Realities and Europe

I

IT seems to be very difficult for human beings to acquire an adequate conception of what is going on in their own time. Naturally this difficulty increases in times when events reach such gigantic proportions and the situation in the world changes as rapidly as it has during the last few years.

The difficulty depends partly on the general inertia of the human mind, which reveals itself in the fact that even the individual is very much bound up with his old ideas and predominantly disposed to follow his old ways of thinking.

This inertia, however, is always a much stronger factor in the psychology of the masses, and it is strengthened to an extraordinary degree by the system of political parties, which drives us to judge each phenomenon in the first instance from the party point of view, and to adopt our party standpoint long before we have had time to observe what is going on, or to form a sufficiently clear conception of the reality we have before us.

To this general difficulty is now added the fact that the present reality is by no means agreeable; that what is actually happening differs very considerably from what, according to settled public opinion, ought to happen, and from what political doctrine has, year after year, taught people was bound to happen.

The difficulties in the way of recognizing a disagreeable reality must reach their extreme in the cases where this reality seems to reduce ideals, for which people have been willing to make the highest sacrifices, to empty illusions, or where the actual results of these sacrifices are just the opposite to the high aims for which they were made.

Under such circumstances it is only natural that people’s insight into the reality in which they live becomes inadequate; that people experience the utmost difficulty in adapting their judgment and their actions to the actual situation; and that public opinion, even where it is most advanced, is apt to remain some distance behind the actual development of events.

We must take account of all these adverse circumstances if we wish to understand how it is possible that the world should stand so completely disoriented before the real course of events, as without doubt it does at present with regard to what is called the Reparations question.

The leaders of the world once had much to say about the abolition of ‘Militarism’ — can we wonder that people now refuse to believe the evidence of their own eyes, when they see Europe more and more given up to the rule of military dictators? It was promised that the world should be made ‘ safe for democracy ‘ — now public opinion refuses to recognize the fact that important parts of Central Europe are being brought to a condition which differs very little from slavery.

People used to be frightened at the idea of a coming supremacy of Germany, and during the long sequence of hard years strained every nerve to crush her — it is natural enough that they should now be extremely unwilling to recognize for themselves that by such action they have only contributed to a most extraordinary development of military despotism on the continent of Europe. We once believed in a lasting peace as the result of the Great War — it is very disappointing indeed to be told that the peace which Central Europe has obtained is nothing but a continuance of hostilities calculated to bring about the extinction of a people even more than actual war itself.

Still, whether palatable or not, it is absolutely necessary that we should begin to see the truth. The actual development of events has, particularly during the last year, become so extremely serious that everybody must begin to feel it to be imperative that he should know exactly what is going on.

II

The first thing that strikes a student of after-war politics is the quite disproportionate importance that has been given to the question of the debt which the war has left behind it. People have paid so much attention to the problem of payment for the reconstruction of Europe that reconstruction itself has been hampered. To a large extent the measures which have been taken to enforce payment have even been purely destructive in their effects, and have thus directly counteracted the general work of reconstruction. For the world as a whole these questions of payment are altogether subordinate to the all-important interest that the world’s productive machinery should be set going once more and be brought to work up to its full capacity.

People sometimes believe that the costs of the war and of Reparations form a burden on future generations. This is not so. The costs of the war were paid during the war, and the costs of the Reparations have been paid as the Reparations have been carried out. In a social community all present burdens must be borne by the present time. What is left to future generations is only the payment of debts by one class of people to another or by one country to another. But the difficulties of such payments, great as they may be, all belong to the problem of distribution of income among the members of the community, and this problem is always of secondary importance in comparison with the great task of increasing the total income of the community.

All that the peoples of the world are accomplishing by their incessant struggles over the payment of debts is the very considerable diminution of the social dividend and the hampering of a very much needed development of the productive resources of the world. It is doubtful whether any class or any country is winning anything by this struggle, but it is quite certain that the net losses are very severe and fall upon some peoples with an absolutely crushing weight.

The struggle is at present very much a struggle about the reasonableness of the claims and about the debtor’s capacity to pay. People ask for such reduction or redistribution of the debts as seems necessary in view of the paying capacity of the debtors. Under such circumstances it seems strange that the world should expect a solution of the problem of indebtedness from the payment of immense sums by the weakest of the great countries concerned.

