Debts, Disarmament & Davis

(See front cover)

One morning last week before most Washingtonians had finished breakfast, towering Sir Ronald Lindsay, British Ambassador to the U. S., marched briskly up the front steps of "Woodley," suburban home of Secretary of State Stimson. He was promptly ushered into the study. After brief greetings Sir Ronald handed Statesman Stimson a heavy brown envelope tied with blue cord. Inside, the brawny Briton explained, was another note from His Majesty's Government on War Debts-- a note, he estimated, "about as long as the Pickwick Papers." In triple-spaced typewriting it covered 26 foolscaps, on the first of which was embossed a large lion & unicorn.

Bolting the rest of his breakfast Secretary Stimson sped to the White House whither President Hoover hastily summoned his other bower, Secretary of the Treasury Mills. Out came the British note and for two hours the three hunched over the President's desk pondering what Britain's whole Cabinet had painstakingly written at Downing Street earlier in the week.

"Expenditure on Destruction." The 6,000-word communication was an appeal, far more emotional than that of Nov. 10, for the U. S., while looking into the whole matter of debt reduction, to suspend the British payment of 95,550,000 gold dollars due Dec. 15. Addressed less to the President than to the U. S. public, it did not flatly refuse to pay but depicted dire consequences if payment were forced. As the President scanned it, he spotted many a phrase--"world depression," "storm brewing," "repeated shocks," "widespread ruin," "baneful effects," "lack of confidence" --which might have been lifted directly from his own campaign speeches. Without emphasizing the domestic poverty of Britain the note declared:

"The causes of the Depression may be manifold but War Debts and reparations have been a major cause and a settlement is an indispensable condition of a revival of general prosperity. . . . Reparations and war debts represent expenditure on destruction. Fertile fields were rendered barren and populous cities a shattered ruin. Like the shells on which they were largely spent these loans were blown to pieces. [Their] repayment necessitates unnatural transfers which provoke widespread economic evil. . . .

"The loss which both the United Kingdom and the United States taxpayers would suffer from reconsideration of the War Debts cannot be measured in the same scales as the untold loss of wealth and human misery caused by the present economic crisis."

De Facto Connection. Britain argued that President Hoover himself recognized a de facto connection between debts and reparations in his 1931-32 Moratorium. On the strength of that alleged connection the allied powers at Lausanne let Germany off 90% of her reparations, conditional upon debt revision by the U. S. Continued debt payments to the U. S. would scrap the Lausanne agreement and cause the allied powers to turn again to Germany for funds. Such international backtracking would, said Britain, only intensify the Depression, do the U. S. more damage than good. To meet its -L-19,750,000 gold debt, Britain would have to put up -L-30,000,000 in sterling. To make the payment in gold "would involve the sacrifice of a considerable part of the gold reserves of the Bank of England which are widely regarded as no more than sufficient for the responsibilities of London as a financial centre."

Trade Threat. Diplomatically tucked away in the long text was a threat of reprisal which President Hoover did not miss: "If War Debt payments had to be resumed it is apparent that the exchange position of this country would need to be strengthened by a reduction of the very heavy adverse balance of trade of the United Kingdom and the United States. This could only be done by adopting measures which would further restrict British purchases of American goods. The result of such restrictions would inevitably be to reduce the market for American farm products."

French Note. Next day found President Hoover and his two Cabinet advisers again bent over another War Debt note, this time from France trying to beg off paying $19,000,000 due Dec. 15. Like Britain, France argued that debt suspension would be the "normal, equitable and necessary sequel" of the 1931 Moratorium but, unlike Britain, aimed its words straight at President Hoover as if he had some personal obligation in the matter. Cited was the Hoover-Laval statement of October 1931, in which the President and the French Premier suggested that on intergovernmental obligations "some agreement may be necessary covering the period of the Depression" and that Europe should take the "initiative" at an early date. How, asked France, could it continue this policy if, contrary to expectations, U. S. co-operation were lacking? The French note, smooth, cold, hard, legalistic, made no offer to resume payments.

United Gentlemen. President Hoover saw some merit in the British note, less in the French. If he were a free agent he might even have granted Britain's request for suspension pending negotiations. With a gold reserve last reported at $680,000,000, payment would come hard for Britain but that she would default no one in Washington from the President down seriously believed. France's capacity-to-pay was rated much higher at the White House but there was grave uncertainty whether her Parliament would vote the necessary funds. Most disturbing to the U. S. was the "United Front" which Europe continued to maintain, in line with the famed Gentlemen's Agreement that came to light after the Lausanne Conference. Last month Britain and France approached the U. S. for relief almost simultaneously with the same set of arguments. Last week they repeated the performance.

