Part 10

The French and Belgian governments in their reply stand by the May, 1921, schedule of payments and decline to forego even the very problematical "C" bonds of £4,250,000,000. Hitherto it has been common ground that £2,500,000,000 is the figure which Germany can be expected to pay. The French and Belgian governments are now insisting on the full measure of the £6,600,000,000 award. The Hughes proposal they scoff at and treat its putting forward by Germany as part of "an expression of a systematic revolt against the Treaty of Versailles." The real temper and purpose of this intransigeant attitude is to be found in two sentences. Here is the first. Alluding to the resistance offered in the Ruhr to the French attempt to exploit its resources the note says: "The Belgian and French governments cannot take into consideration any German proposal whilst the resistance continues." That is, however complete and satisfactory a proposal may be in itself, it would be rejected unless preceded by abject surrender to French designs in the Ruhr. Then later on comes this significant sentence emphasising the moral of the first:--

"The Belgian government and the French government have decided that they will only evacuate the newly occupied territories according to the measure and in proportion to the payments effected. They have nothing to alter in this resolution."

An impossible payment is to be insisted upon--costs of occupation are to be added to that, and until both are liquidated French armies are to remain in possession of the richest areas in Germany. Meanwhile the British Empire and the United States of America, who, at a prodigious cost in life and treasure, saved France from a similar humiliation to that which she is now inflicting on Germany, are practically told when they venture to offer suggestions to mind their own business. No interference will be tolerated from meddlers of any sort.

The sum offered by Germany in settlement of reparations is no doubt inadequate. It cannot be accepted by any of the Allies in discharge of the German obligations under the treaty. The German government must make a very substantial advance on that offer before they can hope to come to terms with the Allied governments. I have no doubt the German government fully realise that fact, and I am sure they did not put forward these figures as their final tender. They meant them to be taken as a beginning and a basis for negotiation. In fact they say so. When you enter into negotiations your lawyer, if he knows his business, never starts with the figure he is authorised ultimately to propose. Nor does the client always communicate to his advocate the last figure he would be prepared to pay if he had to decide between that and a continuation of the struggle, with its costs and its complications. Once pourparlers begin the original figure disappears, and disappears quickly. That is the history of all negotiation, private and public. A refusal to meet in conference until the figure proposed is acceptable rules out discussion between parties as a means of coming to terms on the main question in a dispute.

I have taken part in the settlement of probably more industrial differences than most politicians. In every case I have started with an _impasse_. The first meeting of the parties always revealed an apparently unbridgeable chasm between their respective positions; but perseverance and an honest endeavour on both sides to find a solution usually ends in agreement. Goodwill can bridge any abyss. Unconditional surrender if insisted upon between independent bodies is a sure prelude to fresh disputes. The mere fact, therefore, that Germany put forward a proposal which falls short of the needs and equities of the case is not a sufficient reason for declining to meet her representatives at a conference to determine what the right sum should be, and the best method of liquidating it.