This singular idea has made the settlement of the Interallied debts dependent upon the payment of a German indemnity, which everybody knows to have been fixed very much above what Germany can ever be expected to pay, and naturally still more above what she can pay now. This brings into the problem of Interallied indebtedness an element of unreality which influences the whole discussion and makes a reasonable settlement almost hopeless.

France has now adopted the position that Germany must first pay fifty billions of gold marks, of which France shall have twenty-six billions to cover her Reparations, and that only what Germany can pay France over and above that sum shall be used in the payment of France’s debts to her creditors, Great Britain and America. It is clear to everybody that Germany will never be able to pay anything like such sums. Even if Germany were relieved of all other payments, she could not, as we shall see presently, afford to pay France the sum of twenty-six billions of gold marks.

The French defense of their position is the general formula that France cannot pay if Germany does not pay her. The moral strength of this formula, however, is somewhat weakened by the fact that Germany is called upon to pay, although she has been forced to give up all her claims on other countries, and in addition has been deprived of nearly all resources which could have been used for international payments.

Of course a debtor cannot generally refuse to pay because he cannot collect his own claims. The big sums which Great Britain and America advanced to France during the war were real loans, by no means subject to the condition of an Allied victory, and, naturally, still less to the condition that it should be possible to extract from Germany in payment to France alone, first, a sum of twenty-six billions of gold marks, and then, over and above that, a sum to cover France’s obligations to her allies!

No doubt it will be very difficult for France to pay her debts if she can get nothing out of Germany. But a reasonable settlement of the French debt to Great Britain and America could be expected with more justice if France would reduce her enormous expenditure on occupations, armaments, and subsidies, — in themselves an implicit threat of the military domination of Central Europe, — and if she showed any sign of doing what she could to satisfy her creditors.

For the friends of peace this experience of the value of war debts is in one sense rather encouraging. It will certainly not be so easy in the future to make people enthusiastic for war, when it is known that the enemy’s promises to pay are empty phrases when he has once been crushed, and that the very crushing of the enemy will cause serious and widespread economic disturbances, with incalculable economic losses even for the victorious countries. Nor will it be so very easy to get advances from friendly Governments, since it has been proved that such loans, even in the most favorable case of a complete victory, are not acknowledged to be morally binding. When even a victorious country is sure to come out of the struggle more or less ruined, the prospects of war will not seem very tempting. If the experiences we have now gathered about the afterwar value of war indebtedness can do anything to prevent wars for the future or to limit their extension, something is undeniably gained for the preservation of peace.

It is not the place here to discuss what moral strength France’s claims to payment for devastated provinces may have had originally. The claimant who does not himself do everything in his power to facilitate the payment of the debt can hardly reckon upon sympathy or help from outsiders. The policy of France in the present case has rather been such as directly to hinder Germany from paying.

The coöperation of German labor, German organization, and German capital for the reconstruction of the devastated provinces, which would have been the most natural solution of the indemnity question, has been rejected. Payment by export of commodities has for years been hampered by extra customs duties laid on the importation of German industrial products; while at the same time Germany’s balance of payment has been weakened by the forced importation of French articles of luxury. The paying capacity which Germany might still have had she has had to spend in supporting the military occupation of her country by France.

But this is not all. France has, since the end of the war, systematically worked for the political and economic weakening of Germany. In this France has endeavored to strike at the very basis of German economic life, that is to say, her coal supplies. First France took the Saar district; then it was France who was responsible for the extremely fatal division of Upper Silesia; and finally she has occupied even the last of the most important of the German coal districts, the Ruhr. Day after day M. Poincaré repeats that an industrial renaissance of Germany is a danger which France, and of course also the rest of the world, must fight by every possible means!

The truth is that the claimants of an indemnity from Germany have never been able to make up their minds as to whether they wish to have an indemnity or to have Germany completely crushed.

In France shortsighted protectionist interests have united themselves with that policy of fear and revenge. The result has been the devastation of Germany as a working economic organism, which has culminated in the occupation of the Ruhr, by which the very heart of German industrial life has been hit.

This extreme action of the policy of exhaustion has definitely destroyed the prospects of indemnity payments by Germany.

