The Economic Consequences of the Peace

Tr

was not their anxiety. Their preoccupations, good and bad alike, related to frontiers and nationalities, to the balance of power, to imperial aggrandizements, to the futu

and the Carthaginian Peace of M. Clemenceau. Yet only one of these was entitled to take the field; for th

nstituted the first Contract concluded between the Allied and Associated Powers and the German Government, and that we entered the Conference with our hands, free, except so far as these Armistice Terms might bind us. This was

he points: (1) that the details of the Armistice would have to be left to the military advisers of the United States and the Allies, and must provide absolutely against the possibility of Germany's resuming hostilities; (2) that submarine warfare must cease if these conversations were to continue; and (3) that he required further guarantees of the representative character of the Government with which he was dealing. On October 20 Germany accepted points (1) and (2), and pointed out, as regards (3), that she now had a Constitution and a Government dependent for its authority on the Reichstag. On October 23 the President announced that, "having received the solemn and explicit assurance of the German Government that it unreservedly accepts the terms of peace laid down in his Address to the Congress of the United States on January 8, 1918 (the Fourteen Points), and the

d down in the President's Address to Congress of January 8, 1918, and the principles of settlement enunciated in his subsequent Addresses." The qualifications in question were two in number. The first related to the Freedom of the Seas, as to which they "reserved to themselves complete freedom." The second related to Reparation and ran as follows:-"Further, in the conditions of peace laid down in his Address to Congress on the 8th

e is "to discuss the details of their application." The circumstances of the Contract were of an unusually solemn and binding character; for one of the conditions of it was that Germany should agree to Armistice Terms which were to be such as would

stions requiring a settlement in the Peace Treaty are not touched on, nevertheless, there are certain questions which they settle definitely. It is true that within somewhat wide limits the Allies still had a free hand. Further, it is difficult to apply on a contractual b

Mount Vernon on July 4; and at New York on September 27, the last of these being specially referred to in the Contract. I venture to select from these Addresses those engagements of substance, avoiding repetitions, whic

safety." (5). "A free, open-minded, and absolutely impartial adjustment of all colonial claims," regard being had to the interests of the populations concerned. (6), (7), (8), and (11). The evacuation and "restoration" of all invaded territory, especially of Belgium. To this must be added the rider of the Allies, claiming compensation for all damage done to civi

an imperative principle of action which statesmen will henceforth ignore at their peril.... Every territorial settlement involved in this war must be mad

ch is not consistent with the common interest of all." (3) "There can be no leagues or alliances or special covenants and understandings within the general and common family of the League of Nations." (4) "There can be no special selfish economic combinations within the League and no employment of any form of econo

and had become part of a solemn contract to which all the Great Powers of the world had put their signature. But it was lost,

d a breach of engagements and of international morality comparable with their own offense in the invasion of Belgium. Nevertheless, the German reply was not in all its parts a document fully worthy of the occasion, because in spite of the justice and importance of much of its contents, a truly broad treatment and high dignity of outlook were a little wanting, a

excessive blame-as history often records-vindictive, perfidious, and egotistic. These qualities are familiar in treaties imposed by victors. But the German delegation

ith the justice of the Treaty,-neither with the demand for penal justice against the enemy, nor with

ovisions of the Treaty, reserving, however, for the next my comments on the Reparat

tments, her exports, and the overseas connections of her merchants; II. The exploitation of her coal and iron and the industries built upon them; III. Her transport and tariff syste

n is comprehensive, including not only vessels flying the German flag, but also all vessels owned by Germans but flying other flags, and all vessels under construction as well as those afloat.[10] Further, Germany undertakes

foreign nations may find it worth while to establish out of their surplus tonnage. Germany will have to pay to foreigners for the carriage of her trade such charges as they may be able to exact, and will receive only such convenience

favorable terms to Government property, all of which, including railways, must be surrendered without payment, while, on the other hand, the German Government r

uthority in any former German colony "may make such provisions as it thinks fit with reference to the repatriation from them of German nationals and to the conditions upon which German subjects of European origin shall, or shall not, be allowed to re

by them," within the former German colonies.[16] This wholesale expropriation of private property is to take place without the Allies affording any compensation to the individuals expropriated, and the proceeds will be employed, first, to meet private debts due to Allied nationals from any German nationals, and

e of her former oversea possessions, but the persons and property of her nationals resi

