CHAPTER XXIII
THE CONSORTIUM FOR FINANCING CHINA
1
If all goes well, the open shop in international finance is a thing of the past; at least so far as China goes. On May 11, 1920, exactly eighteen months after the signing of the armistice, Japan formally declared her willingness to enter the new consortium for lending money to China, and on October 15, following, representatives of the British, French, Japanese, and American banking-groups met in New York and there signed the provisions by which they are for the next five years going to finance China under what is known as the Consortium Agreement.
For a full year after the signing of the armistice, Great Britain, France, and America had been ready to act in consort in the matter of future loans to China, but Japan insisted on excluding from the terms of the agreement international activity in Manchuria and Eastern Inner Mongolia. These two provinces have virtually become Japanese territory. Into these she has extended her railroads or added to those built by Russia, and over these she watched as a hen over ducklings. And because she strenuously sought to manoeuver the Allies into admitting her prior rights to these regions, the consummation of the Consortium Agreement was delayed and delayed. Japan finally yielded, at the same time claiming that the powers conceded her special interests; while they, through their chief representative, Mr. Thomas W. Lamont, claimed that Japan waived these interests. We shall presently see what happened, but in the meantime it is obvious that both yielded and both won out,--and that no nation is to-day sufficiently powerful and self-contained to be able to stand apart from the rest of the world. The closed shop in international finance has been ushered in, and the union of world bankers is now known as the Consortium.
In a chapter it is hardly possible to make more than a hasty survey of so intricate a stretch of history. China before the war with Japan was free from debt, but in order to meet the indemnity demanded by Japan she was compelled to raise money abroad. The scramble among the foreign powers to advance this money gave China certain advantages. Her own capitalists had money enough to pay off this indemnity immediately, but they did not trust their government and hoarded their funds. They knew that with the Oriental system of "squeeze" only a fraction of it would succeed in freeing their country.
Another factor conspired to introduce alien domination over China,--her lack of railroads and modern industries. She had wealth, man-power, everything that an isolated nation could possibly desire, but she was no longer an isolated nation, and she had nothing that an active nation among nations needed for its very existence. Instantly, along with the loans, came concessions for railroad-building, and the development of China began. So deeply was China getting embroiled in alien machinations that five years later, seeing that the young emperor himself, Huang-Hsu, was head-over-heels in love with Western ways, the reactionaries precipitated the Boxer Uprising in 1900. This only resulted in another overwhelming indemnity, which China has not yet succeeded in paying off. Consequently, more loans had to be made, and more urgent still became the necessity for means of transportation and for the modernization of industry.
The Russo-Japanese War, which ordinarily might have meant a modicum of relief to China, only succeeded in entrenching her enemy much more securely at her very door, and another period of alien scrambling over Chinese loans set in. Coöperation among various groups of foreign bankers regardless of nationality was not unknown, for absolute competition would most likely have been fatal. But thoroughly thought-out getting together was, in view of the existing jealousy among nations, inconceivable. Still, to such a pass had this suicidal competition come that by 1909 a consortium was proposed which aimed to include Russia, Japan, Germany, France, England, and America. It began to work, but Secretary of State Knox made a proposal for the neutralization and internationalization of the Manchurian railway system which met with a cold no from Japan. Shortly afterward Japan made an agreement with Russia which completely frustrated Knox's proposals, and the thing virtually fell through.
In 1913, President Wilson took the matter in hand. He refused to become a party to a scheme which, in his estimation, instead of working for the rehabilitation of China and the Open Door bound her helplessly. And ever since China has been getting "the crumby side" of every deal. For the plan as it then existed had no provisions against the pernicious practice of marrying China to one power after another with concessions, without giving any guaranty of the preservation of her dower rights,--freedom in her industrial and political affairs.
Russia then was Japan's "natural" enemy. Russia was threatening the "very existence" of Japan. Yet when Knox's proposal came up, Japan was ready to unite with Russia in order to keep the others out of Manchuria. She had to use that argument to save her face. Bear this in mind, for we shall presently see that a second time Japan used this argument in order to keep the consummation of the consortium in abeyance. It was more than a plea for special interests because of propinquity; it was a plea that the peace and safety of the empire demanded it.
