The Economic Consequences of the Peace

ara

iven prior to the

the German Government as the basis of peace on November 5, 1918. These passages have been quoted in full at the beginning of Chapter IV. That is to say, "compensation will be made by Germany for all damage done to the civilian population of the Allies and to their property by the aggression of Germany by l

ime attached any particular importance, did away with all the formal communications which passed between the President and the German Government as to the basis of the Terms of Peace during the days preceding the Armistice, abolished the Fourteen Points, and converted the German acceptance of the Armistice Terms into unconditional surrender, so far as it affects the Financial Clauses. It is merely

as we shall see in the next section of this chapter, as this apparently simple and unambiguous statement. Some have not scrupled to argue that it covers the entire cost of the war; for, they point out, the entire cost of the war has to be met by taxation, and such taxation is "damaging to the civilian population." They admit that the phr

a (as at Scarborough), or damage done by air raids. It was to repair these omissions, which involved losses to the life and property of civilians not really distinguishable in kind from those effected in occupied territory, that the Supreme Council of the Allies in Paris proposed to President Wilson their qualifications. At that time-the last days of October, 1918-I do not believe that any responsible statesman had in mind the exaction from Germany of an indemnity for the general costs of the war. They sought only to make it cl

ct interpretation of our engagements?[77] In the case of th

of an enemy Government including damage by air raid

improper treatment

costs of the war, or (e.g.) ind

clude, as well as items c

sons of civilians in the war area, and

machinery, household effects, timber, and the like by the enem

vied by the enemy Governments or their off

nationals deported or com

re is a further item of more

ng necessary food and clothing to maintain the civil

olved in the invasion of Belgium, whereas, as we have seen, the Fourteen Points include no special demands on this ground.[79] As the cost of Belgian Belief under (g), as well as her general war costs, has been met already by advances from the British, F

; on the one hand, they cover explicitly in Point 11 damage done to Roumania, Serbia, and Montenegro, without qualification as to the nationality of the troops inflicting the damage; on the other hand, the Note of the Allies speaks of "German" aggression when it might have spoken of the aggression of "Germany and her allies." On a strict and liter

Great Britain were to take what Germany could pay and leave Italy and Serbia to get what they could out of the remains of Austria-

claims which the Allies hold against her, the question of her contingent liability for her allies becomes academic. Prudent and honorable s

figures exist on which to base any scientific or exact estimate, and I give m

r was made visible to sight on an extraordinary scale of blasted grandeur. The completeness of the destruction was evident. For mile after mile nothing was left. No building was habitable and no field fit for the plow. The sameness was also striking. One devastated area was exactly like another-a heap of rubble, a morass of shell-holes, and a tangle of wire.[8

the retreating Germans to buildings, plant, and transport, and the loot of machinery, cattle, and other movable property. But Brussels, Antwerp, and even Ostend are substantially intact, and the great bulk of the land, which is Belgium's chief wealth, is nearly as well cultivated as before. The traveler by motor can pass through and from end to end of the devastated area of Belgium almost before he knows it; whereas the destruction in France is on a different kind of scale altogether. Industrially, the loot has been serious and for the moment paralyzing; but the actual money cost of replacing machinery mounts up slowly, and a few tens of millions would have covere

al survey of Belgian wealth, published in 1913 by t

320,000,

s 1,175,

ealth 2,72

85,00

, etc. 60

5,000

y current), the corresponding wealth per head (to take Belgium's immediate neighbors) being $835 for Holland, $1,220 for Germany, and $1,515 for France.[83] A total of $7,500,000,000, giving an average of about $1,000

differs so widely from those generally current, I shall be surprised if it proves possible to substantiate claims even to this amount. Claims in respect of levies, fines, requisitions, and so forth might possibly amount to a further

it will turn out, I believe, that taking account of casualties, loss of property and burden of future debt, Belgium has made the least relative sacrifice of all the belligerents except the United States. Of the Allies, Serbia's sufferings and loss have been proportionately the greatest, and after Serbia, Fra

hose sufferings from invasion which cannot be measured in money, had fallen behind, and in some respects they were not even as great, for example, as Australia's. I say this with no wish to evade the obligations towards Belgium under which the pronouncements of our responsibl

the area of substantial devastation. Of the sixty French towns having a population exceeding 35,000, only two were destroyed-Reims (115,178) and St. Quentin (55,571); three others were occupied-Lille, Roubaix, and Douai-and suffered from loot of machinery and other property, b

t it would be extravagant to put the damage on this head as high as $500,000,000. Farm Capital for the whole of France has not been put by responsible authorities above $2,100,000,000.[86] There remain the loss of furniture and machinery, the damage to the coal-mines and the transport system, and many other minor items. But these losses, however serious, cannot be reckoned in value by hundreds of millions of dollars in respect of so small a part of France. In short, it will be difficult to establish a bill exceeding $

heur, the Minister of Industrial Reconstruction, stated before the Senate on the 17th February, 1919, that the reconstitution of the devastated regions would involve an expenditure of $15,000,000,000 (75 milliard francs),-more than double M. Pupin's estimate of

losses of the French mercantile marine at sea from the attacks of German cruisers and submarines. Probably $1,000,000,000 would be ample to cover all such claims;

y (presumably inclusive of losses at sea, etc., but apart from pensions and allowances) at $26,800,000,000 (134 milliard francs), or more than six times my estimate. Even if my figure prove erroneous, M. Klotz's can never have been justified. So grave has been the deception practised on the Fr

lie, of course, for damage to civilian property in air raids and by bombardment from the sea, but in relation to such figures as we ar

cost; at the figure of $150 per gross ton, which with the rapid growth of shipbuilding may soon be too high but can be replaced by any other which better authorities[92] may prefer, the aggregate claim is $1,150,000,000. To this must be adde

