[105] The challenge of the other Allies, as well as the enemy, had to be met; for in view of the limited resources of the latter, the other Allies had perhaps a greater interest than the enemy in seeing that no one of their number established an excessive claim.

[106] M. Klotz has estimated the French claims on this head at $15,000,000,000 (75 milliard francs, made up of 13 milliard for allowances, 60 for pensions, and 2 for widows). If this figure is correct, the others should probably be scaled up also.

[107] That is to say, I claim for the aggregate figure an accuracy within 25 per cent.

[108] In his speech of September 5, 1919, addressed to the French Chamber, M. Klotz estimated the total Allied claims against Germany under the Treaty at $75,000,000,000, which would acc.u.mulate at interest until 1921, and be paid off thereafter by 34 annual installments of about $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 immediately reflected in the improved tone on the Bourse and throughout the business world in France." So long as such statements can be accepted in Paris without protest, there can be no financial or economic future for France, and a catastrophe of disillusion is not far distant.

[109] As a matter of subjective judgment, I estimate for this figure an accuracy of 10 per cent in deficiency and 20 per cent in excess, _i.e._ that the result will lie between $32,000,000,000 and $44,000,000,000.

[110] Germany is also liable under the Treaty, as an addition to her liabilities for Reparation, to pay all the costs of the Armies of Occupation _after_ Peace is signed for the fifteen subsequent years of occupation. So far as the text of the Treaty goes, there is nothing to limit the size of these armies, and France could, therefore, by quartering the whole of her normal standing army in the occupied area, shift the charge from her own 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 themselves to limit the sum payable annually by Germany to cover the cost of occupation to $60,000,000 "as soon as the Allied and a.s.sociated Powers _concerned_ are convinced that the conditions of disarmament by Germany are being satisfactorily fulfilled." The word which I have italicized is a little significant. The three Powers reserve to themselves the liberty to modify this arrangement at any time if they agree that it is necessary.

[111] Art. 235. The force of this Article is somewhat strengthened by Article 251, by virtue of which dispensations may also be granted for "other payments" as well as for food and raw material.

[112] This is the effect of Para. 12 (_c_) of Annex II. of the Reparation Chapter, leaving minor complications on one side. The Treaty fixes the payments in terms of _gold marks_, which are converted in the above rate of 20 to $5.

[113] If, _per impossibile_, Germany discharged $2,500,000,000 in cash or kind by 1921, her annual payments would be at the rate of $312,500,000 from 1921 to 1925 and of $750,000,000 thereafter.

[114] Para. 16 of Annex II. of The Reparation Chapter. There is also an obscure provision by which interest may be charged "on sums arising out of _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 of the former. It does not affect Pensions and Allowances, the cost of which is capitalized as at the date of the coming into force of the Treaty.

[115] On the a.s.sumption which no one supports and even the most optimistic fear to be unplausible, that Germany can pay the full charge for interest and sinking fund _from the outset_, the annual payment would amount to $2,400,000,000.

[116] Under Para. 13 of Annex II. unanimity is required (i.) for any postponement beyond 1930 of installments due between 1921 and 1926, and (ii.) for any postponement for more than three years of instalments due after 1926. Further, under Art. 234, the Commission may not cancel any part of the indebtedness without the specific authority of _all_ the Governments represented on the Commission.

[117] On July 23, 1914, the amount was $339,000,000.

[118] Owing to the very high premium which exists on German silver coin, as the combined result of the depreciation of the mark and the appreciation 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 gradually leak over the frontier by the agency of private speculators, and thus indirectly benefit the German exchange position as a whole.

[119] The Allies made the supply of foodstuffs to Germany during the Armistice, mentioned above, conditional on the provisional transfer to them of the greater part of the Mercantile Marine, to be operated by them for the purpose of shipping foodstuffs to Europe generally, and to Germany in particular. The reluctance of the Germans to agree to this was productive of long and dangerous delays in the supply of food, but the abortive Conferences of Treves and Spa (January 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 a.s.suming 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 gave the enemy some just grounds for suspicion), their demand was not an improper one; for without the German ships the business of transporting the food would have been difficult, if not impossible, and the German ships surrendered or their equivalent were in fact almost wholly employed in transporting food to Germany itself. Up to June 30, 1919, 176 German ships of 1,025,388 gross tonnage had been surrendered, to the Allies in accordance with the Brussels Agreement.

