THE OTHER SIDE OF AMERICAN NEUTRALITY
By ERWIN
BEFORE very long America's economic position as a neutral is bound to come under severe pressure. It is now distinctly recognised in official and some business circles that while the Neutrality Law has been admirable in keeping American ships out of submarine and mine-laden waters, it has served to make the nation's economic difficulties greater. Economic and financial pressure on the Neutrality Law, to permit loans to the Allies for purchase of non-war materials, is bound to grow stronger as time goes on. Upon this economic issue the question of ultimate American relationship to the war is likely to be settled.
Two facts: in the last week of March the gold-flow to this country reached the record-breaking total of $231,000,000; exports of American farm products in the same month, and all months since the war began, are 25 per cent. lower than they were a year ago, with the sole exception of cotton.
American farmers see their markets growing narrower. They are not greatly pleased with the big orders munitions and aeroplane manufacturers are enjoying, for they see in them little more than another contribution to unbalance. In short, the American farmer is in the line of fire from the Neutrality Law, and the ultimate consequences are bound to be severe.
Our statute, it is being somewhat painfully recalled, requires cash on the barrel-head for all sales to belligerents —war materials or pork and tobacco alike. British, French, Canadian purchasers must dig into their precious supplies of American dollars to purchase all these materials. Although their dollar-supply is large, it is not endless. With a limited supply and an unlimited need, the Allies are very carefully parcelling out their money. They have apparently decided two Things: that any American dollars realised from the sale of capital assets—gold, stocks, bonds, or physical properties—will be spent only for vital war materials; that the only dollars available for other purchases in the United States will be those obtained from sale of British goods and services here.
Application of this policy has already cut down British purchases of tobacco, fruits, pork products, and many other articles which once built up a thriving trade. And it is only the beginning. In these first months of the war, the Allies have devoted only about 25 per cent. of their dollar purchases to war materials. The proportion is bound to rise swiftly. Every effort will be made to keep the cash requirements under the Neutrality Act for the purchase of essentials. The British • currency controls are another important contribution to the same end. Already com- petition from the " free " pound has had some effect in depressing American prices. Controlled consumption within Great Britain further contributes to the essential objective.
For the Allies it is a simple choice between products they would like to buy and materials they must buy. They must choose guns instead of butter, American aeroplanes instead of apples. For Americans, the temporary advantages of a boom market in war-supplies are more than counter- balanced by the unfavourable effect on other products.
To meet this very real pressure, the thin end of the wedge has already been inserted in unofficial discussions here. The present Congress will hardly make any changes in the Neutrality Law, but some farm exporters and some officials are beginning to talk of loans and credits for non-war materials. The alternative, it is being pointed out, is heavy and expensive farm subsidies. Any such proposal for loans must of course combat great isolationist resistance. But this sentiment is strongest in the parts of the country where the blow to farm exports hits most severely. Two kinds of self-interest are therefore battling with one another. By late autumn, after the Presidential elections in November, a special session of Congress is possible ; either then or by next January, when the next regular session meets, pressure for some such change may have become irresistible.
This is the sort of impact that is wearing down upon our neutrality status. Allied mine-laying and diplomatic action toward the Scandinavian neutrals* aroused no substantial indignation here. The United States is little interested in the legalistic rights of neutrals, except in so far as it resists interference with its own shipping and mails. If the Allies are able successfully to block German shipping down the Norwegian coast, the United States, instead of bemoaning the plight of neutrals, will probably start cheering at Allied enterprise.
Americans are, of course, deeply gratified that the Neutrality Law kept their shipping out of dangerous waters. Had our ships been plying their normal trade to the British Isles, to Scandinavia, or into the Baltic, the difficulties with both belligerents would by now have been enormous. Much shipping would probably have gone to the bottom, many lives would have been lost, and the British control examina- tions would have aroused irritations. The 1915-16 situation would have been duplicated in somewhat aggravated measure.
Since the nation is anxious to make its decision about the European War upon the basis of ultimate and fundamental facts, and not because our shipping could not get out of the way, these effects of the Neutrality Law are hailed with un- disguised satisfaction. The economic penalties which are causing the pinch are only in part a result of the statute. Without its restrictions, the Johnson Act would have for- bidden loans to nations still in default on their old war debts, and even if that limitation were not operative, the British and French supplies of dollars and of credit would probably not have been unlimited. Some curtailment of purchase of non-war supplies in the United States was inevitable.
It would be too much to say that the economic pinch of neutrality has already begun to affect American thinking to any significant degree. It probably will be months before the talk of loans reaches an important stage, and events in the meantime may rule it out of the question. It cannot be repeated too often that American public opinion will be in- fluenced not by Allied or German propaganda experts, not by deliberate efforts to appeal to it, but by the events of the war itself. The best way for the Allies to assure themselves
* This was written before the German attack on Scandinavia. Obviously American sympathies have now been tremendously aroused on the Allied side, and the ultimate consequences may be the turning-point in our whole relation to the war.
of the maximum degree of American co-operation which this nation may be progressively ready to offer, will be for them simply to get on with the war.
American opinion, still with the memory of Munich and appeasement hard to blot out, is less than enthusiastic about the Chamberlain Government, while it is eagerly observant of Winston Churchill's dramatic activities. By the simple token that any progressive, Liberal Government tends to be popular abroad, an orientation of the British Cabinet in that direction would favourably influence the United States. Britain need not have worried about offending the United States through boldness, even at the expense of neutral "rights." Nor should the British Government waste any moments in thinking of how to appeal to American opinion. Strong policies and the logic of events will take care of that. The economic pinch applied under the Neutrality Law does not increase Allied popularity here, naturally, even though it be recognised that the stringency is caused by tht cash provisions of the law. And Allied commercial and financial policy is bound to seem increasingly drastic. Yet, however severe the pinch, economic suction is unlikely to bring the United States into the war. That, too, is dependent upon the course of events in Europe, and for- tunately out of reach of propagandists on either side.
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