-making a total claim for Great Britain of $2,850,000,000. It is surprising, perhaps, that the money value of Great Britain's claim should be so little short of that of France an

ea cannot be very heavy, and a figure of from $250,000,000 to $500,000,000 would be fully adequate to cover them. The losses of Serbia, although from a human point of view her sufferings were the greatest of all,[95] are not measured pecuniarily by very great figures, on account of her low economic development. Dr. Stamp (loc. cit.) quotes an estimate by the Italian statistician Maroi, which puts the national wea

y left with t

2,500,000

4,000

tain 2,85

lies 1,2

10,600,

he general magnitude, as distinct from the precise figures, is not hopelessly erroneous; and this may be expressed by the statement that a claim against Germany, based on the in

t the Peace Negotiations to agree to a sum of $10,000,000,000 in final settlement, without further examination of particulars. This would have provided an immediate and certain solution, and would have required from German

n was not settl

nce and the Ter

arine campaign. At that time there were serious doubts as to whether Germany intended to accept our terms, which in other respects were inevitably very severe, and it would have been thought an unstatesmanlike act to risk a continuance of the war by demanding a money paym

lly was, a discovery which some, though not all, had anticipated, but which no one had dared reckon on as a

is enemies with powerful weapons, if he were to leave them time to mature. The best chance, therefore, of consolidating his power, which was personal and exercised, as such, independently of party or principle, to an extent unusual in British politics, evidently lay in active hostilities before the prestige of victory had abated, and in an attempt to found on the emotions of the moment a new basis of power which might outlast the inevitable reactions of the near future. Within a brief period, therefore, afte

t defined themselves, partly out of regard for the delicate balance of a Coalition Party, the Prime Minister's future policy was the subject of silence or generalities. The campaign seemed, therefore, to fall a little flat. In the light of subsequent events it seems improbable that the Coalition P

hat they were not going "to let the Hun off." Mr. Hughes was evoking a good deal of attention by his demands for a very large indemnity,[99] and Lord Northcliffe was lending his powerful aid to the same cause. This pointed the Prime Minister to a stone for t

w, Mr. Bonar Law would promise nothing. "We are going to the Conference," he said, "as one of a number of allies, and you cannot expect a member of the Government, whatever he may think, to state in public before he goes into that Conference, what line he is going to take in regard to any particular question." But a few days later at Newcastle (November 29) the Prime Minister was warming to his work: "When Germany defeated France she made France pay. That is the principle which she herself has established. There is absolutely no doubt about the principle, and that is the principle we should proceed upon-that Germany must pay the costs of the war up to the limit of her capacity to do so." But he accompanied this statement of principle with many "words of warning" as to the practical difficulties of the case: "We have appointed a strong Committee of experts, representing every shade of opinion, to consider this question very carefully and to advise us. There is no doubt as to the justice of

net, in which he was supposed to represent Labor, sh

h significant emphasis on the word European, that "All the European Allies have accepted the pr

" that "The public mind was still bewildered by the Prime Minister's various statements." "There is too much suspicion," they added, "of influences concerned to let the Germans off lightly, whereas the only possible motive in determining their capacity to pay must be the interests of the Allies."

doubts on the possibility of extracting from Germany the whole cost of the war had been the object of serious suspicion, and he had therefore a reputation to regain. "We will get out of her all you can squeeze out of a lemon and a bit more," the penitent shouted, "I will squeeze her until you can hear the pips sque

f Six Points issued on that day to the electorate furnishes a melancholy

al of th

those responsib

ndemnities f

British, socially

on of those bro

er country

latform had reduced the powerful governors of England, who but a little while before had spoken not ignobly of Disar

ty Policy, of which the chief were: First, we have an absolute right to demand the whole cost of the war; second, we propose to demand the whole c

ordinary voter was led to believe that Germany could certainly be made to pay the greater part, if not the whole cost of the war. Those whose practical and selfish fears for the future the expenses of the war had

ffer to the electorate, was swept out of existence.[101] A new House of Commons came into being, a majority of whose members had pledged themselves to a great deal more than the Prime Minister's guarded promises. Shortly a

nsistent with solemn engagements on our part, on the faith of which this enemy had laid down his arms. There are few episodes in history which posterity will have less reason to condone,-a war ostensibly

ure lay not in frontiers or sovereignties but in food, coal, and transport. Neither of them paid adequate attention to these problems at any stage of the Conference. But in any event the atmosphere for the wise and reasonable consideration of them was hopelessly befogged by the commitments of the British delegation on the question of Indemnities. The hopes to which the Prime Minister had given rise not only compelled him to advocate an unjust and unworkable economic basis to the Treaty with Germany, but set h

ited States, into the economic and financial situation as a whole, and that the former should have been authorized to make concrete proposals on the general lines (1) that all inter-allied indebtedness be canceled outright; (2) that the sum to be paid by Germany be fixed at $10,000,000,000; (3) that Great Britain renounce all claim to participation in this sum and that any share to which she proves entitled be placed at the disposal of the Conference for the purpose of aiding the finances of the New States about to be established; (4) that in order to make some basis of credit immediately available an appropriate proportion of the German obligati

