HISTORY OF THE LOANS Any attempt to trace in detail the development of Inter-Allied borrowings, of which the above official figures represent the pres ent position, must be one of great difficulty. For a considerable part no authoritative information has been made available as to the dates at which these various obligations were incurred, and the figures given in the following survey must be taken as mere esti mates. For the sake of convenience the history of these loans may be divided into three periods:— First Period: 1914-17.—Up to the end of 1914 the various Al lies were able in the main to finance their own foreign purchases. Russia, however, soon found herself in difficulties. Unlike Great Britain and France, her Government was unable to command large funds abroad, while her incapacity to manufacture munitions on a sufficiently large scale necessitated heavy purchases from her Allies. In addition, considerable sums were required for the pay ment of interest on the existing external debt. As early as Oct. 1914 she had been forced to apply to the British Government for assistance, and a credit of some £II,5oo,000 was opened on her account at the Bank of England against a shipment of gold to the value of f 8,000,000. At the end of the year a further credit was granted, and in Feb. 1915 at a, meeting in Paris the British, French and Russian Finance Ministers agreed to unite their financial re sources, to share the advances made to Allied Governments, to issue a joint loan and to co-operate in the purchase of supplies abroad. Actually the second proposal was never carried out, but as a result of this and subsequent conferences large funds were raised for Russia in both France and England by the sale of Rus sian Treasury Bills on the open market and by the extension of governmental credits against a small proportion of gold from the Russian reserve. It is estimated that Russia, during the period 1914–Sept. 1917, borrowed f 483,000,00o from the British Govern ment, against a deposit of gold in London of £6o,000,000, and 6,000,000,000 fr. from the French Government. She also obtained advances from the United States Government between the months of April and Sept. 1917. In the United States and Japan, more over, considerable sums were placed at her disposal by the British Government.
The next country to find difficulty in financing its war require ments abroad was France. In Oct. 1914 she had found it advisa ble to arrange for the issue of Treasury Bills on the London mar ket. By May 1915 some II o,000,000 worth of these bills had been placed, and by the end of that year the figure of open market bor rowings had risen to 133,000,00o and to f 8o,000,000 in 1917. In May 1915 it was agreed that the British Government should grant France substantial credits against shipments of gold in the pro portion of three to one. This system lasted until the end of 1916, when the shipment of gold ceased. During the same period France raised considerable sums on the American market, of which the most important was the joint Anglo-French loan for $5oo,000,000 in Oct. 1915, repaid in 1920. France, during this period, borrowed altogether nearly L200,000,000 from the British Government and dispatched to London some £53,500,00o in gold. To the other Allies the French Government lent approximately 6,5oo,000,000 francs.
Great Britain during this period loaned to her Allies over f 900, 000,000. In addition to the above-mentioned advances to France and Russia, f 6o,000,000 were advanced to Belgium and .12 7,000, 00o to Rumania, Serbia, Greece and Portugal. Up to Oct. 1915 Great Britain had not had occasion to borrow in the United States, but it was found impossible to maintain the American exchange unless funds were available to cover the greatly increased pur chases there of war materials. The joint Anglo-French loan was raised on the market without other security than the credit of the two governments, but all moneys subsequently raised in America during this period took the form of credits or secured notes, col lateral being deposited in each case. For this purpose the British and French Governments encouraged their nationals either to sell or lend to the Government their holdings of American securities, which were either sold for dollars or employed as collateral.
Italy did not enter the war until May 1915, and from then until the end of this period confined her borrowing to the United Kingdom (with the exception of a small amount raised in Canada). Credits to the extent of some £ 153,000,00o were granted to her by the British Government, gold to the value of L22,200,000 being deposited in London as security. On the other hand, she herself advanced about 63,000,000 lire to Russia. Her advances to France during this period are in dispute.
