22.2 million of interest payments may be doubted. But as the request has been made, it would be unwise of us to refuse it. The enormously larger aid being proposed, however, raises graver problems. If we are to pay for Britain’s losses from Suez, why not those of France? Of all Western Europe? Of Israel? Even of Egypt? How and where and when do we stop?

It is reported that the Eisenhower Administration will ask for more than $4 billion additional foreign aid in the next fiscal year, and thinks “the key to future foreign-aid operations is a grant by Congress of authority to use funds flexibly and without too many strings.” It is reassuring, at least, to learn that Secretary Humphrey is skeptical about the value of another big foreign-aid program and that Senator Byrd is “opposed to any further continuation of foreign economic aid.” The more than $50 billion of aid we have granted since the end of the second world war was not only a gross waste, it actually went to subsidize and prolong harmful collectivist economic policies. There is no good reason why Congress should grant still further discretion to the executive branch in this direction. The discretion the executive branch already has on foreign aid has been used without wisdom. It is dangerous for Congress to keep delegating and abdicating more and more of its constitutional responsibilities and its control over the purse.

TO FREE THE POUND

The International Monetary Fund and the Export-Import Bank are both ill-advised institutions. Both give undue discretion to the executive branch. Both are political institutions which necessarily politicalize foreign trade and investment. Now the fund has authorized Britain to draw up to $1.3 billion against it. Britain may perhaps get, in addition, a $500 million to $600 million loan from the U.S. Export-Import Bank.

And these funds are to be used to subsidize the continuance of the thoroughly unsound policies of exchange control and artificial price support for the pound sterling. The so-called “dollar shortage” is caused by exchange control (i.e., by coercive overpricing of the pound and other currencies). The alternative is not another “devaluation” of the pound. It is to let the pound go free, like the Canadian dollar, and to support it, not by the police power, but by restoring confidence in the currency through sound policies. The only sound policies, as Canada has shown, are those calculated to attract both domestic and foreign private investment. The cure for the world’s economic ills is not more statism, but a return to free enterprise.