ss in the nature of a windfall; and, in spite of subsequent developments, there was an expectation at that time of balancing our budget by normal methods. But this was not the case with France or Italy. Their peace budgets made no pretense of balancing and had no prospects of doing so, without some far-reaching revision of the existing policy. Indeed, the position was and remains nearly hopeless. These c

nveracity was fundamental. On a basis of so much falsehood it became impossible to erect any constructive financial policy which was workable. For this reason amongst others, a magnanimous financial policy was essential. The financial position of France and Italy was so bad that it was impossible to make them listen to reas

ntention of leaving Germany in a position to practise a vast commercial activity. But he did not trouble his head to understand either the indemnity or poor M. Klotz's overwhelming financial difficulties. If it amused the financiers to put into the Treaty some very large demands, well there was no harm in that; but the satisfaction of these demands must not be a

paration Chapter in its final form. There can have been few negotiations in history so contorted, so miserable, so utterly unsatisfactory to all parties. I doubt if any one w

nd from Germany the entire costs of the war was from the outset clearly untenable; or rather, to put it more impartially, it was clear that to persuade the President of the conformity of this demand with ou

iated Governments recognize that the resources of Germany are not adequate, after taking into account permanent diminutions of such resources which will result from other provisions of the present Treaty, to make complete reparation for all such loss and damage." The President could comfort himself that this was no more than a statement of undoubted fact, and that to recognize that Germany cannot pay a certain claim does not imply that she is liable to pay the claim; but the Prime Minister could point out that in the context it emphasizes to the reader the assumption of Germany's theoretic liability asserted in the preceding Article. Article 232 proceeds: "The Allied an

ich does no one any harm, and which probably seemed much more important at the time tha

ar; Paragraph 2, for acts of cruelty, violence, or maltreatment on the part of the enemy towards civilian victims; Paragraph 3, for enemy acts injurious to health or capacity to work or to honor towards civilians in occupied or invaded territory; Paragraph 8, for forced labor exacted by the enemy from civil

t of prisoners of war," is more doubtful on the strict letter, but may

uring the war by the Allied Governments to the families of mobilized persons, and for the amount of the pensions and compensations in respect of the injury or death of combatants payable by

a woman deprived of the earning power of her husband should not claim. In fact the case for including Pensions and Separation Allowances largely depends on exploiting the rather arbitrary character of the criterion laid down in the pre-Armistice conditions. Of all the losses caused by war some bear more heavily on individuals and some are more evenly distributed over the community as a whole; but by means of compensations granted by the Government many of the former are in f

towards the general costs of the war would have been. But the main consideration is that it was too late to consider whether the pre-Armistice conditions were perfectly judicious and logical or to amend them; the only question at issue was whether these conditions were not in fact limited to such classes of direct damage to civilians and their property as are se

lified his promises by the limiting condition of Germany's capacity to pay, and that the bill as now presented more than exhausted this capacity as estimated by the more sober authorities. The President, on the other hand, had secured a formula, which was not too obvious a breach of faith, and had avoided a quarrel with his Associates on an issue where the appeals to sentiment and passion would all have been

lves that she should not know what she has to pay or they what they are to receive. The method, apparently contemplated by the Treaty, of arriving at the final result over a period of many months by an addition of hundreds of thousands of individual claims for damage to land, farm bu

ermany's prospective capacity to pay, not too much in excess of the estimates of most candid and well-informed authorities, would have fallen hopelessly far short of popular expectations both in England and in France. On the other hand, a definitive figure for damage done which would not disastrously disappoi

mention no figure at all; and from this necessity a great deal o

o the Governments concerned, but is to be a computed figure calculated on the basis of the scales in force in France at the date of the Treaty's coming into operation. This method avoids the invidious course of valuing an American or a British life at a higher figure than a French or an Italian. The French rate for Pensions and Allowances is at an intermediate rate, not so high as the American or British, but above the Italian, the Belgian, or the Serbian. The only d

ire $7,000,

,000,000,

2,500,

ng United State

25,000,

claim, raising it indeed by nearly double. Adding this figure to the estimate under other heads, we have a total claim against Germany of $40,000,000,000.[108] I believe that this figure is fully high enough, and that the actual result may fall some

d Governments, be paid for out of the above sum."[111] This is a qualification of high importance. The clause, as it is drafted, allows the Finance Ministers of the Allied countries to hold out to their electorates the hope of substantial payments at an early date, while at the same time it gives to the Reparation Commission a discretion, which the force of facts will compel them to exercise, to give back to Germany what is required for the maintenance of her economic existence. This discretionary power renders the demand for an immediate payment of $5,000,000,000 less injurious than it would otherwise be, but nevertheless it does not render it innocuous. In the first place, my conclusions in the next section of this

