THE LIVING AGE. Published weekly. Publication office, RUMFORD BUILDING CONCORD N. H. Editorial and General Offices, 8 Arlington Street, Boston 17, Mass. 15c a copy, $5.00 a year; foreign postage $1.50. Entered as second-class matter at the Post Office at Concord, N. H., under the Act of Congress, March 3, 1879. Convricht 1026 by The Living Ace Comp THE LIVING AGE VOL. 329 MAY 8, 1926-NO. 4270 THE LIVING AGE BRINGS THE WORLD TO AMERICA A WEEK OF THE WORLD ARE WE LENDING RECKLESSLY? THE London Statist recently called the roll of defaulting States and Governments, and the list is an imposing one. It is headed by Russia, which owes in principal and interest between twelve and thirteen billion dollars. Eight of our own States are in total default upon certain issues of their bonds, which some of them have repudiated outright. The principal thus outstanding totals about seventy-five million dollars, with from fifty to eighty years' interest in arrears. This is exclusive, of course, of debts contracted by the Confederacy or by the Confederate States during the period of secession, which are recognized as outlawed. Latin America follows, though with relatively fewer delinquencies. Most of the debt of Honduras has been written off the books of her creditors. Ecuador has not paid anything on account of a mortgage of over ten million dollars on the Guayaquil and Quito Railway, which is now thirteen years overdue. The Argentine province of Corrientes is in total default, and the State of Pará in Brazil has not kept up its payment on debts of nearly fifteen million dollars. Mexico, of course, is temporarily in default for very large sums. China, which had a long record of solvency and honorable dealing prior to her revolutionary disturbances, is not paying interest on over seventy-five million dollars of external loans, and it is generally assumed that she will default on some fifteen million dollars additional the present year. Most of these loans are upon railways and are guaranteed as to principal and interest by her Government. Egypt is withholding payment on something like seventy million dollars, while New Turkey has practically repudiated the borrowings of the old Ottoman Empire. The Irish Statesman discusses this question from another angle. It foresees a serious problem if financiers, whether British or American, continue to lend millions of dollars to local borrowers in debtor countries whose Governments are already overburdened with obligations toward the Government of the lender's country. 'Financiers in the United States, for example, have lent over two hundred millions in Copyright 1926, by the Living Age Co. the form of private loans to Germany. Italy has also been the recipient of very large loans. Now, if we have a number of creditor States demanding interest on their loans, while private corporations at the same time vastly increase their advances, there may come a time when the profits on the international trade of the debtor country will not be sufficient to pay both. Will the creditor State then veto other private advances of its own citizens to the country that is already indebted to it? Will the State regard these private advances by financiers as in the nature of a second mortgage on a property already, in its opinion, mortgaged to its full value? Will it insist on the interest due to its own Government coming first? Or will the multitude of private corporations begin an agitation to have the debt owed to their State remitted so that the interest on their own loans may continue to be paid punctually? We are sure there will arise a conflict of interests between the two kinds of creditors, and we have not the least idea which interest will win. We are quite sure that some European countries owe more than they can ever pay, between their public and their private debts to foreign countries, and in the final, inevitable composition with their creditors we wonder whether the State that holds the first mortgage, or the private financiers who hold the second mortgage, will come out best.' A ROMAN COBWEB THIS word seems not inaptly to describe the fragile diplomatic network being spun around the littoral of the Eastern Mediterranean. The cobweb's centre is Rome, but it has points of attachment in every Balkan capital as well as in Berlin, Paris, and even London. Three principal components constitute the back ground of the pattern-Fascism's imperial ambitions, Austro-German union, and a Balkan Locarno. The imperial ambitions of New Italy are not inspired entirely by Fascist fervor; they respond to her urgent need of an outlet for her surplus population, and of raw materials and markets to employ her workers at home. Excluded from the most promising parts of Africa by France and England, who are an indivisible unit when their interests in that quarter are threatened, Italy's present vista of expansion opens toward Asia Minor. This explains the naval and military preparations she is making in Rhodes and Leros for eventually resuming occupation of Adalia and its hinterland. She is supposed to have secured from Mr. Chamberlain, during his conference with Mussolini at Rapallo, a promise of Great Britain's benevolent neutrality toward such a move, in return for supporting England in the Mosul controversy. Italy can play a game in the Levant that she cannot in North Africa, because in Eastern Asia England and France do not march in step. Their common desire for territorial expansion creates an instinctive understanding between Italy and Germany, which may prove a permanent factor in European politics. It is significant that Rassegna Italiana, an assertive champion of Mussolini, has suddenly reversed its attitude toward Germany, as has the whole official press of Italy, and now says of that country: 'Her fate is closely allied with ours, and whatever harms us will harm her whenever it benefits Governments whose first thought is to preserve the gigantic territorial booty they seized during the World War whenever we confront nations controlling fertile and populous colonies, ample outlets for their merchandise, and great commercial highways by land and sea.' Austro-German union has many ramifications. According to current gossip in Rome, the Vatican disapproved it as long as there was hope of restoring the Hapsburgs. Of late, however, the Austrian Clericals, who hitherto have opposed closer relations with Berlin, have reversed their attitude and now favor joining Germany. This volte-face is said to have been inspired by Rome; for, with Austria inside the Reich, the Catholic population of the latter country would be large enough to