The Economic Consequences of the Peace

me

nd too inevitably from what perhaps are not all the relevant causes. The blackness of the prospect itself leads us to doubt its accuracy; our imagination is dulled rather than stimulated by too woeful a narration, and our minds rebound from what is felt "too bad to be true." But before the reader allows himself to be too much swayed by these natural reflections, and before I lead him, a

is at least equal to what it was in 1900. Our balance of trade is adverse, but not so much so that the readjustment of it need disorder our economic life.[157] The deficit in our Budget is large, but not beyond what firm and prudent statesmanship could bridge. The shortening of the hours of labor may have somewhat diminished our productivity. But it should not be too much to hope that this is a feature of transition, and no one who is acquainted with the British workingman can doubt that, if it suits him, and if he is in sympathy and reasonable contentment with the conditions of his life, he can produce at least as much in a shorter working day as he did in the longer hours which prevailed formerly. The most ser

are familiar, are apt to indulge their optimism, and still more those whose immediate environment is American, must cast their minds to Russia, Turkey, Hungary, or Austria, where the most dreadful material evils which men can suffer-fami

d nothing we can do now can repair the mischief wrought at that time. Great privation and great risks to society have become unavoidable. All that is now open to us is to redirect, so far as lies in

ar opinion, but they will never lead us out of our troubles. It is hardly to be supposed that the Council of Four can retrace their step

hose who believe that the Peace of Versail

ion of th

of inter-Ally

loan and the refo

of Central Eur

vision of

und out of harmony with the new peaceful temper and unarmed state of our former enemies. There are punishments foreshadowed over most of which a calmer mood may yet prefer to pass the sponge of oblivion. There are indemnities stipulated which cannot be enacted without grave injury to the industrial revival of Europe, and which it will be in the interests of all to render more tolerable and moderate.... I am confident that the League of Nations will yet prove the path of escape for Europe out of the ruin brought about

benefits which two of its principal begetters thus encourage us to expect from it? The

e League of treaties which have become inapplicable and the consideration of in

gue represented at the meeting." Does not this provision reduce the League, so far as concerns an early reconsideration of any of the terms of the Peace Treaty, into a body merely for wasting time? If all the parties to the Treaty are unanimously of

one with an experience of large Inter-Ally Conferences must know, an unwieldy polyglot debating society in which the greatest resolution and the best management may fail altogether to bring issues to a head against an opposition in favor of the status quo. There are indeed two disastrous blots on the Covenant,-Article V., which prescribes unanimity, and the much-criticized Article X., by which "The Members of the League undertake to respect and preserve as against external aggression the territorial integrity and existing political ind

eace, and which in Articles XI.-XVII.[159] has already accomplished a great and beneficent achievement. I agree, therefore, that our first efforts for the Revision of the Treaty must be made through the League rather than in any other way, in the hope that the force of general opinion and, if necessary, the us

intend to enter here into details, or to attempt a revision of the Treaty clause by clause. I limit myself to three gre

strict interpretation of their engagements, it is unnecessary to particularize the items it repre

in respect of Reparation and the costs of the Armi

ty in ceded territory, of claims against such territory in respect of public debt, and of Germany's claims against her former A

pending its repayment, and should be paid by Germany in th

in for it to perform, it should become an appanage of the League of Natio

would be no further expropriation of German private property abroad, except so far as is required to meet private German obligations out of the proceeds of such property already liquidated or in the hands of Public Truste

made to extract Reparat

en years an amount of coal equal to the difference between the annual production before the war of the coal mines of the Nord and Pas de Calais, destroyed as a result of the war, and the production of the mines of the same area during the years in question; such delivery not to exceed twenty mi

itionally after ten years. But this should be conditional on France's entering into an agreement for the same period to supply Germany from Lorraine with at least 50 per cent of the iron-ore which was carried from Lorraine into G

l Allied and Associated Powers) to the wishes of the inhabitants as shown by the vote, and to the geographical and economic conditions of the locality." But the Allies should

