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Balancing Debits and Credits 
in the Far East 

CHINA — MONGOLIA — MANCHURIA 
SIBERIA — KOREA — JAPAN 

As Between Themselves and Their 

CREDITORS 




BY 

FRED A. DOLPH 

Counsellor to the Republic of Korea 





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The shaded area in Siberia and China are the Japanese spheres of exploitation where Japan 
started various enterprises of questionable character with borrowed money 
from Europe and America. 


NOTE. — Korea and Formosa, tho unshaded on above map, are absolutely con- 
trolled by Japan. North Manchuria and Outer Mongolia are also being absorbed. 


Digitized by the Internet Archive 
in 2017 with funding from 
Columbia University Libraries 


https://archive.org/details/balancingdebtscrOOdolp 


Balancing Debits and Credits 
in the Far East 

CHINA — MONGOLIA — MANCHURIA 
SIBERIA “ KOREA — JAPAN 

As Between Themselves andsTheir 

CREDITORS 


BY 

FRED A. DOLPH 

Counsellor to the Republic of Korea 


Copyright by 
Philip Jaisohn & Co.. In 
1537 Chestnut Street 
Philadelphia 
U. S. A. 


BALANCING DEBITS AND CREDITS IN 
THE FAR EAST 


The writer accounts himself an expert, from force 
of experience, in the psychology surrounding debt- 
ors and creditors and their relations with Financiers, 
called Bankers and Brokers by the humble and lowly. 
At least fifteen years of my life was spent in obtain- 
ing loans and credit for utilities, albeit must be admitted 
that the greater part of the time was consumed with 
"attempts. ’’ At one time or another 1 probably have 
visited the office of every Financier of consequence in 
America and England, and if necessary could describe 
their offices, particularly their outer offices, with great 
detail, down to the last calendar and desk pad. 

My success or failure always turned on whether 
the project met, or failed to meet, the requirements of 
three or four fundamental rules, that the Financier 
always applied as his "first principles,” until 1 have 
come to believe that the whole world of finance and 
credit is controlled by a few set rules that experience 
has found to be infallible. 

So. from the constant ringing in my ears of these 
"first principles" for fifteen years, it is natural that 
1 should apply those principles to the solution of ques- 
tions in the Far East. After all, in the final analysis, 
the situation is financial, and if these ordinary, funda- 
mental rules, that have always unerringly controlled 
business and financial affairs, still hold true, the solu- 
tion is inevitable and certain. 

The financial phase of the question is easily under- 
stood and the information is accessible. Patience and 
industry only are needed to assemble the facts; and, 
when assembled, the every-day business man is just as 

5 


good a judge of what must happen as the wisest states- 
man, or the wiliest diplomat. 

It is conceded that the disturbing element in the 
Far East is Japan; whether for good or for bad, need 
not be decided, or even questioned, until after we 
ascertain just what Japan’s own status is. In fact, 
whether it is for good or bad, will be determined in 
the process. 


I. 

In ordinary affairs, the Banker asks the Wholesaler 
applying for a loan, and the credit man for the whole- 
sale house asks the retailer applying for a line of credit; 
what business, if any, he is engaged in, outside of his 
regular business. 

If it develops that he is engaged in outside busi- 
ness; that he is using borrowed capital for the purpose, 
and that the outside business is being conducted at a 
loss, he will be denied credit until he liquidates his 
outside interests and gets back to his regular business. 

Japan is just exactly in that position. Her regular 
business is to operate Japan. She has engaged in out- 
side undertakings, and has borrowed outside of her 
own nationals, not only an amount representing the full 
value of those outside undertakings, but an amount 
representing twice their value; and when the over- 
head expense of policing and military protection for 
those outside undertakings is considered, they are 
being operated at a loss of over 1 00 %. 