But the consequences of this act of violence are even more far-reaching. The highest authorities on law of the British Crown have declared the Ruhr occupation to be not justified by the Treaty of Versailles. If this is true, the whole occupation has the character of a war of aggression, and then, clearly, Germany must be entitled to an indemnity for this war and for the frightful disturbances it has caused in Germany’s economic life.

It is certainly not to the interest of the world, and at any rate not to the interest of debtor countries like France herself, that International Law should be so interpreted that, in order to enforce payments from its debtors, a creditor country has the right to occupy with its military forces part of the debtor’s territory, to sequestrate private property in such territory, and to subject its population to a condition of slavery. The argument that this extension of the rights of a creditor country, although inadmissible in general International Law, has been created by the Versailles treaty, particularly in favor of the victorious countries, seems to be a singularly bad way out of the dilemma which France has created by her action. For if the Versailles treaty had really included such a clause, the whole treaty would in the world’s conscience stand out as a pactum turpe, imposing upon the defenseless party a laesio enormis. How much moral strength such a treaty could retain in the long run, anybody may judge for himself.

III

Let us now consider the question which is at the bottom of the whole struggle, namely, what can Germany pay? Everybody knows that Germany’s paying capacity was originally fantastically overestimated, and that even the sum eventually fixed by the London ultimatum, 132,000,000,000 gold marks, very much surpassed anything that Germany could conceivably pay. It seems now to be generally admitted that only the A and B bonds, representing together fifty billions of gold marks, can be seriously taken into consideration as realities, whereas the C bonds, representing the remaining eighty-two billions, are nothing but air. Still France insists upon regarding these C bonds as an asset which may be used as an object of exchange in the negotiations with her allies.

How much Germany can in reality pay is still an open question, and obviously a question of central importance for the whole European problem. For, clearly, whatever moral or legal right the victorious countries may have to claim an indemnity from Germany, all endeavors to get more than Germany can pay are futile, and all measures to enforce such payments must be regarded as extremely harmful, both to the object of securing the highest possible indemnity, and, by their disturbing influence on the world’s economic and political life, to the general welfare of the world.

Under such circumstances a scientific investigation of Germany’s paying capacity seems to be the only way out of the political struggles, and Secretary Hughes’s proposal, that the whole question be referred to an international body of experts, was therefore very natural and sound.

There is, however, a danger that the difficulties attending such a calculation are underestimated. In fact, Germany’s paying capacity is no given or fixed quantity, which we can sit down and calculate on the basis of available data. The first thing we have to take account of in studying Germany’s paying capacity is that this capacity is a variable quantity, very much dependent upon the way in which Germany is treated by her creditors. If, from the first moment, Germany had been allowed freely to develop her production and her exports and retain her navy and her international trade-organization, and if Germany had had a reasonable prospect of being able, by hard work and great sacrifices, to free herself from her obligations, no doubt Germany would have had a considerable capacity to pay indemnities.

True, already before the war, Germany had a surplus of imports over exports. But ‘invisible exports’ and interests and dividends from foreign investments filled up the gap and created a certain surplus available for fresh investment abroad.

After the war, an annual paying capacity could have been established, on the one hand by increased efforts in production and increased exports, and on the other hand by a lowering of the standard of living of the German people.

The first development has not been allowed to take place. On the contrary, Germany’s productive capacity has been so much reduced, particularly by the fatal lowering of the efficiency of German labor, and her export facilities have been so severely curtailed, that the value of exports has gone down from about eleven billions of gold marks in 1913 to about four billions in 1922.

It has proved impossible to reduce the imports in the same proportion. In spite of the very far-reaching reduction in the standard of living of the German people, a reduction which for important classes has already overstepped the borders of starvation, the value of imports surpasses that of exports. The balance of trade for 1923 shows a deficit of 2,300,000,000 gold marks. During the last few years this adverse balance seems to have been made up by the sale of securities and real estate, but primarily by the sale of German marks abroad. The latter extremely unsound source of income is now no longer available. The great problem of the present moment is, how it will be possible for Germany to pay for her necessary imports. If, as is most likely, sufficient means of payment cannot be found, a further reduction of consumption in Germany is unavoidable. But such reduction would doubtless mean a catastrophe involving actual starvation for millions of people. Under such circumstances it is of course pure nonsense to speak of Germany’s capacity to pay.