Propinquity! The pin in that word has pricked nearly every one who has shown any interest in China, no matter where. Japan used propinquity as a justification of her annexation of Korea, breaking her word to that kingdom in so doing. Yet Japan contends that she never has broken her word. Japan is a nation true to her word, but, like many another nation, is loose in her wording. She has guaranteed the Open Door in Manchuria and Mongolia,--and Korea. In Korea the door is shut, and Japan has made entrance to the other spheres of little advantage. Ill-content with penetration of these regions, she has, by means of her railroads there, sought to divert the course of Chinese trade from Shanghai through Manchuria and Korea and Japan. In this there is nothing intrinsically wrong. But she goes farther and tries to exclude consortium activity in other fields in these two provinces. But that these are not the only slices of China she is after,--that they are, in fact, only stepping-stones for the final domination of the great republic,--is attested to by certain well-known facts in Far Eastern affairs.
Japan and her friends assert she never has broken her word; her enemies declare she is sinister and not to be trusted. Neither statement is correct. Her methods may sometimes be sinister, but no one who follows events in the Far East is unaware of them, and Japan has taken no pains to conceal them. Actions speak louder than words. But has Japan actually never broken her word? We have already referred to Korea, whose independence Japan has guaranteed by published treaty. During the war Japan carried out the requirements of the Anglo-Japanese Alliance, but Article V reads:
The High Contracting Parties agree that neither of them will, without consulting the other, enter into separate arrangements with another Power to the prejudice of the objects described in the Preamble of this Agreement.
Notwithstanding this clear stipulation, Japan immediately after capturing Kiao-chau from Germany, without consulting Great Britain as herein provided, issued the Twenty-one Demands on China. Of these Group V alone would have made a vassal state of China had she accepted them. Knowledge of these were kept from Britain completely, but when they finally leaked out, Japan vociferously denied them. Downing Street was not pleased, but there was much to be done in Europe just then. In 1918, Japan a second time made an arrangement with China without consulting her ally, Great Britain. This time it was the Sino-Japanese Military Agreement. At the moment Russia withdrew from the war and released the German prisoners, and that was the excuse for imposing combined military action under Japanese officers.
As though this were not enough, when the success of Germany on the western front was at its height, Count Terauchi, Prime Minister and arch-plotter in China, came out with a statement published by Mr. Gregory Mason of the "Outlook" to the effect that it was not unlikely that some understanding, if not alliance, might be effected between Japan, Russia and Germany. And the rumors of such an understanding having been actually arrived at, have since been shown to have had just foundation.
Furthermore, since 1917, according to "Millard's Review" for April, 1920, Japan has lent China about 281,543,762 yen or thereabouts, privately, for political and industrial purposes, for reorganization, railway construction, munitions, canal improvements, flood relief, wireless, forestry, war participation, and other undertakings.
These things must be recalled in considering the new consortium, as they show what led up to its final consummation. These actions of Japan indicate encroachment upon China to the extent of virtually closing the Open Door. In this regard, the alliance has had a dual effect: while it makes possible for Japan to go as far as Britain would dare go, and even farther, on the other hand it tends to keep Japan in check. Hence, the state of mind of the Japanese on the subject of the treaty has been contradictory. They have regarded its renewal and its abrogation with about equal anxiety. From a moral point of view, they dare not stand alone in the world, being the only great autocracy remaining. Conscious of their power and twitching under the restraint which the alliance imposes, yet needing its support, they are trying to make it appear that Great Britain needs it fully as much.
As far as Great Britain goes, the alliance was formed chiefly to guarantee the interests of the empire, but also the Open Door and China's integrity. That is, that Japanese Yen and British Sovereigns should have full freedom to go to China to earn a living. Let us see what the various treaties and understandings purport to accomplish.
The Anglo-Japanese Alliance assures "The preservation of the common interests of all Powers in China by insuring the independence and integrity of the Chinese Empire and the principle of equal opportunities for the commerce and industry of all nations in China."