ern Neutrals, and of Switzerland. Its authority should be advisory only, but should extend over the distribution of the coal supplies of Germany, Poland, and the constituent parts of the former Austro-Hungarian Empire, and of the expor

ers of the Union, Germany, Poland, the new States which formerly composed the Austro-Hungarian and Turkish Empires, and the Mandated States should be compelled to adhere to this Union for ten years, af

rise within her territory, we avoid the perpetual friction and opportunity of improper pressure arising out of Treaty cl

the continuance of Germany's industrial life, and put limits on the loss of productivity which would be brought abo

e territory was included in a few great Empires; but they will not be tolerable when the Empires of Germany, Austria-Hungary, Russia, and Turkey have been partitioned between some twenty independent authorities. A Free Trade Union, comprising the whole of Central, Eastern, and South-Eastern Europe, Siberia, Turkey, and (I should hope

at least a generation to come Germany cannot be trusted with even a modicum of prosperity, that while all our recent Allies are angels of light, all our recent enemies, Germans, Austrians, Hungarians, and the rest, are children of the devil, that year by year Germany must be kept impoverished and her children starved and crippled, and that she must be ringed round by enemies; then we shall reject all the proposals of this chapter, and particularly those which may assist Germany to regain a part of her former material prosperity and find a means of livelihood for the industrial population of her towns. But if this view of nations and of their relation to one another is adopted by the democracies of Western Europe, and is financed by th

would be a loser on paper (on paper only, for she will never secure the actual fulfilment of her present claims), and an escape from her embarrassments must be shown her in some other direction. I proceed, therefor

ent of Inter-A

imate objects for which we said we were fighting, we never included the recovery of separation allowances amongst our war aims. I suggest, therefore, that we should by our acts prove ourselves sincere and trustworthy, and that accordingly Great Britain should waive altogether her claims for cash payment in favor of Belgium, Serbia, and France. The whole of the payments made by Germany would then be subject to the prior charge of repairing the material injury done to those countries and provinces which s

rward with a better grace and more hope of success two other financial propo

ar. This proposal, which has been put forward already in certain quarters, is one which I believe to be absolutely essential to the future prosperity of the world. It would be an act of far-seeing

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her, is nearly $20,000,000,000. The United States is a lender only. The United Kingdom has lent about twice as much as sh

the gain to France; for a large part of the loans made by both these countries has been to Russia and cannot, by any stretch of imagination, be considered good. If the loans which the United Kingdom has made to her Allies are reckoned to be worth 50 per cent of their full value (an arbitrary but convenient assumption which the Chancellor of the Exchequer has adopted on more than one occas

justified itself before its citizens in expending the whole national strength, as did the Europeans. After the United States came into the war her financial assistance was lavish and unstinted, and without this assistance the Allies could never have won the war,[165] quite apart from the decisive influence of the arrival of the American troops. Europe, too, should never forget the extraordinary assistance afforded her during the first six months of 1919 through the agency of Mr. Hoover and the American Commission of Relief. Never was a nobler work of disinterested goodwill carried through with more tenacity and sincerity and skill, and with le

ure of an investment. If Europe is going to repay the $10,000,000,000 worth of financial assistance which she has had from the United States with compound interest at 5 per

oximately offset by the sums which England lent to her other Allies during the same period (i.e. excluding sums lent before the United States came into the war); so that almost the whole of England's indebtedness to the United States was incurred, not on her own account, but to enable her to assist the rest of her Allies, who were for various reasons not in a position to draw their assistance from the United States direct.[167] (2) The United Kingdom has disposed of about $5,000,000,000 worth of her foreign securities, and in addition has incurred foreign debt to the amount of about $6,000,000,000. The United States, so far from selling, has bought back upwards

n to the broader issues of the future relations between the parties to

o another. The total amount of this tribute is even likely to exceed the amount obtainable from the enemy; and the war will h

