Chapter VII
Remedies
It is difficult to maintain true perspective in large affairs. I have
criticised the work of Paris, and have depicted in sombre colours the
condition and the prospects of Europe. This is one aspect of the
position and, I believe, a true one. But in so complex a phenomenon the
prognostics do not all point one way; and we may make the error of
expecting consequences to follow too swiftly and too inevitably from
what perhaps are not all the relevant causes. The blackness of the
prospect itself leads us to doubt its accuracy; our imagination is
dulled rather than stimulated by too woeful a narration, and our minds
rebound from what is felt 'too bad to be true'. But before the reader
allows himself to be too much swayed by these natural reflections, and
before I lead him, as is the intention of this chapter, towards and
ameliorations remedies and the discovery of happier tendencies, let him
redress the balance of his thought by recalling two contrasts --
England and Russia, of which the one may encourage his optimism too
much, but the other should remind him that catastrophes can still
happen, and that modern society is not immune from the very greatest
evils.
In the chapters of this book I have not generally had in mind the
situation or the problems of England. 'Europe' in my narration must
generally be interpreted to exclude the British Isles. England is in a
state of transition, and her economic problems are serious. We may be
on the eve of great changes in her social and industrial structure.
Some of us may welcome such prospects and some of us deplore them. But
they are of a different kind altogether from those impending on Europe.
I do not perceive in England the slightest possibility of catastrophe
or any serious likelihood of a general upheaval of society. The war has
impoverished us, but not seriously I should judge that the real
wealth of the country in 1919 is at least equal to what it was in 1900.
Our balance of trade is adverse, but not so much so that the
readjustment of it need disorder our economic life.(1*) The deficit in
our budget is large, but not beyond what firm and prudent statesmanship
could bridge. The shortening of the hours of labour may have somewhat
diminished our productivity. But it should not be too much to hope that
this is a feature of transition, and no one who is acquainted with the
British working man can doubt that, if it suits him, and if he is in
sympathy and reasonable contentment with the conditions of his life, he
can produce at least as much in a shorter working day as he did in the
longer hours which prevailed formerly. The most serious problems for
England have been brought to a head by the war, but are in their
origins more fundamental. The forces of the nineteenth century have run
their course and are exhausted. The economic motives and ideals of that
generation no longer satisfy us: we must find a new way and must suffer
again the malaise, and finally the pangs, of a new industrial birth.
This is one element. The other is that on which I have enlarged in
chapter 2 the increase in the real cost of food and the diminishing
response of Nature to any further increase in the population of the
world, a tendency which must be especially injurious to the greatest of
all industrial countries and the most dependent on imported supplies of
food.
But these secular problems are such as no age is free from. They
are of an altogether different order from those which may afflict the
peoples of Central Europe. Those readers who, chiefly mindful of the
British conditions with which they are familiar, are apt to indulge
their optimism, and still more those whose immediate environment is
American, must cast their minds to Russia, Turkey, Hungary, or Austria,
where the most dreadful material evils which men can suffer famine,
cold, disease, war, murder, and anarchy are an actual present
experience, if they are to apprehend the character of the misfortunes
against the further extension of which it must surely be our duty to
seek the remedy, if there is one.
What then is to be done? The tentative suggestions of this chapter
may appear to the reader inadequate. But the opportunity was missed at
Paris during the six months which followed the armistice, and nothing
we can do now can repair the mischief wrought at that time. Great
privation and great risks to society have become unavoidable. All that
is now open to us is to redirect, so far as lies in our power, the
fundamental economic tendencies which underlie the events of the hour,
so that they promote the re-establishment of prosperity and order,
instead of leading us deeper into misfortune.
We must first escape from the atmosphere and the methods of Paris.
Those who controlled the conference may bow before the gusts of popular
opinion, but they will never lead us out of our troubles. It is hardly
to be supposed that the Council of Four can retrace their steps, even
if they wished to do so. The replacement of the existing governments of
Europe is, therefore, an almost indispensable preliminary.
I propose then to discuss a programme, for those who believe that
the Peace of Versailles cannot stand, under the following heads:
I. The revision of the treaty.
II. The settlement of inter-ally indebtedness.
III. An international loan and the reform of the currency.
IV. The relations of Central Europe to Russia.
I. The Revision Of The Treaty
Are any constitutional means open to us for altering the treaty?
President Wilson and General Smuts, who believe that to have secured
the covenant of the League of Nations outweighs much evil in the rest
of the treaty, have indicated that we must look to the League for the
gradual evolution of a more tolerable life for Europe. 'There are
territorial settlements', General Smuts wrote in his statement on
signing the peace treaty, 'which will need revision. There are
guarantees laid down which we all hope will soon be found out of
harmony with the new peaceful temper and unarmed state of our former
enemies. There are punishments foreshadowed over most of which a calmer
mood may yet prefer to pass the sponge of oblivion. There are
indemnities stipulated which cannot be enacted without grave injury to
the industrial revival of Europe, and which it will be in the interests
of all to render more tolerable and moderate... I am confident that the
League of Nations will yet prove the path of escape for Europe out of
the ruin brought about by this war.' Without the League, President
Wilson informed the Senate when he presented the treaty to them early
in July 1919, '... long-continued supervision of the task of reparation
which Germany was to undertake to complete within the next generation
might entirely break down;(2*) the reconsideration and revision of
administrative arrangements and restrictions which the treaty
prescribed, but which it recognised might not provide lasting advantage
or be entirely fair if too long enforced, would be impracticable.'
Can we look forward with fair hopes to securing from the operation
of the League those benefits which two of its principal begetters thus
encourage us to expect from it? The relevant passage is to be found in
article XIX of the covenant, which runs as follows:
'The assembly may
from time to time advise the reconsideration by members of the League
of treaties which have become inapplicable and the consideration of
international conditions whose continuance might endanger the peace of
the world.'
But alas! Article V provides that 'Except where otherwise expressly
provided in this covenant or by the terms of the present treaty,
decisions at any meeting of the assembly or of the council shall
require the agreement of all the members of the League represented at
the meeting.' Does not this provision reduce the League, so far as
concerns an early reconsideration of any of the terms of the peace
treaty, into a body merely for wasting time? If all the parties to the
treaty are unanimously of opinion that it requires alteration in a
particular sense, it does not need a League and a covenant to put the
business through. Even when the assembly of the League is unanimous it
can only 'advise' reconsideration by the members specially affected.