The average business man and the Banker, con- 
sidering matters of this kind, insist upon having the 
exact figures before them; accordingly, I have compiled 
the following Schedules from Japanese statistics, 
arranged with special reference to this phase of the 
question: 


6 


JAPANESE LOANS AND INVESTMENTS OUTSIDE 
OF JAPAN 


Borrowed by Japan Outside 

Foreign Loans now held in England, France, 
Italy, Belgium, Holland and the United 


States $669,396,905.00 

Add South Manchuria Railway Loan, guaran- 
teed by the Imperial Government of 
Japan 60,000,000.00 


$729,396,905.00 

Deduct War securities of above countries ab- 
sorbed in Japan, during the World War. 171,263,445.00 


Total 


$558,133,460.00 


Undertakings Outside of Japan 


In Korea, as per details in 
separate schedule fol- 
lowing 

In Manchuria, as per details 
in separate schedule fol- 
lowing 

In Mongolia, as per details 
in separate schedule fol- 
lowing 

In China proper, as per de- 
tails in separate sched- 
ule following 


$I 1,835,765.00 
106,884,792.00 
23,800,000.00 
150,330,000.00 


Total 


$292,850,557.00 


EXCESS OF MONEY BORROWED OVER 

MONEY INVESTED $265,282,903.00 


SCHEDULE “A” 
Japanese Investment in Korea 


Railways, including Trams $38,848,123.00 

Oriental Development Company 3,500,000.00 

Lumber, Mines, Salt Works and other Indus- 
trials 1,610,124.00 

Water Works 3,472,996.00 

Roads, Bridges, Harbors and other Municipals 22,712,392.00 


Total $70,143,635.00 

Credit Korea with excess collected in taxes by 
Japan, and share of Korean Government 
in dividends of Oriental Development 
Company, Railroads, etc.. Ginseng 
Profits and National Forests confiscated. 58,307,870.00 


TOTAL NET INVESTMENT IN KOREA $ 1 1 ,835,765.00 

7 


SCHEDULE “B” 

Japanese Investment in Manchuria 
South Manchuria Railway for Railway proper $35,199,905,00 


Industrials, Utilities, Collieries, Harbors, 

Hotels, Farms and Buildings owned by 

Railway 28,376,837.00 

Kirin Forestry Undertaking 15,000,000.00 

Forestry Undertakings by Okura Kumei. . . . 15,000.000.00 

Penshi Iron Mines 2,500,000.00 

Loan to Fengtien Province (Unrecognized 

by China) 2,500,000.00 

Loan to China for Kirin — Chang-chun Rail- 
way 3,458,050.00 

Loan to China for Mongolian extension. . . 4,850,000.00 


TOTAL INVESTMENT IN MANCHURIA. . . $106,884,792.00 
SCHEDULE “C” 

Japanese Investments in Mongolia 
Loan to China for Manchuria and Mongolia 
Railway, connections into Manchuria and 
China. In reality feeder fot South Man- 
churia Railway, owned by Japan $23,800,000.00 


SCHEDULE “D” 

Japanese Investments in China Proper 


Boxer Indemnity 

Railway Loans 

Nanchang line 

Shantung (not recog- 
nized) 

Mukden line 

Kiukiang line 

Ki Hwei Ry. (not 

recognized) 

Peking Sui Yuan .... 


$23,200,000.00 

$ 1,150,000.00 

23.000. 000.00 

155,000.00 

2.452.000. 00 

10 . 000 . 000.00 

2 . 000 . 000.00 


General Loans 

1915, Central Govern- 
ment 

1917, Central Govern- 
ment 

1918, Central Govern- 
ment 

Printing Bureau 

Yarn Purchase 

Tai-hei Kumei syndicate 

Telegraphs 

Bank of Communica- 
tion 

Wireless 

Military 

2nd Re-organization. .. 
Grand Canal 


38,730,000.00 


250.000. 00 

2.500.000. 00 

4.850.000. 00 

1 . 000 . 000.00 

500.000. 00 

7.000. 000.00 
10 , 000 , 000.00 

10 , 000 , 000.00 

1.500.000. 00 
10,000,000.00 

9.700.000. 00 

2.500.000. 00 


8 


59,800,000.00 


Provincial 

Kuangtung Province 
Shantung 


2.550.000. 00 

750.000. 00 

1 . 000 . 000.00 
1 , 000 , 000.00 

500.000. 00 
1,000,000.00 

500,000.00 


Hunan 

Fukien 

Chihli 

Shensi 

Hupeh 


7,300,000.00 


Industrials 


Hankow Paper Mill . . 
Hankow Hydraulic . . 
Tientsin Spinning . . . . 
Kiangsu Iron Mines . . 
Han Yeh Ping Iron Co. 
Peking Telephone . . . . 