erman speaking-and it has been the scene of some of Germany's most important economic enterprises. Nevertheless, the property of those Germans who reside there, or who have invested in its industries, is now entirely at the disposal of the French Government without compensation, except in so far as the German Government itself may choose to afford it. The French Government is entitled to expropriate without compensation the personal property of private German citizens and German companies resident or situated within Alsace-Lorraine, the proceeds being credited in part satisfaction of various French claims. The severity of this provision is only mitigated to the extent that the French

ent in any peace treaty of recent history for the treatment of private property set forth below, and the German representatives urged that the precedent now established strikes a dangerous and immoral blow at the security of private property everywhere. This is an exaggeration, and the sharp distinction, approved by custom and convention during the past two centuries, between the property and rights of a State and the prope

mined, are overlapping in their incidence, and the more drastic would seem in some cases to render the others unnecessary. Generally speaking, howe

of the coming into force of the present Treaty to German nationals, or companies controlled by them, within their t

idation takes place, and, second, to the satisfaction of claims arising out of the acts of Germany's former allies. Any balance, if the liquidating Government elects to retain it, must be credited in the Reparation account.[22] It is, however, a point of considerable importance that the liquidating Government is not compelled to transfer the

ctory permitted the Allied Governments to introduce in their own favor many divergencies from reciprocity, of which the following are the chief: Whereas the property of Allied nationals within German jurisdiction reverts under the Treaty to Allied ownership on the conclusion of Peace, the property of Germans within Allied jurisdiction is to be retained and liquidated as described above, with the result that the whole of German property over a large part of the world can be expropriated, and the large properties now within the custody of Public Trustees and similar officials in the Allied countries may be retained permanently. In the second place, such German assets are chargeable, not only with the liabilities of Germans, but also, if they run to it, with "payment of the amounts due in respect of claims by the nationals

ver to the Reparation Commission "any rights and interests of German nationals in any public utility undertaking or in any concession[26] operating in Russia, China, Turkey, Austria, Hungary, and Bulgaria, or in the possessions or dependencies of these States, or in any territory formerly belonging to Germany or her allies, to be ceded by Germany or her allies to any Power or to be administered by a Mandatory under the present Treaty." This is a com

erests over a vast territory owing dubious obedience, disordered by war, disruption, and Bolshevism. The division of the spoils between the victors will also pr

hether already granted, contingent or not yet exercised," and any which are not so communicated within this period will automatically lapse in favor of the Allied Governments.[27] How far an edict of this character can be made binding on a German national, whose pe

rty, whether within or outside Germany, and demand its surrender; and their authority would appear to extend not only to property existing at the date of the Peace, but also to any which may be created or acquired at any time in the course of the next eighteen months. For example, they could pick out-as presumably they will as soon as they are established-the fine and powerful German enterprise in South America known as the Deutsche Ueberseeische Elektrizit?tsgesellschaft (the D.U.E.G.), and dispose of it to Allied interests. The clause is unequivocal and all-embracing. It is worth while

mpower the Allies so to deprive her at their will-it is not yet accomplished) of everything she possesses outside her own frontiers as laid down in the Treaty. Not only are her ov

e Treaty, which probably do not add very much in practical effect to those already described, but which deserve brief mention a

sent Treaty, Germany renounces all rights, titles and privileges whatever in or over territory which belonged to her or to her alli

Liberia,[32] for Morocco,[33] and for Egypt.[34] In the case of Egypt not only are special privileges renounced, but by Article 150 ordinary liberties are withdrawn, the Egyp

ions of an international character "operating in any of the Allied or Associated States, or in Austria

ons are revived which it suits the Allied Governments to rev

e described previously. They represent the logical completion of Germany's outlawry and economic subjec

coalfields of the Ruhr, Upper Silesia, and the Saar, alone made possible the development of the steel, chemical, and electrical industries which established her as the first industrial nation of continental Europe. One-third of Germany's population lives in towns of more than 20,000 inhabitants, an industrial

es at Germany's coal

nencumbered, and free from all debts and charges of any kind, the coal-mines situated in the Saar Basin."[36] While the administration of this district is vested for fifteen years in the League of Nations, it is to be observed that the mines are ceded to France absolutely. Fifteen year