But the League will operate, say its supporters, by its influence
on the public opinion of the world, and the view of the majority will
carry decisive weight in practice, even though constitutionally it is
of no effect. Let us pray that this be so. Yet the League in the hands
of the trained European diplomatist may become an unequalled instrument
for obstruction and delay. The revision of treaties is entrusted
primarily, not to the council, which meets frequently, but to the
assembly, which will meet more rarely and must become, as any one with
an experience of large inter-Ally conferences must know, an unwieldy
polyglot debating society in which the greatest resolution and the best
management may fail altogether to bring issues to a head against an
opposition in favour of the status quo. There are indeed two disastrous
blots on the covenant article V, which prescribes unanimity, and the
much-criticised article X, by which 'The members of the League
undertake to respect and preserve as against external aggression the
territorial integrity and existing political independence of all
members of the League.' These two articles together go some way to
destroy the conception of the League as an instrument of progress, and
to equip it from the outset with an almost fatal bias towards the
status quo. It is these articles which have reconciled to the League
some of its original opponents, who now hope to make of it another Holy
Alliance for the perpetuation of the economic ruin of their enemies and
the balance of power in their own interests which they believe
themselves to have established by the peace.
But while it would be wrong and foolish to conceal from ourselves
in the interests of 'idealism' the real difficulties of the position in
the special matter of revising treaties, that is no reason for any of
us to decry the League, which the wisdom of the world may yet transform
into a powerful instrument of peace, and which in articles XI-XVII(3*)
has already accomplished a great and beneficent achievement. I agree,
therefore, that our first efforts for the revision of the treaty must
be made through the League rather than in any other way, in the hope
that the force of general opinion, and if necessary, the use of
financial pressure and financial inducements, may be enough to prevent
a recalcitrant minority from exercising their right of veto. We must
trust the new governments, whose existence I premise in the principal
Allied countries, to show a profounder wisdom and a greater magnanimity
than their predecessors.
We have seen in chapters 4 and 5 that there are numerous
particulars in which the treaty is objectionable. I do not intend to
enter here into details, or to attempt a revision of the treaty clause
by clause. I limit myself to three great changes which are necessary
for the economic life of Europe, relating to reparation, to coal and
iron, and to tariffs.
Reparation.If the sum demanded for reparation is less than what
the Allies are entitled to on a strict interpretation of their
engagements, it is unnecessary to particularise the items it represents
or to hear arguments about its compilation. I suggest, therefore, the
following settlement:
(1) The amount of the payment to be made by Germany in respect of
reparation and the costs of the armies of occupation might be fixed at
�32,000 million.
(2) The surrender of merchant ships and submarine cables under the
treaty, of war material under the armistice, of state property in ceded
territory, of claims against such territory in respect of public debt,
and of Germany's claims against her former Allies, should be reckoned
as worth the lump sum of �3500 million, without any attempt being made
to evaluate them item by item.
(3) The balance of �31,500 million should not carry interest
pending its repayment, and should be paid by Germany in thirty annual
instalments of �350 million, beginning in 1923.
(4) The reparation commission should be dissolved or, if any duties
remain for it to perform, it should become an appanage of the League of
Nations and should include representatives of Germany and of the
neutral states.
(5) Germany would be left to meet the annual instalments in such
manner as she might see fit, any complaint against her for
non-fulfilment of her obligations being lodged with the League of
Nations. That is to say, there would be no further expropriation of
German private property abroad, except so far as is required to meet
private German obligations out of the proceeds of such property already
liquidated or in the hands of public trustees and enemy-property
custodians in the Allied countries and in the United States; and, in
particular, article 260 (which provides for the expropriation of German
interests in public utility enterprises) would be abrogated.
(6) No attempt should be made to extract reparation payments from
Austria.
Coal and iron.(1) The Allies' options on coal under annex V should
be abandoned, but Germany's obligation to make good France's loss of
coal through the destruction of her mines should remain. That is to
say, Germany should undertake 'to deliver to France annually for a
period not exceeding ten years an amount of coal equal to the
difference between the annual production before the war of the
coal-mines of the Nord and Pas de Calais, destroyed as a result of the
war, and the production of the mines of the same area during the years
in question; such delivery not to exceed 20 million tons in any one
year of the first five years, and 8 million tons in any one year of the
succeeding five years.' This obligation should lapse, nevertheless, in
the event of the coal districts of Upper Silesia being taken from
Germany in the final settlement consequent on the plebiscite.
(2) The arrangement as to the Saar should hold good, except that,
on the one hand, Germany should receive no credit for the mines, and,
on the other, should receive back both the mines and the territory
without payment and unconditionally after ten years. But this should be
conditional on France's entering into an agreement for the same period
to supply Germany from Lorraine with at least 50% of the iron ore which
was carried from Lorraine into Germany proper before the war, in return
for an undertaking from Germany to supply Lorraine with an amount of
coal equal to the whole amount formerly sent to Lorraine from Germany
proper, after allowing for the output of the Saar.
(3) The arrangement as to Upper Silesia should hold good. That is
to say, a plebiscite should be held, and in coming to a final decision
'regard will be paid (by the principal Allied and Associated Powers) to
the wishes of the inhabitants as shown by the vote, and to the
geographical and economic conditions of the locality'. But the Allies
should declare that in their judgment 'economic conditions' require the
inclusion of the coal districts in Germany unless the wishes of the
inhabitants are decidedly to the contrary.
(4) The coal commission already established by the Allies should
become an appanage of the League of Nations, and should be enlarged to
include representatives of Germany and the other states of Central and
Eastern Europe, of the northern neutrals, and of Switzerland. Its
authority should be advisory only, but should extend over the
distribution of the coal supplies of Germany, Poland, and the
constituent parts of the former Austro-Hungarian empire, and of the
exportable surplus of the United Kingdom. All the states represented on
the commission should undertake to furnish it with the fullest
information, and to be guided by its advice so far as their sovereignty
and their vital interests permit.