15,500,000.00 

2,500,000.00 


1,000,000.00 

500.000. 00 

300.000. 00 
1,500,000.00 


21,300,000.00 


TOTAL INVESTMENTS IN CHINA 


$150,330,000.00 


Note: — $87,830,000 of above loans and investments are 
not recognized by China because not made with approval of 
the Central Government. Total foreign loans and investments 
of all countries in China, including “Unrecognized” loans by 
Japan, is $1,061,938,437. 

The foregoing schedules show that Japan has 
expended $558,133,460 of “Borrowed” money, eind 
only has $292,850,557, in actual value to show for it. 
There has been an economic loss, some where of 
$265,282,903. Either her own business, of operating 
Japan, is running at a loss, or there has been that 
much overhead in operating her outside undertakings. 
No self respecting Japanese will admit that they have 
been obliged to borrow money outside to sustain their 
own country, and so the loss is conceded to be in the 
outside undertakings. 

It is a plain case of attempted domination and 
control by Japan in these outside countries, and such 
things, whether usurping and selfish, or whether altruis- 
tic, cost money. 

The only difference is that the usurping and selfish 
kind faces mass-anger and resentment that must be 
met by force and oppression, with attendant atrocity, 
brutality and injustice, all high priced commodities in a 


9 


money as well as a moral sense, and such a course 
costs more. 

Large forces of armed soldiers, gendarmes and 
police, and patroling navies, are expensive. Hired 
executioners, floggers, assassins, and other supernumer- 
ary punishers and oppressors, must be well paid. It 
costs money to build and maintain jails well filled with 
prisoners, and where the prisoners are political, charged 
with no crime except love of freedom and their country, 
the activities of their relatives and friends particularly, 
and of sympathizers, are bound to be doubled and 
trebled, so that the cost increases with mathematical 
progression in an endless chain. 

Then there are the questionable expenses that 
always attach themselves to such a policy. Corruption 
and dishonesty thrive in such an atmosphere, and wipe 
their slimy trail over all, searching for money. 

The usurping selfish policy requires well organized 
spy systems, with high paid executives and operatives, 
and a rigorous censorship must be maintained at all 
costs, for the World must not know what is going on. 
Its ostracism would be disastrous, and is a matter to 
be reckoned with. Yet, how futile it all is. A dead 
loss — for the World will know and must know 
eventually. 

Japan is attempting just such a policy in the Far 
East, and is operating on “Borrowed Capital.” For the 
benefit of the every-day business man and the Banker, 
let me emphasize — “Borrowed Capital.” She has 
seized Korea, the three provinces of Manchuria, and 
three Provinces in China proper — Shantung, Fukien 
and Hupeh; an area of over 600,000 square miles, five 
times as large as Japan; with a population of over 
100,000,000, twice her own population; and with 
natural resources at least eight times her own. 

Japan must protect herself in this vast territory 
against the intense, active hatred of an overwhelming 
horde. She must prevent that portion of China, as 

10 


yet unoccupied, with her teeming millions, from coming 
to the aid of her oppressed citizens in the occupied 
territory; and she must prevent Siberia on the north 
from being occupied by an antagonistic Power, to the 
extent of herself occupying and policing Siberia, if 
necessary, thus doubling or trebling the cost. 

Let me emphasize again — -every dollar that Japan 
has spent in this policy, and every dollar that she has 
invested in this vast territory, and every dollar that 
she will spend and will invest in the future, has been 
and must be "Borrowed Money.” 