The figures giving the value of German foreign trade are, of course, not quite reliable, nor could they ever be in a country not having the slightest stability in its standard of value. But the results arrived at are no doubt in the main valid. This can easily be seen if we take account of the weight statistics of exports. German exports of iron and iron manufactures in 1913 amounted to a monthly average of 541,000 tons. In 1922, this average had been reduced to 221,000 tons. But under the Ruhr occupation the figure has been forced down to 143,000 tons in April, 1923.

A corresponding reduction, though not quite to the same extent, has taken place in the export of machinery, electrical supplies, dyes and dye-stuffs. The considerable pre-war surplus of coal exports has for 1922 been converted into a surplus of imports (leaving out the 16,000,000 tons delivered for Reparations account).

It will immediately be clear to anybody that such a reduced export is absolutely insufficient even to pay only for Germany’s most necessary imports. Germany’s power of competition in foreign markets has also, particularly during the last few months, been very much curtailed, and is now so weak that the prospects of a speedy revival of German exports are practically nil.

The truth, which can no longer be concealed, is that, by the action of the victorious countries, and particularly by the policy of France, but also as a result of the social disintegration which has taken place within the country itself, Germany has been brought to the point of starvation, and that it will require the most vigorous efforts to save the German people from a most frightful catastrophe. Already important classes of the German population are reduced to such misery that they are continually dependent upon foreign benevolence.

Under such circumstances it is strange, to say the least, that people should expect a solution of all the difficulties of Europe by what is called a settlement of the dispute between France and Germany about the Ruhr question. This seems indeed to be the most empty of all illusions. Of course, Germany can give way in the matter of passive resistance and such things, and accept every condition France chooses to impose upon her. But she cannot thereby acquire any paying capacity, and there will be no solution of the problem.

If we wish to get a true conception of what the payment of a big external debt really means, and under what conditions such payment is possible, we need only to study the British debt to the United States. Without doubt the payments on this debt, now agreed upon, involve very large sacrifices for Great Britain. An English authority, J. M. Keynes, describes the burden of the American debt in the following words: —

We shall be paying to the United States each year for sixty years a sum equivalent to two thirds the cost of our Navy, nearly equal to the State expenditure on Education, more than the total burden of our pre-war debt, more than the total profits of the whole of our mercantile marine and the whole of our mines together. With these sums we could endow and splendidly house every month for sixty years one university, one hospital, one institute of research, etc., etc. With an equal sacrifice over an equal period we could abolish slums and re-house in comfort the half of our population which is now inadequately sheltered. The Nation and the Athenæum, August 4, 1923.

Still, the sum to be paid yearly, about thirty-five million pounds, is only little more than one half of the value of British exports for one month — about sixty million pounds. Thus we may conclude that the obligation to pay annually to a foreign country the value of half a month’s exports is a heavy burden.

Great Britain can face this burden and solve the problem of acquiring a sufficient amount of foreign exchange, because she has such important invisible items in her international balance of payment, that she is able to pay the yearly sum of the American debt out of a surplus of this balance and still have a sum left for fresh investments abroad.

In the German balance of payment there will, for the future, be very little in the way of such invisible items. An eventual indemnity, therefore, must be paid out of a surplus of exports over imports. Now it is generally very difficult for a great industrial country to establish a surplus in its balance of trade. Countries which export mainly raw materials and agricultural products may do so, but industrial countries generally show a deficit in their balance of trade.

We can, therefore, hardly say that we have any experience proving the possibility of a great industrial country establishing a surplus solely by exporting more than it imports. But even if we assume that this will be possible in the case of Germany, we may take it for granted that the surplus cannot be any great percentage of the exports, probably not much more than ten per cent.

Therefore, if Germany should be able to pay an annual indemnity of, say, one billion gold marks, we must assume her to have reached an export of, say, eleven billions, requiring an import of, say, ten billions. With such an export the annual payment of one billion means the payment of a full month’s amount of exports, which, as there are hardly any invisible items to be drawn upon, must represent an extremely heavy burden.

The question how much Germany can pay, is, as we see, primarily the question, Are the victorious countries, and is the world at large, willing to allow Germany such brilliant economic development as would be required to bring up her exports to something like eleven billions of gold marks yearly? If the annual sums often mentioned in discussions on the Reparations question should be paid, German exports would have to be increased very much above the sum named. Nobody can say that any such development, in view of the experience hitherto gathered, is very probable. At any rate, it can certainly not take place within the next five or ten years.