Tariffs.A free trade union should be established under the
auspices of the League of Nations of countries undertaking to impose no
protectionist tariffs(4*) whatever against the produce of other members
of the union. Germany, Poland, the new states which formerly composed
the Austro-Hungarian and Turkish empires, and the mandated states
should be compelled to adhere to this union for ten years, after which
time adherence would be voluntary. The adherence of other states would
be voluntary from the outset. But it is to be hoped that the United
Kingdom, at any rate, would become an original member.
By fixing the reparation payments well within Germany's capacity to
pay, we make possible the renewal of hope and enterprise within her
territory, we avoid the perpetual friction and opportunity of improper
pressure arising out of treaty clauses which are impossible of
fulfilment, and we render unnecessary the intolerable powers of the
reparation commission.
By a moderation of the clauses relating directly or indirectly to
coal, and by the exchange of iron ore, we permit the continuance of
Germany's industrial life, and put limits on the loss of productivity
which would be brought about otherwise by the interference of political
frontiers with the natural localisation of the iron and steel industry.
By the proposed free trade union some part of the loss of
organisation and economic efficiency may be retrieved which must
otherwise result from the innumerable new political frontiers now
created between greedy, jealous, immature, and economically incomplete,
nationalist states. Economic frontiers were tolerable so long as an
immense territory was included in a few great empires; but they will
not be tolerable when the empires of Germany, Austria-Hungary, Russia,
and Turkey have been partitioned between some twenty independent
authorities. A free trade union, comprising the whole of Central,
Eastern, and south-Eastern Europe, Siberia, Turkey, and (I should hope)
the United Kingdom, Egypt, and India, might do as much for the peace
and prosperity of the world as the League of Nations itself. Belgium,
Holland, Scandinavia, and Switzerland might be expected to adhere to it
shortly. And it would be greatly to be desired by their friends that
France and Italy also should see their way to adhesion.
It would be objected, I suppose, by some critics that such an
arrangement might go some way in effect towards realising the former
German dream of Mittel-Europa. If other countries were so foolish as to
remain outside the union and to leave to Germany all its advantages,
there might be some truth in this. But an economic system, to which
everyone had the opportunity of belonging and which gave special
privilege to none, is surely absolutely free from the objections of a
privileged and avowedly imperialistic scheme of exclusion and
discrimination. Our attitude to these criticisms must be determined by
our whole moral and emotional reaction to the future of international
relations and the peace of the world. If we take the view that for at
least a generation to come Germany cannot be trusted with even a
modicum of prosperity, that while all our recent allies are angels of
light, all our recent enemies, Germans, Austrians, Hungarians, and the
rest, are children of the devil, that year by year Germany must be kept
impoverished and her children starved and crippled, and that she must
be ringed round by enemies; then we shall reject all the proposals of
this chapter, and particularly those which may assist Germany to regain
a part of her former material prosperity and find a means of livelihood
for the industrial population of her towns. But if this view of nations
and of their relation to one another is adopted by the democracies of
Western Europe, and is financed by the United States, heaven help us
all. If we aim deliberately at the impoverishment of Central Europe,
vengeance, I dare predict, will not limp. Nothing can then delay for
very long that final civil war between the forces of reaction and the
despairing convulsions of revolution, before which the horrors of the
late German war will fade into nothing, and which will destroy, whoever
is victor, the civilisation and the progress of our generation. Even
though the result disappoint us, must we not base our actions on better
expectations, and believe that the prosperity and happiness of one
country promotes that of others, that the solidarity of man is not a
fiction, and that nations can still afford to treat other nations as
fellow-creatures?
Such changes as I have proposed above might do something
appreciable to enable the industrial populations of Europe to continue
to earn a livelihood. But they would not be enough by themselves. In
particular, France would be a loser on paper (on paper only, for she
will never secure the actual fulfilment of her present claims), and an
escape from her embarrassments must be shown her in some other
direction. I proceed, therefore, to proposals, first, for the
adjustment of the claims of America and the Allies amongst themselves;
and second, for the provision of sufficient credit to enable Europe to
re-create her stock of circulating capital.
II. The Settlement Of Inter-Ally Indebtedness
In proposing a modification of the reparation terms, I have
considered them so far only in relation to Germany. But fairness
requires that so great a reduction in the amount should be accompanied
by a readjustment of its apportionment between the Allies themselves.
The professions which our statesmen made on every platform during the
war, as well as other considerations, surely require that the areas
damaged by the enemy's invasion should receive a priority of
compensation. While this was one of the ultimate objects for which we
said we were fighting, we never included the recovery of separation
allowances amongst our war aims. I suggest, therefore, that we should
by our acts prove ourselves sincere and trustworthy, and that
accordingly Great Britain should waive altogether her claims for cash
payment, in favour of Belgium, Serbia, and France. The whole of the
payments made by Germany would then be subject to the prior charge of
repairing the material injury done to those countries and provinces
which suffered actual invasion by the enemy; and I believe that the sum
of �31,500 million thus available would be adequate to cover entirely
the actual costs of restoration. Further, it is only by a complete
subordination of her own claims for cash compensation that Great
Britain can ask with clean hands for a revision of the treaty and clear
her honour from the breach of faith for which she bears the main
responsibility, as a result of the policy to which the General Election
of 1918 pledged her representatives.
With the reparation problem thus cleared up it would be possible to
bring forward with a better grace and more hope of success two other
financial proposals, each of which involves an appeal to the generosity
of the United States.
Loans to | By United States | By United Kingdom | By France | Total |
United
Kingdom.....
France........
Italy.........
Russia........
Belgium.......
Serbia and
Jugo-Slavia.
Other Allies..
Total.........
|
Million
�
842
550
325
38
80
20
35
-----
1,900(7*)
|
Million
�
...
508
467
568(5*)
98(6*)
202
79
-----
1,749
|
Million
�
...
...