The question is, how long can Japan stand the 
expense? How long can she continue to operate at a 
loss and retain her credit? A halt will surely be called 
when Japan’s creditors become conscious of how she 
is using their money, irrespective of that inevita- 
ble law of finance that you cannot borrow money 
indefinitely to conduct any undertaking at a loss. When 
Japan has spent herself, and it looks as though she 
had already done so, the whole turmoil must necessarily 
settle down in the Far East, to each Nation minding its 
own business and governing itself according to the 
will of its own people; Japan included, which means 
an end to her autocracy. 

This can be done. China and Korea governed 
themselves for over forty centuries. It is a question as 
to which is the oldest nation in the World, and as to 
which has given to the World the most in fundamental 
arts and inventions. We may criticize their former 
manner of government, and may not approve of Jtheir 
customs, their habits, and even their style of dress. 
The Chinese queue and the Korean top knot may seem 
to be unnecessary appendages; but it is all none of 
our business. Their government, their customs and 
their manners are their own, and no doubt they love 
them and cherish them, as we do ours. 

In any event, both Korea and China have made 
their best bid for our esteem, by both adopting the 

1 1 


republican form of Government and declaring against 
autocracy. The World is due to welcome them back 
as free nations. It is inevitable. 

Japan claiming the right, as she does, to control 
and dominate the destinies of the Far East, it is fair 
to analyze her own conditions, and what foundation 
there is for her cleiims. 

She cannot dominate because of her size, for 
she only has 1 47,000 square miles out of the 3,400,000 
square miles she seeks to dominate. She ought not to 
control because of her population, for she only has 
5 7,000,000 out of 327,000,000. She cannot control 
because of superior intelligence and education, because 
there are probably not over 20,000,000 people in 
Japan who have a real education, as against four times 
as many on the main land of Asia. Trade and Com- 
merce do not give her precedence, because the trade, 
commerce and productions of the Asia main land, far 
exceed those of Japan. It is not a question of natural 
resources, for the resources of Korea and Manchuria 
alone, without reference to the vast resources of China 
proper, are double the natural resources of Japan. It 
is not a question of better credit with other Powers, 
for China has a line of credit and loans with other 
Powers, nearly twice as large as that of Japan. 

If Japan cannot dominate for any of these reasons, 
then she is driven to say, that she must dominate for 
some selfish reason, and this leads us to consider a 
second condition. 


II. 

In ordinary business affairs the applicant for' 
credit might say to his Banker or to his wholesaler: 
“The exigencies of my regular business have driven me 
into these outside enterprises. I am a printer, for 
instance, and print paper is costing too much, and 1 
have been obliged to go into the manufacture of paper 
on my own account; or I am a hotel man and farm 

12 


products are too high, and I had to buy a farm and 
raise my own produce.” 

Even then, he would face the same old question 
of whether the ultimate cost of his print paper, or his 
farm produce, considering his overhead, was not 
greater than before, and nine times out of ten, it would 
be proven that it was. 

So it is with Japan. Even if she does think and 
claim that there is a necessity for more territory and 
more natural resources for her increasing population, 
the $265,000,000 that she has lost in her operations 
in Korea and China, and the $400,000,000 that she 
has just spent in Siberia, according to her own state- 
ments, a total of $665,000,000, would supply at least 
one-third of her population with all of the necessities 
of life, or would pay the ordinary items of her annual 
budget. 

But let us look at this supposed necessity for 
expansion into Asia, urged by Japan. At about the 
same time that this policy was inaugurated, Australia 
had passed certain laws restricting Japanese immigra- 
tion, and the matter was the subject of interchange of 
diplomatic notes, and this is what the Japanese Foreign 
Office, familiar with all of the facts, said at that time 
in a note, dated September 11, 1901 : 

“An impression seems to exist in some quarters, and to 
“find voice in certain sections of the Australian press, 
“that Australia is in danger of an influx of Japanese 
“immigrants. I have already endeavored to show that 
“this impression is altogether erroneous.” 