ct. Among more than 650,000 inhabitants, there were in 1918 less than 100 French. The Saar district has been German for more than 1,000 years. Temporary occupation as a result of warlike operations on the part of the French always terminated in a short time in the restoration of the country upon the conclusion of peace. During a period of 1048 years France has possessed the country for not quite 68 years in all. When, on the occasion of the first Treaty of Paris in 1814, a smal

rraine, and in the spirit of Bismarck they have taken it. Not precedent, b

ject to a plebiscite,[39] to be ceded to Poland. Upper Silesia was never part of historic Poland; but its population is mixed Polish, German, and Czecho-Slovakian, the precise proportions of which are di

and the Saar, the coal supplies of Germany

ation Chapter, "Germany undertakes 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 a

lf, and one which Germany should be able to fulfil

aid in kind instead of in cash. As a part of the payment due for Reparation, Germany is to make the following deliveries of coal or equivalent in coke (th

0,000 tons annually

,000,000 tons annu

ncrements from 4,500,000 tons in 1919-1920 to 8,500,00

ity of coal equal to the pre-war annual

an annual average of

total of 191,500,000 tons. Of this, 19,000,000 tons were consumed at the mines, and on balance (i.e. exports less imports) 33,500,

18,000,

nd electricit

s 6,50

industry and agric

y 78,00

000,

roduction due to lo

raine 3,80

sin 13,

lesia 43

00,0

00 tons to France as compensation for damage done to French mines, and 25,000,000 tons to France, Belgium, Italy, and Luxemburg;[43] as the former figure is a maximum, and the latter figure is to be slightly less in the earliest

rman authorities agree, and have not been confuted, that some of them are bound to persist for some time to come. In part they are the same as elsewhere; the daily shift has been shortened from 8-1/2 to 7 hours, and it is improbable that the powers of the Central Government will be adequate to restore them to their former figure. But in addition, the mining plant is in bad condition (due to the lack of certain essential materials during the blockade), the physical efficiency of the men is greatly impaired by malnutrition (which cannot be cured if a tithe of the reparati

ed to the Allies, there remain 60,000,000 tons for Germany herself to meet her own domestic consumption. Demand as well as supply will be diminished by loss of territory, but at the most extravagant estimate this could not be put above 29,000,000 tons.[46] Our hypothet

ficiency, Germany cannot export coal in the near future (and will even be dependent on her Treaty rights to purchase in Upper Silesia), if she is to continue as an industrial nation. Every million tons she is forced to export must be at the expense of closing down an industry. With results to be considered later this within certain limits is po

g the hour of taxation and retrenchment. But the coal clauses will not be lost sight of so easily,-for the reason that it will be absolutely vital in the interests of France and Italy that these countries should do everything in their power to exact their bond. As a result of the diminished output due to German destruction in France, of the dimi

It may be admitted that the surrender of the coal will destroy German industry, but it may be equally true that its non-surrender will jeopardize French and Italian industry. In such a case must not the victors with their Treaty rights prevail, especially when much of the damage has been u

in large part from Germany, will be hardly less serious. They will go to great lengths in the direction of making their own supplies to Germany of materials which are essential to her, conditional on these being paid for in coal. Indeed they are already doing so.[49] With the breakdown of money economy the practice of international barter is becoming prevalent. Nowadays money in Central and South-Eastern Europe is seldom a true measure of value in exchange, and will not necessarily buy anything, with the consequence that one country, possessing a commodity essential to the needs of another, sells it not for cash but only against a reciprocal engagement on the part of the

eat show of justice, and it will be difficult to weigh against such claims the possible facts that, while German miners will work for butter, there is no available means of compelling

re is any approximate truth in Mr. Hoover's calculation that the coal output of Europe has fallen by one-third, a situation confronts us where distribution must be effected with even-handed impartiality in accordance with need, and no incentive can be neglected towards increased production and economical methods of transport. The establishment by the Supreme Council of the Allies in August, 1

y require less attention, because they are in large measure inevitable. Almost exactly 75 per cent of the iron-ore

heir produce. The German Delegation made strong efforts to secure the inclusion of a provision by which coal and coke to be furnished by them t

aine and the Saar basin together, a large proportion of the ore being carried into Germany proper. Approximately the same proportion of Germany's iron and steel foundries, namely 25 per cent, were s

thin her own frontiers. Much time must elapse before the plant and the skilled labor could be developed within France, and even so she could hardly deal with the ore unless she could rely on receivin

another; and prefer collective animosities to individual happiness. It seems certain, calculating on the present passions and impulses of European capitalistic society, that the effective iron output of Europe will be diminished by a new political frontier (which sentiment and historic justice require), because nationalism and private interest

iron, the presence of coal has led to the establishment of numerous blast furnaces. What is to be the fate of these? If Germany is cut off from her supplies of ore on t

tween the coal and the iron, upon which modern industrialism is founded, will not only diminish the production of useful commodities, but may possibly occupy an immense quantity of human labor in