But there is another and a stronger reason why the German offer should not have been so peremptorily rejected. It did not end with a submission of an inadequate amount in discharge of reparations claims. Had it done so the French government might perhaps contend that Germany must make up her mind, before she is allowed to confer, to raise that figure to something which at least approximates to the region of acceptability. But even if the French contention in that respect were reasonable, it is ruled out by the circumstance that in this note the German government have proposed an alternative if the figure they offer is considered unacceptable. That alternative changes the whole character of the note, when you come to judge of the question of its _bona fides_. This proposition consists in the complete and categorical acceptance by the German government of Mr. Secretary Hughes's famous New Haven suggestions. It will be recollected that, as a way out of the reparations entanglement, he proposed that an international expert commission should be set up to inquire into the question of the amount which Germany is capable of paying, and the best method of discharging her obligations once they were fixed. Mr. Hughes made it clear that the United States of America were prepared to assist in such an inquiry. It is this that lent such significance and importance to his speech. When I first read that speech I thought it of such moment that I cabled from Spain to the British and American papers my earnest hope that the Allies, about to sit in conference in Paris, would immediately consider its terms, and act upon it. It seemed to me the supreme opportunity for placing the vexed question which is fretting Europe almost into nervous paralysis on a pathway which must inevitably lead to a real settlement. The more I think of that proposal, the more am I convinced that it was right, and the more am I perplexed by the rude indifference with which it was treated by the Allied governments. To this hour I am baffled to explain why those who are anxious for a conclusion never brought this momentous declaration of American readiness to take a hand to the notice of the conference. I can suggest explanations, but none which is not a grave reflection on the way in which the proceedings of that conference were handled. I can understand those who wish to exploit reparations for ulterior purposes being anxious to keep America out of the business. But why did Britain, Italy and Belgium neglect this chance of securing the association of the one power which could be helpful to the Allies in reaching a fair and sound decision, and what is equally important, helpful in all subsequent operations for cashing that decision? Now Germany states categorically that, if her cash tender is unacceptable to the Allies, she is willing to leave the question of the amount she is capable of paying to an international tribunal on which America is represented, and to abide by the decision of that tribunal, whatever it may be. That is in substance Mr. Secretary Hughes's suggestion. How can a note containing so reasonable a proposal, and a proposal originally emanating from so powerful and so friendly a quarter, be treated as if it were an insult to the dignity of France--and of Belgium! To declare--as the French note does--that the Hughes proposition is an abrogation of the Treaty of Versailles is to ignore the provisions of that treaty. As a matter of fact it would be a restoration of the treaty. As I have repeatedly pointed out, that treaty delegated the question of the amount which Germany has to pay in respect of reparations to an Allied commission on which the United States of America was to be represented. The function of this commission was to assess the amount of the damages for which Germany is responsible under the treaty, and then to adjudicate on the capacity of Germany to pay those damages in whole or in part.

The commission was authorised to fix the amount of the annual payments to be demanded of Germany on the double basis of liability and capacity. The withdrawal of the only country which had no direct interest in reparations from the treaty left the commission a lop-sided and highly prejudiced tribunal. The reparations commission no longer carries out the treaty idea. Its character has completely changed. It is essential in order to adhere to the Treaty of Versailles that America should have a representative on the tribunal that fixes the payments to be exacted from Germany. The German government now offer to submit the fate of their country to the unaltered clauses of the treaty which was signed in the Galerie des Glaces in June, 1919. France and Belgium have no right in honour to demand submission to any other. Because they insist on enforcing something which is entirely different from the contract entered into by them with Germany in 1919, Europe is disquieted and international relations are saturated with the inflammable spirit of resentment, hatred, and revenge. No wonder Marshal Foch is touring Central Europe to put the Allied armies in order! He seems to me to be the one man in France who has an understanding of what all this is leading up to.

_London, May 14th, 1923._

XVII

THE SECOND GERMAN NOTE

The Germans have tried another note. Inasmuch as all the Allied press without exception are agreed in describing it as a great improvement over the first, it is hardly worth while taking up time and space to demonstrate how the essentials of this more favoured document were contained in its reprobated predecessor. Psychologically it is a decided advance on the first note. It is crisp and condensed, and does not indulge in the irritating processes of an argument. You should never attempt to argue with an angry man who is brandishing a bludgeon--unless you are at a safe distance from him. Germany is in this case at his feet. The second German note therefore is wise in avoiding the provocation of an appeal to reason. It makes its offer simply and uncontentiously.

It also suggests a number of substantial guarantees for the payment of interest on the loans to be raised for reparations purposes. I cannot pretend to assess the value that would be attached to these _gages_ by prospective borrowers. I have no doubt they would add materially to the security of the investment. But this array of securities standing alone will not entice the investor to risk his money on a German reparations loan. He will look at Germany as a whole, and not in parts. He will want to know what is likely to happen to that great country during the coming years, and to its industry, its finance, its politics, and its people. A railway which collects its rates and fares in a corrupt currency is of no use as a security for any loan--a customs revenue collected in a fugitive coin is equally worthless. The only reliable basis for a loan is a stable Germany. You can have no stable Germany until you settle reparations. That is, therefore, the first essential preliminary to all discussions on _gages_ be they _productifs_ or otherwise.