35
160
90
20
50
---
355
|
Million
�
842
1,058
827
766
268
60
164
-----
3,995
|
The first is for the entire cancellation of inter-Ally indebtedness
(that is to say, indebtedness between the governments of the Allied and
Associated countries) incurred for the purposes of the war. This
proposal, which has been put forward already in certain quarters, is
one which I believe to be absolutely essential to the future prosperity
of the world. It would be an act of farseeing statesmanship for the
United Kingdom and the United States, the two Powers chiefly concerned,
to adopt it. The sums of money which are involved are shown
approximately in the above table.(8*)
Thus the total volume of inter-Ally indebtedness, assuming that
loans from one Ally are not set off against loans to another, is nearly
�34,000 million. The United States is a lender only. The United Kingdom
has lent about twice as much as she has borrowed. France has borrowed
about three times as much as she has lent. The other Allies have been
borrowers only.
If all the above inter-Ally indebtedness were mutually forgiven,
the net result on paper (i.e. assuming all the loans to be good) would
be a surrender by the United States of about �32,000 million and by the
United Kingdom of about �3900 million. France would gain about �3700
million and Italy about �3800 million. But these figures overstate the
loss to the United Kingdom and understate the gain to France; for a
large part of the loans made by both these countries has been to Russia
and cannot, by any stretch of imagination, be considered good. If the
loans which the United Kingdom has made to her allies are reckoned to
be worth 5o % of their full value (an arbitrary but convenient
assumption which the Chancellor of the Exchequer has adopted on more
than one occasion as being as good as any other for the purposes of an
approximate national balance sheet), the operation would involve her
neither in loss nor in gain. But in whatever way the net result is
calculated on paper, the relief in anxiety which such a liquidation of
the position would carry with it would be very great. It is from the
United States, therefore, that the proposal asks generosity.
Speaking with a very intimate knowledge of the relations throughout
the war between the British, the American, and the other Allied
treasuries, I believe this to be an act of generosity for which Europe
can fairly ask, provided Europe is making an honourable attempt in
other directions not to continue war, economic or otherwise, but to
achieve the economic reconstitution of the whole continent. The
financial sacrifices of the United States have been, in proportion to
her wealth, immensely less than those of the European states. This
could hardly have been otherwise. It was a European quarrel, in which
the United States government could not have justified itself before its
citizens in expending the whole national strength, as did the
Europeans. After the United States came into the war her financial
assistance was lavish and unstinted, and without this assistance the
Allies could never have won the war,(9*) quite apart from the decisive
influence of the arrival of the American troops. Europe, too, should
never forget the extraordinary assistance afforded her during the first
six months of 1919 through the agency of Mr Hoover and the American
commission of relief. Never was a nobler work of disinterested goodwill
carried through with more tenacity and sincerity and skill, and with
less thanks either asked or given. The ungrateful governments of Europe
owe much more to the statesmanship and insight of Mr Hoover and his
band of American workers than they have yet appreciated or will ever
acknowledge. The American relief commission, and they only, saw the
European position during those months in its true perspective and felt
towards it as men should. It was their efforts, their energy, and the
American resources placed by the President at their disposal, often
acting in the teeth of European obstruction, which not only saved an
immense amount of human suffering, but averted a widespread breakdown
of the European system.(10*)
But in speaking thus as we do of American financial assistance, we
tacitly assume, and America, I believe, assumed it too when she gave
the money, that it was not in the nature of an investment. If Europe is
going to repay the �32,000 million worth of financial assistance which
she has had from the United States with compound interest at 5%, the
matter takes on quite a different complexion. If America's advances are
to be regarded in this light, her relative financial sacrifice has been
very slight indeed.
Controversies as to relative sacrifice are very barren and very
foolish also; for there is no reason in the world why relative
sacrifice should necessarily be equal so many other very relevant
considerations being quite different in the two cases. The two or three
facts following are put forward, therefore, not to suggest that they
provide any compelling argument for Americans, but only to show that
from his own selfish point of view an Englishman is not seeking to
avoid due sacrifice on his country's part in making the present
suggestion. (1) The sums which the British Treasury borrowed from the
American Treasury, after the latter came into the war, were
approximately offset by the sums which England lent to her other allies
during the same period (i.e. excluding sums lent before the United
States came into the war); so that almost the whole of England's
indebtedness to the United States was incurred, not on her own account,
but to enable her to assist the rest of her allies, who were for
various reasons not in a position to draw their assistance from the
United States direct.(11*) (2) The United Kingdom has disposed of about
�31,000 million worth of her foreign securities, and in addition has
incurred foreign debt to the amount of about �31,200 million. The
United States, so far from selling, has bought back upwards of �31,000
million, and has incurred practically no foreign debt. (3) The
population of the United Kingdom is about one-half that of the United
States, the income about one-third, and the accumulated wealth between
one-half and one-third. The financial capacity of the United Kingdom
may therefore be put at about two-fifths that of the United States.
This figure enables us to make the following comparison: Excluding
loans to allies in each case (as is right on the assumption that these
loans are to be repaid), the war expenditure of the United Kingdom has
been about three times that of the United States, or in proportion to
capacity between seven and eight times.
Having cleared this issue out of the way as briefly as possible, I
turn to the broader issues of the future relations between the parties
to the late war, by which the present proposal must primarily be
judged.
Failing such a settlement as is now proposed, the war will have
ended with a network of heavy tribute payable from one Ally to another.
The total amount of this tribute is even likely to exceed the amount
obtainable from the enemy; and the war will have ended with the
intolerable result of the Allies paying indemnities to one another
instead of receiving them from the enemy.
For this reason the question of inter-Allied indebtedness is
closely bound up with the intense popular feeling amongst the European
Allies on the question of indemnities a feeling which is based, not
on any reasonable calculation of what Germany can, in fact, pay, but on
a well-founded appreciation of the unbearable financial situation in
which these countries will find themselves unless she pays. Take Italy
as an extreme example. If Italy can reasonably be expected to pay �3800
million, surely Germany can and ought to pay an immeasurably higher
figure. Or if it is decided (as it must be) that Austria can pay next
to nothing, is it not an intolerable conclusion that Italy should be
loaded with a crushing tribute, while Austria escapes ? Or, to put it
slightly differently, how can Italy be expected to submit to payment of
this great sum and see Czechoslovakia pay little or nothing? At the
other end of the scale there is the United Kingdom. Here the financial
position is different, since to ask us to pay �3800 million is a very
different proposition from asking Italy to pay it. But the sentiment is
much the same. If we have to be satisfied without full compensation
from Germany, how bitter will be the protests against paying it to the
United States. We, it will be said, have to be content with a claim
against the bankrupt estates of Germany, France, Italy, and Russia,
whereas the United States has secured a first mortgage upon us. The
case of France is at least as overwhelming. She can barely secure from
Germany the full measure of the destruction of her countryside. Yet
victorious France must pay her friends and allies more than four times
the indemnity which in the defeat of 1870 she paid Germany. The hand of
Bismarck was light compared with that of an Ally or of an associate. A
settlement of inter-Ally indebtedness is, therefore, an indispensable
preliminary to the peoples of the Allied countries facing, with other
than a maddened and exasperated heart, the inevitable truth about the
prospects of an indemnity from the enemy.