"Let's See the Grass." To Congress, whose heart and head have long been set against any further debt tinkering, the British and French communications were just so much waste paper which did not change a single vote. Any Congressional sympathy for Britain vanished at her threat of trade reprisals against the U. S. Declared an anonymous Treasury official: "Britain has said in effect, 'Relent or the grass will grow in your streets,' and Congress is saying 'Let's see the grass.' " Most Senators and Representatives felt that European debtor nations were ganging the U. S. taxpayer and Congress was that harried individual's last line of defense. The few Congressmen whose minds remained open observed with dismay that owing largely to the uncertainty of Europe's paying $124,000,000, the value of securities listed on the New York Stock Exchange had slumped $3,500,000,000 in three weeks, farm commodity values untold millions more.

Debts & Arms. One thing upon which U. S. opinion of every shade seemed undivided was this: that quite as connected de facto as Debts and Reparations are Debts and Disarmament. This connection Europe continued to deny. Last month after his White House conference with Governor Roosevelt, who rejected War Debt responsibility as "not his baby," President Hoover declared:

"I must reiterate that the problem of foreign debts has in the American mind very definite relationship to the problem of disarmaments and the continuing burden which competitive armaments impose upon us and the rest of the world."

If that was a hint, both Britain and France failed to take it for their debt notes of last week contained no suggestion whatever of reducing armaments in return for debt reduction.

Delegate at Large. The only active negotiator the U. S. had on the European disarmament front last week was Norman Hezekiah Davis, a grey-haired, drawling Tennessee Democrat. On an allowance of $6 per day from his Government (and spending five times that much out of his own pocket), Mr. Davis was covering more ground more effectively than a full-fledged delegation of plenipotentiaries. A diplomat who had earned his spurs under Woodrow Wilson, he was picked by President Hoover as a U. S. delegate to the League of Nations' General Disarmament Conference which opened last February at Geneva. When talk was loud and hopes high, Delegate Davis was obscured by other U. S. representatives. But as the conference began to coast downhill into disagreement and failure, the others tiptoed home one by one. The parley moved too slowly to hold Secretary of State Stimson's presence for more than a fortnight. Ambassador Gibson went back to Belgium, ceased, for reasons unknown, to be President Hoover's diplomatic handyman. Miss Mary Emma Woolley returned to Mount Holyoke College, Virginia's Senator Swanson to the Capitol, neither with new glory. That left Delegate Davis as the lone survivor to carry on the U. S. job of trying to get Europe to disarm. In the months following the general conference's adjournment in July he became a sort of roving ambassador, dipping into many a diplomatic problem of primarily foreign concern.

Shut Up or Blow Up. Before its mid summer adjournment the Geneva conference had received only two full-length disarmament plans: 1) a 33% all-round cut, by President Hoover; 2) an international police force, by Frenchman Tardieu. To complicate matters, Germany in a huff quit Geneva in September because France declined to recognize its right to arms equality. Italy continued to play on the sidelines, though seeming to side with President Hoover. The prospect of real disarmament was rarely blacker.

Last month Delegate Davis decided that the conference should be wound up promptly and decently instead of dying a long lingering death. It was a case of ''shut up or blow up." He set himself to work on two principal objectives: 1) to get France and Italy to join the London Naval Agreement of 1930; 2) to get Germany back to Geneva. Objective No. 1 took him to Italy early in November where he had a heart-to-heart with Premier Mussolini on naval disarmament. Back in Paris he reported his conversations to Premier Herriot who promptly made a pro-Italian speech at Toulouse. Back in Rome Delegate Davis was told: "These are fine words, but I want acts."

Five-Power Parley. Fortnight ago Delegate Davis, followed by his faithful shadow and legal adviser, Allen Welsh Dulles, arrived in Paris to work on objective No. 2. He shocked protocol experts by rolling up at the Quai d'Orsay in one of the most battered of Paris' many battered taxis. There he slapped M. Herriot on the back, patted his knee, jollied him. Exclaimed the French Premier: "We are great friends! M'sieu Davees is a loyal and trustworthy man." Mr. Herriot gave the U. S. diplomat a fine antique Chinese pipe.

Upshot of Mr. Davis' Paris conferences was that Premier Herriot agreed to join an extraordinary Five-Power meeting at Geneva to discuss methods of liquidating the general conference without a score of zero. Mr. Davis journeyed back to Geneva with Prime Minister MacDonald and Sir John Simon who also were to sit in. Before he left Paris he had word from Berlin that Germany would send a representative. Signor Aloisi Rosso was on his way from Rome.