The Second Period.—This dates from April 1917, when the United States entered the war, till the Armistice in Nov. 1918. Towards the end of the previous period the Allies were beginning to grow anxious as to their ability to continue the purchase of supplies in America on the then existing scale for an indefinite period. Accordingly, one of the first acts of the United States Government after the declaration of war was to obtain the con sent of Congress to a law (Liberty Loan Act) authorizing the ex tension of credits to Allied Governments up to a total of $3,000, 000,000. This limit was subsequently raised three times up to a total of ten thousand million dollars in July 1918. Such credits were granted without any collateral and they were to bear the same rate of interest and be subject to the same conditions as the corresponding bonds to be issued on the United States mar ket in order to raise the sums required. From that time the Amer ican Government assumed the responsibility for Allied purchases in the United States. Market borrowings by the Allies ceased with the exception of certain small amounts required for the pur pose of refunding existing market loans, some of which, however, were also paid off with the funds obtained from the new credits. The total advances by the United States Government to the governments of the Allies amounted during this period to some of which Great Britain received approximately $3,696,000,000, France $1,970,000,000, Italy $I,o3o,000,00o and Belgium $171,780,000. The Provisional Government of Russia (successors to the Tsarist Government) received $188,000,000 between April and Nov. 1917. Smaller Allies account! for the remainder. During the same period the British Government con tinued to finance the requirements of the Allies in the United Kingdom, and also assisted them by the employment, to a certain extent, of the credits extended to her in America. These credits were principally employed for the purchase there of raw materials required for the manufacture in the United Kingdom of war sup plies for the Allies. For, as the needs of the United States army increased, her ability to meet all the Allied requirements decreased to some extent, and Great Britain endeavoured to take her place. In Aug. 1918, however, it was arranged that each Ally should be debited by America with the cost of the necessary raw materials. In addition, during the early part of 1917 Great Britain advanced funds from her American credits to the Russian Government for interest payments due in America. Total loans by Great Britain to her Allies during these years amounted to over £550,000,000, of which France borrowed nearly f 2 50,000,000, Italy L220,000,000 and Belgium f 50,000,000. France, on the other hand, in addition to the advances made by Great Britain, borrowed nearly $2,000,000, 00o from the United States, and loaned to her other Allies nearly 7,000,000,00o francs. Italy, Russia, Belgium, Serbia and Rumania were all borrowing nations.
Third Period: Nov. 1918–Sept. 1920.—Although the Armis tice was signed on Nov. II, 1918, nearly two years elapsed before it was possible for the lending Governments to cease making ad vances to the other Allies for the payment of goods already sup plied or ordered. They were also required to enable the Allies to purchase war stores left by the lending Governments in their ter ritories. In addition, the impoverished condition of Europe made it essential, if complete economic chaos were to be avoided, for relief credits for the purchase of foodstuffs and for reconstruction to be granted not only to the poorer Allies but also to certain of the new states created by the peace treaties, and even to some of the enemy countries.
In the United States there was some doubt after the Armistice as to the legality of granting further credits under the Liberty Loan Acts. These Acts limited credits to the period of the war, and Congress had refused to approve any prolongation. On the other hand, the presidential proclamation announcing the official termination of the war was not published until July 2, 1921, and the Administration felt themselves justified in continuing to make advances during the intervening period. The balance of $2,500, 000,000 authorized under the Acts was, in this way, advanced to the Allies and utilized by them partly to meet existing contracts in America and partly for the purchase of supplies for the relief of Europe. Moreover, special credits were granted with the approval of Congress to the extent of $740,000,000, of which $600,00o,000 were utilized for the sale of war stores to Allied Governments, and $140,000,00o for the sale of flour through the United States Grain Corporation. To this must be added a revolving credit of $100,000,000 opened in favour of the American Relief Administra tion, of which $84,000,00o was expended for relief supplies fur nished on credit.
Relief and reconstruction loans by the British Government amounted during this period to L32,522,000, loans for the purchase of war stores to L12,205,200 and for the repatriation of prisoners to f 1,4So,000. Similar advances by France amounted to some I,5o0,000,0oo fr. and by Italy to approximately 600,000,000 lire.