I

nificance of those discussed hitherto. They are pin-pricks, interferences and vexations, not so much objectionable for their solid consequences, as dishonorable to the Al

en Points,-if they were reciprocal. Both for imports and exports, and as regards tariffs, regulations, and prohibitions, Germany binds herself for f

t of customs duty, up to the average amount sent annually into Germany from 1911 to

ar privilege,[57]- but not German exports to Poland or to Luxemburg. Luxemburg also, which for many years has enj

a ridiculous and injurious provision, by which Germany is prevented from taking those steps necessary to conserve her limited resources for the purchase of necessaries and the discharge of Reparation. As a result of the existing distribution of wealth in Germany, and of financial wantonness amongst individuals, the offspring of uncertainty, Germany is threatened with a deluge of luxuries and semi-luxuries from abroad, of which she has been starved for years, which would exhaust or diminish her

This provision was probably introduced as a possibly useful adjunct to the French policy of somehow detaching the left bank provinces from Germany during the years of their occupation. The project of establishing an independent Republic under French clerical auspices, which would act as a buffer state and realize the French ambition of driving Germany proper beyond the Rhine, has not yet been abandon

he most favored treatment as regards rail freight rates, etc., applied to goods of the same kind carried on any German lines "under similar conditions of transport, for example, as regards length of route."[62] As a non-reciprocal provision this is an act of inte

er, with all necessary spare parts and fittings." Under the Treaty Germany is required to confirm this surrender and to recognize the title of the Allies to the material.[66] She is further required, in the case of railway systems in ceded territory, to hand over these systems compl

ted by normal repairs, had already reduced the German railway system to a low state of efficiency. The further heavy losses under the Treaty will confirm

rt is generally unknown. Yet they constitute an unprecedented interference with a country's domestic arrangements and are capable of being so operated as to take from Germany all e

elsewhere; the Elbe rises in the mountains of Bohemia, now called Czecho-Slovakia; the Oder traverses Lower Silesia; and the Niemen now bounds the frontier of East Prussia and has its source in Russia. Of these, the Rhine and the Niemen are frontier rivers, the Elbe is pri

discrimination. This principle has long been recognized in the International Commissions which regulate the Rhine and the Danube. But on such Commissions the States concerned should be represent

mate powers of these Commissions are to be determined by "a General Convention drawn up by the Allied and Associated Powers, and approved by the League of Nations."[70] In the meantime the Commissions are to draw up their own constitutions and are apparently

e the voting is so weighted as to place Germany in a clear minority. On the Elbe Commission Germany has four votes out of ten; on the Oder Commission three out of nine; on the Rhine Commission four out of nineteen; on the Danube Commission, which is no

business of Hamburg, Magdeburg, Dresden, Stettin, Frankfurt, Breslan, and Ulm will be subject to a foreign jurisdiction. It is

itimate needs of the parties concerned, and particularly to the shipping traffic during the five years preceding the war," the craft so ceded to be selected from those most recently built.[72] The same course is to be followed with German vessels and tugs on the Rhine and with German property in the port of Rotterdam.[73] Where the Rhine flows between France and Germany, France is to have all th

ich might impoverish Germany now or obstruct her development in future. So situated, Germany

TNO

his reservation is discuss

ent. The second of the Fourteen Points, which relates to the Freedom of the

III. Annex

VIII. Anne

e shipbuilding output of Germany was about

VIII. Anne

Art

ts. 120

Art

ation appears to lie, not with the Reparation Commission, but with the particular

d para. 4 of Annex t

ts. 53

lways were private property. As they afterwards became the property of the German Government, the French Government have held, in spite o

