The Economic Consequences of the Peace

after t

good neighbors, nothing to stabilize the new States of Europe, nothing to reclaim Russia; nor does it promote in any way a compact of economic solidarity amongst the

thing that was not just and right. It is an extraordinary fact that the fundamental economic problems of a Europe starving and disintegrating before their eyes, was the one question in which it was impossible to arouse the interest of the Four. Re

nt situation of Europe, as the War and the Peace have made it; and it will no longer be part of my pur

of surplus, by means of a delicate and immensely complicated organization, of which the foundations were supported by coal, iron, transport, and an unbroken supply of imported food and raw materials from other continents. By the destruction of this organization and the interruption of the stream of supplies, a part of this population is deprived of its means of livelihood. Emigration is not open to the redundant surplus. For it would take years to transport them overseas, even, which is not the case, if countries could be found which were ready to receive them. The danger confronting us, therefore, is the rapid depression of the stan

nution of her products, after the economic depression resulting from the loss of her colonies, her merchant fleet and her foreign investments, Germany will not be in a position to import from abroad an adequate quantity of raw material. An enormous part of German industry will, therefore, be condemned inevitably to destruction. The need of importing foodstuffs will increase considerably at the same time that the possibility of satisfying this demand is as greatly diminished. In a very short time, therefore, Germany will not be in a position to give bread and work to her numerous millions of inhabitants, who are prevented from earning their livelihood by navigation and trade. These persons should emigrate, but this is a material impossibility, all the more because many countries and the most important ones will oppose any German immigration. To put the Peace conditions into execution would logically involve, therefore, the loss of several millions of persons in Germany. This

tment and the balance of European power are insignificant. Some of the catastrophes of past history, which have thrown back human progress for centuries, have been due to the reactions following on the sudden terminati

time being, in Europe's internal productivity; second, the breakdown of transport and exchange by means of which its products

ontinuance of mobilization; the falling-off in efficiency through continued underfeeding in the Central Empires; the exhaustion of the soil from lack of the usual applications of artificial manures throughout the course of the war; the unsettlement of the minds of the laboring classes on the above all (to quote Mr. Hoover), "there is a great fundamental economic issues of their lives. But relaxation of effort as the reflex of physical exhaustion of large sections of the population from privation and the mental and physical strain of the war." Many person

many produced 85 per cent of the total food consumed by her inhabitants, the productivity of the soil is now diminished by 40 per cent and the effective quality of the live-stock by 55 per cent.[145] Of the European countries which formerly possessed a large exportable surplus, Russia, as much by reason of deficient transport as of diminished output, may herself

unt of her power of replacement by manufacture, is probably not so serious as that of some of her neighbors. In Russia (about which, however, we have very little exact or accurate information) the condition of the rolling-stock is believed to be altogether desperate, and one of the most fundamental factors in her existing economic disorder. And in Poland, Roumania, and Hungary the posit

aleable manufactures of the towns) without the usual incentives to market food in return for other wares; an industrial population unable to keep its strength for lack of food, unable to earn a livelihood for lack of materials, and so unable to make good by imports from

of production and exchange in foreign trade leads me to a

nriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers,", who are the object of the hatred of the bourgeoisie, whom the inflationism has im

society than to debauch the currency. The process engages all the hidden forces of economic law on

re, broadly speaking, the entrepreneur class of capitalists, that is to say, the active and constructive element in the whole capitalist society, who in a period of rapidly rising prices cannot help but get rich quick whether they wish it or desire it or not. If prices are continually rising, every trader who has purchased for stock or owns property and plant inevitably makes profits. By directing hatred against this class, therefore, the European Governments are carrying a step further the fatal process which the sub

in England twenty-five years ago, any more than it is now in the United States. Then the capitalists believed in themselves, in their value to society, in the propriety of their continued existence in the full enjoyment of their riches and the unlimited exercise of their power. Now they tremble before every insult;-call them pro-Germans, international financiers, or profiteers, and they will give you any ransom you choose to ask not to speak of them so harshly. They allow themselves to be ruined

e for the purposes of foreign trade the currency is practically valueless. The Polish mark can be bought for about three cents and the Austrian crown for less than two cents, but they cannot be sold at all. The German mark is worth less than four cents on the exchanges. In most of the other countries of Eastern and South-Eastern E

part at least of its former value. To their minds it appears that value is inherent in money as such, and they do not apprehend that the real wealth, which this money might have stood for, has been dissipated once and for all. This sentiment is supported by the various legal regulations with which the Governments endeav

o purchase what he requires at a price comparable to that which he has received for his own products, he will keep his produce for himself, dispose of it to his friends and neighbors as a favor, or relax his efforts in producing it. A system of compelling the exchange of commodities at what is not their real relative value not only relaxes producti