The prior note to which the Japanese Foreign 
Minister alludes contained this statement: 

“As Japan is under no necessity to find outlet for her 
“population my government would readily consent to 
“any arrangement by which all that Australia seeks, 
“so far as the Japanese are concerned, would be at 
“once conceded.” 

We must, and we do give all faith and credit to 
the veracity and sincerity of the Japanese Foreign 
Minister in making these statements to the effect that 

13 


Japan is under no necessity to find outlet for her 
population. 

This is the real inside opinion of official Japan 
and the average Japanese citizen is evidently of the 
same mind, at least so far as Asia is concerned. Japan 
prides herself upon keeping an accurate acdount of her 
residents abroad. The total given in the last Japan 
Year Book of 1920 is 376,780, of which nearly two- 
thirds, 221,463, reside in the United States. The 
private Japanese citizens do not flock to the Asiatic 
countries that Japan seeks to dominate and exploit 
for their benefit; rather, they prefer other countries, so 
that expansion into Asia, affords no practical relief 
for Japan’s over population, because her citizens wll 
not emigate to a country that is already over populated. 

Japan is no doubt facing the same difficulty, in 
a measure, that we have in America. There is the 
same crowding into cities and abandoning the country, 
and the same tendency to avoid the development of 
natural resources by agriculture, mining, etc. I dare 
say that in northern Japan and Saghalin Island, there 
is the same undeveloped space that we have in the 
West and the South, and that the abandoned farms 
of New England and the East have their counterpart 
in Japan. Certainly she is no worse off, with respect 
to over population, than many European countries. 

Japan has protected herself from immigration, 
properly enough, by adopting laws even more restric- 
tive than the laws of California, Australia or Canada 
against Japanese immigration. She has followed our 
example and our remedy, to face the same difficulty. 
We do not complain, and certainly she is not in a posi- 
tion to. What is fair for us, is fair for her, and vice 
versa. It is plain that safety for present and future 
Japan, lies in her own development, and not in expan- 
sion into outside undertakings, and that the inevitable 
rules of finance and credit will force that policy. 

14 


in. 


In our ordinary affairs, the Banker or the credit 
man for the wholesale house, finding that the applicant 
for credit has already submerged himself in outside 
undertakings, might from personal considerations for 
the welfare of the applicant, make further inquiry into 
his exact status. 

The applicant’s condition would be considered 
hopeless, however, if it should develop that he has 
co-investors and co-creditors in his outside business; 
that his nominal interest is only about 14% of the 
whole; that he is in fact a creditor of his co-investors 
for twice the amount of his investment, and that he 
has taken the advantage of his co-investors, and seeks 
an unlawful preference, by seizing and attempting to 
control 99% of the security and property of the joint 
undertaking. 

He is surely going to face dissension and with- 
drawal of his own credit and financial ostracism, the 
moment his co-investors become conscious of all that 
he is doing, and he will be compelled to liquidate, and 
at a great loss. 

Japan’s situation is just that. China owes the 
world, outside of her own nationals, according to 
her last statement, ending with the year 1918, the 
following: 


War Loans, Japanese War 1896 $156,535,565.00 

Boxer Indemnities 301,776,090.00 

Railway Loans 212,715,602.00 

General Loans 240,581,180.00 

Recognized Japanese Loans 62,500,000.00 


Total $974,108,437.00 


If we add to that the so-called “Unrecognized ” 
Japanese loans of $87,830,000, reported by Japan, 
but contested by China, we have a total of 

$1,061,938,437. 

Incidentally, these “Unrecognized Loans’’ present 
another difficulty and bone of contention, that may 

15 


result in loss to Japan and probably will, in whole or 
in part. They represent loans made to Provinces of 
China, without the approval of the Central Govern- 
ment, or to industrials for which the Central Govern- 
ment has not in every case granted concessions. 