The Root-Takahira Understanding declares: "The Policy of both Governments [Japanese and American], uninfluenced by any aggressive tendencies, is directed to the maintenance of the existing _status quo_ in the region above mentioned and to the defense of the principle of equal opportunity for commerce and industry in China." In other words, without an alliance, America has secured from Japan an understanding guaranteeing the integrity of China and the Open Door for her pet, the Dollar. Hence, except for the fact that it made no promises to the effect, "My Ally, right or wrong, but still my ally," this agreement says that the American Dollar has as much right to earn a living in China as the Yen has.
But in the meantime the Yen has been having it all his own way, for the Sovereign and the Franc and the Dollar were very busy doing things in Europe. And in good Oriental fashion the Yen has been breeding, and breeding rapidly. He was going to China, as we have seen, by the million and keeping China's interests and integrity, which all had guaranteed, in a very feverish state, notwithstanding alliances and agreements born and in embryo.
This, at bottom, is what the whole Far Eastern problem is,--all of the governments seeking opportunities in China and mutually binding and barring one another from aggression and concessions. They have all guaranteed China's "integrity," but none, except America, has actually lived up to the agreement, and China's integrity is rapidly ceasing to be an integer.
Now, if that were all there was to it, debate would be childish, but integers, like the atom, are not easily divided without creating something new. The atom becomes an electron; and the integer, when a nation, becomes a source of international conflict. Hence, it is of the utmost importance that China remain an integer. The Anglo-Japanese Alliance has failed to maintain China's integrity. The Root-Takahira Agreement seemed to cover the ground well enough, but that it was not sufficient is proved by the later necessity on the part of Mr. Lansing to supplement it by his so-called "understanding" with Viscount Ishii. However, that the Ishii-Lansing Agreement is loose and inadequate was obvious on the face of it and it was shown to be absurd when the Consortium Agreement was being negotiated. It seems that Secretary-of-State Lansing, realizing that his "agreement" with Ishii was being translated into a Monroe Doctrine of Asia, as it was never intended to be, fostered the new Consortium Agreement in order to throw a ring round the Ishii-Lansing Agreement and define its limitations. With the very first approach the promoters of the consortium made to Japan, Japan, as we have seen, began eliminating from its scope everything that propinquity permitted, threatening not only the consortium but the various previous agreements. I state these facts not to condemn Japan, but to delve into the psychology of the powers who, at the Peace Conference at Versailles, came to the conclusion that the only solution for the situation in the Far East was a coöperative scheme. They must be borne in mind in order to understand why Japan withheld from concurring, and finally yielded.
2
America was viewing all this with no little apprehension. Matters in the Far East were extremely precarious at the time she entered the war. It was in order to reassure Japan and merely as a restatement of issues that the Ishii-Lansing Agreement was made. Japan's propinquity was recognized. But it was also recognized that the Open Door was being walled up. Hence, the American Government, which had withdrawn from the Sextuple Consortium, suggested that a new consortium agreement be made in which the four leading powers take equal part. These powers had been drawn closer together during the war, and that concord was to be taken advantage of before it had a chance to dissipate.
At the time that I wrote the article on "Lending Money to China" for the "World's Work," August, 1920, the whole consortium scheme was shrouded in mystery. Since then the correspondence that took place between the powers has in part been published. The way it developed is worthy of being outlined.
The American bankers had been asked by the Government to enter the proposed consortium. They were not over-enthusiastic about it, for at the time they felt they had enough demand at home and in Europe for such funds as they could command. They realized that at that time (July, 1918) they would be expected to carry, with Japan, both England and France, but they agreed that "such carrying should not diminish the vitality of the membership in the four-Power group." But they did stipulate that "One of the conditions of membership in such a four-Power group should be that there should be a relinquishment by the members of the group either to China or to the group of any options to make loans which they now hold, and all loans to China by any of them should be considered as a four-Power group business."
Lansing replied to the bankers, accepting their stipulations, obviously his main intention in working for the consortium being, as I have said, to encircle the problem with a view to defining its limitations so as to make it impossible for Japan to interpret his agreement with Ishii too broadly.