It might be an exaggeration to say that it is impossible for the
European Allies to pay the capital and interest due from them on these
debts, but to make them do so would certainly be to impose a crushing
burden. They may be expected, therefore, to make constant attempts to
evade or escape payment, and these attempts will be a constant source
of international friction and ill-will for many years to come. A debtor
nation does not love its creditor, and it is fruitless to expect
feelings of goodwill from France, Italy and Russia towards this country
or towards America, if their future development is stifled for many
years to come by the annual tribute which they must pay us. There will
be a great incentive to them to seek their friends in other directions,
and any future rupture of peaceable relations will always carry with it
the enormous advantage of escaping the payment of external debts. If,
on the other hand, these great debts are forgiven, a stimulus will be
given to the solidarity and true friendliness of the nations lately
associated.
The existence of the great war debts is a menace to financial
stability everywhere. There is no European country in which repudiation
may not soon become an important political issue. In the case of
internal debt, however, there are interested parties on both sides, and
the question is one of the internal distribution of wealth. With
external debts this is not so, and the creditor nations may soon find
their interest inconveniently bound up with the maintenance of a
particular type of government or economic organisation in the debtor
countries. Entangling alliances or entangling leagues are nothing to
the entanglements of cash owing.
The final consideration influencing the reader's attitude to this
proposal must, however, depend on his view as to the future place in
the world's progress of the vast paper entanglements which are our
legacy from war finance both at home and abroad. The war has ended
with everyone owing everyone else immense sums of money. Germany owes a
large sum to the Allies; the Allies owe a large sum to Great Britain;
and Great Britain owes a large sum to the United States. The holders of
war loan in every country are owed a large sum by the state; and the
state in its turn is owed a large sum by these and other taxpayers. The
whole position is in the highest degree artificial, misleading, and
vexatious. We shall never be able to move again, unless we can free
our limbs from these paper shackles. A general bonfire is so great a
necessity that unless we can make of it an orderly and good-tempered
affair in which no serious injustice is done to anyone, it will, when
it comes at last, grow into a conflagration that may destroy much else
as well. As regards internal debt, I am one of those who believe that a
capital levy for the extinction of debt is an absolute prerequisite of
sound finance in every one of the European belligerent countries. But
the continuance on a huge scale of indebtedness between governments has
special dangers of its own.
Before the middle of the nineteenth century no nation owed payments
to a foreign nation on any considerable scale, except such tributes as
were exacted under the compulsion of actual occupation in force and, at
one time, by absentee princes under the sanctions of feudalism. It is
true that the need for European capitalism to find an outlet in the New
World has led during the past fifty years, though even now on a
relatively modest scale, to such countries as Argentina owing an annual
sum to such countries as England. But the system is fragile; and it has
only survived because its burden on the paying countries has not so far
been oppressive, because this burden is represented by real assets and
is bound up with the property system generally, and because the sums
already lent are not unduly large in relation to those which it is
still hoped to borrow. Bankers are used to this system, and believe it
to be a necessary part of the permanent order of society. They are
disposed to believe, therefore, by analogy with it, that a comparable
system between governments, on a far vaster and definitely oppressive
scale, represented by no real assets, and less closely associated with
the property system, is natural and reasonable and in conformity with
human nature.
I doubt this view of the world. Even capitalism at home, which
engages many local sympathies, which plays a real part in the daily
process of production, and upon the security of which the present
organisation of society largely depends, is not very safe. But however
this may be, will the discontented peoples of Europe be willing for a
generation to come so to order their lives that an appreciable part of
their daily produce may be available to meet a foreign payment the
reason for which, whether as between Europe and America, or as between
Germany and the rest of Europe, does not spring compellingly from their
sense of justice or duty?
On the one hand, Europe must depend in the long run on her own
daily labour and not on the largesse of America; but, on the other
hand, she will not pinch herself in order that the fruit of her daily
labour may go elsewhere. In short, I do not believe that any of these
tributes will continue to be paid, at the best, for more than a very
few years. They do not square with human nature or agree with the
spirit of the age.
If there is any force in this mode of thought, expediency and
generosity agree together, and the policy which will best promote
immediate friendship between nations will not conflict with the
permanent interests of the benefactor.(12*)
III. An International Loan
I pass to a second financial proposal. The requirements of Europe
are immediate. The prospect of being relieved of oppressive interest
payments to England and America over the whole life of the next two
generations (and of receiving from Germany some assistance year by year
to the costs of restoration) would free the future from excessive
anxiety. But it would not meet the ills of the immediate present the
excess of Europe's imports over her exports, the adverse exchange, and
the disorder of the currency. It will be very difficult for European
production to get started again without a temporary measure of external
assistance. I am therefore a supporter of an international loan in some
shape or form, such as has been advocated in many quarters in France,
Germany, and England, and also in the United States. In whatever way
the ultimate responsibility for repayment is distributed, the burden of
finding the immediate resources must inevitably fall in major part upon
the United States.