IV

The complete ignorance of what international payments mean is doubtless a very prominent feature in that French policy which pretends to have no other aim than to enforce payments from Germany. But there are also other features of this policy, which make it evident enough that the extraction of payments is not the sole aim, but that this desire is very much mixed up with the desire, not only to prevent a restoration of Germany to economic and political health, but even to destroy the country still more, and keep it in a permanent state of misery. When the indemnity is fixed at such a sum that it can never be paid, and when the sums actually paid are squandered on occupations and other costs entailed in collecting the debt, with the effect that the debt is practically never diminished, in spite of the complete exhaustion of the debtor, then, clearly, we have to do with the policy of a usurer, framed to keep his victim in a state of permanent indebtedness, extracting yearly as big payments as possible, but never allowing the capital debt to be written off. Germany’s permanent indebtedness affords France an excuse for permanent interference and permanent control.

True, we have been given the assurance that it is not a part of French policy to incorporate German territory. But this does not exclude an occupation and an exploitation proclaimed as destined to last until sums have been paid which it is most obviously impossible for Germany to pay so long as her most important industrial districts are occupied. And such a permanent exploitation of a foreign territory is, after all, at bottom a much worse thing than the old-fashioned method of conquest and incorporation.

Still there are signs which show clearly enough that the aims of the French policy of destruction go further, namely, to the splitting up of Germany into those small provincial states which made up Germany before her modern unification. As the whole of the German economic development after 1870, as well as the increase of her population since that time, has depended on the transition from mediæval to modern state-construction which took place in 1870, any attempt at dissolving Germany again would mean forcing the country back to the economic conditions prevailing before 1870, and therefore, so far as we can see, to reducing her population to something like what it was at that time.

But for a policy the real significance of which is to reduce by starvation a highly civilized population in the midst of Europe by some twenty million people, no citizen in the civilized world, and particularly no American citizen, can assume the slightest share of responsibility.

The pernicious effects of the French treatment of Germany, and particularly of the Ruhr occupation, are by no means restricted to Germany. The modern world is so much a unit that the paralyzing of one of its most important industrial centres cannot but be severely felt by all other members of the great trading community. Some few particular interests may find enjoyment in the relief from competition, but for the world at large there is a loss in the efficiency of the productive machinery and therefore unavoidably a loss of income and well-being. The buying capacity of Central Europe has been reduced to an alarming extent by the policy of exhaustion and destruction which has been carried on since the end of the Great War. The result has been a considerable impoverishment of large districts which used to sell food and raw materials to Central Europe. Thus the buying capacity of these countries has been diminished, too, and industrial countries organized for supplying such countries with industrial products have seen their power of selling seriously reduced.

At the same time, the whole carrying trade of the world has suffered, and commerce and banking have suffered likewise. In some industrial countries these adverse effects have been so great that unemployment has become a social evil of the first order, the financial burden of which threatens to become more and more unbearable. Year after year Great Britain has had to care for an army of unemployed of between one and two million people. The devastation of British economic life which is measured by such figures is certainly not less serious than the war’s devastation of French provinces, which probably has not required that more than some hundred thousands of workers be drawn from their ordinary occupations. Naturally, the whole of the world-wide economic depression cannot be debited to the account of France’s destructive policy. But certainly Great Britain has very good reason to complain of the great additional difficulties which the French policy undoubtedly causes in a situation already in itself precarious enough.

Great Britain must necessarily be very anxious to have things put in normal order again on the European continent, and this anxiety is shared by a number of other countries, both industrial and agricultural.

Under such circumstances it is very distasteful, to say the least, to find French policy actually aiming at an exploitation of this anxiety, and asking to be paid for abandoning her terrorist régime. But this is just what is being done when the giving up of a destructive policy, by which even France herself suffers, is made the subject of such conditions as the canceling by other Governments of their very legitimate claims on France, or the guaranteeing through international finance of the payment to France of a German indemnity.

Of course, the other participants in the indemnity, and also the United States as a large creditor, lose their prospect of ever getting paid by a Germany which the French policy has reduced to complete misery. But this loss to others is for the French politicians only an asset more on their side in the bargain they expect to make. Naturally, such a policy cannot count on much sympathy from former allies who have made the most severe sacrifices on behalf of France.

