Part 7

In the face of these quotations and of these undoubted facts, can any one say that I calumniated France when I said there was a powerful party in that country which claimed that the Rhine should be treated as the natural barrier of Germany, and that the Peace treaty should be based upon that assumption?

Let it be observed that I never stated that this claim had the support of the French democracy. The fact that the treaty, which did not realise that objective, secured ratification by an overwhelming majority in the French parliament and subsequently by an emphatic verdict in the country, demonstrates clearly that the French people as a whole shrank with their invincible good sense from following even a lead they admired on to this path of future disaster. But the mere fact that there are potent influences in France that still press this demand, and take advantage of every disappointment to urge it forward, calls for unremitting vigilance amongst all peoples who have the welfare of humanity at heart.

In conclusion I should like to add that to denounce me as an enemy of France because I disagree with the international policy of its present rulers is a petulant absurdity.

During the whole of my public career I have been a consistent advocate of co-operation between the French and British democracies. I took that line when it was fashionable in this country to fawn on German imperialism.

During the war I twice risked my premiership in the effort to place the British army under the supreme command of a French general. To preserve French friendship I have repeatedly given way to French demands, and thus have often antagonised opinion in this country. But I cannot go to the extent of approving a policy which is endangering the peace of the world, even to please one section of a people for whose country I have always entertained the most genuine affection.

_London, December 9th, 1922._

IX

WHAT IS FRANCE AFTER?

_3. The Paris Conference_

The third conference with M. Poincaré over reparations has ended, like its two predecessors, in a complete breakdown.

The first was held in August, the second in December, and the third fiasco has just been witnessed.

I congratulate Mr. Bonar Law on having the courage to face a double failure rather than agree to a course of policy which would in the end prove disappointing, and probably disastrous.

Agreement amongst allies is in itself a desirable objective for statesmen to aim at, but an accord to commit their respective countries to foolishness is worse than disagreement.

France and Britain must not quarrel, even if they cannot agree; but if French ministers persist in the Poincaré policy, the companionship of France and Britain over this question will be that of parallel lines which never meet, even if they never conflict.

What is the object of this headstrong policy? Reparations?

There is no financier of repute, in any quarter of the globe, who will agree that these methods will bring the Allies any contributions towards their impoverished resources.

At the August conference all the experts were in accord on this subject, but whilst these methods will produce no cash, they will produce an unmistakable crash.

My recollections of the August discussions enable me to follow with some understanding the rather confused reports which have so far reached me here.[2]

It is common ground amongst all the Allies that Germany cannot under present conditions pay her instalments.

It is common ground that she must be pressed to put her finances in order, and by balancing her budget restore the efficiency of her currency, so as to meet her obligations.

But M. Poincaré insisted that, as a condition of granting the moratorium, pledges inside German territory should be seized by the Allies.

These pledges consisted of customs already established, and of new customs to be set up on the Rhine and around the Ruhr, so that no goods should be permitted to pass from these German provinces into the rest of Germany without the payment of heavy customs dues.

The other proposed pledges were the seizure of German forests, of German mines, and of 60 per cent. of the shares in certain German factories.

Mr. Bonar Law, judging by his official _communiqué_ after the breakdown of the conference, seems to have raised the same objections to these pledges as I put forward at the August conference.

They would bring in nothing comparable to the cost of collection;

They would provoke much disturbance and irritation and might lead to consequences of a very grave character.

In fact, these pledges are nothing but paper and provocation.

The customs barrier on the Rhine was tried once before, and was a complete failure.

It was tried then as a sanction and not as a means of raising money. For the former purpose it may have achieved some measure of success, but from the point of view of collecting money it was a ludicrous fiasco.

There are at the present moment hundreds of millions of paper marks collected at these new tollhouses still locked up in the safe of the Reparations Commission. They are admittedly worthless.

As long as these tolls lasted, they were vexatious; they interfered with business; they dealt lightly with French luxuries working their way into Germany, but laid a heavy hand on all useful commodities necessary to the industry and life of the people.

They were ultimately withdrawn by consent. M. Poincaré now seeks to revive them.

The seizure of German forests and mines will inevitably lead to even more serious consequences. The allied control established in the far interior of Germany would require protection.

Protection means military occupation in some shape or other.

Military occupation of these remote areas means incidents, and incidents quickly ripen into more serious complications.