Hence the propositions that really matter in the German note are not those which give a schedule of guarantees, but those which bear on the fixation of the amount which Germany is to be called upon to pay. On this question the note does not increase the sum which the first note estimated as the limit of German capacity. But it reaffirms the readiness of the German government to submit the consideration of the capacity of Germany to pay to an impartial tribunal. It offers to place at the disposal of this body all the material which is necessary to enable it to arrive at a just conclusion. It proceeds to suggest that all further discussion on the subjects at issue between the parties should take place at a conference rather than by interchange of notes. How can any unprejudiced person refuse to recognise the essential reasonableness of this part of the offer? It is common ground that the annuities imposed upon Germany in May, 1921, demand modification. Even M. Poincaré proceeds on that assumption. There is, therefore, a most important and highly difficult figure to be ascertained. What annuity can Germany pay? And when will she be in a position to pay? Is it unreasonable to propose that this question which involves a most searching examination into German assets should be referred to a tribunal which would be capable of giving it calm and judicial consideration? And what objection can there be to discussing the matter at a conference where Germany as well as all the Allies would be represented? If this were a business or a trade dispute these two proposals would be regarded as eminently sensible and fair, and the party that rejected them would be condemned by public opinion.

What are the objections to acceptance formulated by the French press? Up to the date of writing this article the French government have not officially expressed their views on the German note. But one may safely assume from past experience that Parisian journalists consulted the Quai d'Orsay before writing their critical articles.

The first is that the French government will discuss no proposals emanating from Germany until the latter withdraw its passive resistance to French and Belgian exploitation of the Ruhr. What does this exactly mean? If it imports--as a preliminary condition to conference or consideration of terms--an acquiescence by Germany in the occupation and exploitation by France and Belgium of the Ruhr valley until reparations be fully paid, then the position is hopeless. A German government may submit to such an occupation because it has no force at its command to offer resistance. But no German government can give assent to such an invasion of its territories. A peace signed on such terms would inevitably be repudiated at the first favourable opportunity. Meanwhile there would be constant friction and trouble in the Ruhr. I can hardly believe that this is what the French government mean to insist upon, in spite of an article in the _Temps_ which bears that interpretation. But they may only ask that whilst terms are being discussed an armistice shall be concluded, the first condition of which will be that all obstacles now interposed in the way of supplying France, Belgium, and Italy with reparation coal and coke shall be withdrawn. An armistice on those terms ought not to be difficult to arrange, especially if the French and Belgian authorities withdraw the ban they have placed on the export of Ruhr products to the unoccupied parts of Germany. Unless the terms are mutually accommodating, I surmise that the German government will experience an insurmountable difficulty in persuading the stubborn miners and railway operatives of the Ruhr to assist in furnishing to France the products of their labour which are denied to their own fellow-countrymen. It is too readily taken for granted that the Ruhr workmen will obey any behest that comes from Berlin. Governments in Germany have ceased to receive that kind of obedience. It is one of the indirect consequences of the great disaster that the decrees of Wilhelmstrasse no longer command the respect which attached to them in pre-war days. Still, a conference at which all the interests concerned were represented would experience no difficulty in fixing up stipulations which would make it possible for France to enter a conference on reparations without any suspicion being attached to her ministers that they had lowered the national flag on entering the room. I trust that good sense will prevail over temper and exaggerated pride--on both sides.

Should this preliminary point of honour be disposed of, then what remains? The fixation of the annuities and the guarantees for their payment. What are the objections to accepting the method put forward in the German note for these two points? It is not the German method--it is the American method adopted by the German government. A conference with an impartial tribunal if conference fails. I know of no other way except a resort to blind force.

It is objected that the Treaty of Versailles has already provided such a tribunal in the reparations commission for the specific purpose of adjudicating upon Germany's liability and Germany's capacity, and that to set up another for exactly the same purpose would be to supersede that treaty. There are two answers to this contention. The first is that the reparations commission as at present constituted is not the body to which Germany agreed to refer these questions so vital to her existence. It is not the body which Britain and the other Allies contemplated. The withdrawal of America from the commission--after Germany had already signed the treaty--has completely changed the balance and therefore the character of this tribunal. No man in his senses can pretend that in its mutilated form it is either impartial in its composition or judicial in its methods. M. Poincaré does not conceal the fact that the French government issues orders to its representative on that "judicial" body. The chairman is an eminent French deputy who has played and still plays a conspicuous and influential part in French politics, and is looking forward to pursuing his career as a politician whithersoever it may lead. Ever since he has been chairman he has delivered speeches in public denouncing the party of whose case he is supposed to be the chief judge. All his colleagues represent powers who have a direct pecuniary interest in the result of their decisions. The only disinterested power has retired from the commission. The American proposal is very moderate. It implies the restoration of the treaty by reintroducing America to the body that settles reparations. If France objects to the appointment of a separate commission why should it not be agreed between the Allies that their representatives on the body of experts to be set up shall be the men who now constitute the reparations commission? To these the American government could add their nominee. Germany has a right under the treaty to present her case. The whole question of capacity could then be gone into in the light of the experience acquired during the last four years, and a settlement could thus be effected on a sound basis. Such settlement would have a much better chance of being workable, and therefore more durable than terms imposed by force on a people who only accept under duress.