The chief objections to all the varieties of this species of
project are, I suppose, the following. The United States is disinclined
to entangle herself further (after recent experiences) in the affairs
of Europe, and, anyhow, has for the time being no more capital to spare
for export on a large scale. There is no guarantee that Europe will
put financial assistance to proper use, or that she will not squander
it and be in just as bad case two or three years hence as she is in
now: M. Klotz will use the money to put off the day of taxation a
little longer, Italy and Jugoslavia will fight one another on the
proceeds, Poland will devote it to fulfilling towards all her
neighbours the military role which France has designed for her, the
governing classes of Roumania will divide up the booty amongst
themselves. In short, America would have postponed her own capital
developments and raised her own cost of living in order that Europe
might continue for another year or two the practices, the policy, and
the men of the past nine months. And as for assistance to Germany, is
it reasonable or at all tolerable that the European Allies, having
stripped Germany of her last vestige of working capital, in opposition
to the arguments and appeals of the American financial representatives
at Paris, should then turn to the United States for funds to
rehabilitate the victim in sufficient measure to allow the spoliation
to recommence in a year or two?
There is no answer to these objections as matters are now. If I had
influence at the United States Treasury, I would not lend a penny to a
single one of the present governments of Europe. They are not to be
trusted with resources which they would devote to the furtherance of
policies in repugnance to which, in spite of the President's failure to
assert either the might or the ideals of the people of the United
States, the Republican and the Democratic parties are probably united.
But if, as we must pray they will, the souls of the European peoples
turn away this winter from the false idols which have survived the war
that created them, and substitute in their hearts, for the hatred and
the nationalism which now possess them, thoughts and hopes of the
happiness and solidarity of the European family then should natural
piety and filial love impel the American people to put on one side all
the smaller objections of private advantage and to complete the work
that they began in saving Europe from the tyranny of organised force,
by saving her from herself. And even if the conversion is not fully
accomplished, and some parties only in each of the European countries
have espoused a policy of reconciliation, America can still point the
way and hold up the hands of the party of peace by having a plan and a
condition on which she will give her aid to the work of renewing life.
The impulse which, we are told, is now strong in the mind of the
United States to be quit of the turmoil, the complication, the
violence, the expense, and, above all, the unintelligibility of the
European problems, is easily understood. No one can feel more intensely
than the writer how natural it is to retort to the folly and
impracticability of the European statesmen Rot, then, in your own
malice, and we will go our way --
Remote from Europe; from her blasted hopes;
Her fields of carnage, and polluted air.
But if America recalls for a moment what Europe has meant to her
and still means to her, what Europe, the mother of art and of
knowledge, in spite of everything, still is and still will be, will she
not reject these counsels of indifference and isolation, and interest
herself in what may prove decisive issues for the progress and
civilisation of all mankind?
Assuming then, if only to keep our hopes up, that America will be
prepared to contribute to the process of building up the good forces of
Europe, and will not, having completed the destruction of an enemy,
leave us to our misfortunes, what form should her aid take?
I do not propose to enter on details. But the main outlines of all
schemes for an international loan are much the same. The countries in a
position to lend assistance, the neutrals, the United Kingdom and, for
the greater portion of the sum required, the United States, must
provide foreign purchasing credits for all the belligerent countries of
continental Europe, Allied and ex-enemy alike. The aggregate sum
required might not be so large as is sometimes supposed. Much might be
done, perhaps, with a fund of �3200 million in the first instance. This
sum, even if a precedent of a different kind had been established by
the cancellation of inter-Ally war debt, should be lent and should be
borrowed with the unequivocal intention of its being repaid in full.
With this object in view, the security for the loan should be the best
obtainable, and the arrangements for its ultimate repayment as complete
as possible. In particular, it should rank, both for payment of
interest and discharge of capital, in front of all reparation claims,
all inter-Ally war debt, all internal war loans, and all other
government indebtedness of any other kind. Those borrowing countries
who will be entitled to reparation payments should be required to
pledge all such receipts to repayment of the new loan. And all the
borrowing countries should be required to place their customs duties on
a gold basis and to pledge such receipts to its service.
Expenditure out of the loan should be subject to general, but not
detailed, supervision by the lending countries.
If, in addition to this loan for the purchase of food and
materials, a guarantee fund were established up to an equal amount,
namely �3200 million (of which it would probably prove necessary to
find only a part in cash), to which all members of the League of
Nations would contribute according to their means, it might be
practicable to base upon it a general reorganisation of the currency.
In this manner Europe might be equipped with the minimum amount of
liquid resources necessary to revive her hopes, to renew her economic
organisation, and to enable her great intrinsic wealth to function for
the benefit of her workers. It is useless at the present time to
elaborate such schemes in further detail. A great change is necessary
in public opinion before the proposals of this chapter can enter the
region of practical politics, and we must await the progress of events
as patiently as we can.
IV. The Relations Of Central Europe To Russia
I have said very little of Russia in this book. The broad character
of the situation there needs no emphasis, and of the details we know
almost nothing authentic. But in a discussion as to how the economic
situation of Europe can be restored there are one or two aspects of the
Russian question which are vitally important.
From the military point of view an ultimate union of forces between
Russia and Germany is greatly feared in some quarters. This would be
much more likely to take place in the event of reactionary movements
being successful in each of the two countries, whereas an effective
unity of purpose between Lenin and the present essentially middle-class
government of Germany is unthinkable. On the other hand, the same
people who fear such a union are even more afraid of the success of
Bolshevism; and yet they have to recognise that the only efficient
forces for fighting it are, inside Russia, the reactionaries, and,
outside Russia, the established forces of order and authority in
Germany. Thus the advocates of intervention in Russia, whether direct
or indirect, are at perpetual cross-purposes with themselves. They do
not know what they want; or, rather, they want what they cannot help
seeing to be incompatibles. This is one of the reasons why their policy
is so inconstant and so exceedingly futile.
The same conflict of purpose is apparent in the attitude of the
council of the Allies at Paris towards the present government of
Germany. A victory of Spartacism in Germany might well be the prelude
to revolution everywhere: it would renew the forces of Bolshevism in
Russia, and precipitate the dreaded union of Germany and Russia; it
would certainly put an end to any expectations which have been built on
the financial and economic clauses of the treaty of peace. Therefore
Paris does not love Spartacus. But, on the other hand, a victory of
reaction in Germany would be regarded by everyone as a threat to the
security of Europe, and as endangering the fruits of victory and the
basis of the peace. Besides, a new military power establishing itself
in the East, with its spiritual home in Brandenburg, drawing to itself
all the military talent and all the military adventurers, all those who
regret emperors and hate democracy, in the whole of Eastern and Central
and south-eastern Europe, a power which would be geographically
inaccessible to the military forces of the Allies, might well found, at
least in the anticipations of the timid, a new Napoleonic domination,
rising, as a phoenix, from the ashes of cosmopolitan militarism. So
Paris dare not love Brandenburg. The argument points, then, to the
sustentation of those moderate forces of order which, somewhat to the
world's surprise, still manage to maintain themselves on the rock of
the German character. But the present government of Germany stands for
German unity more perhaps than for anything else; the signature of the
peace was, above all, the price which some Germans thought it worth
while to pay for the unity which was all that was left them of 1870.