0 by reason of the permitted deductions, to such further amount as shall bring the total payments by Germany in cash, kind, and bearer bonds up to May 1, 1921, to a figure of $15,000,000,000 altogether.[112] These bearer bonds carry interest at 2-1/2 per cent per annum from 1921 to 1925,

issued for a further $10,000,000,000, the rate of amortization being determined by the Commission hereafter. This would bring

nder Annex I. has been provided for. On the basis of my estimate of $40,000,000,000 for the total liability, which is more likely to be criticized as being too low than as being to

variation of this rate." That is to say, the capital sum of indebtedness is rolling up all the time at compound interest. The effect of this provision towards increasing the burden is, on the assumption that Germany cannot pay very large sums at first, enormous. At 5 per cent compound interest a capital sum doubles itself in fifteen years. On the assumption that Germany cannot pay more than $750,000,000 annually until 1936 (i.e. 5 per cent interest on $15,000,000,000) the $25,000,000,000 on which interest is deferred will have risen to $50,000,000,000, carrying an annual interest charge of $2,500,000,000. That is to sa

at Germany cannot pay anything approaching this sum. Until the Treaty is altered, therefore, Germany has

the policy which the Treaty represents, to extract from Germany year after year the maximum sum obtainable. There is a great difference between fixing a definite sum, which though large is within Germany's capacity to pay and yet to retain a little for herself, and fixing a sum far beyond her capacity, which is then to be reduced at the discretion of a foreign Commission acting with the object of obtaining each year the maximum which the circumstances of that year permit. Th

ich the Treaty accords to the Reparation Commission. But the

ny's Capac

harge the sum which she has engaged

wealth in the form of gold,

n ceded territory, or surr

ears, partly in cash and partly in materia

n and French securities, cattle, machinery, and works of art. In so far as the actual goods taken can be identified and restored, they must clearly be

ely Transfe

but of gold ornaments of every kind. Private hoards doubtless still exist, but, in view of the great efforts already made, it is unlikely that either the German Government or the Allies will be able to unearth them. The return can therefore be taken as probably representing the maximum amount which the German Government are able to extract from their people. In addition to gold there was in the Reichsbank a sum of about

future prospects of Reparation payments. The German representatives maintained from the outset that the financial exhaustion of their country was for the time being so complete that a temporary loan from the Allies was the only possible expedient. This the Allies could hardly admit at a time when they were preparing demands for the immediate payment by Germany of immeasurably larger sums. But, apart from this, the German claim could not be accepted as strictly accurate so long as their gold was still untapped and their remaining foreign securities unmarketed. In any case, it was out of the question to suppose that in the spring of 1919 public opinion in the Allied countries or in America would have allowed the grant of a substantial loan to Germany. On the other hand, the Allies were naturally reluc

e Reichsbank accruing in the neighboring neutral countries, which could not be met otherwise than in gold. The failure of the Reichsbank to meet its liabilities would have caused a depreciation of the exchange s

old reserve of the Reichsbank by more than half, the figures

abroad) to destroy the exchange value of the mark almost entirely. A sum of $25,000,000, $50,000,000, or even $100,000,000 might be taken for a special purpose. But we may assume that the Reparation Commission will judge it imprudent, having regard to the reaction on their future prospects of securing payment, to ruin

can be expected in the form of gold or silver towar

Allies prior to the conclusion of Peace, either by detention in their ports or by the provisional transfer of tonnage under the Brussels Agreement in connection with the supply of foodstuffs.[119] E

estimates are confessedly based on insufficient data, such as the admission of foreign securities to the German Stock Exchanges, the receipts of the stamp duties, consular reports, etc. The principal German estimates current before the war are given in the appended footnote.[122]

gregate total have to b

and similar officials, and are not available for Reparation except in so far as they show a surplus over various private claims. Under the scheme for dealing with enemy debts outlined in Chapter IV.,

at any rate for the time being; especially those in Russia and Austria-Hungary. If present market value is to be taken as the test, none of these investments are now saleable above a nominal figure. Unless the Allies are pre

ecurities, although some current estimates of these sales (a figure of $300,000,000 has been mentioned) are probably exaggerated. But throughout the war and particularly in its later stages, when her exchanges were weak and her credit in the neighboring neutral countries was becoming very low, she was disposing of such securities as Holland, Swi

rities and are not registered. They are easily smuggled abroad across Germany's extensive land frontiers, and for some months before the conclusion of peace it was certain that their owners would not be allowed to retain them if the Allied Governments

y's own allies, and the neutral countries adjacent to Germany exhaust between them almost the whole of the civilized world; and, as we have seen, we cannot expect much

esswork. I give the reader the best personal estimate I can form after ponder

,000, of which $500,000,000 may be ultimatel

. This gives a total of $1,225,000,000, which is to some extent borne out by the figure of $1,000,000,000 given in 1911 by Dr. Ischchanian as a deliberately modest estimate. A Roumanian estimate, published at the time of that country's entry in the war, gave the value of Germany's investments in Roumania at $20,000,000 to $22,000,000, of which $14,000,000 to $16,000,000 were in Government securities. An association for the defense of French interests in Tu

rising practically all Germany's holding of Scandinavian, Dutch, and Swiss securities, a part of her South American securiti

tional stories of the expedients adopted. But if we put the value of securities which have already left Germany or have been safely secret

a round figure of about $5,000,000,000, and leave us with an

t blocks of securities, specified by countries and enterprises, can Germany possibly still have which could amount to as much as $1,250,000,000? I cannot answer the question. She has some Chinese Government securities which have not been sequestered, a few Japanese perhaps, and a more substantial value of first-class South American properties. But there are very few enterprises of this class still in German hands, and even their value

00,000 to $1,250,000,000 as the maximum con

nsferable wealth is

silver-say

ps-$600

ties-$500,000,000

system injurious to the interests of the Allies themselves. The contribution from all these sources together which the Reparati