These communications were transmitted to the British Foreign Office, prompting a reply from Mr. Balfour on August 14, 1918, wherein he inquired whether it was the intention of the American Government to enter the $100,000,000 loan to China for currency reform which was then under consideration and toward which Japan had already made two separate advancements; and whether it was the intention of the United States to confine activities to administrative loans or to include industrial and railway enterprises as well. Lord Reading made inquiry of the State Department and determined that both types of loans had been considered.
It is obvious from these communications that both Japan and Great Britain wished to retain their special interests in regard to the existing railway and industrial loans, and balked at their being pooled with those of the consortium. But England was ready enough from the beginning to forego these. The United States held "that industrial as well as administrative loans should be included in the new arrangement, for the reason that, in practice, the line of demarcation between those various classes of loans often is not easy to draw."
Everything went along smoothly until Japan was consulted, and then it was found that while she was willing enough to enter into a consortium for the whole of China, she was emphatically unwilling to have Manchuria and Mongolia included. From the very beginning, the American, British, and French banking-groups and governments most decidedly refused to accede to Japan's demands in this matter, declaring that such a rendering would simply open up the sores of spheres-of-interests and concession-hunting, and completely nullify the purposes and intentions of the consortium. The Japanese argument is amusing. When Japan first encroached upon Manchuria and Mongolia, it was because of danger to her safety from Czarist Russia. Now she was face to face with Bolshevist Russia, and she trembled for her safety in these terms:
Furthermore, the recent development of the Russian situation, exercising as it does an unwholesome influence upon the Far East, is a matter of grave concern to Japan; in fact, the conditions in Siberia, which have been developing with such alarming precipitancy of late, are by no means far from giving rise to a most serious situation, which may at any time take a turn threatening the safety of Japan and the peace of the Far East, and ultimately place the entire Eastern Asia at the mercy of the dangerous activities of extremist forces. Having regard to these signals of the imminent character of the situation, the Japanese Government all the more keenly feel the need of adopting measures calculated to avert any such danger in the interest of the Far East as well as of Japan. Now, South Manchuria and Mongolia are the gate by which this direful influence may effect its penetration into Japan and the Far East to the instant menace of their security. The Japanese Government are convinced that, having regard to the vital interests which Japan, as distinct from the other Powers, has in the regions of South Manchuria and Mongolia, the British Government will appreciate the circumstances which compelled the Japanese Government to make a special and legitimate reservation indispensable to the existence of the state and its people....
The utter fallacy of this is obvious. The consortium was not a miracle-worker. Its efforts would necessarily extend over a series of years; its principals were as opposed to Bolshevism as Japan was. But there was Japan,--bureaucratic, imperialistic Japan,--shedding tears over the prospect of what might happen to her people from Bolshevism if the consortium were permitted to take a share in the development of Manchuria and Mongolia,--to which she has no right other than that of her might.
No pressure such as could be said to be in the nature of an ultimatum to join the consortium was exerted, of course, but it was obvious that unless Japan withdrew her objections the consortium would not materialize. Japan made an effort to get the other powers to make some written statement or accept her formula securing to her these special rights; but the others were adamant. Japan specified just what she feared,--the construction of other railroads.
The United States replied:
The American Government cannot but acknowledge, however, its grave disappointment that the formula proffered by the Japanese Government is in terms so exceedingly ambiguous and in character so irrevocable that it might be held to indicate a continued desire on the part of the Japanese Government to exclude the American, British, and French banking groups from participation in the development, for the benefit of China, of important parts of that republic, a construction which could not be reconciled with the principle of the independence and territorial integrity of China.
It is interesting to note that in all these communications, the Japanese Government is constantly referring to its own special interests and dangers, whereas the others repeat and repeat their concern for the integrity of China. It may be, after all, that the Japanese Government is the more honest, though America's stand is unchallengeable.