The first question we have to put to ourselves when trying to analyze the value of a political programme is this, Is it in accordance with the general trend of evolution and progressive civilization, or is it against it? If the latter is the case, the policy in question will surely have to be corrected by the future, and is therefore simply burdening history with a repetition of its own work.

Let us apply this test to the present French policy. The splitting-up of Germany into several countries is clearly a step backward, which the future will have to make good. The progress of Europe has, since the end of the Middle Ages, been identified with the creation of great national units. The fact that Germany, like Italy, was some centuries later in this development than France and England, does not make her national unity a less essential need.

The future of Central Europe lies in the creation of great political and economic organizations, and every policy which aims at drawing up more frontiers on the European continent, or at accentuating the political antagonism and the economic isolation which such frontiers mean, is a retrograde policy, pregnant with untold sufferings for future generations, which will have to take up the work of constructive progress once again.

It is equally clear that the ruining of a great industrial organization, which has been generations in building up, is a retrograde policy which must be corrected by future generations, and which therefore entails a mad waste of the resources of humanity, and a serious set-back to the general progress of the world.

The very methods of suppression and violence which have taken the place of solidarity and peace denote in themselves a most serious set-back in the development of civilization. It will perhaps take the work of generations to build up again what has already been destroyed of ideal values by these methods. Such methods are, moreover, terribly contagious. Already Italian politicians seek to defend Italy’s violent and lawless action against Greece by alleging the action of France in the Ruhr as an example!

If we are to develop in future anything like civilized relations between nations, we must most emphatically reject the idea that one country, for the sake of punishing another country, has the right to take a part of the latter’s territory, and to expose the population thereof to any kind of injuries and humiliations. It is necessary to safeguard the human rights of such populations, which cannot be made responsible for quarrels of their countries.

Americans are asking what America can do in this situation, and sometimes are even eager to free America from all responsibility in the matter. But undoubtedly America has a responsibility. The United States took part in the great European struggle — perhaps a decisive part. America fought for the high ideals of humanity and freedom. Now, when the victory has largely proved to have been an illusion, when the ideals for which the war was fought are trampled down more recklessly than ever, and when the future of civilization is more seriously threatened than ever, it is impossible for America to withdraw and say that this is a thing that does not concern her. Economically even America is concerned when a great consuming power is annihilated, and the world’s trade is disorganized. America’s dependence upon the world’s market, and therefore upon the world’s prosperity, is doubtless a much more important reality than many Americans imagine.

Still, it is not in the first instance economic ties that bind America to the rest of the world. The ideals of humanity represent a common good for all nations, and the duty of guarding and developing these ideals more than anything else binds the world together into an indissoluble unit. Of this unit the United States forms a part, and, by virtue not only of its wealth and power, but also of moral traditions, a very important part. America once fought a great fight for the abolition of slavery, and it is therefore impossible for America to stand by and renounce responsibility when slavery in new and worse forms is being reintroduced.

The actual question is, therefore, What can America do? People are generally inclined to underrate the power of moral force in such a situation as the present. If public opinion in the United States stood absolutely united in an unconditional condemnation of the French policy of exhaustion and suppression, this opinion would represent a moral power which could not be neglected. But every American speaking or writing on the present subject ought to realize how much the authority of American opinion is weakened by even the slightest support given to what is wrong and disgraceful.

America also has strong material weapons for giving weight to her opinion. First of all she can say to France, Pay us! Pay us instead of squandering your resources on submarine and air armaments against former allies and on military subsidies to new allies! Pay us instead of destroying by costly occupations every possibility, both for yourselves and for others, and particularly for us, of ever getting any payment out of Germany! If you cannot pay, at any rate do not destroy our own and the world’s trade and well-being by your short-sighted policy against your own debtor!

It must once and for all be made quite clear to France that the claims of the United States on account of the money they have advanced are not mere idle words, but are meant to be taken seriously. If France asks for consideration and grace, America may reasonably answer: ‘Well, we will show you the same consideration and grace you are showing your debtor.’ France could indeed in this connection very appropriately be warned not to expose herself to our Lord’s severe sentence upon the unmerciful servant: ‘Shouldest not thou also have had compassion on thy fellowservant, even as I had pity on thee?’