The World’s Santa Claus

July 21, 1947

More and more the strange idea is being put forward that America must make loans or gifts to foreign countries, not primarily to save them but to save itself. We are told that we must make these gifts or loans not as a humane or charitable duty but out of shrewd self-interest. Newspaper commentators in the recipient countries have more and more been interpreting our generosity to them on this theory. On June 25 Pravda declared that the Marshall Plan was influenced by a desire to prolong a postwar “boom in the United States” and to “lessen the ripening economic crisis” here.

That Communist Russia should hold such a view is not surprising. It fits in perfectly with all the other claptrap that Communists have long preached about capitalism. But the theory is just as eagerly embraced elsewhere.

A year ago, in its issue of July 12, 1946, the Eastern Economist of New Delhi put it forward in its most candid form. “The United States Lend-Lease plan of helping the Allies in the recent war has been acclaimed as an act of unparalleled generosity,” it said. “But it was also a brilliant and ingenious way of solving what would otherwise have been an intractable problem. . . . The productive power of America has multiplied itself so fast that it is now admitted that she cannot continue to give 60,000,000 jobs unless she is able to have a large export trade. . . . In such circumstances it would not be such a foolish thing (as some might imagine) to give away goods to other countries, for on balance it would be better to part with surplus goods than to create unemployment. . . . Machinery should be set up by America whose purpose would be to provide gifts of loans to countries.... The United States . . . will buy the goods, give them as gifts, and reimburse itself by additional internal taxation. . . . If this is to play the world’s Santa Claus, the United States is both rich enough and should have sense enough to fill the role.” This idea, in both crude and sophisticated guise, now runs like a refrain through the French and British press.

More surprising, it is endorsed by some American businessmen and even by some American economists. Yet it is unadulterated nonsense.

If we could create prosperity merely by making goods to give away, then we would not have to give them to foreign countries. We could make the goods to give away to our own poor. We could furnish them with free overcoats, free lunches, and free automobiles; build any amount of good new housing, which we badly need, and turn it over to them. Simplest of all, we could turn over to them direct additional money taken from the taxpayers and let them buy with it whatever they themselves wanted. Why confuse the issue by bringing in foreign nations and foreign trade?

It ought to be clear to the meanest intelligence that nobody can get rich by giving his goods away. What seems to confuse otherwise intelligent people when this proposition is applied to a nation instead of an individual, however, is the fact that particular firms and persons within the nation can profit by such a transaction while the rest of us are forced to absorb the losses. The exporter may profit because he makes additional sales. But if the foreign loan is not repaid, then the loss must be made good out of increased taxes on every American. American consumers will then have just that much less money to buy American goods. Domestic business will lose as much as export business has gained. And the country will be poorer by the amount of goods it has given away.

This would be the consequence of unsound foreign loans at any time. But the country is now in the midst an unprecedented inflationary boom. Precisely when this inflation should be prevented from going further, a government foreign-loan policy can only intensify it. The theory that we need to create an export surplus by unsound governmental loans would be foolish enough even if we had unemployment and wished prices to go up; it becomes downright idiotic in a period of full employment and when everyone is already complaining of high living costs.