Territory or surrende

ive important credits available towards meeting repa

n debts to Allied nationals, and only the surplus, if any, is available towards Reparation. T

the former Kingdom of Poland are also to be surrendered without credit. There remain, therefore, Government properties, other than the above, surrendered to Poland, Government properties in Schleswig surrendered to Denmark,[125] the v

at the Saar coalfields have been valued at from $75,000,000 to $100,000,000. A round figure of $150,000,000 for al

tice as well as for certain other specified items, and generally for any material so surrendered for which the Reparation Commission think that credit should be given, "as having non-military val

under the previous heading. This figure differs from the preceding in that it does not represent cash capable of bene

ter the conclusion of Peace. The aggregate of this figure up to May, 1921, cannot be calculated until the rate of withdrawal is known which is to reduce the monthly cost from the figure exceeding $100,000,000, which prevailed during

require to purchase from abroad in order to re-establish her economic life, or as to the degree of liberality with which the Allies will exercise their discretion. If her stocks of raw materials and food were to be restored to anything approaching their normal level by May, 1921, Germany would probably require foreign purchasing power of from $500,000,000 to $1,000,000,000 at least, in addition to the value of her current exports. While this is not likely to be per

he Treaty, and the discharge of the cost of the Armies of Occupation. As Belgium has secured a private agreement with France, the United States, and Great Britain, outside the Treaty, by which she is to receive, towards satisfaction of her claims, the first $500,000,000 available for Reparation,

nts spread over

erritory and population, of one-third of her coal and of three-quarters of her iron ore, by two million casualties amongst men in the prime of life, by the starvation of her people for four years, by the burden of a vast war debt, by the depreciation of her cur

indemnity from Germany depend on the assumption that she is in a position to

partly effected in kind (coal, dyes, timber, etc.), as contemplated by the Treaty. In any event, it is only by the export of specific commodities t

available for effecting payments abroad. Germany can pay in the long-run in goods, and in goods only, whether these goods are furnished direct to the Allies, or whether they are sold to neutrals and the neutral credits so arising are then made over to the Allies. The most solid basis for estimating the extent to which this process can be car

any's pre-war balance for new foreign investment was derived from the interest on her existing foreign securities, and from the profits of her shipping, foreign banking, etc. As her foreign properties and her mercantile marine are now to be taken from her, and as her foreign banking and other miscellaneous sources of revenue from abroad have been largely destroyed, it appears that, on the pre-war b

ing tables. The considerations applying to the enumerated portions may be assumed to apply more or

ports, 19

ll

Percen

l Ex

ding tin plates,

and parts

ars) 18

and briquett

ds (includ

and clothing

s (includin

thread)

.85

c. (includi

hops) 1

leather go

66.0

etc. 65

58.

oods (instal

mps, cables

oods 5

48.

goods 3

25.

rubber good

s, and mus

h 15.

15.7

chloride

ans, and pa

nc 13.

ain 12

.70

unenumerate

2,524.

ports, 19

ll

Percen

l Ex

mater

n 151

d skins

118.3

r 83.

68.

r 58.

re 56.

46.

flaxseed

tre 42

39.

r 36.

23.

eum 17

14.5

us chalk

ing oil

.90

, tobacc

etc. (whe

e, maize,

) 327.

and cake

alm kerne

eans) 1

fat, bladde

e 54.

48.

co 33

r 29.

s 29.

18.2

14.

ry 14

13.

.30

anufac

arn and

on g

05

yarn an

o

85

ery 20

.00

merated 8

2,692.

t the most important

uding tin plates

etc. (7.5

nd briquettes

ng raw and combed woo

otton yarn and thread and

nd practically no wool. These trades are therefore incapable of expansion unless Germany is given facilities for securing these raw materials (which can only be at the expense of the Allies) in excess of the pre-war standard of consumption, and even then the effective increase is not the gross value of the exports, but only the difference between the value of the manufactured exports and of the imported raw material. As regards the other three categories, namely, machinery, iron goods, and coal, Germany's capacity to increase her exports will have been taken from her by the cessions of territory i

or by an arrangement by which sugar was taken in part payment for the indemnity on the same lines as has been proposed for coal, dyes, etc. Paper exports also might be capable of some increase. Leather goods, furs, and silks depend upon corresponding imports on the other side of the account. Silk goods are largely in competition with the trade of France and Italy. The remaining items are individually

erent problem. It is unlikely that, apart from certain comforts, the consumption of food by the German laboring classes before the war was in excess of what was required for maximum efficiency; indeed, it probably fell short of that amount. Any substantial decrease in the imports of food would therefore react on the efficiency of the industrial population, and consequently on the volume of surplus exports which they could be fo

um, 10 per cent to Russia and Roumania, and 7 per cent to the United States; that is to say, more than half of the exports found their market in the countries of the Entente nations. Of the balance, 12 per cent went to Austria-Hungary, Turkey,

) According to Des

inat

Exports

ny's

ll

Per cent

rs Pe

n 359.65 14.

.65 1.5

.85 0.4

5.10 0.6

22.10 0.

ca 11.70 0

Empire 456.95 1

7.45 7.8

37.75 5.5

.35 3.9

78.30 7.1

0.00 8.7

35.00 1.4

ary 276.20 1

4.60 1.0

7.55 0.

es 800.20 35.