Hence the reluctance of the British government of which I was the head to concur in this dangerous policy. Hence the refusal of Mr. Bonar Law's government to accept the responsibility for sanctioning such a policy. Even logically it is indefensible.

There are only two alternative points of view. One is that Germany cannot pay under present conditions until her finances are restored, and that a moratorium ought to be granted for a period which will enable that financial restoration to mature. The second is that Germany can pay, that she is only shamming insolvency, and that all that you have to do is to apply the thumbscrew firmly and cash will be forthcoming.

Logically I can understand either of these two alternatives, but I fail to comprehend the reason for a proposal that will grant a moratorium on the ground that Germany cannot pay, and at the same time apply the thumbscrew until she pays.

I am glad the British Prime Minister has had the wisdom not to associate himself with a policy which will bring inevitable discredit upon those who share the responsibility of enforcing it.

Meanwhile, the prospects of Europe's recovery are once more to be retarded by the vain stubbornness of some of her rulers.

_Ronda (Spain), January 6th, 1923._

FOOTNOTE:

[2] This chapter was written at Ronda (Spain).

X

REPARATIONS

What is the reparations problem? Why does it appear to be further from solution than ever?

The great public in all lands are perplexed and worried by its disturbing insolubility. It keeps them wondering what may happen next, and that is never good for a nerve-ridden subject like postwar Europe.

The real trouble is not in solving the problem itself, but in satisfying the public opinion which surrounds it. I do not mean to suggest that it is an easy matter to ascertain what payments Germany can make, or for Germany to pay and keep paying these sums once they have been ascertained. But if the difficulty were purely financial it could be overcome. The heart of the problem lies in the impossibility at present of convincing the expectant, indignant, hard-hit and heavily burdened people of France that the sums so fixed represent all that Germany is capable of paying.

The question of compelling a country to pay across its frontiers huge sums convertible into the currency of other countries is a new one. At first it was too readily taken for granted that a wealth which could bear a war debt of £8,000,000,000 could surely afford to bear an indemnity of £6,000,000,000 provided that this smaller sum were made a first charge on the national revenues; and it took time for the average mind to appreciate the fundamental difference between payment inside and transmission outside a country.

When I think of the estimates framed in 1919 by experts of high intelligence and trained experience as to Germany's capacity to pay cash over the border I am not disposed to complain of the impatience displayed by French taxpayers at the efforts made at successive conferences to hew down those sanguine estimates to feasible dimensions. I am content to point with pride to the fact that the common sense of the more heavily burdened British taxpayer has long ago taught him to cut his loss and keep his temper. When his example is followed all round, the reparations question is already solved.

When public opinion in all the Allied countries has subsided into sanity on German reparations, as it already has in Britain, financiers can soon find a way out, and trade and commerce will no longer be scared periodically from their desks by the seismic shocks given to credit every time a French minister ascends the tribune to make a statement on reparations.

Regarding the payment of reparations solely from the point of view of finance, the issues can be stated simply, and I think solved readily.

It is always assumed by those who have never read the Treaty of Versailles, and the letter that accompanied it, that this much-abused and little-perused document fixed a fabulous indemnity for payment by Germany. The treaty may have its defects; that is not one of them, for it fixed no sum for payment, either great or small.

It stipulated that a reparations commission should be set up in order, _inter alia_, to assess the damage inflicted by Germany on Allied property and the compensation for injury to life and limb in Allied countries.

In the second place--and this is also overlooked--it was to ascertain how much of that claim Germany was capable of paying. On both these questions Germany is entitled to be heard before adjudication.

It is in accordance with all jurisprudence that as Germany was the aggressor and the loser she should pay the costs. But it would be not only oppressive but foolish to urge payment beyond her capacity.

The amount of damage was to be ascertained and assessed by May, 1921. Capacity was to be then determined and revised from time to time, according to the varying conditions. Even so fair a controversialist as the eminent Italian statesman Signor Nitti has ignored the latter provision in the Versailles treaty. No wonder that he should, for there are multitudes who treat every alteration in the annuities fixed in May, 1921, as if it were a departure from the Treaty of Versailles to the detriment of the victors; whereas every modification made was effected under the provisions and by the machinery incorporated in the treaty for that express purpose.

But there has undoubtedly been a departure from the treaty--a fundamental departure. It has, however, been entirely to the detriment of the vanquished. In what respect? I propose to explain, for the whole trouble has arisen from this change in the treaty. The treaty provided that the body to be set up for deciding the amount to be paid in respect of reparations should consist of a representative each of the United States of America, the British Empire, France, Italy, and Belgium.