[120] The amount of tonnage transferred may be rather greater and the value per ton rather less. The aggregate value involved is not likely, however, to be less than $500,000,000 or greater than $750,000,000.

[121] This census was carried out by virtue of a Decree of August 23, 1918. On March 22, 1917, the German Government acquired complete control over the utilization of foreign securities in German possession; and in May, 1917, it began to exercise these powers for the mobilization of certain Swedish, Danish, and Swiss securities.

[122] 1892. Schmoller $2,500,000,000 1892. Christians 3,250,000,000 1893-4. Koch 3,000,000,000 1905. v. Halle 4,000,000,000[A]

1913. Helfferich 5,000,000,000[B]

1914. Ballod 6,250,000,000 1914. Pistorius 6,250,000,000 1919. Hans David 5,250,000,000[C]

[A] Plus $2,500,000 for investments other than securities.

[B] Net investments, _i.e._ after allowance for property in Germany owned abroad. This may also be the case with some of the other estimates.

[C] This estimate, given in the _Weltwirtschaftszeitung_ (June 13, 1919), is an estimate of the value of Germany"s foreign investments as at the outbreak of war.

[123] I have made no deduction for securities in the ownership of Alsace-Lorrainers and others who have now ceased to be German nationals.

[124] In all these estimates, I am conscious of being driven by a fear of overstating the case against the Treaty, of giving figures in excess of my own real judgment. 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 myself believe that the Reparation Commission will secure real resources from the above items by May, 1921, even as great as the _lower_ of the two figures given above.

[125] The Treaty (see Art. 114) leaves it very dubious how far the Danish Government is under an obligation to make payments to the Reparation Commission in respect of its acquisition of Schleswig. They might, for instance, 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 $33,000,000 (kr. 120,000,000) for the joint purposes of "taking over Schleswig"s share of the German debt, for buying German public property, for helping the Schleswig population, and for settling the currency question."

[126] Here again my own judgment would carry me much further and I should doubt the possibility of Germany"s exports equaling her imports during this period. But the statement in the text goes far enough for the purpose of my argument.

[127] It has been estimated that the cession of territory to France, apart from the loss of Upper Silesia, may reduce Germany"s annual pre-war production of steel ingots from 20,000,000 tons to 14,000,000 tons, and increase France"s capacity from 5,000,000 tons to 11,000,000 tons.

[128] Germany"s exports of sugar in 1913 amounted to 1,110,073 tons of the value of $65,471,500, of which 838,583 tons were exported to the United Kingdom at a value of $45,254,000. These figures were in excess of the normal, the average total exports for the five years ending 1913 being about $50,000,000.

[129] The necessary price adjustment, which is required, on both sides of this account, will be made _en bloc_ later.

[130] If the amount of the sinking fund be reduced, and the annual payment is continued over a greater number of years, the present value--so powerful is the operation of compound interest--cannot be materially increased. A payment of $500,000,000 annually _in perpetuity_, a.s.suming interest, as before, at 5 per cent, would only raise the present value to $10,000,000,000.

[131] As an example of public misapprehension on economic affairs, the following letter from Sir Sidney Low to _The Times_ of the 3rd December, 1918, deserves quotation: "I have seen authoritative estimates which place the gross value of Germany"s mineral and chemical resources as high as $1,250,000,000,000 or even more; and the Ruhr basin mines alone are said to be worth over $225,000,000,000. It is certain, at any rate, that the capital value of these natural supplies is much greater than the total war debts of all the Allied States. Why should not some portion of this wealth be diverted for a sufficient period from its present owners and a.s.signed to the peoples whom Germany has a.s.sailed, deported, 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 miles deep in the bowels of the earth as high as in a coal scuttle, of an annual lease of $5000 for 999 years at $4,995,000 and of a field (presumably) at the value of all the crops it will grow to the end of recorded time, opens up great possibilities, it is also double-edged. If Germany"s total resources are worth $1,250,000,000,000, those she will part with in the cession of Alsace-Lorraine and Upper Silesia should be more than sufficient to pay the entire costs of the war and reparation together. In point of fact, the _present_ market value of all the mines in Germany of every kind has been estimated at $1,500,000,000, or a little more than one-thousandth part of Sir Sidney Low"s expectations.