100.0 2,6

in supplies of such raw materials as cotton and wool (the world's supply of which is limited), (2) that France, having secured the iron-ore deposits, makes a serious attempt to secure the blast-furnaces and the steel trade also, (3) that Germany is not encour

the maximum possible export with a problematic (and in fact) impossible increase to 40,000,000 tons at some future time; even on the basis of 20,000,000 tons we have virtually no increase of value, measured in pre-war prices;[129] whilst, if this amount is exacted, there must be a decrease of far greater value in the export of manufactured articles requirin

hat commodity is she to pay? Dyes?-their total value in 1913 was $50,000,000. Toys? Potash?-1913 exports were worth $15,000,000. And even if the commodities could

able reduction of expenditure on imported commodities may be possible. But, as we have alread

,000,000 annually, measured in pre-war prices. This adjustment is first required to liquidate the adverse trade balance, which in the five years before the war averaged $370,000,000; but we will assume that after allowing for this, she is left with a favorable trade balance of $250,000,000 a year. Doubling this to

per cent for repayment of capital, represents a capital

y as much. Let those who consider this a very low figure, bear in mind the following remarkable comparison. The wealth of France in 1871 was estimated at a little less than half that of Germany in 1913. Apart from changes in the value of money, an indemnity from Germany of $2,500,000,00

is actually in view. The additional contribution thus obtainable depends on the number of laborers which the German Government could contrive to maintain in this way and also on the number which, over a period of years, the Belgian and French inhabitants would tolerate in their midst. In any c

an annual payment amounting to hundreds of millions sterling to say in what specific commodities they intend this payment to be made and in what markets the goods are to b

which affect the force of my argum

food, and raw materials during that period, building up markets for her, and deliberately applying all their resources and goodwill to making her the greatest indu

f gold were to sink to a half or a tenth of its present value, the real burden of a payment fixed in terms of gold would be reduced proportionately. If

our reach methods and devices by which the whole standard of life would be raised immeasurably, and a given volume of products would represent but a portion of the human effo

r. We cannot as reasonable men do better than base our policy on the evidence we have and adapt it to the five or ten years over which we may suppose ourselves to have some measure of prevision; and we are not at fault if we leave on one side the extreme chances of human existence and of re

politicians? If an explanation is needed, I attribute thi

l sense of number and magnitude in matters of finance. What we believed to be the limits of possibility have been so enormously exceeded, and those who founded their expectations on the past h

xport surplus. Helfferich's estimate of Germany's annual increment of wealth in 1913 was $2,000,000,000 to $2,125,000,000 (exclusive of increased money value of existing land and property). Before the war, Germany spent between $25

vestments, and her foreign banking and connections, all of which have now been taken from her. Her saving on armaments is far more than balanced by her annual charge for pensions now estimated at $1,250,000,000,[132] which represents a real loss of productive capacity. And even if we put on one side the burden of the internal debt, which amounts to 24 milliards of marks, as being a question of internal distribution rather than of productivity, we must still allow for the foreign debt incurred by Germany during the

n the method of calculation. An annual surplus available for home investment can only be converted into a surplus available for export abroad by a radical change in the kind of work performed. Labor, while it may be available and efficient for domestic services in Germany, may yet be able to find no outlet in foreign trade. We are back on the same question which faced us in our examinati

paration C

unctions at all, exert so wide an influence on the life of

ent after previous wars have differed in two fundamental respects from this one. The sum demanded has been determinate and has been measured in

and to approve necessary abatements and delays. It was only possible to place this body in a position to exact the utmost year by year by giving it wide powers over the internal economic life of the enemy countries, who are to be treated henceforward as bankrupt estates to be administered by and for the benefi

reaty with Germany. But the same Commission is to exercise authority over Austria and Bulgaria, and possibly over Hungary and Turkey, when Peace i

attended by the delegates of Japan or the Serb-Croat- Slovene State; the delegate of Japan in all proceedings affecting maritime or specifically Japanese questions; and the delegate of the Serb-Croat-Slovene State when q

d with full executive authority to carry out its decisions. It may set up an executive staff and delegate authority to its officers. The Commission and its staff are to enjoy diplomatic privileges, and its salaries are to be paid by Germany, who will, however, have no voice in fixing them, If the

nctions are

nnex I. of the Reparation Chapter. This task must be completed by May, 1921. It shall give to the German Government and to Germany's allies "a just opportunity t

interest within thirty years. From time to time it shall, with a view to modifying the schedule within the limits of poss

which Germany is required to pay shall become a charge upon all her revenues prior to that for the service or discharge of any domestic loan, and secondly, so a

der of any piece of German property whatever, wherever situated: that is to say, "Germany shall pay in such installments

a, China, Turkey, Austria, Hungary, and Bulgaria, or in any territory formerly belonging to Germany or her allies, are to be expropri

m Germany must be returned to her to keep enough life in her economic organ

eded under the Armistice, and under the Treaty,-roiling-stock, the mercantile marine, river craft, c

in defined limits) of the contributions which Germany is to make in k

or the restitution by Germany of

bute all receipts from Germany in cash or in kind. It

e ceded areas of Schleswig, Poland, Danzig, and Upper Silesia. The Commission will also di

ank, and will supervise the withdrawal and replacement o

judgment, Germany is falling short in fulfillment of

dy, will perform the same functions for Austria and Bulgaria as

o make abatements, if in their judgment the economic conditions of Germany require it, will render it in many different particulars the arbiter of Germany's economic life. The Commission is not only to inquire into Germany's general capacity to pay, and to decide (in the early years) what import of foodstuffs and raw materials is necessary; it is authorize

o the possession and exercise by such Commission of the power and authority given to it under the present Treaty." She undertakes to furnish the Commission with all relevant information. A