d be loaded with a crushing tribute, while Austria escapes? Or, to put it slightly differently, how can Italy be expected to submit to payment of this great sum and see Czecho-Slovakia pay little or nothing? At the other end of the scale there is the United Kingdom. Here the financial position is different, since to ask us to pay $4,000,000,000 is a very different proposition from asking Italy to pay it. But the sentiment is much the same. If we have to be satisfied without full compensation from Germany, how bitter will be the protests against paying it to the United States. We, it will be said, have to be content with a claim against the bankrupt estates of Germany, France, Ita

ernational friction and ill-will for many years to come. A debtor nation does not love its creditor, and it is fruitless to expect feelings of goodwill from France, Italy, and Russia towards this country or towards America, if their future development is stifled for many years to come by the annual tribute which they must pay us. There will be a grea

however, there are interested parties on both sides, and the question is one of the internal distribution of wealth. With external debts this is not so, and the creditor nations may soon find their interest incon

the United States. The holders of war loan in every country are owed a large sum by the State, and the State in its turn is owed a large sum by these and other taxpayers. The whole position is in the highest degree artificial, misleading, and vexatious. We shall never be able to move again, unless we can free our limbs from these paper shackles. A general bonfire is so great a necessity that unless we can make of it an orderly and good-tempered af

ely modest scale, to such countries as Argentine owing an annual sum to such countries as England. But the system is fragile; and it has only survived because its burden on the paying countries has not so far been oppressive, because this burden is represented by real assets and is bound up with the property system generally, and because the sums already lent are not unduly large in relation to those which it is still ho

ociety largely depends, is not very safe. But however this may be, will the discontented peoples of Europe be willing for a generation to come so to order their lives that an appreciable part of their daily produce

ill not pinch herself in order that the fruit of her daily labor may go elsewhere. In short, I do not believe that any of these tributes wil

together, and the policy which will best promote immediate friendship between

ternatio

xcessive anxiety. But it would not meet the ills of the immediate present,-the excess of Europe's imports over her exports, the adverse exchange, and the disorder of the currency. It will be very difficult for European production to get started again without a temporary measure of external assistance. I am therefore a supporter of

;-M. Klotz will use the money to put off the day of taxation a little longer, Italy and Jugo-Slavia will fight one another on the proceeds, Poland will devote it to fulfilling towards all her neighbors the military r?le which France has designed for her, the governing classes of Roumania will divide up the booty amongst themselves. In short, America would have postponed her own capital developments and raised her own cost of living in order that Europe might continue for another

are probably united. But if, as we must pray they will, the souls of the European peoples turn away this winter from the false idols which have survived the war that created them, and substitute in their hearts for the hatred and the nationalism, which now possess them, thoughts and hopes of the happiness and solidarity of the European family,-then should natural piety and filial love impel the American people to put on one side all the smaller objections of

expense, and, above all, the unintelligibility of the European problems, is easily understood. No one can feel more intensely than the writer

rope; from her

carnage, and

and of knowledge, in spite of everything, still is and still will be, will she not reject these counsels of indifference

to the process of building up the good forces of Europe, and will not, having completed

ht be done, perhaps, with a fund of $1,000,000,000 in the first instance. This sum, even if a precedent of a different kind had been established by the cancellation of Inter-Ally War Debt, should be lent and should be borrowed with the unequivocal intention of its being repaid in full. With this object in view, the security for the loan should be the best obtainable, and the arrangements for its ultimate repayment as complete as possible. In particular, it should rank, both

subject to general, but not detailed

ly $1,000,000,000 (of which it would probably prove necessary to find only a part in cash), to which all members of the League of

great intrinsic wealth to function for the benefit of her workers. It is useless at the present time to elaborate such schemes in further detail. A great change is nec

ns of Central

s, and of the details we know almost nothing authentic. But in a discussion as to how the economic situatio

iddle-class Government of Germany is unthinkable. On the other hand, the same people who fear such a union are even more afraid of the success of Bolshevism; and yet they have to recognize that the only efficient forces for fighting it are, inside Russia, the reactionaries, and, outside Russia, the established forces of order and au