But whatever the French view may be of the suggested annuities or guarantees, or of the impartial commission, it is inconceivable that they should reject the conference. It is the surest road to reparations. At Spa the method of pelting the bewildered Reich with demand notes was for a time abandoned, and that of conference at the same table was substituted. The results were admirable. The process of disarmament made immediate strides towards satisfactory completion, and the coal deliveries became fuller and steadier. At Cannes last year the Allies once more started to confer with German ministers. All those who were present at those discussions--without exception--admit that satisfactory progress was being made towards a comprehensive settlement when the conferees were scattered by a bomb. It is too early yet to estimate the loss which inured to Europe through that explosion. But all idea of discussion between the parties has since been loftily and petulantly dismissed as an exhibition of pernicious weakness. What has been substituted for it? For twelve months we had rather a ridiculous display of feather-rustling about the farmyard to inspire terror. Threatening speeches full of ominous hints of impending action were delivered at intervals in different parts of France. These produced nothing but increased confusion and incapacity to pay. Every speech cost France milliards in postponed reparations. French opinion not unnaturally insisted on some action being taken. Hence this rash invasion. At Cannes a two-year moratorium would have been accepted as a settlement. Already a year and a half of that period would by now have elapsed. German finances would, under the strict Allied supervision which was conceded, by now have been restored to soundness--the mark would have been stabilised, and a loan could have been negotiated which would have provided the Allies with substantial sums towards lightening the burdens they are all bearing. Confidence would have been restored in Europe, and for the first time there would have been real peace. One can see what the alternative has produced. Whatever the final terms may be, Germany is not in a financial position to pay what she was able to offer then. These eighteen months have been devoted to reducing assiduously German capacity to pay Allied debts, and the value of the German security for such payment. At Cannes the mark stood at 770 to the pound sterling. It now stands at 500,000. Germany will need an extended moratorium to recover from the clumsy mishandling of the past year and a half. The mark has to be picked up out of the abyss into which it has been thrown by those whose interest it was to lift it out of the depression wherein it lay. A debtor on whose restored health and nerve payment entirely depends has been violently pushed down several flights of stairs. It will take him a long time to recover from the bruises, the shake, and the loss of blood. What an achievement in scientific debt collecting! If reparations are ever to be paid the Allies must retrace their steps and get back to conference. Once the parties--all the parties--sit round the table I feel assured that the common sense of most will in the end prevail. We shall never get back what has been lost during 1922-23, but we shall get something that will help. It will take some time to set up the tackle for hoisting the mark out of the crevass and some to do the winding. But the sooner a start is made the less winding there will be to do. So for everybody's sake it is high time to stop the strutting and get back to business.

XVIII

THE NAPOLEONIC DREAM

What a muddle it all is! France and Germany are both anxious to settle in the Ruhr, but are too proud to admit it. The struggle, therefore, goes on, and will continue to the detriment of both. Belgium is sorry she ever entered the Ruhr, but cannot get out of it. Every time she tries to get away France pulls her back roughly by the tail of her coat, so she has to do sentry-go at Essen whilst her franc is leading a wild life at home. Italy has forgotten that she ever sanctioned the occupation, and her moral indignation is mounting rapidly, although it has not yet risen to a height which is visible across the Alps. Great Britain is growling futile notes of dissatisfaction with everybody--France and Germany alike. The confusion of tongues is deafening and paralysing, and no one is quite happy except the spirit of mischief who is holding his sides with ghoulish laughter. He never had such a time--not since the Tower of Babel. And this time it may end in a second deluge.