55. This follows th

rt. 29

tions III. and I

ubious. The phrase is so wide as to seem to include private debts. But in

y in Poland and the other new States, the proceeds of liquidat

its nationals and relating to property, rights, or interests situated in the territory of that Allied or Associated Power.... Germany will at any time on demand of any Allied or Associated Power furnish such information as may be required

ncession" is a vague phrase, the precise i

Art

Art

Art

ts. 129

rts. 1

rts. 1

nferred on her by the General Act of Algeciras of April 7, 1906, and b

gypt are regarded as abrogated from Aug. 4, 1914." Art. 153: "All property and possessions in Eg

Art

Art

Section IV. An

During fifteen years we are going to work on them, to attack them from every point, till we obtain from them a declaration of love. It is evidently a less brutal proceeding than the coup de force which detached from us our Alsatians and Lorrainers. But if less brutal, it is more hypocritical. We know quite well between ourselves that it is an attempt to annex

Allies, who shall have regard, partly to the results of the vote in each commune, and partly "to the geographical and economic conditions of the locality." It would require great local knowledge to predict the result. By voting Polish, a locality can escape liability for the indemnity, and for the crushing taxation consequent on voting German, a factor not to be neglected. On the other hand, the bankruptcy and incompetence of the new Polish State might deter those who were disposed to vo

judge from the votes cast at elections, one-third of the populatio

Poland or in any other country." This does not apparently amount to a right of preemption, and it is not easy to estimate its effective practical consequences. It is evident, however, that in so far as the mines are maintained at their former efficiency, and in so far as Germany is in a position to purchase substantially her former supplies from that source, the loss is limited to the effect on her balance of trade, and is without the more serious repercussions on her economic life which are contemplated in the text. Here is an opportunity for the Allies to render more tolerable the actual operation of the settlement. The Germans, it should be added, have pointed out that the same economic argument which adds the S

ee years 35,000 tons of benzol, 60,000 tons of

ellations "the coal to replace coal from destroyed mines shall receive priority over other deliveries." This concluding clause is of the greatest importance, if, as will be seen, it is physically impossible for Germany to furnish the full 45,000,000; for it means that France will receive 20,000,000 tons be

to about 60 per cent of that of 1913. The effect on reserves has natural

f 15 per cent as compared with the e

ermany's industrial undertaking and a diminut

,000 tons of briquette. This amount of lignite, however, was required in Germany before the war in addition to the quantities of coal assumed above. I am not competent to speak on the extent to which the loss of coal can be made

o 443,000,000 tons,-as a result in a minor degree of loss of material and labor, but owing chiefly to a relaxation of physical effort after the

nts providing for payment in coal were made by Germany with Denmark, Norway, and Switzerland. The amounts involved were not large, bu

furnishing coal for export to Denmark hence butter will be exported in return. The butter will benefit the

rospects of whisky

ual delivery of 20 million tons as compared with 43 millions as provided in the Peace Treaty. If Germany's total production exceeds the present level of about 108 millions a year, 60 per cent of extra production, up to 128 millions, shall be delivered

lusion of the iron and steel of Luxemburg from the German Customs Union is, however, important, especially when this loss is added

states that the iron and steel works in Lorraine, and to a lesser extent in the Saar Valley, are dependent on supplies of coal and coke from Westphalia. It is necessary to mix Westphalian coal with

ovisions can only be extended beyond five y

rt. 26

. 268 (b

owers relating to the Grand Duchy" (Art. 40). At the end of September, 1919, a plebiscite was held to determine whether Luxemburg should join the French or the Belgian Customs

Art

Art

he purpose of obtaining the required guarantees" (Art. 429); and also that "in case either during the occupation or after the expiration of the fifteen years, the Reparation Commission finds that Germany refuses to observe the whole or part of her obligations under the present Treaty with regard to Reparation, the whole or part of the areas specified in Article 429 will be re-occupied immediately by the Allied and Associated Powers" (Art. 430). Since it will be impossible for Germany to fulfil the whole of her Reparation obligations, the effect of the above provisions will be in practice that the Allies will occupy the left bank of the Rhine just so long as they choose. They will also govern it in such manner as

Article is subject to revision by t

iron and steel goods, on the ground that these privileges would have been more than counterbalanced by the corres

Art

nd application are to be referred

Art

mer Russian Poland converted by Germany to the German gage, such

nations to trade between German towns but forbids German vessels to trade between non-German towns except with special permi

le are to be similarly treate

Art

the Elbe and the Oder; the Danube and the Rhine ar

Art

Art

o be allowed some payment or credit i

Art