Therefore Paris, with some hopes of disintegration across the Rhine not
yet extinguished, can resist no opportunity of insult or indignity, no
occasion of lowering the prestige or weakening the influence of a
government with the continued stability of which all the conservative
interests of Europe are nevertheless bound up.
The same dilemma affects the future of Poland in the role which
France has cast for her. She is to be strong, Catholic, militarist, and
faithful, the consort, or at least the favourite, of victorious France,
prosperous and magnificent between the ashes of Russia and the ruin of
Germany. Roumania, if only she could be persuaded to keep up
appearances a little more, is a part of the same scatter-brained
conception. Yet, unless her great neighbours are prosperous and
orderly, Poland is an economic impossibility with no industry but
Jew-baiting. And when Poland finds that the seductive policy of France
is pure rhodomontade and that there is no money in it whatever, nor
glory either, she will fall, as promptly as possible, into the arms of
somebody else.
The calculations of 'diplomacy' lead us, therefore, nowhere. Crazy
dreams and childish intrigue in Russia and Poland and thereabouts are
the favourite indulgence at present of those Englishmen and Frenchmen
who seek excitement in its least innocent form, and believe, or at
least behave as if foreign policy was of the same genre as a cheap
melodrama.
Let us turn, therefore, to something more solid. The German
government has announced (30 October 1919) its continued adhesion to a
policy of non-intervention in the internal affairs of Russia, 'not only
on principle, but because it believes that this policy is also
justified from a practical point of view'. Let us assume that at last
we also adopt the same standpoint, if not on principle, at least from a
practical point of view. What are then the fundamental economic factors
in the future relations of Central to Eastern Europe?
Before the war Western and Central Europe drew from Russia a
substantial part of their imported cereals. Without Russia the
importing countries would have had to go short. Since 1914 the loss of
the Russian supplies has been made good, partly by drawing on reserves,
partly from the bumper harvests of North America called forth by Mr
Hoover's guaranteed price, but largely by economies of consumption and
by privation. After 1920 the need of Russian supplies will be even
greater than it was before the war; for the guaranteed price in North
America will have been discontinued, the normal increase of population
there will, as compared with 1914, have swollen the home demand
appreciably, and the soil of Europe will not yet have recovered its
former productivity. If trade is not resumed with Russia, wheat in
1920-1 (unless the seasons are specially bountiful) must be scarce and
very dear. The blockade of Russia lately proclaimed by the Allies is
therefore a foolish and short-sighted proceeding; we are blockading not
so much Russia as ourselves.
The process of reviving the Russian export trade is bound in any
case to be a slow one. The present productivity of the Russian peasant
is not believed to be sufficient to yield an exportable surplus on the
pre-war scale. The reasons for this are obviously many, but amongst
them are included the insufficiency of agricultural implements and
accessories and the absence of incentive to production caused by the
lack of commodities in the towns which the peasants can purchase in
exchange for their produce. Finally, there is the decay of the
transport system, which hinders or renders impossible the collection of
local surpluses in the big centres of distribution.
I see no possible means of repairing this loss of productivity
within any reasonable period of time except through the agency of
German enterprise and organisation. It is impossible geographically and
for many other reasons for Englishmen, Frenchmen, or Americans to
undertake it; we have neither the incentive nor the means for doing the
work on a sufficient scale. Germany, on the other hand, has the
experience, the incentive, and to a large extent the materials for
furnishing the Russian peasant with the goods of which he has been
starved for the past five years, for reorganising the business of
transport and collection, and so for bringing into the world's pool,
for the common advantage, the supplies from which we are now so
disastrously cut off. It is in our interest to hasten the day when
German agents and organisers will be in a position to set in train in
every Russian village the impulses of ordinary economic motive. This is
a process quite independent of the governing authority in Russia; but
we may surely predict with some certainty that, whether or not the form
of communism represented by Soviet government proves permanently suited
to the Russian temperament, the revival of trade, of the comforts of
life and of ordinary economic motive are not likely to promote the
extreme forms of those doctrines of violence and tyranny which are the
children of war and of despair.
Let us then in our Russian policy not only applaud and imitate the
policy of non-intervention which the government of Germany has
announced, but, desisting from a blockade which is injurious to our own
permanent interests, as well as illegal, let us encourage and assist
Germany to take up again her place in Europe as a creator and organiser
of wealth for her eastern and southern neighbours.
There are many persons in whom such proposals will raise strong
prejudices. I ask them to follow out in thought the result of yielding
to these prejudices. If we oppose in detail every means by which
Germany or Russia can recover their material well-being, because we
feel a national, racial, or political hatred for their populations or
their governments, we must be prepared to face the consequences of such
feelings. Even if there is no moral solidarity between the nearly
related races of Europe, there is an economic solidarity which we
cannot disregard. Even now, the world markets are one. If we do not
allow Germany to exchange products with Russia and so feed herself, she
must inevitably compete with us for the produce of the New World. The
more successful we are in snapping economic relations between Germany
and Russia, the more we shall depress the level of our own economic
standards and increase the gravity of our own domestic problems. This
is to put the issue on its lowest grounds. There are other arguments,
which the most obtuse cannot ignore, against a policy of spreading and
encouraging further the economic ruin of great countries.
I see few signs of sudden or dramatic developments anywhere. Riots
and revolutions there may be, but not such, at present, as to have
fundamental significance. Against political tyranny and injustice
revolution is a weapon. But what counsels of hope can revolution offer
to sufferers from economic privation which does not arise out of the
injustices of distribution but is general? The only safeguard against
revolution in Central Europe is indeed the fact that, even to the minds
of men who are desperate, revolution offers no prospect of improvement
whatever. There may, therefore, be ahead of us a long, silent process
of semi-starvation, and of a gradual, steady lowering of the standards
of life and comfort. The bankruptcy and decay of Europe, if we allow it
to proceed, will affect everyone in the long run, but perhaps not in a
way that is striking or immediate.