.... Germany is no longer a people and a State, but becomes a mere trade concern placed by its creditors in the hands of a receiver, without its being granted so much as the opportunity to prove its willingness to meet its obligations of its own accord. The Commission, which is to have its permanent headquarters outside Germany, will possess in Germ

engine of oppression or a device for interfering with German sovereignty. It has no forces at its command; it has no executive powers within the territory of Germany; it cannot, as is suggested, direct or control the educational or other systems of the country. Its business is to ask what is to be paid; to satisfy itself that Germany can pay; and to report t

erve 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 reoccupied immediately by the Allied and Associated Powers"? The decision, as to whether Germany has kept her engagements and whether it is possible for her to keep them, is left, it should be observed, not to the League of Nations, but to the Reparation Commission itself; and an adverse ruling on the part of the Commission is to be followed "immediately" b

Viennese argue, still light-headed in adversity. But perhaps they are right. The Reparation Commission will come into very close contact with the problems of Europe; and it will bear a responsibility proportionate to its powers. It may thus come to fulfil a very different r?le from that which some of its authors intended for it. Transferre

man Counte

and, as they were not really prepared to offer so large a figure, they exercised their ingenuity to produce a formula which might be represented to Allied opinion as yielding this amount, whilst really representing a much more modest sum. The formula produced was transparent to any one who read it carefully and knew the facts, and it could hardly have been expected by its authors to deceive the Allied negotiators. The German tactic assumed, therefore, that the latter were secretly as anxious as the Germans themselves to arrive at a settlement which bore some

t all interferences during the war with her economic rights and with German private property, etc., shall be treated in accordance with the principle of reciprocity";-that is to say, the offer is conditional on the greater part of the rest of the Treaty being abandoned. In the second place, the claims are not to exceed a maximum of $25,000,000,000, of which $5,000,000,000 is to be discharged by May 1, 1926; and no part of this sum is to carry interest pending the payment of it.[141] In the third place, there are to be allowed

allowed in the actual Treaty, according to a rough estimate, by a sum of as much a

0,000 claimed for offsets which the Treaty does not allow, and then halve the remainder in order to obtain the present value of a deferred payment on which interest

was conditional on the abandonment of the greater part of the rest of the Treaty, it could hardly be regarded as a serious one.

zed the inconvenience of the indeterminacy of the burden laid upon Germany and proposed a method by which the final total of claim might be established at an earlier date than May 1, 1921. They promised, therefore, that at any time within four months of the signature of the Treaty (that is to say, up to the end of

to confer with the representatives of the Powers directly concerned. Secondly, such offers must be unambiguous and must be p

hment of the total bill of claims as defined in the Treaty-whether (e.g.) it is $35,000,000,000, $40,000,000,000, or $50,000,000,000. "The questions,

ence; and it will not help Germany's financial position to know for certain that she is liable for the huge sum which on any computation the Treaty liabilities must amount to. These negotiations do offer, however, an op

nation of happiness should be abhorrent and detestable,-abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilized life of Europe. Some preach it in the name of Justice. In the gre

TNO

oved by the enemy which can serve as a pledge to the Allies for recovery or reparation of war losses. Immediate restitution of cash deposit in National Bank of Belgium, and, in general, immediate return of all documents, of specie, stock, shares, paper money

d contrary to the recognized rules of warfare. That is to say, it is permissible to include claims arising

nals should be included, if at all, in the settlement of enemy debts, along wi

tually included In the Peace Treaty, and was acc

esigned to express to the traveler the memories of the ground. A visitor to the salient early in November, 1918, when a few German bodies still added a touch of realism and human horror, and the great struggle was

n three marks), was the occasion of the smuggling of mark-notes into Belgium on an enormous scale, to take advantage of the profit obtainable. The Belgian Government took this very imprudent step, partly because they hoped to persuade the Peace Conference to make the redemption of these bank-notes, at the par of exchange, a first charge on German assets. The Peace Conference held, however, that Reparation proper must take precedence of the adjustment of improvident banking transactions effected at an excessive rate of exchange. The possession by the Belgian Gov

enerally include not only devastation proper, but all kinds of other items, as, for example, the p

f Powers," by J.C. Stamp (Journal of th

m $12,100,000,000 to $13,400,

sly pointed out by M. Charles Gide

hese and other figure

ny of the townships were old and unhealthy, and many of the hamlets miserable. To re-erect the same type of building in the same places would be foolish. As for the land, the wise course may be in some cases to leave long strips of it to Nature for many years to come. An aggregate money sum should be computed as fairly representing the value of the material damage, and France should be left to expend it in the manner she thinks wisest with a view to her economic enrichment as a whole. The first breeze of this controversy has already blown through France. A long and inconclusive debate occupied the Chamber during the spring of 1919, as to whether inhabitants of the devastated area receiving compensat

France devant la Guer

already effected, as set forth in a speech delivered by M. Tardieu on October 10, 1919, in which he said: "On September 16 last, of 2246 kilomètres of railway track destroyed, 2016 had been repaired; of 1075 kilomètres of canal, 700; of 1160 constructions, such as bridges and tunnels, which had been blown u

owance for contingent and immaterial dam

service of the Allies; this must not be duplicat

vessels of 71,765 tons gross, or for the 1855 vessels of 8,007,967 tons damaged or molested

an; but they were largely incurred on the service of the other Allies, who paid for them directly or indirectly. Th