[132] The conversion at par of 5,000 million marks overstates, by reason of the existing depreciation of the mark, the present money burden of the actual pensions payments, but not, in all probability, the real loss of national productivity as a result of the casualties suffered in the war.

[133] It cannot be overlooked, in pa.s.sing, that in its results on a country"s surplus productivity a lowering of the standard of life acts both ways. Moreover, we are without experience of the psychology of a white race under conditions little 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 and the shopkeeper will not save, the laborer will not toil, if the fruits of their industry are set aside, not for the benefit of their children, their old age, their pride, or their position, but for the enjoyment of a foreign conqueror.

[134] In the course of the compromises and delays of the Conference, there were many questions on which, in order to reach any conclusion at all, it was necessary to leave a margin of vagueness and uncertainty. 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 to the League of Nations. But on financial and economic questions, the final decision has generally be a left with the Reparation Commission,--in spite of its being an executive body composed of interested parties.

[135] The sum to be paid by Austria for Reparation is left to the absolute discretion of the Reparation Commission, no determinate figure of any kind being mentioned in the text of the Treaty Austrian questions are to be handled by a special section of the Reparation Commission, but the section will have no powers except such as the main Commission may delegate.

[136] Bulgaria is to pay an indemnity of $450,000,000 by half-yearly instalments, beginning July 1, 1920. These sums will be collected, on behalf of the Reparation Commission, by an Inter-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, but it is to act, nevertheless, as the agent of the latter, and is authorized to tender advice to the Reparation Commission as to, for example, the reduction of the half-yearly instalments.

[137] Under the Treaty this is the function of any body appointed for the purpose by the princ.i.p.al Allied and a.s.sociated Governments, and not necessarily of the Reparation Commission. But it may be presumed that no second body will be established for this special purpose.

[138] At the date of writing no treaties with these countries have been drafted. It is possible that Turkey might be dealt with by a separate Commission.

[139] This appears to me to be in effect the position (if this paragraph means anything at all), in spite of the following disclaimer of such intentions in the Allies" reply:--"Nor does Paragraph 12(b) of Annex II. give the Commission powers to prescribe or enforce taxes or to dictate the character of the German budget."

[140] Whatever that may mean.

[141] a.s.suming that the capital sum is discharged evenly over a period as short as thirty-three years, this has the effect of _halving_ the burden as compared with the payments required on the basis of 5 per cent interest on the outstanding capital.

[142] I forbear to outline the further details of the German offer as the above are the essential points.

[143] For this reason it is not strictly comparable with my estimate of Germany"s capacity in an earlier section of this chapter, which estimate is on the basis of Germany"s condition as it will be when the rest of the Treaty has come into effect.

[144] Owing to delays on the part of the Allies in ratifying the Treaty, the Reparation Commission had not yet been formally const.i.tuted by the end of October, 1919. So far as I am aware, therefore, nothing has been done to make the above offer effective. But, perhaps in view of the circ.u.mstances, there has been an extension of the date.

CHAPTER VI

EUROPE AFTER THE TREATY

This chapter must be one of pessimism. The Treaty includes no provisions for the economic rehabilitation of Europe,--nothing to make the defeated Central Empires into 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 Allies themselves; no arrangement was reached at Paris for restoring the disordered finances of France and Italy, or to adjust the systems of the Old World and the New.

The Council of Four paid no attention to these issues, being preoccupied with others,--Clemenceau to crush the economic life of his enemy, Lloyd George to do a deal and bring home something which would pa.s.s muster for a week, the President to do nothing 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. Reparation was their main excursion into the economic field, and they settled it as a problem of theology, of polities, of electoral chicane, from every point of view except that of the economic future of the States whose destiny they were handling.