With the exception of the United States of America, all these powers are pecuniarily interested in the verdict. At best it was therefore on the face of it not a very impartial tribunal. Still, Britain, as a great trading community, was more interested in a settlement than in a few millions more or less of indemnity wrung out of Germany; and Italy also was a country which had large business dealings with Germany and would not therefore be tempted to take a violently anti-German view on the commission. The presence therefore of the United States of America, Britain and Italy together on the commission constituted a guarantee for moderation of view.

Now the only disinterested party has retired from the tribunal. The most interested party is in the chair, with a casting vote on certain questions. That is not the treaty signed by Germany.

If you sign an agreement to pay a sum to be awarded by A, B, C, D, and E, trusting for a fair hearing largely to the influence of A, who is not only very powerful but who is the only completely disinterested referee and A then retires from the board of arbitrators, you are entitled to claim that the character of the agreement is changed. The representatives of France and Belgium on the Reparations Commission are honourable men who are most anxious to do justice, but they are watched by a jealous, vigilant and exacting opinion constantly ready to find fault with concession and to overpower moderating judgment.

The balance of the treaty has therefore been entirely upset. What is really needed is to restore that balance so as to secure a fair verdict on the only question in issue--how much Germany can pay.

When you come to consider that issue you must view the claim for reparations as you would any ordinary debt. You must make up your mind whether you wish to ruin the debtor or to recover the cash. If there are no sufficient realisable assets, then, if you want your money, you must keep your debtor alive. If you want beef from your cow you must forgo the milk. If your object is to destroy your debtor, you press for payment of more than he can be reasonably expected to pay, and then seize his house, his lands, and his chattels, whether they can be disposed of or not.

On the other hand, if you want your money, you will find out what he can pay, and then proceed judiciously, patiently, and firmly to recover that amount. By that I do not mean what he can pay by condemning himself to a life of servitude and poverty. No brave nation will stand that long. That is not a method of recovering an old debt, but of creating a new one. I mean, what a nation can be expected to pay steadily without revolt for a whole generation.

If you scrape the butter from the bread of every German child for thirty years you may add to the sum of your indemnity a milliard or two of gold marks. That is not what was intended by the Treaty of Versailles. Hungry faces make angry hearts, and the anger spreads further than the hunger. I mean, what Germany can pay without condemning a generation of workers to Egyptian bondage, and their children to semi-starvation. Every oppression, if persisted in, ultimately ends in the ruin of the Red Sea for the oppressors. Europe has only just escaped with great loss from its waters. We do not want to be overwhelmed in another.

How are you to arrive at the exact figure of the annuities Germany can reasonably be expected to pay without creating these intolerable conditions for her people? That is the question. The answer was given in the treaty as signed: by setting up a commission to inquire and determine. That commission has been weakened, and its character almost destroyed by the defection of the United States of America.

Is it possible to find a substitute? I am afraid a reference of that question to a new committee of experts would not advance matters, for each country would demand a representative on that committee, and that would only mean the Reparations Commission over again under another name.

The only hope of a fair and final decision is to secure the presence of a representative of the United States of America on the adjudicating body, whatever it may be. Is that impossible?

I need hardly say that I am not venturing to express any opinion as to the American refusal to ratify the treaty as a whole. I am only stating quite frankly my view that, unless America takes a hand in reparations, real settlement will be postponed until the hour of irreparable mischief strikes. If for reasons of which I am not competent to judge America cannot occupy her vacant chair on the tribunal which may decide fateful issues for humanity, I despair of any real progress being made.

Allied ministers can accept from a body representing the leading powers who won the war decisions they dare not take on their own responsibility. That is the essence of the matter. It is no use blaming politicians. If they of their own initiative attempt to ride down public sentiment, which alone confers authority upon them, they will inevitably fail. In every country there are plenty of itching partisans ready to take advantage of tactical blunders committed by political opponents or personal rivals. But the judgment of an international tribunal is another matter, and statesmen can accept it and act upon it without being taxed with responsibility for its conclusions.

British opinion cannot and will not accept a settlement based on the assumption that abatements in the sum claimed for reparations, if and when made, must be discounted by the British taxpayer alone.

France undoubtedly suffered more severely from the ravages of war than any other belligerent. But that is recognised in the proportion allocated to her of the reparations payments. She is to be paid 52 per cent. of the total, _i. e._, more than all the other Allied countries put together.