Associated Powers formally reserve the right of Russia to obtain from Germany re

one half of Serbia's male population, from 18 to 60 years of age, perished outright in the European War. In addition, the Serbian Medical Authorities estimate that about 300,000 people have died from typhus among the civil population, and the losses among the population interned in enemy camps are estimated at 50,000. During the two Serbian retreats and durin

ta la richezza d'Italia e delle altre

de many hypothetical items of indirect and non-material damage; but

included for the general expenses of the war def

osts of the war, protested against our ever having entered into such engagements, and maintained loudly that he had been no party to them and could not consider himself bound by

s. This would mean an annual payment for interest (apart from sinking fund) of $6,

leaders maintained substantial silence. What a different position in the country's estimation they might hold now

ngland makes one feel that one must have made some mistake. But I believe that I know all the facts, and I can discover no such mistake. In any ca

ery clear. You might persuade them that some current estimates as to the amount to be got out of Germany were quite fantastic. Yet a

Belgium "in accordance with Germany's pledges, alr

ew of the limited resources of the latter, the other Allies had perhaps a greater inter

milliard francs, made up of 13 milliard for allowances, 60 for pensions, and 2 fo

m for the aggregate figure a

bout $5,000,000,000 each, of which France would receive about $2,750,000,000 annually. "The general effect of the statement (that France would receive from Germany this annual payment) proved," it is reported, "appreciably encouraging to the country as a whole, and was immed

n accuracy of 10 per cent in deficiency and 20 per cent in excess, i.e

taxpayers to those of Germany,-though in reality any such policy would be at the expense not of Germany, who by hypothesis is already paying for Reparation up to the full limit of her capacity, but of France's Allies, who would receive so much less in respect of Reparation. A White Paper (Cmd. 240) has, however, been issued, in which is published a declaration by the Governments of the United States, Great Britain, and France engaging

ed by Article 251, by virtue of which dispensations may also be

pter, leaving minor complications on one side. The Treaty fixes the payment

cash or kind by 1921, her annual payments would be at the rate o

material damage as from November 11, 1918, up to May 1, 1921." This seems to differentiate damage to property from damage to the person in favor

ar to be unplausible, that Germany can pay the full charge for interest and s

1926, and (ii.) for any postponement for more than three years of instalments due after 1926. Further, under Art. 234, the Commissi

1914, the amount

preciation of silver, it is highly improbable that it will be possible to extract such coin out of the pockets of the people. But it may g

ary 16, February 14-16, and March 4-5, 1919) were at last followed by the Agreement of Brussels (March 14, 1919). The unwillingness of the Germans to conclude was mainly due to the lack of any absolute guarantee on the part of the Allies that, if they surrendered the ships, they would get the food. But assuming reasonable good faith on the part of the latter (their behavior in respect of certain other clauses of the Armistice, however, had not been impeccable and ga

value per ton rather less. The aggregate value involved is not likel

rnment acquired complete control over the utilization of foreign securities in German possession; and in May,

1

oller $2,5

stians 3,2

Koch 3,0

alle 4,000

erich 5,000

llod 6,2

torius 6,

David 5,250

for investments ot

property in Germany owned abroad. This may als

g (June 13, 1919), is an estimate of the value of Ger

in the ownership of Alsace-Lorrainers and othe

. There is a great difference between putting down on paper fancy estimates of Germany's resources and actually extracting contributions in the form of cash. I do not

stance, arrange for various offsets such as the value of the mark notes held by the inhabitants of ceded areas. In any case the amount of money involved is quite small. The Danish Government is raising a loan for $33

t the possibility of Germany's exports equaling her imports during this period

pper Silesia, may reduce Germany's annual pre-war production of steel ingots from 20,000,000

ich 838,583 tons were exported to the United Kingdom at a value of $45,254,000. These figures were in

which is required, on both sides of th

present value-so powerful is the operation of compound interest-cannot be materially increased. A payment of $500,000,000

rted, and injured? The Allied Governments might justly require Germany to surrender to them the use of such of her mines, and mineral deposits as would yield, say, from $500,000,000 to $1,000,000,000 annually for the next 30, 40, or 50 years. By this means we could obtain sufficient compensation from Germany without unduly stimulating her manufactures and export trade to our detriment." It is not clear why, if Germany has wealth exceeding $1,250,000,000,000. Sir Sidney Low is content with the trifling sum of $500,000,000 to $1,000,000,000 annually. But his letter is an admirable reductio ad absurdum of a certain line of thought. While a mode of calculation, which estimates the value of coal mi

tion of the mark, the present money burden of the actual pensions payments, but not, in all proba

ttle short of servitude. It is, however, generally supposed that if the whole of a man's surplus production is taken from him, his efficiency and his industry are diminished, The entrepreneur and the inventor will not contrive, the trader

The whole method of the Conference tended towards this,-the Council of Four wanted, not so much a settlement, as a treaty. On political and territorial questions the tendency was to leave the final arbitrament t

terminate figure of any kind being mentioned in the text of the Treaty Austrian questions are to be handled by a special

-Ally Commission of Control, with its seat at Sofia. In some respects the Bulgarian Inter-Ally Commission appears to have powers and authority independent of the Reparation Commission, bu

rincipal Allied and Associated Governments, and not necessarily of the Reparation Commissi

countries have been drafted. It is possible that T

f the following disclaimer of such intentions in the Allies' reply:-"Nor does Paragraph 12(b) of Annex II.

tever tha

thirty-three years, this has the effect of halving the burden as compared with th

her details of the German offer as

capacity in an earlier section of this chapter, which estimate is on the basis of

en formally constituted by the end of October, 1919. So far as I am aware, therefore, nothing has been done to ma