I have dwelt sufficiently, I believe, with the emanations from behind departmental doors. The human elements are much more interesting. Suffice it to say that Japan held out for a long, long time, and things seemed hopeless. At last, after an understanding with all those concerned outside Japan, Mr. Thomas W. Lamont went to the Far East as spokesman for the other powers, to carry on negotiations with Japan.
Unfortunately--whether by design or not I have no way of telling--an American business mission also went to Japan at that time, upon the invitation of Baron Shibusawa, popularly known as the "Schwab of Japan." Everybody got these two parties mixed, but I have since been very earnestly assured that Mr. Frank A. Vanderlip, who headed the business mission, had nothing whatever to do with Mr. Lamont's mission. Be that as it may, it was certain even from the twin-reports that while the business mission was being lavishly entertained, Mr. Lamont was seeing all that he wanted to see, and saying all that he wanted to say. The mission was discussing with Junnosuke Inouye, Governor of the Bank of Japan, and Baron Shibusawa, and others such questions as Japanese immigration, the Shantung situation, the invasion of Siberia, and the submarine cables. All that the world at large got as to the decisions arrived at was the fact that views were exchanged in a friendly manner, and some delightfully amusing articles from the pen of Julian Street who was the scribe of the occasion.
In the meantime, Lamont, who seems to be a man for whom a dinner has little attraction, left the impression on the Japanese Government that Japan and Japan alone would lose by holding back. When he left Japan, to go to China, the Japanese Government was still determined on securing from the powers exemption for Manchuria and Mongolia.
But a series of subsequent events helped Japan to make up her mind. First and foremost among these was the financial slump in Japan, which was seriously embarrassing. This was followed by financial stringency in Manchuria and the eagerness of the directors of the South Manchurian Railway,--who are at present involved in a far-reaching scandal for a loan which could not be floated in Japan and which was sought in America. Third, as either cause or effect, was the situation in China. China, on account of Japan's courtship of the Peking militarists and the rape of Shantung, had instituted a boycott of Japanese goods the bitterness and force of which Japan had learned to respect. These circumstances alone might have been enough to drive a nation to desperation; but a sensitive nation like Japan would suffer these things a thousand times over in silence. One thing Japan cannot stand, and that is the distrust of the world.
And the Lamont party found from the moment it left Nagasaki for China until the moment it set foot again in Shimonoseki on its return that there was not a white man nor a yellow man who had a good word to say for Japan. Japan was an isolated country socially,--isolated a thousand times more definitely than she is geographically. And the good sense of the Japanese has brought them to a realization that that does not pay. Japan wants the good-will of the world, and she wants it sorely.
When Mr. Lamont arrived in China he did not find the same atmosphere he had found in Japan. The fact that he had been in Japan first added to the suspicions of the Chinese. They had many things to ponder over and be suspicious about. China remembered the processes of westernization which she had had to answer with the Boxer Uprising in 1900. But China has never forgotten the return of the Boxer indemnity by the United States.
In Peking some students threatened to stone the hotel at which Mr. Lamont stopped. A few came as special representatives of the student body, according to one report, and quizzed Mr. Lamont for two hours. They left apparently satisfied. Their strong plea was that no loans be made to the Government until peace between North and South was established.
The press of China and the people of China were divided. Some of the Japanese, who owned papers in China, sought to alienate the sympathy of the Chinese for America; some tried other tactics. The Chinese militarists in Peking who had tasted of the flesh-pots of Nippon were not over-anxious to put themselves on a diet. Chinese patriots saw in the new consortium a rope of a different fiber. The consortium party found itself double-crossed by obvious agencies.
In a measure this was justified all the way round, for the undertaking was shrouded in secrecy on many points which could not but discredit it in the eyes of many. Perhaps this was unavoidable, but it was none the less natural that China should be wary. In her own sort of way, China was taking inventory. The last loan of $125,000,000 only arrived in China as $104,851,840 after deductions for underwriting had been paid. And before the sum can be paid off, it will have cost China $235,768,105 by way of interest and commissions. And China knows that only a small part of this tremendous sum had gone into actual constructive work.
