Friday, Nov. 26, 1965

Money & the Flag

Judging by the lessons of history, Harold Wilson's effort "to get the rogue elephant back under control"--as the Times of London last week described British sanctions against Rhodesia--will not be easy. Ever since the League of Nations in 1935 attempted the first international sanction against Italy, punishing other nations by commercial or financial boycott has been like stalking elephants with air rifles.

Russia imposed sanctions on Yugoslavia in 1948 after Tito broke with the Comintern, but Tito survived. Arabs and Israelis embargo each other's products, but the results are hardly noticeable. In spite of U.S. sanctions, Cuba and Red China carry on. South Africa hardly realizes that it is being boycotted by 46 nations that are incensed at apartheid. The urge to trade is so strong that it usually can be dulled effectively only by outright war. Money talks louder than the flag.

Customers Lost. Aware of this, Britain hopes to topple Rhodesia's Ian Smith with a sophisticated attack on the Rhodesian pound. The pound has been ordered to a kind of Commonwealth Coventry: Rhodesia's $60 million sterling account with the Bank of England has not been frozen, but new exchange controls prevent British businessmen from accepting Rhodesian pounds and force them to channel payments to Rhodesia into special accounts held up at the bank. The London capital market, on which Rhodesia's 2,700 tobacco farmers depend, has been barred to them. A nation whose economy is precariously based on tobacco and sugar exports has lost its two best customers: Britain and neighboring Zambia, which together took $93 million (or 52%) of Rhodesian exports. Whitehall aims to force devaluation of the Rhodesian pound and make belt-tightened Rhodesians turn against Smith.

Rhodesia is already feeling the first effects of the economic siege. To compensate for the import duties that it will lose, the government last week sharply raised taxes on domestic beer, whisky and tobacco. South African banks, on which the Rhodesians had counted as allies, temporarily stopped trading in Rhodesian pounds because of the uncertainty. The United Nations, which has never imposed economic sanctions on any nation last week recommended an oil embargo on Rhodesia and the U.S. announced it will not accept Rhodesian sugar.

Jute & Jets. Yet Rhodesia is far from on its knees, and the longer that sanctions drag on the more impatient other nations will become to ignore them. Such, at least, has been the case in previous boycotts. South Africa, denied Indian jute, got all it needed from Pakistan. Businessmen find ways, moreover, to transship; U.S. goods have reached Cuba by way of Canada and Mexico.

Cold war politics today make some boycotts impractical or ineffective. Placed under sanctions by Russia, Yugoslavia received aid from the West; Cuba, in the face of U.S. sanctions, got help from the East. Red China has been able to buy from Western nations despite a U.S. embargo. The Israeli-Arab standoff is a joke, since neither has markets to interest the other, and both sides in the cold war trade with each country. Indeed, the only really successful postwar sanction was the 28-day naval blockade that the U.S. threw around Cuba during the 1962 missile crisis. It was totally effective, but it required 180 ships and cost $44.5 million. Neither Britain nor many other nations today can afford to spend that kind of money to stymie an antagonist.

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