This has one fortunate side. We may still have time to reconsider
our courses and to view the world with new eyes. For the immediate
future events are taking charge, and the near destiny of Europe is no
longer in the hands of any man. The events of the coming year will not
be shaped by the deliberate acts of statesmen, but by the hidden
currents, flowing continually beneath the surface of political history,
of which no one can predict the outcome. In one way only can we
influence these hidden currents by setting in motion those forces of
instruction and imagination which change opinion. The assertion of
truth, the unveiling of illusion, the dissipation of hate, the
enlargement and instruction of men's hearts and minds, must be the
means.
In this autumn of 1919 in which I write, we are at the dead season
of our fortunes. The reaction from the exertions, the fears, and the
sufferings of the past five years is at its height. Our power of
feeling or caring beyond the immediate questions of our own material
well-being is temporarily eclipsed. The greatest events outside our
own direct experience and the most dreadful anticipations cannot move
us.
In each human heart terror survives
The ruin it has gorged: the loftiest fear
All that they would disdain to think were true:
Hypocrisy and custom make their minds
The fanes of many a worship, now outworn.
They dare not devise good for man's estate,
And yet they know not that they do not dare.
The good want power but to weep barren tears.
The powerful goodness want: worse need for them.
The wise want love; and those who love want wisdom;
And all best things are thus confused to ill.
Many are strong and rich, and would be just,
But live among their suffering fellow-men
As if none felt: they know not what they do.
We have been moved already beyond endurance, and need rest. Never
in the lifetime of men now living has the universal element in the soul
of man burnt so dimly.
For these reasons the true voice of the new generation has not yet
spoken, and silent opinion is not yet formed. To the formation of the
general opinion of the future I dedicate this book.
THE END
NOTES:
1. The figures for the United Kingdom are as follows:
Monthly Average | Imports (£1,000) | Exports (£1,000) | Excess of Imports (£1,000) |
1913
1914
Jan.-Mar. 1919
April-June 1919
July-Sept. 1919
|
54,930
50,097
109,578
111,403
135,927
|
43,770
35,893
49,122
62,463
68,863
|
11,160
14,204
60,456
48,940
67,064
|
But this excess is by no means so serious as it looks; for with the
present high freight earnings of the mercantile marine the various
'invisible' exports of the United Kingdom are probably even higher than
they were before the war, and may average at least �345 million
monthly.
2. President Wilson was mistaken in suggesting that the supervision of
reparation payments has been entrusted to the League of Nations. As I
pointed out in chapter 5, whereas the League is invoked in regard to
most of the continuing economic and territorial provisions of the
treaty, this is not the case as regards reparation, over the problems
and modifications of which the reparation commission is supreme,
without appeal of any kind to the League of Nations.
3. These articles, which provide safeguards against the outbreak of war
between members of the League and also between members and non-members,
are the solid achievement of the covenant. These articles make
substantially less probable a war between organised Great Powers such
as that of 1914. This alone should commend the League to all men.
4. It would be expedient so to define a 'protectionist tariff' as to
permit (a) the total prohibition of certain imports; (b) the imposition
of sumptuary or revenue customs duties on commodities not produced at
home; (c) the imposition of customs duties which did not exceed by more
than 5% a countervailing excise on similar commodities produced at
home; (d) export duties. Further, special exceptions might be permitted
by a majority vote of the countries entering the union. Duties which
had existed for five years prior to a country's entering the union
might be allowed to disappear gradually by equal instalments spread
over the five years subsequent to joining the union.
5. This allows nothing for interest on the debt since the Bolshevik
Revolution.
6. No interest has been charged on the advances made to these
countries.
7. The actual total of loans by the United States up to date is very
nearly �32,000 million, but I have not got the latest details.
8. The figures in this table are partly estimated, and are probably not
completely accurate in detail; but they show the approximate figures
with sufficient accuracy for the purposes of the present argument. The
British figures are taken from the White Paper of 23 October 1919 (Cmd.
377). In any actual settlement, adjustments would be required in
connection with certain loans of gold and also in other respects, and I
am concerned in what follows with the broad principle only. The sums
advanced by the United States and France, which are in terms of dollars
and francs respectively, have been converted at approximately par
rates. The total excludes loans raised by the United Kingdom on the
market in the United States, and loans raised by France on the market
in the United Kingdom or the United States, or from the Bank of
England.
9. The financial history of the six months from the end of the summer
of 1916 up to the entry of the United States into the war in April 1917
remains to be written. Very few persons, outside the half-dozen
officials of the British Treasury who lived in daily contact with the
immense anxieties and impossible financial requirements of those days,
can fully realise what steadfastness and courage were needed, and how
entirely hopeless the task would soon have become without the
assistance of the United States Treasury. The financial problems from
April 1917 onwards were of an entirely different order from those of
the preceding months.
10. Mr Hoover was the only man who emerged from the ordeal of Paris
with an enhanced reputation. This complex personality, with his
habitual air of weary Titan (or, as others might put it, of exhausted
prize-fighter), his eyes steadily fixed on the true and essential facts
of the European situation, imported into the councils of Paris, when he
took part in them, precisely that atmosphere of reality, knowledge,
magnanimity, and disinterestedness which, if they had been found in
other quarters also, would have given us the Good Peace.
11. Even after the United States came into the war the bulk of Russian
expenditure in the United States, as well as the whole of that
government's other foreign expenditure, had to be paid for by the
British Treasury.
12. It is reported that the United States Treasury has agreed to fund
(i.e. to add to the principal sum) the interest owing them on their
loans to the Allied governments during the next three years. I presume
that the British Treasury is likely to follow suit. If the debts are to
be paid ultimately, this piling up of the obligations at compound
interest makes the position progressively worse. But the arrangement
wisely offered by the United States Treasury provides a due interval
for the calm consideration of the whole problem in the light of the
after-war position as it will soon disclose itself.