Yet China needs assistance. Railroads are the world's salvation and China's crying need. But for lack of railroads, China would to-day be the most powerful nation on earth, financially and politically. And the fact that her railroads are short while those of other countries are long makes of her a prey to those tentacles of trade against which she is helpless. China has to-day only about 6,500 miles of railroad: she needs 100,000. She who built the rambling wall has still only foot-paths. She needs 100,000 miles of highway. Her canals, which a thousand years ago kept the country open to trade and partially free from famine, have fallen into disrepair. She needs telegraphs, telephones, wireless. If only the money she borrowed went into such enterprises China would repay the world a thousandfold.
It was therefore natural that China should be suspicious, and likewise natural that she should be willing to be convinced. What young China wanted most was definite and outspoken assurance that her integrity as a nation would not be jeopardized.
The leading Chinese newspapers expressed their gratitude at repeated, assurances of due respect being given to Chinese public opinion and promises to refrain from interfering in her internal affairs. But others, like the China "Times," said:
The British plan to control our railroads jointly, and the American plan is to monopolize our industries jointly, while the Japanese plan to monopolize all our railroads, mines, forestry, and industries. Any one of these plans will put our destiny in their hands.
It also declared: "Although it has been reported that Japan will make certain compromises, it is hard to say to what extent these will go."
To this Mr. Lamont said: "It now remains for the Japanese Government formally to confirm this desire [of the bankers to join]. If they fail to do so and if Japan remains outside the consortium, I should think that Japan might prove to be the chief loser." He next made it clear to China that she would first have to establish peace if she is to be helped. Aside from the reorganization of the currency, the consortium is going to see to it that a sufficiently safe audit system is established, so that it will be sure that all loan expenditures go as far as they should into the properties themselves. Further, the Chinese Government, in order to save some cash, refused to pay on certain bearer bonds which had come back rather curiously. These were formerly German property bonds on the Hukuan Railway loan which Germany had evidently sold off before the war. They had now come back by way of England and America. The Chinese Government wanted proof of transference on bearer bonds. Mr. Lamont pointed out to them that this action would totally discredit them and that the ability to secure further investments would be very slim unless these were redeemed. Mr. Lamont then returned to Japan.
Then it became known that the Japanese Government had finally given its consent. In Japan, opinion ranged from imperialistic chauvinism to liberal recognition of the consortium as a way out of the mess. On May 11 things came to a head. Mr. Lamont stated on his return to America that:
The fact that Japan has come into the Consortium for China without reservations should be made clear. The agreement that the Japanese banking group with the approval of its government, signed at Tokio, leaves nothing to be desired on this point; but in Japan, while there was perfect readiness by all authorities to announce that an understanding had been reached, there seems to be some reluctance to make public any statement that the Japanese Government had withdrawn its reservations as to Manchuria and Mongolia. It is only fair, therefore, that every member of the American banking group and American investors generally should clearly understand the facts.
Still Viscount Uchida, the Foreign Minister, insisted:
While other powers can afford to regard the new Consortium solely as a business matter Japan is otherwise situated, since her vital national interests, such as national defense and economic existence, are apt to be involved in enterprises near her border. When the three other governments expressly declared to Japan that they not only did not contemplate acts inimical to her vital interests but were ready to give assurance sufficiently safeguarding them, the Japanese Government decided to confirm the Paris agreement.
What Japan expected the powers to say other than just that is a matter for diplomats to play with. To the common person this statement is absolutely meaningless. It is a generalization which leaves the door open for Japan to object to loans for any work which she feels will jeopardize her national life or vitally affect her "sovereignty." Any railroad scheme which might become a competitor by diverting freight from Manchurian lines owned by Japan would be a menace to Japan's sovereignty.
For instance, it seems understood that among these vital interests are certain loans to Chinese capitalists and corporations. And doubtless Japan would right now much rather have the millions which she has sunk in China in her own hands. But if these loans are recognized, what guarantee is there that even under the nose of the consortium further "loans" will not be made?