give its voters the balance of power and perhaps to range New Germany in the ranks of Roman Catholic States. On the other hand, that prospect has cooled enthusiasm for this measure among nationalist Pan-Germans in the Protestant section of the country. Simultaneously industrial Germany's interest in political association with Austria has waned with the growing conviction that the latter country would add nothing to in fact, would detract from Germany's economic strength, and that the union of the two countries might invite troublesome political controversies with the Balkans and Italy that would be 'bad for business.' operate with her eastern and southern neighbors in a common Balkan policy. Greece would receive as compensation for her Saloniki concessions a guaranty of Italy's support for her territorial ambitions in Asia Minor, particularly at Smyrna. Of course, these plans are directed against Turkey, although Italy has played with the idea of acquiring the Syrian mandate from France should a favorable opportunity offer. Angora is on her guard, however, and has reinsured herself at Moscow against an attack upon her territorial integrity. France sympathizes with Turkey, while England, with the Mosul issue still in mind, regards benignantly the rival combination. But the picture shifts even as we gaze at it. Pašič's Yugoslav Cabinet has fallen, partly on account of Radič's furious denunciation of the suspected willingness of Foreign Minister Ninčič to sacrifice the interests of the Adriatic Slavs to Serb ambitions in Macedonia, which look toward the Ægean. The Croat leader argued that Yugoslavia has nearly four hundred miles of coast on the Adriatic and not a mile of coast on the Ægean, and that a bird in the hand is worth two in the bush. Since the completion of the Lika Railroad, which gives Yugoslavia a western outlet at her own port of Spalato on the Adriatic, that town has experienced a great revival. Nearly two million tons of merchandise crossed its wharves last year, or six times as much as was landed in Fiume. Furthermore, General Pangalos, whose election as President is due to the acquiescence rather than the active support of his people, shares the shrewd trading instinct of his race and may close a better bargain elsewhere whenever he thinks it will strengthen his popularity at home. Whatever the outcome, if the word The proposed Balkan Locarno involves directly Yugoslavia, Greece, and Bulgaria; but indirectly, if carried out as suggested, it would make Italy the big brother of the Little Entente and to some extent elbow France out of that position. The negotiations early this spring are said to have contemplated liberal Greek concessions to Yugoslavia at Saloniki that would give the latter a satisfactory outlook on the Egean, though of course without actual sovereignty of that port. This would make Yugoslavia face eastward commercially, and would leave Italy a free hand in the Adriatic. Bulgaria would also have a restored outlet to the Ægean, it is not specified at what country's expense, and would co- outcome can be applied to any phase of this rapidly shifting panorama, -it Hongkong at the most conservative will not be cut and dried. CHINA'S ENTANGLEMENTS If we are to believe the West European press, which is constitutionally nervous about China, the Celestial Republic is entangled in a far-flung net of Soviet diplomacy and intrigue extending from Canton in the South and Kalgan in the Northwest to Harbin in Manchuria. Since Sun Yat-sen's death Canton has been one of the most governed, if not the best governed, communities in the world; for it has had six or seven coexisting sets of authorities—a municipal a municipal government, a provincial government, a national government, which hopes ultimately to extend its jurisdiction over all China, a strike committee, the political bureau of the Kuomingtang or National Party founded by Dr. Sun, a delegation of Russian advisers from Moscow, and more recently its own local tuchun, Chiang Kai-shek. This conglomeration of authorities refuses to recognize the Peking Government, except under the compulsion of foreign warships in respect to the Customs Administration. Kalgan, as we all know, is the headquarters of the Christian General, although that illusive commander was at last account in Urga, the Mongolian capital close to the Siberian border. At Harbin Mr. Ivanoff, the Soviet manager of the Chinese Eastern Railway, holds the fort for Moscow. At each of these strategic points China is putting up a vigorous fight against alleged usurpations of the Western Powers. In the South she has boycotted British goods and severed all connection with Hongkong since the participants in a parade were mowed down with machine-guns fired from the fortified foreign settlement at Canton last June. This indiscretion has cost estimates more than one million dollars a day in trade losses during the past ten months. On the Kalgan front the contest between Nationalist China, backed by Russia, and the Chinese militarists, backed by the Western Powers, is being fought out on the battlefield battlefield or, more accurately, by military manoeuvring, for the actual fighting has not been heavy. To be sure, a number of demonstrating student patriots were shot down by the Chinese President's armed guards in Peking not long ago, to the great anger of Feng Yu-hsiang's commander in that city. But this incident is not likely for the time being to have as serious political effects as the similar episodes in Shanghai and Canton a year ago. At Harbin the opposing parties have compromised their difficulties, at least temporarily, around the directors' table. The Chinese Eastern Railway is technically owned by Russia; the country through which it passes is owned by China; and the party behind the scenes is Japan. Should there be a resort to force, Chang Tso-lin, with Japanese backing, could probably seize the line, but the Mukden tuchun has other preoccupations to the southward, and prefers to hold the balance even between the two other parties in the controversy, neither of whom he loves. All this time the Western Powers have dealt with the Peking Government, whose jurisdiction hardly extends beyond the confines of the city, as if it really represented China. That diplomatic fiction serves a purpose. It is one that the United States above all wishes to preserve. But there are powerful interests behind a plan to deal with China on a basis of the actual situation that is, to appoint separate diplomatic representatives to Canton, Mukden, and whatsoever other sections of the country have set up virtually in |