It is claimed in China, that in many instances, 
Japan has made loans to Military Governors of differ- 
ent Provinces, that have been used to foment opposi- 
tion, and in some cases actual revolt, against the 
Central Government. Of course, such loans are not 
going to be collected, except by force. Other “Un- 
recognized ” loans have been made to industrials to 
exploit and devast the natural resources of China, with 
no return to China, and all such loans fall in the same 
category, as to collectibility, with loans made to incite 
or promote rebellion. 

The securities of China, held in Japan, and 
Japan’s investments in China, as per schedule already 
set out, total $150,330,000, which is 14% of the total 
of $1,061,938,437, including Japan’s contested claims 
and loans. The uncontested loans and claims only 
represent about 6%. 

All of the balance of Chinese securities, held out- 
side of China, constituting at least 86% of the whole, 
are held in England, France, Italy, Holland, Belgium 
and the United States, the former holdings of Ger- 
many, Austria and Russia having been absorbed in 
War Indemnities growing out of the World War. 
These are the very same countries to which Japan is 
indebted $558, 1 33,460, almost four times her holdings 
in China. 

Japan holding only 14% of the securities, and 
those holdings only nominal, if she paid her own debts; 
recognizing no principles of fair dealing, either with 
debtor or co-creditor, has seized 600,000 square miles 
of territory in Korea, Manchuria, and China proper, 
with a population of over 100,000,000; or over one- 
fourth of the wealth and natural resources of Asia, 

16 


and with 2,700 miles out of 4,500 miles of the east 
frontage of China. 

Japan’s co-investors in China, holding at least 86% 
of the securities, as against Japan’s 14%, for which 
they also furnished Japan the money, have possession 
of Hong Kong, Kuangchouwan, and Wei Hai Wei, 
mere spots on the map, with a total area of 795 
square miles and a population of 752,000, and with 
less than 1 00 miles of China’s eastern frontage, which 
is a great deal less than 1 % of the security seized by 
Japan. 

Japan has treated China as though she were a 
failing debtor, without any reference to her inher- 
ent rights as a debtor or her dignity as a Nation. One 
would say that China with her vast wealth, resources 
and population was a good enough debtor without 
security. At least the financiers of the United States 
have thought so, for the United States has no con- 
cessions or holdings of territory, of any kind, as secur- 
ity for its holdings in China. 

When China wakes up, and when the creditors 
of Japan wake up, including our own dear old United 
States, something is bound to happen; and the least 
that can happen is that Japan, facing economic and 
financial ostracism, will be forced to liquidate her 
interests in Korea, Manchuria and China and get out. 

IV. 

Let us still assume the position of Japan as' 
analogous to that of the individual in every-day life, 
applying to his Banker for a loan or a line of credit, 
which is exactly Japan’s attitude in the world today. 
In such a case, Mr. Japan would reluctantly consent 
to liquidate his outside interests and to confine him- 
self to his own business of operating Japan, and then 
would turn to his own country and its resources, as a 
basis for a line of credit. 

Mr. Banker would say: “Now you are getting 

17 


down to business and I would be inclined to extend 
you a line of credit on that basis, if it were not for 
one thing. Your government is an autocracy and 
there is bound to be discontent where people are gov- 
erned against their will, or without their will. 1 
cannot run the risk of revolts and repudiation, and of 
what is equally as dangerous to the safety of invest- 
ments, the economic waste and poverty that follows 
in the wake of revolution.” 

Mr. Japan would reply: "But Japan is only nomi- 
nally an autocracy, we have a Diet, and in fact a 
representative form of Government.” The Banker 
would say: "My understanding is the other way 
around, you have a nominal representative form of 
government and an actual autocracy. However, there 
can be no misunderstanding between us on that score. 

1 have here Ito’s Commentaries on the Constitution of 
Japan. Your Constitution reads, referring to such 
articles as are apropos: 

PREAMBLE 

We hereby promulgate this law of State, to which our 
descendants and our subjects and their descendants are to for- 
ever conform. 

The rights of sovereignty we have inherited and we shall 
bequeath them to our descendants. 