asis of the Peace. Besides, a new military power establishing itself in the East, with its spiritual home in Brandenburg, drawing to itself all the military talent and all the military adventurers, all those who regret emperors and hate democracy, in the whole of Eastern and Central and South-Eastern Europe, a power which would be geographically inaccessible to the military forces of the Allies, might well found, at least in the anticipations of the timid, a new Napoleonic domination, rising, as a phoenix, from the ashes of cosmopolitan militarism. So Paris dare not love Brandenburg. The argument points, then, to the sustentation of those moderate forces of order, which, somew

of Russia and the ruin of Germany. Roumania, if only she could be persuaded to keep up appearances a little more, is a part of the same scatter-brained conception. Yet, unless her great neighbors are prosperous and orderly, Poland is an economic imposs

and thereabouts are the favorite indulgence at present of those Englishmen and Frenchmen who seek excitement in its

airs of Russia, "not only on principle, but because it believes that this policy is also justified from a practical point of view." Let us assume that at last we also adopt the s

eed price, but largely by economies of consumption and by privation. After 1920 the need of Russian supplies will be even greater than it was before the war; for the guaranteed price in North America will have been discontinued, the normal increase of population there will, as compared with 1914, have swollen the home demand appreciably, and the soil

The reasons for this are obviously many, but amongst them are included the insufficiency of agricultural implements and accessories and the absence of incentive to production caused by the lack of commodities in the town

for furnishing the Russian peasant with the goods of which he has been starved for the past five years, for reorganizing the business of transport and collection, and so for bringing into the world's pool, for the common advantage, the supplies from which we are now so disastrously cut off. It is in our interest to hasten the day when German agents and organizers will be in a position to set in train in every Russian village the impulses of ordinary economic m

announced, but, desisting from a blockade which is injurious to our own permanent interests, as well as illegal, let us encourage

he consequences of such feelings. Even if there is no moral solidarity between the nearly-related races of Europe, there is an economic solidarity which we cannot disregard. Even now, the world markets are one. If we do not allow Germany to exchange products with Russia and so feed herself, she must inevitably compete with us for the produce of the New World. The more successful we a

onomic privation, which does not arise out of the injustices of distribution but is general? The only safeguard against Revolution in Central Europe is indeed the fact that, even to the minds of men who are desperate, Revolution offers no prospect of improvement whatever. There may, therefo

the coming year will not be shaped by the deliberate acts of statesmen, but by the hidden currents, flowing continually beneath the surface of political history, of which no one can predict the outcome. In one way only can we influence these hidden

sufferings of the past five years is at its height. Our power of feeling or caring beyond the immediate questions of our own material wel

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yet spoken, and silent opinion is not yet formed. To the form

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650 218,8

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ings of the mercantile marine the various "invisible" exports of the United Kingdom are proba

in Chapter V., whereas the League is invoked in regard to most of the continuing economic and territorial provisions of the Treaty, this is not the case a

etween members and non-members, are the solid achievement of the Covenant. These Articles make substantially less p

position of customs duties which did not exceed by more than five per cent a countervailing excise on similar commodities produced at home; (d) export duties. Further, special exceptions might be permitted by a majority vote of th

s are taken from the White Paper of October 23, 1919 (Cmd. 377). In any actual settlement, adjustments would be required in connection with certain loans of gold and also in other respects, and I am concerned in what follows with

or interest on the debt sin

n charged on the advances

d States up to date is very nearly $10,000,0

cials of the British Treasury who lived in daily contact with the immense anxieties and impossible financial requirements of those days, can fully realize what steadfastness and courage were needed, and how entirely

ght put it, of exhausted prize-fighter), his eyes steadily fixed on the true and essential facts of the European situation, imported into the Councils of Paris, when he took part i

expenditure in the United States, as well as the whole of that Government

presume that the British Treasury is likely to follow suit. If the debts are to be paid ultimately, this piling up of the obligations at compound interest makes the position progressively worse. But th