Is it likely that Japan will relinquish her hold on the South Manchurian Railroad, which in her opinion is of strategic importance? If the consortium is to have no say in such vested interests, obtained before its conclusion, how is it going to secure itself against these very interests being used as a means of breaking up the unity of the cooperative enterprises? How is so sweeping a clause going to be kept within bonds? If Japan is left in full control of the Manchurian railways, if the consortium has not really dissolved the Sino-Japanese Military Agreement, if Japan is to control the German-built railways in Shantung, how is the consortium going to better things in the Far East? There is altogether too much silence on many points in the consortium project for the world to have any real assurance. Secret diplomacy having been discredited, it seems that bankers have themselves broken into diplomacy. Of course, individuals have a perfect right in this modern world to discuss whatever matters they like,--and governments, too, for that matter,--but it should seem that the people as a whole whose money, whose happiness, and whose lives are involved have a right to know to the last detail what has been traded off in the making of the consortium. China evidently was placated by Lamont with full explanations of what the consortium intended. In brief it was this:
The agreement calls for the pooling of all such interests of the several powers in China as had not been already developed separately, in a "full and free partnership." In this way it is hoped that future spheres of influence will be eliminated, jealousies between the powers be done away with, and Chinese grafters be prevented from pitting one power against the other for their own selfish ends. Chinese complain that now they will not be able to secure loans on a competitive basis and that therefore they are being more surely strangled. That is partially true. But it is also true that corrupt Chinese officials have been keeping China and the world in turmoil for their own greedy ends. Both of these things must be stopped if peace is to obtain in the Pacific.
The guarantees given to China were to the effect that in no circumstances would the consortium undertake such private enterprises as banking, manufacturing, or commerce, but would devote itself entirely to the construction of railroads, the laying of highways, and the reorganization of China's currency. The consortium was to make loans to the central or provincial government only, but as a condition of their advancement, peace between the North and South was urged. The consortium was not to interfere in the domestic affairs of China. Loans were to be made only with the approval of the governments behind the bankers. Nor, of course, can you compel any one to borrow money from you, wherein China has the whip hand. Herein lies a very important possibility.
China has plenty of money. Its bankers hoard enough to clean up the country's debts in no time. But they cannot trust their governmental officials; they never have trusted them. But just lately these bankers have been awakening to the wisdom of foreign financial methods, and are adopting them. This may be the first good result of the consortium.
On the other hand, should the terms of the Anglo-Japanese Alliance displease China, she may refuse to recognize the consortium. What then? China has set out to strangle the alliance, which was formed without consulting her. But we speculated enough in the last chapter to show that should the consortium really work, the Anglo-Japanese Alliance would cease to have any functional value.
But there are dangers in the consortium,--and even in the coöperative development of China. If Japan joins whole-heartedly in the consortium, she may be the greatest gainer. For here are all the powers mutually developing China, laying railways, and opening up the resources of the country. Who, more than Japan, is going to tap China's unlimited raw supplies,--the coal in Shansi, for instance, which is enough to supply the world's needs for a thousand years? And should Japan in the end still seek the hegemony of the East, she could utilize these railroads and resources for her own aggrandizement. Who could stop her? Have not the separate governments given Japan their assurance that she "need have no reason to apprehend that the consortium would direct any activities affecting the security of the economic life and national defense of Japan?"
There is, it is said, only little left to be told, but that little may be more than enough. But if China is really helped to strength and independence, then the greatest menace that has ever faced mankind will have been averted, and China, a country with the oldest culture in the world, will have been won back to civilization. Not in emasculated alliances but in a healthy cooperation will the peace of the Pacific be preserved. And the consortium, as things are in the world, is the first example of international good sense known to modern history.
Now, the Consortium Agreement is not an idealistic scheme. The powers recognize that the future peace of the world depends on how they manage their affairs in China. If the consortium throws all secrecy to the winds and comes out openly and at all times for the principles on which it was formed and for which the several governments have guaranteed their protection to these banking-groups, what use is there going to be for the alliance? Perhaps, to paraphrase President Wilson's statement when he went across the Atlantic with his challenge for the freedom of the seas, Great Britain and Japan may now have to say to the world: "Gentlemen, the joke's on us. Why, if the consortium works in China there is going to be no need of an alliance!"