the country lose their normal adjustment. The price of imported commodities, when converted at the current rate of exchange, is far in excess of the local price, so that many essential goods will not be imported at all by private agency, a

same evil throughout, according as they have been cut off from international intercourse by the Blockade, or have had their im

s in two ways (apart from other obstacles) that revival of the import trade which is the essential preliminary of the economic reconstruction of the country. In the first place, imported commodities are beyond the purchasing power of the great mass of the population,[148] and the flood of imports which might have been expected to succeed the raising of the blockade was not in fact commercially possible.[149] In the second place, it is a hazardous enterprise for a merchant or a manufacturer to purchase with a foreign credit material for which, when he has imported it or manufactured it, he will receive mark currency of a quite uncertain and possibly unrealizable value. This latter obstacle to the revival of trade is one which easily escapes notice and deserves a little attention. It is

ck of individual credit abroad wherewith to buy the raw materials needed to secure the working capital and to re-start the circle of exchang

very great part of her imports have not been paid for, but have been covered by loans from the Governments of Great Britain and the United States. This has allowed a want of equilibrium between exports and imports to be established, which is becoming a very serious factor, now that the outside assistance is being gradually discontinued. The internal economy of France and

s proceeded further in Italy than in France. On the other hand, Italy's "invisible" receipts, from emigrant remittances and the expenditure of tourists, have been very injuriously affected; the disruption of Austria has deprived her of an important market; and her pecul

rade are aggravated, both in France and in Italy, by the unfort

103 francs." The taxation voted in France for the financial year ending June 30, 1919, was less than half the estimated normal post-bellum expenditure. The normal budget for the future cannot be put below $4,400,000,000 (22 milliard francs), and may exceed this figure; but even for the fiscal year 1919-20 the estimated receipts from taxation do not cover much more than half this amount. The French Ministry of Financ

Oct., 1919), thought it necessary to make public the following desperate analysis of the situation:-(1) The State expenditure amounts to about three times the revenue. (2) All the industrial undertakings of the State, including the railways, telegraphs, and telephones, are being run at a loss. Although the public is buying bread at a high price, tha

Federal States, and the Communes in 1919-20 is estimated at 25 milliards of marks, of which not above 10 milliards are covered by previously existing taxation. This is wit

a product of the war, of which peace begins the cure. It is

required to re-start the circle of exchange and also, by swinging the forces of economic law yet further from equilibrium rather than towards it, they favor a continuance of the present conditions instead of a recovery

asses over into malady of the mind. Economic privation proceeds by easy stages, and so long as men suffer it patiently the outside world cares little. Physical efficiency and resistance to disease slowly diminish,[156] but life proceeds somehow, until the limit of human endurance is reached at last and counsels of despair and madness stir the sufferers from the lethargy which precedes the crisis. Then man shakes himself, and the bonds of custom are loosed. The power of ideas is sovereign, and he listens to whatever instruction of hop

or in what direction men will seek at

TNO

s Report on Food Conditio

Darlehenskassensch

s ought to be between twenty and

eir administration of the occupied areas of Germany during the Armistice arose out of the fact that

and so cure itself. But in Germany, and still more in Poland and Austria, there

be less than 40 per cent of its previous value, instead of the actual figure of about

rance's international exchange now is

nt

ge Im

00 E

0 Exc

po

,0

355 114,6

,705 81,

915 69,05

19 387,140 6

19 421,410 8

67,565 123,

the trade of 1918 and 1919 has been valued at 1917 official rates. French imports cannot possibly continue at

res for Italy

nt

ge Im

00 E

0 Exc

po

,0

760 41,8

720 36,8

025 41,39

19 229,240 3

19 331,035 6

19 223,535 8

s I write (Oct. 2 and 9, 1919) the increases in the note issue

penditure for the past nine months, and while during the first period his revenue had amounted to one-fifth of his expenditure, for the coming months he was budgeting for rec

trayed the intentions which were said to have guided its construction as is the case with this Treaty . . . in which every provision is permeated with ruthlessness and pitilessness, in which no breath of human sympathy can be detected, which flies in the face of everything whic

d, generally speaking, is malignant. In the same way rickets is more serious and more widely prevalent. It is impossible to do anything for these diseases; there is no milk for the tuberculous, and no cod-liver oil for those suffering from rickets.... Tuberculosis is assuming almost unprecedented aspects, such as have hitherto only been known in exceptional cases. The whole body is attacked simultaneously, and the illness in this form is practically incurable.... Tuberculosis is nearly always fatal now among adults. It is the cause of 90 per cent of the hospital cases. Nothing can be done against it owing to lack of food-stuffs.... It appears in the most terrible forms, such as glandular tuberculosis, which turns into purulent dissolution." The following is by a writer in the Vossische Zeitung, June 5, 1919, who accompanied the Hoover Mission to the Erzgebirge: "I visited large country districts where 90 per cent of all the children were ricketty and where children of three years are