If Delegate Davis could have his way, France and Italy would come to a naval agreement, Germany would get theoretical arms equality and an ad interim treaty would be initiated providing for restrictions on aerial bombing and chemical warfare. Then the conference could save its face by having something concrete, though small, to point to as an accomplishment. Such a program was in accord with the dispirited U. S. State Department.

Bossy U. S.? As Delegate Davis sat in his unimpressive bedroom office at the Hotel des Bergues in Geneva, critical talk began to ooze through the foreign Press that the U. S. was trying to boss things. Reports were published from Washington that President Hoover had lost interest in disarmament, that Delegate Davis was really representing nobody but himself. Such criticism, mostly unfounded, was an echo of what had appeared in the Paris Press concerning Mr. Davis' attempts to bring France and Italy together on one side and France and Germany on the other. Declared La Liberte:

"One may be permitted to express surprise that when President Hoover has assumed his real figure of an insatiable Shylock, his representative in Europe--for Norman Davis is playing the role of a super-Ambassado--is interfering between France and Germany and between France and Italy. . . . Europe's foreign politics seem to be to the United States a kind of hellbroth into which Mr. Hoover, like Macbeth's witches, keeps pouring new poison. . . ."

Yes, No & Maybe. Wherever Delegate Davis turned on disarmament, he bumped head-on into War debts. During the War he had been the Treasury Department's Financial Commissioner in Paris on loans from the U. S., was thus thoroughly familiar with the origin of these obligations. He was an off-the-record observer at the Lausanne conference and is credited in some quarters not only with knowing the inside story of the Gentlemen's Agreement but with having, by his tact and patience, materially aided the conference's success. His repeated statement, repeatedly confirmed by the U. S. State Department, is: "I have no authority to discuss debts." But in present-day diplomacy, which Congress has told President Hoover he must continue to use on the Debts, lack of authority can be a great asset, a key to confidence. If a diplomat says Yes he means Maybe. If he says No he is no diplomat. A diplomat without authority can mean Yes without committing anyone to anything, No without offending anyone, yet his answer may open the way to further understanding and help set the stage for negotiators in whom authority is vested. If the U. S. loses its grip on Debts as a club to force Disarmament, the fault will lie with President Hoover and Norman Davis. Conversely, if Debt pressure brings down armaments, the great credit will be wholly theirs.

State Candidate. Last week President-elect Roosevelt was reported culling his list of Cabinet possibilities. Most vital appointment he has to make is that of Secretary of State, because, weak on foreign affairs, he needs an internationally equipped mind to lean on. Most often mentioned for this No. 1 Cabinet post is Owen D. Young. But Mr. Young's wife is a chronic invalid and last week Mr. Young was ordered to be examined in Federal Court on his connection with the bankrupt Insull Utility Investments--a connection which would help no public career before a catawauling Senate. Another outstanding possibility for Secretary of State is Newton Diehl Baker. But Mr. Baker's friends say he is reluctant to return to public life. A third, viewed expectantly by European statesmen who have dealt with him, is Norman Hezekiah Davis.

Democratic Morrow. Born (1878) and bred in Tennessee where he still lives at Tullahoma, Mr. Davis comes from a long line of Democrats. One of his five brothers, Ewin, is now the "lame duck" chairman of the House Merchant Marina, Radio & Fisheries committee. In 1902 Norman Davis went to Cuba, where in 15 years he made his fortune in banking, construction, dredging. His Havana partner was Tillinghast I'Hommedieu Huston, onetime Colonel in the Army Engineers, onetime part-owner of the New York Yankees.

At the outbreak of the War President Wilson called Mr. Davis to Washington as a $1-a-year man in the Treasury, sent him to Spain to stabilize the peseta and thus facilitate U. S. Army purchases there. In Paris he served as a member of the Supreme Economic Council, the Armistice Commission, the Reparations Commission, the U. S. Peace Commission. When France imposed its first indemnity on Germany, Mr. Davis exclaimed: "The French have not only plucked this bird but now they're going to keep it from flying." During the last nine months of the Wilson Administration as Undersecretary of State he ran the nation's foreign affairs over the slumping shoulder of Secretary of State Bainbridge Colby.

Mr. Davis' friends call him "the Democratic Dwight Morrow." His critics complain that he has served Republicans too long to fit into a "new deal." Wealthy, he likes diplomacy for the fun of it. He is as much at home knocking around drafty European conference halls as he is shooting wild turkeys in Tennessee.

Long a friend of Governor Roosevelt, he is already a member of the committee organizing the proposed World Economic Conference. If the next President decides to scramble debts, disarmament and world trade all up in that parley he would have a long search for a Secretary of State so well trained by experience in the practicalities of such problems as Norman Davis. But perhaps Mr. Roosevelt will find him as Mr. Hoover has, even more useful without portfolio.

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