When, in the future, it may be necessary to amend any 
of the provisions of this constitution, we or our successors, 
shall assume the initiative right to amend, and in nowise shall 
our subjects be permitted to attempt any alteration thereof. 

ARTICLE I 

The Empire of Japan shall be reigned over and governed 
by a line of Emperors, unbroken for ages eternal. 

ARTICLE 3 

The Emperor is sacred and inviolable. 

ARTICLE 4 

The Emperor is the head of the Empire, combining in 
himself the rights of sovereignty and the exercise of them. 

ARTICLE 5 

The Emperor gives sanction to laws and orders them to be 
promulgated and executed. 

ARTICLE 7 

The Emperor convenes the Imperial Diet; opens, closes 
a-nd prorogues it and dissolves the House of Representatives. 

18 


ARTICLE 10 

The Emperor determines the organization of the different 
Branches of the Administration and the salaries of all civil 
and military officers, and appoints and dismisses the same. 

ARTICLES 11 AND 12 

The Emperor has supreme command of the Army and 
Navy and determines the organization and standing of the same. 


ARTICLE 13 

The Emperor declares War, makes Peace and concludes 
Treaties. 

ARTICLE 14 

The Emperor orders amnesty, pardon, commutation of 
punishment and rehabilitation. 


ARTICLE 34 

The House of Peers shall be composed of the Royal Family, 
Nobles and persons nominated by the Emperor. 

ARTICLE 64 

The expenses of the Imperial House, as now fixed, shall 
be paid out of the national Treasury and shall not require the 
consent of the Diet. 

ARTICLES 70 AND 71 

Provide that when the Imperial Diet cannot be convened 
the government may take necessary financial measures by mean* 
of an Imperial Ordinance, and that if the Diet should fail to 
pass the Budget, the budget of the previous year shall remain 
in force. 


The Banker, after finishing his reading of the 
Constitution, would necessarily say: “1 am convinced 
that Japan is actually an autocracy, and only nominally 
a representative government. I cannot conceive of a 
single thing that the Emperor cannot either directly 
or indirectly order done, or prohibit to be done, at 
will. The Constitution is binding forever and cannot 
be amended except upon the initiative of the Emperor. 
No law can pass the Diet without passing the House 
of Peers, composed of members of the royal family and 
members appointed by the Emperor. None of them 
are elected or are representative in any sense. Even 
if a law should pass, the Emperor has absolute veto 
power, from which there is no appeal or redress. He 
can convene or dismiss the Diet at will, to say nothing 
of his retained right to determine the organization 
and standing of the Army and Navy, and the right to 

19 


declare War and make Peace and Treaties at will, 
without reference to the Diet, We could not extend a 
credit where so much depends upon the will and per- 
haps the caprice of one man, selected by nature, and 
not by his countrymen.” 

CONCLUSION 

In the final analysis, if Japan were an individual, 
it could not obtain a loan or a line of credit, accord- 
ing to known rules of finance and banking, without 
liquidating and abandoning its outside undertakings, 
and without changing its own form of government, or 
management of its affairs. 

Japan faces economic and financial ostracism that 
will prevent her from borrowing. Her outside under- 
takings and policy of expansion cannot be conducted 
without loss, taking into consideration the enormous 
overhead necessary to maintain them. The question 
resolves itself into whether Japan can stand the drain, 
without credit. That she has been obliged, up to this 
time, to borrow money outside of her own resources 
and nationals, is sufficient evidence of the fact that 
she is driven to that last expedient. Neither a Nation 
nor an individual can continue to borrow indefinitely 
to conduct any undertaking that is being operated at 
a loss. 

It is inevitable that Japan must get out of China 
and that she must give back to Korea her independ- 
ence, because she is operating in both countries at a 
loss, on “Borrowed Money.” 

The past financial methods of Japan preclude her 
from further credit. European countries cannot loan 
her, if they would, and certainly the United States will 
not loan money to an autocracy, with which to oppress 
and annihilate sister Republics like Korea and China. 


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