Britain comes next in the damage sustained by her people, and she is given 22 per cent. In many respects she has suffered more heavily than any other Allied country, especially in taxation and in trade. She is willing to stand in with the Allies for loss as well as for profit, but she will resent bitterly the suggestion that the loss must necessarily be her share, whilst such profit as there is belongs to others.

The American people, who receive no part of the compensation awarded and collected, will _a fortiori_ take the same view of their obligations in the matter. They certainly will not see the force of a settlement to be made at their expense, as if they had been condemned to pay an indemnity.

The question is not what remission or indulgence shall be granted to Germany, but what payment she is capable of making. If Germany can pay a large indemnity France gets 52 per cent. of that, and Britain only 22 per cent. If Germany can only make a disappointing payment, France still gets 52 per cent. and Britain 22 per cent. There is, therefore, no ground for debiting Britain and America with the cost of reduced expectations.

The offer to hand over the worthless "C" bonds to the British Empire in return for her claims is an insult to the intelligence of the British public. Let us get away from these shifts on to the straight road. Back to the treaty--that is the real remedy. There is no need to revise it--all that is required is to restore it.

If America reappears on the arbitrating tribunal she need not accept the rest of the treaty. Then a fair and enduring settlement would soon ensue, this irritating sore would rapidly heal, and the condition of the world would steadily improve.

_Algeciras, January 1st, 1923._

XI

MR. HUGHES'S NEW HAVEN SPEECH

The preceding chapter was written at Algeciras on January 2nd, 1923. On January 3rd there appeared in the Spanish papers a compressed report of the speech delivered by the American Secretary of State, Mr. Hughes, at New Haven. It made suggestions on the subject of reparations which were obviously intended for consideration at the forthcoming Paris conference. I knew the chairman of that conference, M. Poincaré, would not be too anxious to bring these proposals to the notice of his colleagues, but I had some hope that the British, Italian, and Belgian premiers might do so. I therefore cabled the following message to the British and American press:--

"I have read with gladness Secretary Hughes's important speech. As far as I can judge from compressed report appearing in the local paper of this remote corner of Spain his suggestions and mine travel in same direction. Earnestly hope Paris conference will give American proposals priority of consideration. All other expedients will but postpone mischief which will in the end have to be redeemed with compound interest at usurious rates by an embarrassed Europe."

I constantly refer to this speech in subsequent articles, and as it has been suggested that the interpretation I placed on it is not borne out by the text, I append the full report which appeared in _The Times_ of December 30th, 1922:--

"Mr. Hughes, the Secretary of State, in a speech which he delivered before the American Historical Association at New Haven, Connecticut, to-night lifted yet another corner of the veil which has shrouded the immediate plans of the United States government. Much of his address concerned the Washington conference of 1921, but it ended with a discussion of economic conditions in Europe which are of prime importance.

"Mr. Hughes began with the admission that 'we cannot dispose of these problems by calling them European, for they are world problems, and we cannot escape the injurious consequences of failure to settle them.' They were, however, European problems in the sense that they cannot be solved without the consent of the European governments, and the _crux_ of the situation lay in the settlement of reparations. 'There will be no adjustment of other needs, however pressing, until a definite and accepted basis for the discharge of reparations claims has been fixed. It is futile to attempt to erect any economic structure in Europe until the foundation is laid.'

"Then followed a passage referring to the attempts to link up the debts owed to the United States with the question of reparations or with projects of cancellation, attempts which had been steadily resisted. It led up to a discussion of the attitude of the United States towards reparations, 'standing, as it does, a distinct question, and as one which cannot be settled unless the European governments concerned are able to agree.' First came a denial that America desired to see Germany relieved of her responsibility for the war, or of her just obligations, or that America wished that France should lose 'any part of her just claims.' On the other hand, America did not wish to see a prostrate Germany. Some Americans had suggested that the United States should assume the _rôle_ of arbitrator, but Mr. Hughes did not think 'we should assume such a burden of responsibility.'

"From this point the speech deserves quotation in full:

"'But the situation,' said Mr. Hughes, 'does call for a settlement upon its merits. The first condition of a satisfactory settlement is that the question should be taken out of politics. Statesmen, have their difficulties, their public opinion, the exigencies they must face. It is devoutly to be hoped that they will effect a settlement among themselves, and that the coming meeting in Paris will find a solution. But if it does not, what should be done?